Supreme Court of WA|2002-10-14|Before: Mr J, Heenan J

Australian Securities and Investments Commission v Secure Finance & Investment Services (Australia) Pty Ltd & Anor [2002] WASC 260 (14 October 2002)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION -v- SECURE FINANCE & INVESTMENT SERVICES (AUSTRALIA) PTY LTD & ANOR [2002] WASC 260

MATTER : Sections 601ED(5), 727, 780, 781 and 995 of the Corporations Law of Western Australia and ss 461, 462, 601ED(5), 727, 780, 781, 995, 1114, 1323 and 1327 of the Corporations Act 2001

SECURE FINANCE & INVESTMENT SERVICES (AUSTRALIA) PTY LTD (ACN 094 169 481)

BETWEEN : AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

SECURE FINANCE & INVESTMENT SERVICES (AUSTRALIA) PTY LTD (ACN 094 169 481)

Corporations - Managed investment scheme - Application for winding up - Evidence - Final or interlocutory relief - Admissibility of hearsay evidence based on information and belief refused - Application adjourned

Corporations Law of Western Australia s 461(1)(k)

Rules of the Supreme Court O 29 r 2(d), O 37 r 6, r 6(2), O 81G r 30, r 33(1)

First Defendant : Mr J Gilmour QC & Mr P H McAppion

Second Defendant : Mr J Gilmour QC & Mr P H McAppion

1 EM HEENAN J: Before the Court is an application by the Australian Securities and Investments Commission (ASIC), by what is termed an interlocutory process dated 16 August 2002, seeking orders for the winding-up of the first respondent pursuant to the provisions of subs 461(1)(k) of the Corporations Law and for the appointment of a scheme liquidator pursuant to s 601EE. This application, to that extent, repeats claims for relief in the originating proceedings which commenced this litigation some months before.

2 The reference to s 601EE of the Corporations Act is to be taken in this setting. It involves an application for an order to wind up a managed investment scheme alleged to have been operating in contravention of subs 601ED(5) of the Act, on the grounds that it was operating in the jurisdiction without being registered.

3 In support of both these applications, which are listed before me as a special appointment today, counsel for ASIC has sought to adduce some nine affidavits to make out his client's entitlement to the relief claimed. A series of objections has been taken by counsel for the respondents to the admissibility of these affidavits.

4 These objections go, so I am told, variously to relevance and to the form of individual passages in the affidavits, but all embrace one common factor, said to be "an overarching objection", that to a significant extent the affidavits contain hearsay evidence which is inadmissible in an application of this nature. The questions of the admissibility of these affidavits, and the characterisation of the proceedings, have necessitated a decision on these discrete issues.

5 Reference has been made by Mr Gilmour QC for the respondents to the provisions of the Rules of the Supreme Court O 81G and, in particular, to r 30 and r 33(1) in support of the submission that, except in circumstances which do not apply here, affidavits must contain admissible evidence within the direct knowledge of the deponent.

6 It is perhaps unnecessary for Mr Gilmour to rely on O 81G although it sufficiently makes out the point of his proposition, for it is well established by O 37 r 6 that, except as provided in certain other provisions of the Rules which are not germane here, that subject to any order made under O 29 r 2(d), an affidavit must be confined to such facts as the deponent is able of his own knowledge to prove.

7 The exception under O 29 r 2(d) is simply a recognition of the fact that the Court, in view of its case management powers, may order that evidence of any particular facts shall be given at the trial by a statement on oath based on information and belief or by production of documents or entries of books or otherwise as the Court may direct. It is sufficient to note that no such direction has, at least so far, been sought or made in these proceedings.

8 Order 37 r 6(2) goes on to provide that in interlocutory proceedings, an affidavit may contain statements of information or belief with the sources and grounds of that information and belief. This leads counsel for ASIC to contend that these proceedings are, as the application of 16 August itself asserts, interlocutory processes. Counsel for ASIC relies further on a decision of Owen J in this Court in Australian Securities and Investments Commission v Chase Capital Management Pty Ltd & Ors [2001] WASC 27, reported at [2001] WASC 27; (2001) 36 ACSR 778, for the proposition that relief of this kind can be granted on an interlocutory application and that affidavit evidence is admissible in support. To my mind, not very much turns on the manner or description of the process by which the relief is sought from the Court. What is more essential, indeed what is crucial, is the proper characterisation of the relief which is being sought. In this case, ASIC seeks orders for the winding-up of a company under the just and equitable ground and, secondly, orders for the winding-up of a managed investment scheme under s 601EE. I will come to winding-up orders on the just and equitable ground later.

9 An application for the winding-up of a managed investment scheme under s 601EE of the Act has, as far as I can see, no direct analogue. It is a species of relief created under the legislation for a new type of investment scheme which itself is recognised under chapter 5C of the Act. There are obvious similarities with the winding-up of a company or other incorporated body and, for that matter, with the administration of a trust or other fund, which often will require the appointment of some officer or officers to undertake the administrative tasks in the winding-up, to hold or collect the property of the company, scheme or fund, to conduct investigations, to report on progress, and, eventually, to arrange distribution of the property assembled as part of the winding-up, but those similarities do not establish any direct identity between the winding-up of a managed investment scheme and for the winding-up of a company.

10 It seems to me that this is special relief of a statutory kind which the Court is free to grant if the requisite conditions, in this case breach of s 601ED(5), are established. It being an order of some consequence, it is obviously necessary that the Court should only make such an order if satisfied, to the requisite degree of proof, that facts are established which warrant an order of that kind.

