FEDERAL COURT OF AUSTRALIA Bristow v Australian Securities and Investments Commission [2008] FCA 1099 PRACTICE AND PROCEDURE – application for extension of time to file and serve notice of appeal – allegations of duress in agreeing to proposed orders arising out of mediated settlement Federal Court Rules O 52 r 15 Harvey v Phillips (1956) 95 CLR 235 cited IAN BRISTOW v AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION VID 513 of 2008 VID 514 OF 2008 HEEREY J 22 JULY 2008 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 513 of 2008 BETWEEN: IAN BRISTOW Applicant AND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Respondent JUDGE: HEEREY J DATE OF ORDER: 22 JULY 2008 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The application for extension of time to file and serve notice of appeal is dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 514 of 2008 BETWEEN: IAN BRISTOW Applicant AND: AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION Respondent JUDGE: HEEREY J DATE OF ORDER: 22 July 2008 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The application for extension of time to file and serve notice of appeal is dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 513 of 2008 VID 514 OF 2008 BETWEEN: IAN BRISTOW Applicant AND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Respondent JUDGE: HEEREY J DATE: 22 JULY 2008 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The applicant Mr Ian Bristow seeks leave to appeal or alternatively an extension of time to appeal against orders made by Goldberg J on 27 March 2008. On that date his Honour made declarations that five schemes were managed investment schemes which were required to be registered under s 601ED(1)(a) of the Corporations Act 2001 (Cth) but were not so registered. 2 His Honour also made declarations that the first and second defendants and Mr Bristow contravened s 601ED(5) by operating one or more of those schemes and, in the case of Mr Bristow, all of them. His Honour ordered that pursuant to s 1324(1) of the Act Mr Bristow be permanently restrained from further operating or promoting the schemes, that the schemes be wound up pursuant to s 601EE(1) and that the second defendant be wound up. His Honour appointed a liquidator and gave various directions about the liquidator's powers, costs and expenses. His Honour further ordered that, with the exception of a family trust company, Mr Bristow be disqualified from managing a corporation for a period of three years. There was no order as to costs. 3 His Honour made a subsequent order on 9 April 2008 to the effect that the schemes as defined in the 27 March order include a number of companies, identified only by their Australian Company Number (the ACN companies), that the ACN companies be joined as defendants and that they be wound up. 4 In my opinion, his Honour's order of 27 March, as varied by the order of 9 April, was a final order. The two orders were not interlocutory in the sense that they were part of some larger proceeding. They finally established rights and obligations. Therefore no question of leave to appeal arises; rather it is a question of extension of the time fixed by O 52 r 15(1)(a) of the Federal Court Rules for filing and serving a notice of appeal. 5 Separate applications for extension of time to file and serve a notice of appeal against the two orders were filed on 4 July 2008. The time fixed by O 52 r 15(1)(a)(i) had expired on 17 April in respect of the orders of 27 March, and 30 April in respect of the orders of 9 April. Since the application for extension of time was made after the time fixed by the Rules had expired, "special reasons" for granting leave to file and serve a notice of appeal are required: O 52 r 15(2). 6 The orders made by his Honour were not consent orders. After mediation, the parties agreed on proposed orders and submitted a statement of agreed facts. However, his Honour was not bound by the parties' agreement and gave independent consideration to the appropriateness of the proposed orders. 7 In Harvey v Phillips (1956) 95 CLR 235 the High Court was concerned with a consent judgment in a personal injuries claim. The plaintiff sought to set aside the judgment on the ground that counsel appearing for her was not authorised to compromise the action. The High Court (Dixon CJ, McTiernan, Williams, Webb and Fullagar JJ) held that, on the facts as found by the Supreme Court, the plaintiff had given her authority to her counsel to settle "however reluctant it may have been" (at 244). Earlier (at 242-243) their Honours had said that in the circumstances of the case it was not one where the court possessed a discretion to set aside the compromise. Instances of cases where there was such a discretion were: · Misapprehension or mistake by counsel in consenting to an order or settlement; · Where the assistance of the Court is invoked to carry into effect a compromise which otherwise could not be enforced; · Where counsel, owing to mistake or misapprehension, has acted in opposition to the client's instructions. Their Honours went on to say that where a compromise was made within the actual as well as the apparent authority of counsel there was no discretion to set the resulting order aside. It could only be set aside upon a ground which would suffice to render a contract "void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like" (at 243-244). 8 The central thrust of Mr Bristow's proposed appeal is an allegation of duress in the conduct of the mediation. As Harvey v Phillips holds, a consent order can be set aside if the agreement pursuant to which it was made is invalidated on the ground of, inter alia, duress. A fortiori, if the order is not a consent order in the true sense but one in which there is a discretion in the Court to set it aside (the second Harvey v Phillips category – see [7] above), then proof of duress would be a ground for exercising that discretion. In the present case, however, as will appear, an arguable case of duress has not been established. 