William Arthur Forge & 5 Ors v Australian Securities & Investments Commission [2004] NSWCA 448

Reported Decision : 52 ACSR 1 (2005) 23 ACLC 1010

New South Wales Court of Appeal

CITATION : William Arthur Forge & 5 Ors v Australian Securities & Investments Commission [2004] NSWCA 448 HEARING DATE(S) : 11 August 2003 to 14 August 2003 30 September 2003, 2 October 2003 (written submissions) JUDGMENT DATE : 7 December 2004

JUDGMENT OF : Handley JA at 1; Santow JA at 2; McColl JA at 3 DECISION : (1) Appeal dismissed save as to ground 22. (2) Matter remitted to the Equity Division for hearing on penalty only. (3) Appellants to bear three-quarters of the costs of the appeal. (4) The primary judge's order that the appellants pay ASIC's costs of the proceedings below including reserved costs should not be disturbed.

CATCHWORDS : CORPORATIONS LAW - APPEALS - Appeal from declarations of contravention of the Corporations Law, disqualification orders and pecuniary penalties - breach of directors' duties and related party transaction provisions of the Corporations Law - whether proceedings commenced under the Corporations Law validly continued under the Corporations Act 2001 (Cth) - whether fourth appellant was an "officer" for the purposes of s 232 of the Corporations Law - whether primary judge erred in concluding the appellants had contravened ss 232(2), (4) and (6) and s 243ZE of the Corporations Law - subjective or objective test of "honestly" in s 232(2) of the Corporations Law - whether purported ratification of contraventions of the Corporations Law by shareholders effective - whether a separate hearing on penalty should be held in civil penalty proceedings - EVIDENCE - Admissibility of expert evidence going to an ultimate legal issue. (D) Constitution s 51(xxxvii) Corporate Law Economic Reform Program Act 1999 s 1466 Corporations Act 2001 (Cth) s 79, s 180, s 181, s 182, s 208, s 209, s 210, s 211, s 239, s 243N, s 254T, s 254V, s 1317L, s 1332, Ch 10, s 1370, s 1371, s 1371(2), s 1382(1)(bb), s 1383, s 1383(1), s 1383(1)(a), s 1383(1)(b), s 1383(1)(b)(i), s 1383(1)(c), s 1383(2), s 1383(3), s 1383(3)(a), s 1384, s 1384(3), s 1384(3)(a), s 1398, s 1401, s 1401(1)(a), s 1401(1)(b), s 1401(2), s 1401(2)(a), s 1401(2)(b), s 1401(3), s 1408 LEGISLATION CITED : Corporations (Commonwealth Powers) Act 2001 Corporations Law s 9, s 79, s 82A, s 85A, s 191, s 192, s 192(2), s 192(4), s 232, s 232(1), s 232(2), s 232(4), s 232(5), s 232(6), s 232(6B), s 243F, s 243F(1)(a), s 243F(1)(d), s 243F(1)(e), s 243F(1)(f), s 243G, s 243H, s 243K, s 243N, s 243ZE, s 243ZE(2), s 243ZE(3), s 243ZE(5), s 254C, s 254K, s 254K(b), Pt 9.4B, s 1317DA, s 1317DB, s 1317EA, s 1317EA(2), s 1317EA(3), s 1317EA(3)(a), s 1317EA(3)(b), s 1317EA(4), s 1317EA(5), s 1317EB(1), s 1317EC, s 1317ED, s 1317ED(1), s 1317HD(1), s 1317HD(1A), s 1317JA, s 1332, s 1447, s 1473, s 1473(1)(a) Evidence Act 1995 (NSW) s 80, s 80(a), s 135(a), s 135(e) Supreme Court Act 1970 (NSW) s 75A Supreme Court Rules 1970 (NSW) Pt 4 r 1, Pt 15 r 13 Adler and Anor v Australian Securities and Investments Commission; Williams v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1 Allstate Life Insurance Co v ANZ Banking Group Ltd (No 6) (Allstate Judgment No 33) (1996) 64 FCR 79 Australian Competition and Consumer Commission v Amcor Printing Papers Group Limited [1999] FCA 672; (1999) ALR 465 Australian Competition & Consumer Commission v FFE Building Services Limited [2003] FCAFC 132; (2003) 130 FCR 37 Australian Competition and Consumer Commission v J McPhee & Son (Australia) Pty Ltd (No 2) (1997) 77 FCR 217 Australian Growth Resources Corporation Pty Limited v Van Reesema (1988) 13 ACLR 261 Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 41 ACSR 72 Australian Securities and Investments Commission (ASIC) v Adler & Ors [2002] NSWSC 510; (2002) 42 ACSR 74 Australian Securities and Investments Commission v Edensor Nominees Pty Limited [2001] HCA 1; (2001) 204 CLR 559 Australian Securities & Investments Commission v Forge & Ors [2002] NSWSC 760 Australian Securities and Investments Commission v William Arthur Forge and five Others (Supreme Court of New South Wales, unreported, Foster AJ, 12 March 2002) Australian Securities and Investments Commission v Loiterton [2004] NSWSC 172 Australian Securities and Investments Commission v Plymin [2002] VSC 56; (2002) 4 VR 168 Australian Securities and Investments Commission v Plymin (No 1) [2003] VSC 123; (2003) 175 FLR 124 Australian Securities and Investments Commission v Vines [2003] NSWSC 1095; (2003) 48 ACSR 291 Australian Securities and Investments Commission (ASIC) v Whitlam (No 2) [2002] NSWSC 591; (2002) 169 FLR 383 Australian Securities and Investments Commission (ASIC) v Whitlam (No 2) [2002] NSWSC 718; (2002) 42 ACSR 515 Bamford v Bamford [1970] Ch 212 Banque Commerciale SA (in Liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 160 CLR 279 Barbosa v Di Meglio [1999] NSWCA 307 Baumer v The Queen [1988] HCA 67; (1988) 166 CLR 51 Blackie v Police [1966] NZLR 910 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 Carabelas v Scott [2003] SASC 389; (2003) 177 FLR 334 Chew v The Queen [1992] HCA 18; (1992) 173 CLR 626 Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd [2003] HCA 49; (2003) 77 ALJR 1629 Combined Auctions Pty Ltd v Gray Eisdell Timms Pty Ltd (1997) 16 ACLC 252 Commissioner for Corporate Affairs (Vic) v Bracht [1989] VR 821 Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 Corporate Affairs Commission v Papoulias (1990) 20 NSWLR 503 Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 Feil v Commissioner of Corporate Affairs (1991) 9 ACLC 811 Fitzsimmons v R (1997) 23 ACSR 355 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Furs Limited v Tomkies [1936] HCA 3; (1936) 54 CLR 583 Gamester Pty Limited & Anor v The Honourable Mr Justice Lockhart (1993) 67 ALJR 547 George Hill and Co v Hill (1886) 55 LT 769 Giorgianni v R [1985] HCA 29; (1985) 156 CLR 473 Gray Eisdell Timms Pty Ltd v Combined Auctions Pty Ltd (1995) 122 FLR 253 Hall v New South Wales Trotting Club Ltd [1977] 1 NSWLR 378 Harlowe's Nominees Pty Limited v Woodside (Lakes Entrance) Oil Co NL [1968] HCA 37; (1968) 121 CLR 483 Holpitt Pty Limited v Swaab & Ors (1992) 33 FCR 474 Howe v Administrative Decisions Tribunal of New South Wales [2003] NSWSC 157 Howe v Administrative Decisions Tribunal of New South Wales [2003] NSWCA 120 Hughes v N M Superannuation Pty Ltd (1993) 29 NSWLR 653 CASES CITED : Ibbs v The Queen [1987] HCA 46; (1987) 163 CLR 447 Kinsela v Russell Kinsela Pty Limited (in Liq) (1986) 4 NSWLR 722 Life Savers (Australasia) Ltd v Frigmobile Pty Ltd [1983] 1 NSWLR 431 Macleod v The Queen [2003] HCA 24; (2003) 214 CLR 230 Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 Malone v Marr [1981] 2 