11 In the ordinary course of events the establishment of facts to found the making of any order or the grant of any judgment or relief from the Court will need to be established on admissible evidence. The exception, as I have already noted, is in interlocutory applications. The reason for that is not difficult to appreciate. Interlocutory applications are not final; they are provisional and subject to variation and, generally speaking, are not intended to have final effects on the interests of the parties. Perhaps the most obvious example is an interlocutory injunction, although there are many other forms of interlocutory order.

12 In my view, an order for the winding-up of a managed investment scheme is of a different character. It has and is intended to have a lasting effect in bringing to an end the operation of a management investment scheme which has, up until that point, been operating in contravention of legislative provisions. It is quite true, as counsel for ASIC submits, that there will still be much to do and for a Court to supervise after such a winding-up order is made. There will, or may be, directions to be given to a liquidator, receiver or officer appointed; there may be the need for special powers to be extended; there may be the need for vesting orders to be made; there may be a need for orders for the examination of particular persons claiming interests in the properties of the scheme to be made; but those matters seem to me to be part of the mechanics of putting into effect an order of the Court which irrevocably changes the status of the scheme.

13 This description of the effect of a winding-up order for a managed investment scheme appears to me to satisfy the criteria for a final order within the meaning of the accepted authorities - in particular, Carr v Finance Corporation of Australia Ltd (1981) 147 CLR 248 and Australian Telecommunications Corporation v Barnes [1996] 2 Qd R 335. Another case cited by Mr Robson in support of a contention that this was an interlocutory order in character was Biala Pty Ltd v Mallina Holdings (1989) 2 WAR 381. However, an examination of both the Australian Telecommunications Corporation case and Biala reveals that the orders made in those cases, respectively - an order declaring that the plaintiff in the first case had made an election of a particular kind entitling him to pursue an action for damages and, in the second case, an order for an extension of time for the confirmation of the issue of securities at a discount - were interlocutory because they were not final by their natures. Those two decisions appear to me to demonstrate quite obviously the temporary or provisional nature of interlocutory orders and to demonstrate how they are recognisable because they do not finally determine the rights of the parties to the litigation.

14 The fact that if an order winding up this alleged management investment scheme were to be made, that it would then be possible for ASIC or others to come and seek supplementary relief, does not in any way to suggest to me that the order winding up the scheme would not of itself be final. I am unable to accept the implied submission that if such an order were made in these proceedings, the first or second defendant could come along in the same proceedings by a subsequent chamber summons and simply seek the winding up orders revoked by showing the development of some new circumstance, or that some evidence, which was available at the time and could have been relied on, is brought to attention. It seems to me that if an order winding up the first defendant were to be made under s 601EE, that would be a final and conclusive order challengeable only by the exercise of a right of appeal, thus demonstrating its character.

15 With respect to the submission that conclusions to the opposite effect should follow from the decision of Owen J in ASIC v Chase Capital Management Pty Ltd (supra), I can only say that upon my reading of his Honour's reasons for decision in that case there was no issue between the contending parties about whether evidence of one kind rather than another was admissible in those proceedings. There seems to me to be no finding by his Honour that the character of those proceedings justified the reception of hearsay evidence on the basis that the proceedings were interlocutory in nature. It is true that there are some passages in his Honour's reasons referring to the process which led to the order being termed an interlocutory application and there is also reference, as Mr McLeod has pointed out, to the fact that, to an extent, his Honour relied on a report of an officer appointed by the Court who had conducted an investigation into the alleged scheme. Nevertheless, it seems clear from his Honour's decision that Owen J was satisfied on uncontested evidence that there had been trading of a kind which established a management investment scheme by a company or group of companies which had not been registered as required by the legislation. Therefore I distinguish the decision in ASIC v Chase Capital on the basis that it does not deal directly with the issue which has arisen here.

16 There were other cases cited by Mr Robson and by Mr Gilmour which largely dealt with the question of whether or not hearsay evidence is admissible in proceedings for the winding-up of a company in the ordinary or traditional way. One of those cases is the decision of Lucas J in Community Development Pty Ltd v Engwirda Construction Co [1968] Qd R 541. This is a helpful decision in that it illustrates how different evidence may be used for different purposes, depending upon whether the relief being sought is interlocutory or final in character. At issue in that case was the question of whether or not an affidavit or affidavits containing hearsay evidence were admissible in proceedings for an injunction to restrain the further prosecution of a petition for the winding-up of a company under the Uniform Companies Acts of 1961. It was said by Lucas J, at 544, that the hearsay evidence was admissible in proceedings dealing with the application for the injunction to restrain the prosecution of the winding-up petition because they were interlocutory in character. However, his Honour said, admittedly obiter, that such an affidavit would not be receivable at the hearing of the petition itself, the implication plainly being that that would be a claim for final relief. That decision appears to me to confirm the orthodox approach referred to by Megarry J in Koscot Interplanetary v Koscot AG [1972] 3 All ER 829 and also to demonstrate that an application for the winding-up of a company will result in a major change of status of a company which will be binding between the parties.

17 By direct application, those authorities appear to me to require that I should find that the application for the winding-up of the first defendant pursuant to s 461K is an application for final relief which necessitates the exclusion of hearsay material.

18 Therefore, in relation to both the application for the winding-up of the scheme and in relation to the winding-up of the first defendant under s 461K, I consider that the plaintiff may only rely on direct evidence and not evidence of information or belief or other hearsay.

Australian Securities and Investments Commission v Secure Finance & Investment Services

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Australian Securities and Investments Commission v Secure Finance & Investment Services (Australia) Pty Ltd & Anor [2002] WASC 260 (14 October 2002)

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