Australian Securities & Investments Commission v Maxwell & ors [2006] NSWSC 1052

Reported Decision : 59 ACSR 373 (2006) 24 ACLC 1308

New South Wales Supreme Court

CITATION : Australian Securities & Investments Commission v Maxwell & ors [2006] NSWSC 1052 This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 6 February 2006, 20 February 2006, 23 February 2006

JUDGMENT DATE : 10 October 2006

JURISDICTION : Equity Division

JUDGMENT OF : Brereton J

DECISION : Declarations of contravention pursuant to Corporations Act, s 1317E; pecuniary penalty orders pursuant to s 1317G, injunctive relief pursuant to s 1324; compensation orders pursuant to s 1317H; and banning orders pursuant to s 206C, 206D and 206E: see Schedules A to H.

CATCHWORDS : CORPORATIONS – Fundraising – Offers of securities – whether loan agreement was "debenture" within Corporations Act, s 9, and "security" for purposes of Chapter 7 - whether offer to enter into loan agreements was offer of securities for purposes of Part 6D.2 – whether offers to enter into loan agreements required disclosure under Part 6D.2 – conditions of availability of s 708(10) exemption - licensee's satisfaction on reasonable grounds of matters in s 708(10)(b) is condition and requires that licensee sufficiently investigate experience of investor to form relevant opinion - whether advertisement of offers prohibited if disclosure not required by reason of s 708(1) – whether to make singular personal approach to acquaintance is to "publish" a statement referring to an offer – whether Corporations Act s 79 available to impose accessorial civil liability in respect of provisions which are not civil penalty provisions – Carrying on financial services business without a licence - "financial services business" - "financial service" - "financial product advice" – "financial product" – whether loan agreements were financial products - whether by issuing loan agreements, corporation issued, and thereby dealt in, financial products – whether corporation was carrying on a financial services business - whether licensee under old legislation pursuant to transitional provisions was to be treated as if it held an Australian Financial Services Licence under new legislation for purposes of s 708(10) - Misleading and deceptive conduct – where corporations engaged in misleading and deceptive conduct by publishing advertisements and distributing brochures – whether director "knowingly concerned" - where evidence does not implicate director in any relevant conduct after he is shown to have knowledge of matters which falsify representations - Directors duties – whether breached by director authorising, permitting or failing to prevent contraventions by corporation of provisions of Corporations Act (not being civil penalty provisions) – ss 180, 181 and 182 are not concerned with any general obligation owed by directors at large to conduct affairs of company in accordance with law generally or Corporations Act in particular, but with duties owed to company - relevant considerations – whether s 181 duty of good faith is contravened in absence of deliberate conduct known to be not in interests of company - where corporations were closely held proprietary companies in which interests of directors and shareholders were identical, director was young and inexperienced and his role was to provide building and construction expertise while others were responsible for fund-raising role and directors obtained legal and accounting advice - Disqualification orders – when operation of s 206D is attracted – Consent orders – effect of agreement of parties on Court's discretionary powers – Injunctions – whether appropriate to make orders prohibiting respondent from engaging in conduct that is misleading or deceptive or which is likely to mislead or deceive – Declarations of contravention – duplicity - whether declarations of contravention should treat as a single contravention of s 180, and as another single contravention of s 181, whole course of conduct as director of Group of companies over period, rather than particular acts or omissions – whether appropriate to make declarations of involvement (under s 79) in contravention by corporations (being contraventions of provisions which are not civil penalty provisions and do not make provision for accessorial civil liability) – Disqualification orders – relevant considerations.