Adler and Anor v Australian Securities and Investments Commission; Williams v Australian Securities and Investments Commission [2003] NSWCA 131

Reported Decision : (2003) 46 ASCR 504 (2003) 21 ACLC 1810

New South Wales Court of Appeal

CITATION : Adler and Anor v Australian Securities and Investments Commission; Williams v Australian Securities and Investments Commission [2003] NSWCA 131 HEARING DATE(S) : 17, 18, 19, 20, 21, 24, 25, 26, 27 March 2003 JUDGMENT DATE : 8 July 2003

JUDGMENT OF : Mason P at 1; Beazley JA at 2; Giles JA at 3 DECISION : IN THE APPEAL BY MR ADLER AND ADLER CORPORATION: (1) Appeal allowed in part; (2) Vary declarations 3 and 4 made on 27 March 2002 by adding before "182(1)" the word "and" and deleting the words and figures "and 183(1)"; (3) Direct that within 21 days the parties calculate the compensation payable to HIH Casualty and General Insurance Ltd in accordance with the reasons of this Court and advise the Registrar of the sum calculated; (4) Vary order 7 made on 6 June 2002 by deleting the sum of $7,986,402 and substituting the sum advised to the Registrar; (5) Liberty to apply in the event of disagreement as to the calculation; (6) Appeal otherwise dismissed; (7) Appellants pay the respondent's costs. IN THE APPEAL BY MR WILLIAMS: (1) Direct that within 21 days the parties calculate the compensation payable to HIH Casualty and General Insurance Ltd in accordance with the reasons of this Court and advise the Registrar of the sum calculated; (2) Vary order 7 made on 6 June 2002 by deleting the sum of $7,986,402 and substituting the sum advised to the Registrar; (3) Liberty to apply in the event of disagreement as to the calculation; (4) Appeal dismissed; (5) Appellant pay the respondent's costs.

