Australian Securities Commission v Bank Leumi Le-Israel

Australian Securities Commission v Bank Leumi Le-Israel - [1996] FCA 1789 - FCA 1996 case summary — Zoe

[24]

"primary notice", in relation to shares in a company, means

a written notice addressed to the holder of the shares requiring

the holder to give to the body giving the notice a written

statement setting out:

(a) full particulars of the holder's relevant interest in

the shares and of the circumstances because of which the

holder has that interest; and

(b) so far as is known to the holder:

(i) full particulars of the name and address of every

other person (if any) who has a relevant interest in

any of the shares;

(ii) full particulars of each such interest and of the

circumstances because of which the other person has

that interest; and

(iii) full particulars of the name and address of

each person (if any) who has given to the holder of the

shares relevant instructions in relation to any of the

shares and of those relevant instructions, and the date

or dates on which those relevant instructions were

given;

"relevant instructions", in relation to shares, means

instructions or directions:

(a) in relation to the acquisition or disposal of the

shares;

(b) in relation to the exercise of any voting or other

rights attached to the shares; or

(c) in connection with any other matter relating to the

shares;

"secondary notice", in relation to shares in a company, means a

written notice addressed to a person requiring the person to give

to the body giving the notice a written statement setting out:

(a) full particulars of any relevant interest that the

person has in any of the shares and of the circumstances

because of which the person has that interest; and

(b) so far as is known to the person:

(i) full particulars of the name and address of every

other person (if any) who has a relevant interest in

any of the shares;

(ii) full particulars of each such interest, and of the

circumstances because of which the other person has

that interest; and

(iii) full particulars of the name and address of

each person (if any) who has given to the person to

whom the notice is addressed relevant instructions in

relation to any of the shares and of those relevant

instructions, and the date or dates on which those

relevant instructions were given.

[86]

45. The Commission accepted that in deciding upon the appropriate remedy the Judge exercised a discretion of a kind which the Court will review only in accordance with the well-known principles stated in House v R [1936] HCA 40; (1936) 55 CLR 499 at 505. The Commission contended, however, that the Judge's exercise of discretion, applying those principles, could not stand. In essence the Commission's complaint was, as I understood it, that in circumstances where the Judge recognised that it was possible to make an order which would in practical effect ensure the provision of the information required by the notices and thus promote the principal object of the provisions of the Law, the refusal to make such an order would both set at nought the statutory purpose in this particular case (because the market would remain uninformed) and, perhaps more importantly, encourage others in the future to evade the statutory objects by holding shares in Australian companies through foreign institutions bound by foreign secrecy laws. As an aspect of that general submission, the Commission argued that the Judge was wrong, having had regard to Swiss law in considering the construction of the provisions, to have regard to it again in connection with the exercise of his discretion as to remedy. The Commission submitted also that the Judge failed to take into account, or at least to give appropriate weight to, the investigatory objects of the provisions, particularly in circumstances where (as was the case) the giving of the notices was instigated by the Australian Stock Exchange in the course of an investigation which it had commenced into dealings in shares in OAP. Additionally, the Commission contended that the Judge was mistaken in the way in which he took into account the position of the ultimate beneficial owners: it was they, the Commission said, who were "calling the shots"; it was their refusal to consent to disclosure which led to the breaches by Leumi and EBC. As counsel for the Commission put it in their written submissions:

[90]