9 The sequence of events was as follows. On 12 December 2007 ASIC commenced the proceeding seeking interlocutory and final relief. The originating process was returnable on 5 February 2008. On that date Mr Bristow appeared and was represented by senior and junior counsel. Goldberg J made orders including setting down the application for interlocutory relief for hearing on 14 February and referring the proceeding to a Registrar for mediation to commence on or before 13 February. 10 On 14 February Mr Bristow was again represented by the same senior and junior counsel. During that hearing senior counsel on behalf of Mr Bristow sought an extension of the timetable for the conduct of the proceeding. He said that there was a large volume of material to respond to and that his clients would be "away on a holiday between 6 and 14 March". His Honour remarked, "Well, it's a matter for your clients to work out the priorities, I suppose". 11 His Honour made orders which included a direction that Mr Bristow and the other defendants serve any material in reply by 11 March and that the proceeding be set down for hearing on 22 April with an estimate of five days. His Honour noted that the material relied on by ASIC had been in the possession of the defendants since about the middle of the previous December. 12 The mediation did not commence until 21 February. It reconvened on 28 February and 20 March. Mr Bristow participated in the mediation and was again represented by the same senior and junior counsel. The mediation was conducted by the Victoria District Registrar of the Court, Ms Sia Lagos. On 20 March the parties arrived at a settlement. 13 Although there had been no halt order on the directions for the filing of material, Mr Bristow and the other defendants did not file any material in reply by 11 March as directed. On 14 March ASIC wrote to Mr Bristow's solicitors regarding this failure to comply with the directions. In the letter ASIC pointed out that Mr Bristow had not sought an extension of time for filing any affidavit material and that ASIC would not consent to any adjournment of the trial of the proceeding listed for 22 April. There was no response to that letter. 14 The matter came on again on 27 March before Goldberg J when the orders the subject of the present application were made. At this hearing, Mr Bristow was represented by the junior counsel who had appeared at the earlier hearings and at the mediation. 15 Counsel for ASIC handed up proposed orders and an agreed statement of facts. It is apparent from the transcript of the proceedings on 27 March that his Honour was familiar with the substantive material that had been relied on by ASIC. He discussed a number of details of that material with counsel. It must be stressed that the orders made on 27 March were in no sense a rubber stamp of an agreement between the parties. His Honour exercised his own judgment on the material before him including, but not limited to, the agreed statement of facts. 16 There was no suggestion by counsel on behalf of Mr Bristow in any way attacking the conduct of the mediation process and no suggestion that the settlement had been reached under duress. The proceedings commenced by senior counsel on behalf of ASIC saying: Your Honour, we are pleased to tell the Court that the matter has settled – all matters have settled, the subject of the current amended originating process and for our part we express our indebtedness to the registrar for her tireless effort at hosting a number of mediation sessions. 17 At the conclusion of the hearing his Honour said: Might I just say this, which I think is important to say as a matter of public record? The parties and their legal advisers are to be commended for resolving a matter such as this by mediation. There was an element of public interest involved in the matter but nevertheless it was important for the defendants to be in a position to put such matters as they wanted to in relation to the issue and that was appropriate to be done by way of mediation. Proceedings such as this have the potential to snowball, as matters in this court over the last couple of years have demonstrated, and costs get out of all proportion to the issues involved, but it is important that the regulatory scheme be observed and implemented. So I just wanted to reiterate again, I commend the parties and their legal advisers for having been prepared to take a matter such as this to mediation and resolve it in a manner which I think is most suitable and satisfactory. 18 One other matter which emerged in the course of the proceedings is that counsel on behalf of Mr Bristow said that his client did not intend to be involved in managing a company other than the family trust company. His Honour noted that Mr Bristow had surrendered his Australian financial services licence in late January. 19 In his proposed notice of appeal Mr Bristow alleges first that he was "denied natural justice". The essence of that seems to be that on 21 March, according to the notice, he and the other defendants: …were horrified and distressed when the registrar opened the mediation on 21 [sic – 20] March and immediately said that the trail [sic] on 22 April would not be postponed and the defendants had to get an agreement signed with ASIC that day otherwise the case would be heard and decided on the evidence before the court already and as (Mr Bristow) (and other defendants in the case) had not filed any material that we would lose the case and ASIC would get whatever they want and we would have to pay their costs as well which were estimated to be around $300,000. It is alleged: (Mr Bristow) and the other defendants signed the agreement under extreme duress. 