NSWLR 894 Marchesi v Barnes [1970] VR 434 Mayes v Mayes [1971] 2 All ER 397; [1971] 1 WLR 679 McCann v Switzerland Insurance Australia Limited [2000] HCA 65; (2000) 203 CLR 579 Miller v Miller (1995) 16 ACSR 73 Multinational Gas & Petrochemical Co v Multinational Gas & Petrochemical Services Ltd [1983] Ch 258 Naxakis v Western General Hospital [1999] HCA 22; (1999) 197 CLR 269 Ngurli Ltd v McCann [1953] HCA 39; (1953) 90 CLR 425 Nicholson v Permakraft (NZ) Ltd (in Liq) [1985] 1 NZLR 242 Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346; (2001) 53 NSWLR 116 O'Brien v Gillespie (1997) 41 NSWLR 549 Pascoe Ltd (in liq) v Lucas (1998) 27 ACSR 737 Pascoe Ltd (in liq) v Lucas [1999] SASC 519; (1999) 75 SASR 246; (1999) 33 ACSR 357 Pemble v R [1971] HCA 20; (1971) 124 CLR 107 Permanent Trustee Australia Ltd v Boulton & Lynjoe Pty Ltd (1994) 33 NSWLR 735 Pioneer Concrete Services Ltd v Galli [1985] VR 675 R v Byrnes [1995] HCA 1; (1995) 183 CLR 501 R v De Simoni [1981] HCA 31; (1981) 147 CLR 383 R v GK [2001] NSWCCA 413; (2001) 53 NSWLR 317 R v Newth [1974] 2 NZLR 760 Re Bright Pine Mills Pty Limited [1969] VR 1002 Re Media Entertainment & Arts Alliance; ex parte Hoyts Corporation Pty Limited [1993] HCA 41; (1994) 68 ALJR 179 Re New World Alliance Pty Limited; Sycotex Pty Limited v Baseler & Ors (No 2) (1994) 51 FCR 425 Re Portuguese Consolidated Copper Mines Ltd; Ex parte Badman; Ex parte Bosanquet (1890) 45 Ch D 16 Re Wakim; ex parte McNally [1999] HCA 27; (1999) 198 CLR 511 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 Reynolds v Wilkinson (1948) 51 WALR 17 Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 78 ALJR 1354 RW Miller & Co Pty Ltd v Krupp (Aust) Pty Ltd (1991) 34 NSWLR 129 Shum Yip Properties Development Limited v Chatswood Investment and Development Co Pty Limited & Ors [2002] NSWSC 13; (2002) 166 FLR 451 Sidebottom & Anor v Commissioner of Taxation of the Commonwealth of Australia [2003] VSCA 2; (2003) 173 FLR 335 Southern Resources Limited v Residues Treatment & Trading Co Limited (1990) 3 ACSR 207 Standard Chartered Bank Limited v Antico & Ors (No 1) (1995) 38 NSWLR 290 Stone v Law Society of the Northern Territory and Others (1992) 108 FLR 332 Suvaal v Cessnock City Council [2003] HCA 41; (2003) 77 ALJR 1449 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1987) 8 NSWLR 270 Van Den Hoek v R [1986] HCA 76; (1986) 161 CLR 158 Whisprun Pty Limited v Dixon [2003] HCA 48; (2003) 77 ALJR 1598 Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285 Whitlam v Australian Securities and Investments Commission [2003] NSWCA 183; (2003) 57 NSWLR 559 Williams v The Minister for Aboriginal Land Rights Act 1983 and the State of NSW [2000] NSWCA 255; (2000) Aust Torts Reports 81-578 Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666 Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 William Arthur Forge - (1st Appellant) Jozsef Endresz - (2nd Appellant) Dawn May Endresz - (3rd Appellant) PARTIES : Allan Paul Endresz - (4th Appellant) Kamanga Holdings - (5th Appellant) Bisoya Pty Limited - (6th Appellant) Australian Securities & Investments Commission - (Respondent) FILE NUMBER(S) : CA 40854/02 COUNSEL : P M Biscoe QC (1 - 6 Appellants) D R Stack (Respondent) Ken Cush & Associates by their agents Curwood & Partners (1 - 6 Appellants) SOLICITORS : Graeme Plath, Australian Securities and Investments Commission (Respondent)