Australian Securities and Investments Commission v Antares Energy Ltd

SIOPIS J: 1 This is an application to serve originating process and other Court documents on Mr James Andrew Cruickshank, the second defendant, out of Australia pursuant to rr 10.43 and 10.44 of the Federal Court Rules 2011 (Cth) (the Rules). The plaintiff, the Australian Securities and Investments Commission (ASIC), applies for leave to serve Mr Cruickshank personally in the United States of America pursuant to the Hague Convention. There is evidence that Mr Cruickshank resides in Dallas, Texas. 2 The plaintiff has commenced an application against Antares Energy Ltd (administrators appointed), the first defendant, and Mr Cruickshank, who was, at the material times, the chairman and chief executive officer of the first defendant. The plaintiff alleges that the first defendant contravened s 674(2) of the Corporations Act 2001 (Cth). The plaintiff also alleges that the second defendant was knowingly involved in the contravention of s 674(2) by the first defendant and so contravened s 674(2A) of the Corporations Act, and that he also contravened s 180(1) of the Corporations Act. 3 In summary, the plaintiff claims that the first defendant failed to comply with the continuous disclosure regime of the Corporations Act in relation to announcements which it made to the Australian Securities Exchange (ASX) commencing on 7 September 2015 about the sale by the first defendant of two mining properties located in the United States of America. These properties are referred to as the "Northern Star Assets" and the "Big Star Assets". The 7 September 2015 announcement to the ASX stated that the first defendant had sold the Northern Star Assets for USD 148,788,560 and the Big Star Assets for USD 105,069,420. 4 The plaintiff alleges that the first defendant contravened its continuous disclosure obligations in respect of the sale transactions the subject of the ASX announcements in three respects. 5 First, the announcements failed to state the identity of the party that was said to be the purchaser of the Northern Star Assets and the Big Star Assets. That party was Wade Energy Corporation (Wade Energy), but this was not disclosed in the announcements. 6 Secondly, on or about 6 September 2015, which was the day before the first announcement was made to the ASX, Mr Barry Hanson, the chief executive officer of Wade Energy had advised Mr Cruickshank that Wade Energy had not received all financial approval necessary to complete the purchase of the Big Star Assets. This was not disclosed in the first or subsequent announcements by the first defendant. 7 Thirdly, the plaintiff alleges that the first defendant failed to disclose that it had not undertaken a due diligence exercise in relation to the capability of Wade Energy to fulfil its obligations to pay the amounts of USD 148,788,560 for the Northern Star Assets and USD 105,069,420 for the Big Star Assets. 8 As mentioned, the plaintiff also claims that Mr Cruickshank was knowingly concerned in the contraventions of the first defendant. The plaintiff also alleges that by engaging in that conduct, Mr Cruickshank contravened s 180(1) of the Corporations Act in that he failed to discharge his duties as a director with the requisite degree of care and diligence that a reasonable person in his position would exercise in relation to the non-disclosure of information which the plaintiff alleges was price sensitive information. 9 The plaintiff claims declarations that each of the defendants contravened the Corporations Act and that Mr Cruickshank should pay a pecuniary penalty in respect of the alleged contraventions of the Corporations Act; and that, in addition, Mr Cruickshank should be disqualified from holding office as a director of a corporation. 10 Before making an order for service out of the jurisdiction, the Court must be satisfied that there has been compliance with the three matters referred to in r 10.43(4) of the Rules. 11 First, the Court must be satisfied that it has jurisdiction in respect of the proceeding. 12 Section 1337B of the Corporations Act confers on this Court jurisdiction in relation to civil matters arising under the Corporations Act. I am satisfied, therefore, that the jurisdictional requirement is met. 13 The second matter is whether the proceeding is of a kind that is mentioned in r 10.42 of the Rules. 14 As mentioned, the plaintiff, in its originating application, has claimed a pecuniary penalty against the second defendant. However, in relation to the claim against the first defendant, which is in administration, leave has been given to proceed against the first defendant on the basis that the plaintiff will seek only declaratory relief and not pecuniary penalties from the first defendant. 15 One of the kinds of proceedings mentioned in r 10.42 is a proceeding based on a contravention of an Act which is committed in Australia (item 12). I am satisfied that the claims which are made against the second defendant mean that the proceeding falls within that characterisation. 16 I was also referred by counsel to cases where the Court has made orders for service out of the jurisdiction of proceedings where the relief claimed was a pecuniary penalty. 17 I refer to the case of Fair Work Ombudsman v Transpetrol TM As [2017] FCA 311 as an example of where the Court has given leave for service out of the jurisdiction of civil penalty proceedings. In that case, the Fair Work Ombudsman commenced a civil penalty proceeding against a Norwegian company for contravention of the Fair Work Act 2009 (Cth) because of the underpayment of certain seamen who were engaged on a ship's voyage pursuant to a licence granted under an Australian statute. 18 I am content to accept, therefore, that the fact that the proceeding includes a claim for a pecuniary penalty, does not preclude the proceeding from falling within the characterisation contended for by the plaintiff with the consequence that the second requirement in r 10.43(4) is satisfied. 19 I observe that this proceeding may also be characterised under r 10.42 as a "proceeding in relation to the construction, effect or enforcement of an Act…" (item 14); a "proceeding seeking any relief or remedy under an Act" (item 15); or a "proceeding affecting the person to be served in relation to: (a) the person's…office in, a corporation incorporated, or carrying on business, in Australia; or …(c) the person's conduct as a member or officer of such a corporation…" (item 24). 20 The third requirement under rule 10.43(4) is that the plaintiff demonstrate a prima facie case for all or any of the relief claimed. 21 The standard which the plaintiff needs to satisfy in demonstrating a prima facie case does not call for an extensive inquiry. It is sufficient if, on a broad examination of the material, that there is material from which inferences may be drawn which, if translated into findings of fact, would support the relief claimed. 22 The plaintiff relies on the affidavit of Mr Vincent Geneste dated 28 November 2017 and his supplementary affidavit dated 4 December 2017. Mr Geneste is a senior manager in enforcement at ASIC. 23 Mr Geneste has annexed to his affidavit material which shows that there was a substantial movement in the first defendant's share price from 9 cents on the last trading day before the announcement to 31.5 cents after the announcement was made. The closing share price reached a peak of 50 cents on 10 September 2015. 24 In support of the allegation that the impugned ASX announcements were made with the knowledge and involvement of Mr Cruickshank, Mr Geneste has annexed to his affidavit of 28 November 2017 some emails which on their face show that Mr Cruickshank was involved in making the announcements and had been conscious of the absence of the identity of the acquirer in the announcements. 25 Accordingly, I am satisfied that applying the test referred to earlier, the plaintiff has demonstrated a prima facie case pursuant to r 10.43(4)(c) of the Rules. 26 As to the proposed method of service on the second defendant, there is also evidence from Mr Geneste that the second defendant resides at an address in Dallas, Texas. 27 There is evidence that the United States of America is a party to the Hague Convention and that the preferred method of service within the United States of America is personal service. The website maintained by the Hague Conference on Private International Law states that an entity, Process Forwarding International, is the only private service entity authorised to act on behalf of the United States of America to receive requests for service and to proceed to serve documents. The plaintiff intends to serve the process and attendant documents on the second defendant by that method. 28 There are, on the face of the evidence, no discretionary reasons why I should not make the orders which are sought in the amended interlocutory application. 29 Accordingly, I will make orders in those terms. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.