Australian Securities and Investment Commission v Burton-Clay [2003] FCA 111 | Case summary

(g) will not, whether by himself, his servants or agents or otherwise howsoever: (i) carry on a financial services business ("financial services business" as defined in section 761A of the Corporations Act 2001); (ii) be or become an authorised representative of the holder of an Australian financial services licence ("Australian financial services licence" and "authorised representative" are defined in section 761A of the Corporations Act 2001); (iii) provide a financial service as defined in Chapter 7, Part 1, Division 4 of the Corporations Act 2001; (iv) be or become a proper authority of a securities dealer or an investment adviser or do any act as a representative of a securities dealer or an investment adviser; (v) carry on a business of arranging contracts of insurance, including acting as an agent, broker or insurance intermediary; (vi) arrange contracts of insurance; provided that nothing in these Orders shall prohibit the first defendant from forwarding to an insurer or to United Insurance Advisers Pty Ltd money received by him on or prior to 20 December 2002, as payment for a policy of insurance arranged with that insurer on or prior to 20 December 2002, or forwarding to EIG Ansvar cheques received by him on or after 20 December 2002, as payment for a policy of insurance arranged with EIG Ansvar on or prior to the date of this Order. 2. The undertakings given by the defendants to the Court on 20 December 2002, Order 1 of the Orders made by the Court on 20 December 2002 and the Orders of 4 February 2003 and 14 February 2003 are discharged. 3. The proceeding is otherwise dismissed with no order as to costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT 1 Following an investigation the Australian Securities and Investments Commission instituted this proceeding in which it alleged that the defendants had contravened (1) s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (by engaging in misleading conduct in relation to financial services) and (2) provisions in Chapter 7 of the Corporations Act 2001 (Cth) which regulate the provision of financial services. ASIC seeks certain declarations as well as injunctions under s 12GD of the ASIC Act. The action has now settled and I have been asked to make orders by consent. The orders will require the first defendant to repay certain amounts to his clients. It is also proposed that he be restrained in perpetuity from, amongst other things, carrying on a financial services business, becoming the holder of a financial services licence and providing any financial services. Ordinarily the making of consent orders to bring an action to its conclusion is unremarkable, and would not require reasons. However, there are aspects of the proposed orders here, and in other like cases, which justify some comment. 2 At one time an injunction would not go to restrain the commission of an offence in breach of a statutory prohibition: Gee v Pritchard (1818) 36 ER 670 where Lord Eldon LC said: "I have no jurisdiction to prevent the commission of crimes". Even when the impediment to jurisdiction was removed by the Common Law Procedure Act 1854 such injunctions were still not granted: Ramsay v Aberfoyle Manufacturing Co. (Australia) Pty Ltd (1935) 54 CLR 230, 239 per Latham CJ: "A Court of equity has no general duty to 'enforce the law' either at the suit of the Attorney-General or private persons". The reasons why courts were reluctant to intervene were explained by Kirby P in Peek v New South Wales Egg Corporation (1986) 6 NSWLR 1, 2-5. At their base was the view that an attempt by a civil court to regulate public conduct would have the effect of enlarging and amending the criminal law. Moreover as Middleton JA said in Robinson v Adams [1925] 1 DLR 359, 365: "Government by injunction is a thing abhorrent to the law of England and of this Province". 3 During the twentieth century various exceptions to the general rule were developed in relation to statutory and regulatory offences, as distinct from criminal offences proper. The exceptional cases included those where the law had been flouted and the statutory penalty was an inadequate restraint (Attorney-General v Harris [1961] 1 QB 74); where the damage that might be caused by the commission of an offence could not be redressed in private law (Gouriet v Union of Post Office Workers [1978] AC 435, 498); where if the breach of the criminal law was not stopped, others might take matters into their own hands (Burnley Borough Council v England (1977) 76 LGR 393); and where there was an immediate threat or danger to public safety (Attorney-General v Chaudry [1971] 3 All ER 938). 4 Many of these considerations may be put to one side when dealing with a case where parliament itself has provided that an injunction may be an appropriate additional remedy for the breach of a statute. The ASIC Act and the Corporations Act are two examples of the many statutes which create an offence, prescribe a penalty for that offence and confer on a civil court the additional power to restrain by injunction future breaches. Nevertheless there is still a need to show caution when exercising the power. I have in mind at least two reasons. The first is that by being subjected to an injunction a defendant runs the risk of committing two "offences" if the statute is breached; both of the statute and the injunction. Secondly, the statutory prohibition, which is often not a criminal prohibition, will be converted into just that. In this connection it is instructive (making due allowance for the nature of the offence there under consideration) to refer to the observations of Lord Diplock in Gouriet v Union of Post Office Workers [1978] AC 435 at 498-9,: "It is in my view appropriate to be used only in the most exceptional of cases. It is not accurate to describe it as preventive justice. It is a deterrent and punitive procedure; but this is characteristic too of the enforcement of criminal law through the ordinary courts of criminal jurisdiction. The very creation by Parliament of a statutory offence constitutes a warning to potential offenders that if they are found guilty by a court of criminal jurisdiction of the conduct that is proscribed, they will be liable to suffer punishment up to a maximum authorised by the statute. When a court of civil jurisdiction grants an injunction restraining a potential offender from committing what is a crime but not a wrong for which there is redress in private law, this in effect is warning him that he will be in double jeopardy, for if he is found guilty by the civil court of committing the crime he will be liable to suffer punishment of whatever severity that court may think appropriate, whether or not it exceeds the maximum penalty authorised by the statute and notwithstanding that he will also be liable to be punished again for the same crime if found guilty of it by a court of criminal jurisdiction. Where the crime that is the subject matter of the injunction is triable on indictment the anomalies involved in the use of this exceptional procedure are enhanced. The accused has the constitutional right to be tried by jury and his guilt established by reference to the criminal standard of proof. If he is proceeded against for contempt of court he is deprived of these advantages." These sentiments are not new. In many respects they echo the observations of Lord Herschell LC in Institute of Patent Agents v Lockwood [1894] AC 347, 361-362. 5 Plainly enough where parliament has authorised the court to interfere by injunction to "enforce the law" the injunction cannot be regarded as a remedy which is alternative or even additional to that which has been imposed for the commission of the offence: Ramsay v Aberfoyle Manufacturing Co. (Australia) Pty Ltd (1935) 54 CLR 230 at 256. Nevertheless the grant of an injunction, especially one which is to run in perpetuity, can be oppressive, and for that reason may only be justified in exceptional circumstances. 6 In this case I will not impede the agreement which the parties have reached. In an appropriate case I could decline to make consent orders if, for one reason or another, they were contrary to the public interest: Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc [1999] FCA 1387 at [37]-[46]. There are three reasons why I will not intervene. First, my comments in this case have been directed to injunctions which require observance of an obligation imposed by statute. The injunctions which I have been requested to grant are only indirectly concerned with enforcement; primarily they require the first defendant to stay out of a particular line of business. Secondly, I take into account that the first defendant is legally represented and is able to understand and evaluate the effect on him of the proposed orders. Thirdly, I was also told by counsel that the first defendant is almost at the end of his working life and the restraining orders will have practical effect for only a short time. 7 I will make orders in accordance with the agreed minutes of short orders which have been submitted. I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

Australian Securities and Investment Commission v Burton-Clay

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