ASIC v Matthews [1999] NSWSC 763

Reported Decision : [1999] 32 ACSR 519 [1999] 17 ACLC 1648

New South Wales Supreme Court CITATION : ASIC v Matthews [1999] NSWSC 763 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 3183/99 HEARING DATE(S) : 26 July 1999 JUDGMENT DATE : 26 July 1999

Australian Securities & Investments Commission (P) PARTIES : v Stephen Lewis Matthews (D) JUDGMENT OF : Austin J

COUNSEL : D R Stack (P) Defendant in person SOLICITORS : J Redfern (P) Defendant in person CATCHWORDS : Courts - jurisdiction - jurisdiction of Federal Court of Australia in State matter - orders under Federal Courts (State Jurisdiction) Act 1999 (NSW) - criteria for orders Federal Courts (State Jurisdiction) Act 1999 (NSW), ss 3, 4, 6, 11 ACTS CITED : Corporations (New South Wales) Act 1990 (NSW) s 42 Corporations Law, ss 781, 995, 1018, 1019 CASES CITED : Re Wakim; ex parte McNally (1999) 31 ACSR 99 DECISION : Orders and declarations made as sought

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

MONDAY 26 JULY 1999

3183/99 - AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION v STEPHEN LEWIS MATTHEWS

JUDGMENT (Delivered ex tempore on 26 July 1999; revised 27 July 1999)

1 HIS HONOUR: This matter comes before the Court by summons for orders under the Federal Courts (State Jurisdiction) Act 1999 (NSW) ('Jurisdiction Act'). The orders sought are of two kinds: first, an order pursuant to s 11 of the Jurisdiction Act that a certain Federal Court proceeding be treated as a Supreme Court proceeding; and, secondly, declarations to the effect that under s 6 of the Jurisdiction Act the rights and liabilities of persons affected by certain judgments and orders of O'Connor and Sackville JJ in that proceeding are the same as if they had been valid judgments and orders of the Supreme Court. 2 The proceeding in the Federal Court was brought by an application in the New south Wales District Registry of that court pursuant to s 1324 of the Corporations Law, filed on 16 February 1999. Essentially the complaint is that the defendant, without any licence or authority, is carrying on an investment advice business contrary to s 781 of the Corporations Law by means of an internet site called 'The Chimes', and is thereby engaging in misleading conduct contrary to s 995, and has thereby invited subscriptions for securities in a company not yet formed contrary to s 1019 and without a prospectus contrary to s 1018. 3 Sections 781, 995, 1019 and 1018 of the Corporations Law of New South Wales do not expressly articulate any territorial nexus with this State. In my opinion, it is appropriate to infer from the defendant's Sydney residential address and his personal appearance before me that the activity of which the plaintiff complains is sufficiently connected with this State that the Federal Court proceeding is correctly described as a civil matter arising under the Corporations Law of New South Wales. That being so, s 42(1) of the Corporations (New South Wales) Act 1990 (NSW) ('Application Act') confers jurisdiction on this Court, and s 42(3) of the Application Act purports to confer jurisdiction on the Federal Court, with respect to the matter. 4 On 19 February 1999 O'Connor J made interim orders including injunctions restricting the defendant from giving advice and publishing reports about securities. One of O'Connor J's orders (order 4) was that 'until further order the respondent Stephen Lewis Matthews be restrained from publishing reports or allowing to be published reports about securities on the internet including, but not limited to, the internet site as 'The Chimes' and situated at htpp//www.chimes.au'. 5 On 22 March 1999 the plaintiff filed a notice of motion in the Federal Court seeking orders that the defendant be found guilty of and punished for contempt of the orders of O'Connor J made on 19 February 1999. The application for contempt orders was dealt with by Sackville J on 16 June 1999. His Honour found that the defendant was guilty of contempt and made certain orders including an order for the defendant's imprisonment. 6 On the day after Sackville J made those orders, the High Court of Australia delivered its judgment in Re Wakim; ex parte McNally (1999) 31 ACSR 99. The effect of the High Court's judgment is that under the Constitution the Federal Court of Australia cannot exercise jurisdiction in a matter brought solely under the Corporations Law of a State, although the High Court accepted that the Federal Court possesses accrued jurisdiction in connection with federal matters. 7 On 15 July 1999 the matter returned to Sackville J and at the hearing before his Honour, counsel for the plaintiff conceded on instructions that, in view of the High Court's judgment in Wakim, the Federal Court had no jurisdiction to hear the proceeding. During the course of the hearing Sackville J said to counsel for the plaintiff: 'Your position is that this Court has no jurisdiction to hear these proceedings. What I will do is stand this matter over generally and note that the Court has no jurisdiction in relation to the completion of this matter. I do not think it makes any difference if I stand the matter over to a particular date.'