Australian Securities and Investments Commission v China Environment Group Ltd

REASONS FOR JUDGMENT 1 This proceeding was commenced on 7 March 2013 and in it the Australian Securities and Investments Commission ("ASIC") as plaintiff seeks injunctive, declaratory and other relief against China Environment Group Limited ("CEG") as first defendant, and Mr John William Ullmann as second defendant, in relation to alleged contraventions of the Corporations Act 2001 (Cth). The sections said to have been contravened include ss 727, 736, 911A(1), 1041E and 1041H. 2 The plaintiff also issued an interlocutory process on 7 March 2013 seeking an interim injunction restraining the defendants from various activities in relation to financial products and investments said to be carried on within the jurisdiction. I heard the application and I made orders in favour of the plaintiff against Mr Ullmann on 13 March 2013 and against CEG on 14 March 2013. Neither defendant appeared. 3 One of the orders I made on 14 March 2013 was that pursuant to r 10.23 of the Federal Court Rules 2011 (Cth), CEG is deemed to have been served on 7 March 2013 with the originating process and the interlocutory process. It is that order which is the subject of these reasons. 4 The evidence establishes that CEG was incorporated under what is referred to in the documents as the British Virgin Islands Business Companies Act on 22 March 2012. The registered office of CEG is in the British Virgin Islands and the first and sole director is Mr Ullmann. Mr Ullmann continues to be the sole director of the company. The authorised share capital of the company is $US1 million comprised of 100,000,000 shares with a par value of $US0.01. 100,000,000 shares in the company were allotted to Mr Ullmann. As I understand it, something in the order of 2.5 to 3 million shares were transferred by Mr Ullmann to various investors in July 2012 as part of what ASIC contends is the contravening conduct. Nevertheless, Mr Ullmann is and has always been the company's directing mind and will (Tesco Supermarkets Ltd v Nattrass [1972] AC 153; Hamilton v Whitehead (1988) 166 CLR 121). 5 On 15 October 2012 Mr Ullmann was arrested and charged with one count of attempted deception by the South Australian Police ("SAPOL"). ASIC decided that it did not want to duplicate the investigation being carried out by the police. It was advised that the charge was to be heard on 15 March 2013. 6 On 5 March 2013 a Detective Inspector Hutchins of SAPOL informed Mr Murray Holmes, who is a Senior Manager of ASIC's enforcement team in Adelaide, that the charge against Mr Ullmann had been dropped. As a result, Mr Ullmann was discharged from his bail obligations. ASIC had no prior warning that this would happen. 7 At about 5.30 pm on 5 March 2013 Mr Holmes learned that Mr Ullmann's solicitor was collecting his client's passport and other property from SAPOL. An alert was placed on Mr Ullmann's travel movements. 8 At about 2.17 pm eastern daylight saving time ("EDST") on 7 March 2013 ASIC was advised by Carole Tolstrup of the Australian Federal Police Operations Coordination Centre in Canberra that Mr Ullmann had cleared customs in Melbourne four minutes earlier at 2.13 pm (EDST) and that he was bound for Singapore on flight SQ228 which was scheduled to depart at 4.45 pm (EDST). At approximately 4.30 pm (EDST) on that day two airport uniform police from the Melbourne Airport Office, Detective Senior Constable Charlie Roberts and Constable Brian Birch, boarded Singapore Airlines flight SQ228 and served Mr Ullmann with the originating process and interlocutory process both filed on 7 March 2013 and a covering letter from ASIC. 9 CEG has not been independently served with the originating process and interlocutory process and no application for leave to serve it outside the jurisdiction under r 10.42 and following of the Federal Court Rules 2011 (Cth) has been made. I should say that there appears to be no reason why leave to serve would not be granted as the requirements of r 10.43 appear to have been satisfied. However, ASIC submitted that the matter was urgent and that I should deem service to have taken place on CEG by reason of the service effected on Mr Ullmann on 7 March 2013. As to the circumstances of urgency, I am satisfied that there is at least a reasonable prospect that, unless restrained, CEG and Mr Ullmann will continue with the activities identified by ASIC and that their activities involve ordinary members of the public. 10 Rule 10.23 of the Federal Court Rules 2011 (Cth) provides: Deemed service A party may apply to the Court, without notice, for an order that a document is taken to have been served on a person on a date mentioned in the order if: (a) it is not practicable to serve a document on the person in a way required by these Rules; and (b) the party provides evidence that the document has been brought to the attention of the person to be served. Note Without notice is defined in the Dictionary. 11 Rule 10.23 is one of a number of rules which enable the Court to dispense with the strict requirements for service. The ordinary meaning of the word "practicable" includes the concepts of feasibility and capability: see further, Alstom Ltd v Sirakas [2010] NSWSC 669 at [40]; Statewide Secured Investments Pty Ltd v Tarrant [2011] FCA 1067. 12 The meaning of "not practicable" must be determined according to the circumstances of the particular proceedings, including the relief sought and the requirement that the litigation be progressed quickly and efficiently: Rohalo Pharmaceutical Pty Ltd v R P Scherer SpA (1994) 15 ACSR 347 at 366; Ricegrowers Co-operative Ltd and Another v ABC Containerline NV and Others (1996) 138 ALR 480 at 482. Lindgren J explained in Rohalo Pharmaceuticals Pty Ltd v R P Scherer SpA at 366: …the jurisdictional question posed by O 7 r 9 is whether "for any reason it is impractical to serve a document in the manner set out in the Rules". I think that there are special circumstances in the present case which make it desirable that the litigation be progressed quickly and efficiently. 13 In Laurie v Carroll (1958) 98 CLR 310, the Court held that an order for substituted service could not be used to avoid the strict conditions regulating and limiting service out of the jurisdiction. 14 Tamberlin J explained in Ricegrowers Co-Operative Ltd v ABC Containerline NV at 482: The meaning of the expression "practicable" for the purpose of a substituted service application under the corresponding United Kingdom rule was considered by the Court of Appeal in Paragon Group Ltd v Burnell [1991] 2 All ER 388. Lloyd LJ considered that the word "practicable" should be given a wide meaning and that the simple question was whether it was "practicable" to serve by one of the prescribed methods (at 390). The expression "not practicable" is in my view essentially identical in meaning to the term "impractical". In order to establish impracticality some attempt, at least, should be made to effect service in accordance with the rules, or evidence should be led that it is so obviously futile as not to warrant an attempt at service. In this case, there is no evidence of obvious futility nor has any attempt been made to serve in accordance with the rules. 15 The cases I have referred to deal with substituted service (see new r 10.24) not deemed service. In part at least r 10.23 looks to past events whereas r 10.24 looks to the future. In this case, I am satisfied that the originating process and the interlocutory process have been brought to the attention of CEG because they were brought to the attention of the company's directing mind and will, namely, Mr Ullmann. Service on CEG in the way required by the Rules could be undertaken, but it was submitted by ASIC that it was not practicable in the circumstances of urgency which attended the plaintiff's claim for interlocutory relief. Self created urgency is most unlikely to justify an order under r 10.23. I am satisfied that there are circumstances of urgency in this case (i.e., the need for interlocutory or interim orders) and that they are not of ASIC's making. I am also satisfied that the circumstances of urgency involve the protection of members of the public. It seems to me that those matters are relevant to the assessment of what is "practicable". I note that was the view of Lindgren J in Rohalo Pharmaceuticals Pty Ltd v R P Scherer SpA. 16 In the circumstances of this case it can be said that it was not practicable to serve the documents on CEG in the way required by the Rules within r 10.23(a). It was for these reasons that I made the order for deemed service set out earlier in these reasons. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.