New South Wales Supreme Court CITATION : Australian Securities and Investments Commission v Sea-Land Insurance Brokers Pty Ltd [1999] NSWSC 788 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 3323/99 HEARING DATE(S) : 26/07/99 JUDGMENT DATE : 26 July 1999 Australian Securities and Investments Commission (P) Sea-Land Insurance Brokers Pty Ltd (D1) PARTIES : Robert William Tresidder (D2) Sharon Denise Tresidder (D3) Peter John Fitzhenry (D4) ANZ Executors & Trustee Company Ltd (D5) JUDGMENT OF : Young J COUNSEL : T Lynch (P) - Ex parte SOLICITORS : Jan Redfern (P) CATCHWORDS : Corporations [305]- ASIC- Right to injunction- Scope of statutory power ACTS CITED : Corporations Law ss 60, 588G(2), 1323, 1323(1)(e), 1324, 1324(1), 1324(4), 1324(9) CASES CITED : Broken Hill Proprietary Co Ltd v Bell Resources Ltd (1984) 8 ACLR 609 Mesenberg v Cord Industrial Recruiters Pty Ltd (1996) 39 NSWLR 128 DECISION : See para 14 THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG, J MONDAY 26 JULY 1999 3323/99 - AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V SEA-LAND INSURANCE BROKERS PTY LTD & ORS JUDGMENT 1 HIS HONOUR: This is an ex parte application by the Australian Securities and Investments Commission for interim injunctions in aid of relief sought in the summons filed today, being declaratory relief that the second, third and fourth defendants are effectively running the first defendant whilst it is insolvent without them being registered as the de jure directors. A company search shows that Mr Johnson is the only director of the company but that at various periods the second defendant was a director during its history. 2 The first defendant carries on business as an insurance broker. The Commonwealth authorities were concerned about its activities and it would seem that the first defendant's licence was cancelled. The first defendant appealed and the Commonwealth Administrative Appeals Tribunal allowed the appeal on condition that neither the second nor third defendant were to be managers, directors or signatories to the insurance broking account of the first defendant. That order was made on 12 January 1998. 3 There is evidence to suggest that that order is being outflanked by the involvement of Mr Johnson and the fourth defendant Mr Fitzhenry. 4 The material which the plaintiff has collected indicates that a mystery deposit of almost $300,000 was made into a bank account styled Sea-Land Insurance Brokers Pty Ltd No 2 account with the fifth defendant ANZ Executors and Trustee Co Ltd at its 68 Martin Place Branch. 5 There is evidence to suggest that that money became trust money and is in fact and in law part of the trust account of the first defendant. However, the second and fourth defendants appear to have control of the account, the fourth defendant being the signatory presumably so the undertaking given to the AAT was not breached. The evidence suggests, accordingly, that (1) there are trust moneys of the first defendant which are partly held in trust for members of the public or for insurance companies; (2) the first defendant company may be insolvent if those moneys are withdrawn; and (3) there have been attempts by the second, third and fourth defendants to withdraw them. Immediate action is thus needed. 6 The problem that I have is that the way in which the Corporations Law is framed a route by which relief can be given does not clearly expose itself. Section 1324 permits the plaintiff to obtain an injunction, but subs (1) is confined to contraventions of the Corporations Law and does not extend to breaches of the undertaking to the AAT or problems with the legislation governing insurance brokers, or breaches of trust generally. 7 Again, the section is limited to the people against whom an injunction can be given and it is probably right, though I would certainly not like to be taken as having so decided, that an injunction cannot be granted against a bank or other person who hold funds on behalf of the company. 8 Broadly speaking the Law lets people run their own company without State interference, so the court must be careful not to permit the Commission or any other person empowered by s 1324 to interfere beyond the scope of the section. 9 On the other hand, there is quite high authority for the proposition that the court must construe the section in a broad way with the aim of protecting the public in respect of the commercial activities of corporations (Broken Hill Proprietary Co Ltd v Bell Resources Ltd (1984) 8 ACLR 609, which I discussed and applied in Mesenberg v Cord Industrial Recruiters Pty Ltd (1996) 39 NSWLR 128 at 134 and following). 10 The interim relief sought in the notice of motion is that the third defendant be restrained from causing the company to incur a debt within the meaning of s 588G(2) of the Corporations Law. I do not see a sufficient prima facie case at this stage that the third defendant was a de facto director and so a director within the meaning of s 60 of the Corporations Law, or that even if she was that a withdrawal from a trust account was necessarily incurring a debt within the means of s 588G(2). 11 Interim relief is also sought that the defendants be restrained from dealing with the bank account. However, I cannot see that this is a contravention of the Corporations Law. It has been put that so long as there is a proper application for a declaration or injunction under s 1324(4) the court is empowered to grant an interim injunction, but I do not consider that one should endorse that submission. It seems to me that unless there is a prima facie contravention of the Law then the court should be very slow to make an interim order. 12 However, s 1324(9) provides that in proceedings under s 1324 the court may make an order under s 1323 in respect of the person. The person must be the second or third defendants in this case. Although I do not consider there is a prima facie case, there certainly is some material which, when added to the material that will be found in due course, may mean that the court will at the final hearing make the declarations sought in the summons. 13 Accordingly, it seems to me I can make an interim order under s 1323, and s 1323 permits not only orders against the person but under s 1323(1)(e) an order prohibiting a bank from paying any of the money. An order against the bank is usually far more efficacious than a personal order against former company directors who may be so desperate as to risk imprisonment for contempt. 14 Thus, I will make order 3 in the notice of motion. I will also order that the fifth defendant up to 9 August 1999 be restrained from paying to any person, without the consent of the plaintiff, any of the moneys in account 8513 76882 in the account styled "ANZ Trustees - Sea-Land Insurance Brokers Pty Ltd". There must be liberty to any of the defendants to discharge any of those orders on twelve hours' notice and the summons may be made returnable before the Registrar on 9 August at 9.30am. Costs of today are reserved. I also grant leave to file the summons in court. o0o Last Modified: 08/02/1999 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.