20 There are further allegations that "over the course of the day" (presumably the day of the mediation) there was a change by ASIC of the position it had taken, including in relation to the ACN companies. ASIC allegedly "started removing facts from the agreed Statement of Facts to deceive the Federal Court and Justice Goldberg". 21 It is further alleged Mr Bristow was formerly a director of a company which was a trustee of the alleged unregistered managed investment scheme and was not approached to chair a meeting on 2 February 2008 at which one of the companies was "terminated by the unit holders as trustee". It is alleged that ASIC: …sought to deceive and mislead Justice Goldberg and the Federal Court and had Justice Goldberg wind up 5 trusts that had already been wound up… 22 It is alleged that ASIC denied the shareholders of the four ACN companies the opportunity to meet and: …stripped away their rights with treats [sic] and intimidation to several of the shareholders that had become Directors of those companies at the shareholders meetings. 23 Finally, it is alleged that ASIC: …covered up and removed all trace of any reference to the unit holder meetings and that the trust had in fact been wound up and the assets transferred to the ACN companies. 24 One relevant factor on the question of any extension of time is whether there has been any reasonable explanation for the delay. In my opinion there has not been a reasonable explanation. Mr Bristow asserted from the bar table and in his affidavit that he has been taking anti-depressant medications and on one occasion attempted suicide, but there is no supporting medical evidence. Further, he seems to have been able to produce a large body of material, presumably while affected by the same condition. 25 More importantly, there is in my view no reasonable prospect of success in the appeal. The orders were made following mediation at which Mr Bristow was represented by senior and junior counsel. 26 When the matter was before Goldberg J on 27 March there was open expression of appreciation of the way the mediation had been conducted and not the slightest demur on behalf of Mr Bristow, let alone any suggestion of duress. The only specific complaint about the conduct of the mediation in the proposed notice of appeal at most amounts to the Registrar pointing out to the defendants the reality of the situation: this was a matter or some urgency, they were in default of complying with procedural directions, the matter was going to proceed on 22 April and if they lost the case they would be liable for substantial costs. I imagine that this would be typical of the sort of considerations drawn forcefully by mediators to the attention of parties, and is in no way improper. Still less does it amount to duress in any legally relevant sense. The allegation of denial of natural justice is absurd. 27 In any event, there does not seem to be any foreshadowed challenge to the essential case of ASIC, that there were five unregistered managed investment schemes and that Mr Bristow had operated them, whether or not, as he alleges, they or some of them had already been wound up early in 2008. 28 Further, I would respectfully agree with his Honour's comment that the penalty agreed between the parties, and which his Honour, on an independent assessment of the material, thought proper to impose, was at the lower end of the scale. Investments of some $7 million by over 200 people were involved. Mr Bristow had been involved in the financial advising business for some 36 years and must be taken to have been aware of the applicable law. A three year suspension with no penalty and no order for costs was, objectively considered, an excellent outcome for Mr Bristow, no doubt due in substantial part to the professional skills of his counsel and solicitors. 29 As already mentioned, Mr Bristow's counsel told the Court that he had no intention of engagement in the management of corporations in the foreseeable future, apart from the family trust company which was expressly excluded from the disqualification. This was a factor which weighed in his favour. Mr Bristow's desire to appeal would seem to indicate that he wishes to be free to manage corporations and intends to do so if not restrained. While he asserts in an affidavit that he wants "some shred of (his) decency and reputation left", he does not exclude the possibility of managing companies if his appeal is successful. 30 A final consideration against exercising the discretion is the fact that the liquidator has already embarked on substantial work in relation to the windings up. As is shown by the liquidator's report to ASIC dated 15 July 2008, one of the managed investment schemes involved a substantial investment in a property in Queensland for the purpose of redevelopment. That property has been since resumed by the local council and there is a right to compensation. The valuation so far obtained put the value of the property at its highest and best use, namely as a single residential home site, at $575,000. It appears the property is affected by a number of planning controls including biodiversity for koala habitats, major flood events and bushfire hazard. The liquidator has engaged a valuer and town planner to assist in resolving this matter. There are also some disputes of a rather complicated nature involving the Moreton Trust managed investment scheme and financial dealings with other parties. 31 Suffice it to say that the liquidator has already embarked on a substantial amount of work in investigation of affairs of these unregistered managed investment schemes. 32 I therefore decline to grant an extension of time to appeal. The application will be dismissed with costs. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate: Dated: 30 July 2008 Counsel for the Applicant: The applicant appeared in person Counsel for the Respondent: St J Hibble Solicitors for the Respondent: Australian Securities and Investments Commission Date of Hearing: 22 July 2008 Date of Judgment: 22 July 2008