Adams v Australian Securities and Investments Commission

REASONS FOR JUDGMENT 1 Mr Gambhir Watts appeals from an order made by a judge of the Court refusing his application for leave under s 206G of the Corporations Act 2001 (Cth) to manage either generally or specifically a number of corporations. Such leave was required because on 11 August 2010 a sequestration order was made against him. 2 On 14 September 2010 proceedings under the sequestration order were stayed pending the determination of his appeal. The appeal was determined on 9 March 2011 adversely to Mr Watts and special leave to appeal was refused by the High Court on 7 June 2011. 3 In essence the primary judge found that there was insufficient evidence to support Mr Watts' application. The primary judge identified a number of matters as to which the appellant failed to adduce any evidence. 4 Specifically at [29] his Honour said: Beyond some very limited corporate details to which I will refer below, the evidence does not reveal anything about the business, activities or affairs of these companies. There is no evidence about how or by whom they are managed or about the role that Mr Watts has played or intends to play in their management. There is, indeed, no evidence about why it is necessary for Mr Watts to play any role in the management of these or any other companies. 5 Mr Watts now applies to this Court to adduce further evidence under s 27 of the Federal Court Act 1976 (Cth). Mr Watts accepts that the proposed evidence endeavours to address those matters specifically identified by the primary judge as absent. 6 Mr Watts also contends, in support of his appeal, that the primary judge was in error in his application of the legal principles stated in a number of authorities to which his Honour referred. 7 We will deal first with the application under s 27 of the Federal Court Act. It is important to note a number of matters. First, Mr Watts was aware, in the proceeding before the primary judge, that it was his application and that he bore the onus of adducing evidence in support of it. 8 Secondly, Mr Watts also accepts that the evidence upon which he now seeks to rely upon was available to him at the time of the application before the primary judge. He says that he was not aware that he needed the evidence at that time because he thought that the Court would ask for it. That is the only explanation which he offers for his failure to give the evidence before the primary judge. We note that this explanation was not itself included in his affidavit. Rather, it was given to us from the bar table. 9 Accepting the onus on him under s 27 of the Federal Court Act to demonstrate the cogency of the evidence and the effect it would be likely to have had on the result of his application, Mr Watts identifies a number of facts which he seeks to draw from the proposed additional evidence: his family members, who are variously directors and shareholders of a number of the corporations, support his application; one of the not-for-profit organisations of which he was the founder and president supports his application; with respect to the primary judge's observation that a number of the corporations had less than the minimum number of directors prescribed by the Corporations Act, Mr Watts was not a director at the relevant times and therefore could not control the directorships. 10 We reject the application to adduce further evidence under s 27 for two reasons. First, Mr Watts has given no satisfactory explanation as to why the evidence was not presented to the primary judge. Mr Watts well knew that he bore the onus of presenting all of the evidence on which he relied in support of his application. It is not appropriate for a litigant to sit back and wait for the judge to identify the deficiencies in his case in the reasons for judgment and then seek to remedy the defects on appeal with new evidence. 11 Secondly, it is not clear that even if the further evidence had been adduced an opposite result would have been likely to have been produced. In particular, Mr Watts has not addressed the matters raised by Drummond J in Re Shneider (1996) 71 FCR 69 to which the primary judge referred at [15], namely to put before the Court a proposal to take part in the management of the corporations. See also the observations of Lindgren J in Adams v Australian Securities and Investments Commission (2003) 46 ACSR 68 to which the primary judge referred at [17]. 12 Here, there was no proposal of the type referred to in decisions to which Mr Watts referred: see in particular in the matter of Carey, in the matter of Carey [2011] FCA 235; see also Duffy; Re Westgate Ports Pty Ltd (2010) 79 ACSR 267. 13 We turn then to the appeal and to the errors of law asserted by Mr Watts. The effect of Mr Watts' attack on the reasons of the primary judge is that his Honour correctly cited the relevant principles but failed to apply them. The gravamen of what he said was that the primary judge recognised that the disqualification order is entirely protective but that he failed to apply that principle to the facts of this case. 14 Mr Watts relies on the decision of Barker J in Carey and the decision of Gordon J in Duffy to which we have referred above. In Duffy at [19] Gordon J summarised the relevant legal principles drawn from a long line of authority. Mr Watts contends that his Honour wrongly failed to apply those principles to his case and wrongly distinguished those two cases. 15 It is apparent to us from his Honour's reasons that he did recognise and apply the correct legal principles but found that on the evidence before him Mr Watts failed to demonstrate the matters required to establish a basis for the exercise of the discretion under s 206G of the Corporations Act. This is plain from what his Honour said at [61] to [66] of his reasons, in which he discussed the deficiencies in Mr Watts' evidence. 16 In particular, as we have said, the decisions in Carey and Duffy indicate that the judge in each of those cases had, in support of the application, detailed facts which disclosed the proposed involvement of the applicant in the management of the corporation and the particular role which the applicant would play in the management so as to indicate that there would be adequate protection for the public notwithstanding the bankruptcy of the applicant and the effect of that on the entitlement of the applicant to be a director or officer of the relevant corporation. This can be seen in particular in Duffy at [27] to [32] and in Carey at [37] to [42]. 17 We also note that the primary judge relied at [64] on the fact that Mr Watts' actions showed a lack of understanding of the requirements of the Act concerning the management of a corporation during the currency of a sequestration order. Mr Watts supplied an explanation. His explanation, while perhaps understandable to a lay person, is legally flawed and does not undermine the primary judge's observations. 18 It follows from what we have said above that the appeal must be dismissed. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jacobson, Bennett & Siopis.