Australian Securities & Investments Commission v Karl Suleman Enterprizes Pty Ltd [2001] NSWSC 1079

Reported Decision : [2001] NSWSC 1079 [2001] ACL Rep 120 NSW 154

New South Wales Supreme Court

CITATION : Australian Securities & Investments Commission v Karl Suleman Enterprizes Pty Ltd [2001] NSWSC 1079 CURRENT JURISDICTION: Equity Division Corporations List FILE NUMBER(S) : SC 5415/01 HEARING DATE(S) : 08/11/01 JUDGMENT DATE : 8 November 2001

Australian Securities & Investments Commission (P) Karl Suleman Enterprizes Pty Ltd (D1) PARTIES : Suleman Investments Ltd (D2) Karl Suleman (D3) Vivian Suleman (D4) JUDGMENT OF : Young CJ in Eq

COUNSEL : R Dalgleish (P) SOLICITORS : Jan Redfern (P) CATCHWORDS : CORPORATIONS [324]- Supervision by ASIC- Ex parte application- When appropriate. LEGISLATION CITED : Corporations Act 2001, ss 1323, 1324 CASES CITED : Corporate Affairs Commission v United International Technologies Pty Ltd (1988) 6 ACLC 637 DECISION : See para 8.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST 5415 of 2001 YOUNG CJ in EQ

Thursday 8 November 2001 AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION v KARL SULEMAN ENTERPRIZES PTY LTD & ORS

Judgment 1 His Honour: In these proceedings, the Australian Securities & Investments Commission (ASIC) seeks orders under s 1323 and s 1324 against the defendants, the aim being to prohibit the defendants from taking advantage of, to put it mildly, suspect investment claims. Counsel for ASIC has asked for an ex parte order which would put in an interim receiver without security of all the property of the defendants, injunct them from giving any investment advice, or from carrying on any securities business, restrain them from disposing of any property or from mortgaging or charging any property save to $1,000 a week, and require them to disclose certain property holdings. 2 Those orders are very drastic orders indeed. They often need to be made for the protection of the public. However, the Court has to do justice to all manner of people, and those orders are only made ex parte when there are good reasons for doing so and proper formalities have been observed; cf Corporate Affairs Commission v United International Technologies Pty Ltd (1988) 6 ACLC 637, 641. 3 There will be good reasons for doing so when a scam is first discovered and it is necessary to prevent the money that has been received by the defendants being dissipated immediately. There will also be good reasons for doing so when, to alert the defendants that the axe is about to fall, may mean that they have time to disperse. 4 Neither factor is significantly present in the instant case. The first is there to a degree in that the scheme, from what I have seen of it, seems to involve attracting a large input of money and then paying out to investors something like $1 million a week, presumably some out of capital of new investments received. However, the plaintiff has been aware to one degree or other of what was happening since May: it ordered the bank to give it notice of the defendants' bank statements between July and October, and obtained more information between 23 October and 1 November 2001. 5 The solicitor in charge says that ASIC received 7000 complaints a year and the variety of demands on the Enforcement Directorate means it is not possible to have the Court approached until it believes it has marshalled sufficient material, and that takes time, and he says: "Even if I, as the officer responsible, was incorrect in my assessment and the Plaintiff could have acted more quickly it does not follow that the public should be denied the protection of the orders the Plaintiff seeks." 6 The first riposte is that individual defendants should not be affected in their rights merely because ASIC's officers are overworked or fix other priorities. Secondly the words quoted are, of course, a motherhood statement. No court is going to deny the public the protection that it requires. 7 However, the Court has to balance whether that relief should be given on an ex parte basis after the delay in this case and I am not convinced that it should. 8 Accordingly, I will give leave for the summons to be served by 10 am tomorrow, Friday, returnable before the Corporations List Judge on Monday next at 10 am.