CATCHWORDS : CORPORATIONS ACT - CONTRAVENTIONS OF CIVIL PENALTY PROVISIONS - orders for compensation and pecuniary penalties and disqualification from managing corporations - whether error shown in the trial judge's findings of contraventions - consideration of appellate review of first instance findings - whether findings paid regard to matters outside the plaintiff's pleaded and particularised case - consideration of functions of pleadings and particulars - to ensure procedural fairness -- CONTRAVENTIONS OF S208 OF THE ACT RELATING TO GIVING A FINANCIAL BENEFIT TO A RELATED PARTY - whether payment of money to related party as loan or held on trust - if held on trust whether a bare trust for payer - in any event was giving a financial benefit - financial benefit not on reasonable arms length terms - no error in findings - INVOLVEMENT IN THE CONTRAVENTIONS OF S208 - whether necessary to know financial benefit was given otherwise on reasonable arms length terms - sufficient to know facts whereby financial benefit was given otherwise than on reasonable arms length terms - CONTRAVENTIONS OF S260A OF THE ACT RELATING TO A COMPANY GIVING FINANCIAL ASSISTANCE TO ACQUIRE ITS SHARES - same payment of money - whether material prejudice to the company - whether opinion evidence of material prejudice properly admitted - no error in holding that opinion wholly or substantially based on witness's experience - even without the opinion evidence, material prejudice whether or not money held on trust - no error in findings - INVOLVEMENT IN THE CONTRAVENTIONS OF S260A - whether plaintiff must prove knowledge of facts constituting material prejudice to the company - not necessary - in any event there was knowledge - CONTRAVENTIONS OF SS180, 181, 182 AND 183 OF THE ACT RELATING TO DIRECTOR'S DUTIES - same payment of money and use of the money in various ways - whether opinion evidence that conduct was contrary to the provisions properly admitted - again no error in holding - no error in trial judge's findings of contraventions of ss180, 181, 182 - but conduct alleged and proved did not constitute contravention of s183 - JONES V DUNKEL INFERENCES - whether available in civil penalty proceedings - are civil proceedings and inferences available - were available on the facts - RULES OF PROSECUTORIAL FAIRNESS - whether applied so that plaintiff obliged to call a material witness - did not apply - in any event no miscarriage if witness not called - CAUSATION OF LOSS TO THE COMPANY PAYING THE MONEY - necessity to show company would not have paid if director's duties fulfilled - whether analogy with claims against defaulting fiduciaries - not analogous and must show causation in fact - on facts no error in finding of causation - LOSS THROUGH LOSS OF USE OF MONEY - whether analogy with claims against defaulting fiduciary - not analogous and must show loss in fact - different interest rate to calculate loss from that used by trial judge - PECUNIARY PENALTIES - trial judge's orders affirmed - DISQUALIFICATIONS - whether can make order as to some corporations only - order is as to management of corporations and can not do so - in any event trial judge's orders affirmed. Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 6) (1996) 64 FCR 79; Armory v Delamirie (1722) 1 Stra 505; 93 ER 664; ASIC v Plymin [2003] VSC 123; Australian Cement v Adelaide Broughton [2001] NSWSC 645; Australian Securities Commission v Forem-Freeway Enterprises Pty Ltd (1999) 39 ACSR 339; Azzopardi v The Queen (2001) 205 CLR 50; Banque Commerciale SA v Akhil Holdings Ltd (1996) 169 CLR 279; Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1; Belmont Finance Corporation v Williams Furniture Ltd (No 2) (1980) 1 All ER 393; Black v S Freedman & Co (1910) 12 CLR 105; Briginshaw v Briginshaw (1938) 60 CLR 336; Charterhouse Investment Trust Ltd v Tempest Diesels Ltd (1986) PCLC 1; Chew v The Queen (1992) 173 CLR 626; Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 398; Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115; Daniels v Anderson (1995) 37 NSWLR 438; Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 192 ALR 561; Dare v Pulham (1982) 148 CLR 658; Dyers v The Queen (2002) 76 ALJR 1552; Eastman v R (1997) 76 FCR 9; Employment Advocate v Williamson (2001) 111 FCR 20; Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477; Fabre v Arenales (1992) 27 NSWLR 437; Giorgianni v The Queen (1985) 156 CLR 473; Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336; Godfrey v New South Wales (No 1) [2003] NSWSC 160; Gould v Vaggelas (1985) 157 CLR 215; Greek Herald Pty Ltd v Nikolopoulos (2001) 54 NSWLR 165; Hamilton v Whitehead (1988) 166 CLR 121; Henville v Walker (2001) 206 CLR 459; HG v The Queen (1999) 197 CLR 414; Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358; House v The King (1936) 55 CLR 499; CASES CITED : Hungerfords v Walker (1989) 171 CLR 125; Hunters Beach Investments Pty Ltd v Braams (2001) 38 ACSR 71; I & L Securities Pty Ltd v NTW Valuers (Brisbane) Pty Ltd (2002) 76 ALJR 1461; Jones v Bradley [2003] NSWCA 81; Jones v Dunkel (1995) 101 CLR 298; King v GIO Australia Holdings Ltd (2001) 184 ALR 98; Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281; Lee v The Queen (1998) 195 CLR 594; Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262; Paper Products Pty Ltd v Tomlinsons (Rockdale) Pty Ltd (1994) AIPR 41-315; Pereira v Director of Public Prosecutions (1988) 63 ALJR 1; Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328; The Queen v Apostilides (1984) 154 CLR 563; The Queen v Byrnes (1995) 183 CLR 501; Refrigerated Express Lines (Australasia) Pty Ltd v Australian Meat and Livestock Corporation (1979) 42 FLR 204; R v Yilditz (1983) 11 A Crim R 115; Regina v Glennan (1970) 91 WN (NSW) 609; Reid v Howard (1995) 184 CLR 1; Richardson v The Queen (1974) 131 CLR 116; Robins v Incentive Dynamics Pty Ltd (In Liquidation) [2003] NSWCA 71; RPS v The Queen (2000) 199 CLR 620; Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236; Smith v The New South Wales Bar Association (1992) 176 CLR 256; Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157; Swindle v Harrison (1997) 4 All ER 705; Target Holdings Ltd v Redfern (1996) AC 421; Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96; Wallersteiner v Moir (1975) 1 QB 373; Westbay Seafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd [1996] FCA 630; Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; Whitehorn v The Queen (1983) 154 CLR 657; Williams v The Minister for Aboriginal Land Rights Act 1983 (2000) Aust Torts Reports 81-578; Yorke v Lucas (1985) 158 CLR 661; Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 77 ALJR 895. Rodney Stephen Adler and Adler Corporation Pty Ltd - Appellants in matter No 40538/02 PARTIES : Raymond Reginald Williams - Appellant in matter No 40556/02 Australian Securities and Investments Commission - Respondent in both matters FILE NUMBER(S) : CA 40538/02; 40556/02 B W Walker SC, I M Jackman SC - Mr Adler & Adler Corporation Pty Ltd COUNSEL : P D Crutchfield - Mr Williams R B Macfarlan QC, P Durack, A J Abadee - ASIC Gilbert + Tobin - Mr Adler & Adler Corporation Pty Ltd SOLICITORS : Arnold Bloch Leibler - Mr Williams Jan Redfern, Australian Securities & Investment Commission - ASIC