48. Thirdly, I do not think that the criticism can be sustained that the Judge took account of irrelevant matters or failed to take account of essential ones. It is, in general terms, unexceptionable, as an exercise of discretion, to refuse specific relief if that relief would compel a breach of the law: see, e.g., Pottinger v George [1967] HCA 25; (1967) 116 CLR 328 at 337. Indeed, in Rowell v Pratt (1938) AC 101 at 106, Lord Wright said bluntly that a judge "cannot compel a man to commit a criminal offence". I cannot think it is a wrong exercise of discretion to take into account that specific relief, or relief having a similar practical effect, may compel conduct which is in breach of foreign law; thus I think that the Judge was right in having regard to Swiss law in considering the appropriate remedy: to do so in my view is not, as the Commission contended it was, to give Swiss law primacy over Australian law. It is clear that his Honour took into account the primary object of the disclosure provisions: he considered that in the particular circumstances their primary object would be adequately served, having regard to the other considerations to which he referred, by an order for sale to the highest bidder without an order freezing the shares or their proceeds. It is clear also (Appeal Book p 1281) that he took into account - albeit in a somewhat different context - the possible investigatory object of the provisions but, rightly in my view, regarded that as a subsidiary object. His Honour was clearly right in taking into account the degree of culpability of Leumi and EBC (Metals Exploration Ltd v Samic Ltd [1994] HCA 38; (1994) 181 CLR 109 at 127, 128) and I can see no basis for interfering with his findings on that subject. Finally, I do not think his Honour's treatment of the position of the ultimate beneficial owners ("ultimate wrongdoers" as counsel for the Commission described them) discloses error. There was no evidence as to who they were (which distinguishes this case from, for instance, Re North Broken Hill Holdings Ltd (1986) 10 ACLR 270), where they were resident or domiciled or what their grounds or motives may have been for refusing their nominees permission to disclose their identity. Certainly, there was no basis for a conclusion that they had, so far as Australian or any other law was concerned, any obligation to permit disclosure. I do not think his Honour was wrong in taking account, as a discretionary matter going to remedy, of the fact that an order he was asked to make might punish those persons, by depriving them of their interest in the shares or their proceeds, for (and during the continuation of) failure to make a disclosure which their nominees, but not (for anything that appears) they themselves, had an obligation to make.

[91]

49. I think, therefore, that we should not interfere with the exercise by the primary Judge of his discretion as to remedy. Two things should, however, be emphasised: one is that the existence of the two offers for the shares in OAP was an important consideration in this case and made it somewhat unusual; secondly, there were a number of other discretionary considerations which led his Honour to conclude that, having made declarations, the only consequential relief required was an order that the shares be sold. I would not assent to the general proposition, put to us in argument by counsel for Leumi, that in most cases of non compliance with a secondary notice the appropriate order will be (only) one for a peremptory sale of the shares to which the notice relates. It is not, I think, as counsel described it, impermissibly to "conflate" obligation with remedy to say that the evident policy of the Law is that the identity of beneficial owners of shares in Australian listed companies should, if required by a notice given under the Law, be disclosed, not that such a holder should generally be able to avoid the obligation of disclosure, where it is required, by prompt sale. For instance (and it should be stressed that this is only an example) an order for sale of a large parcel may well, despite whatever publicity the proceedings may receive, be highly disruptive to the market in the shares concerned unless the sale takes place over a substantial period; but if nevertheless disclosure is not made, and is not compelled, during that period the market remains uninformed and the policy of the Law is not given effect. Again, a nominee company which is fully aware of the requirements of Australian law and of the remedies available for breach may not evoke much sympathy if it persists in a practice of acquiring Australian shares on behalf of clients without obtaining instructions which would permit disclosure of their identity if required. That is to say no more than that the question, what is the appropriate remedy, is a discretionary one which in each case will have to be answered having regard to the particular circumstances; there is in my view no general rule.

[110]

63. When one compares the provisions of Part 6.8 with, for instance, those of Part 5.4, it is evident that the latter provisions, so far as they relate to the service of documents and their receipt, are drawn with much greater precision than the former. Particularly, subs 459E(1) permits a person to "serve" on a company a demand; events which may follow the service of a demand, and time limits applicable to them, are consistently described by reference to the time when the demand was "served": see e.g., sections 459(2)(a)(ii), 459F(b), 459G(1), 459G(2), 459Q(a). The contrast with Part 6.8 is quite striking. Whereas sections 718 and 719 authorise the Commission or a company to "give" a notice, sections 721 and 722 speak of action which may, or must, be taken by a person who "receives" (rather than "is given") a notice. Then, subs 721(3) refers to a refusal "by written notice to the person"; subs 722(2) speaks of a requirement to "notify the company in writing" of a request; and s 723 speaks of the day on which the Commission "notifies a person of its decision on a request". Additionally, the verb "give" and various derivatives of it are used in Part 6.8 in contexts where clearly s 109X is not, or may not be, applicable: see, e.g., the opening words of the definitions of "primary notice" and "secondary notice" in s 717 ("to give to the body giving the notice"), paras 721(1)(a) and (c) and 721(2)(d), (e) and (f). Additionally, if the construction for which Leumi and EBC contend is right, different requirements, as to giving a notice, apply according to whether or not the person to whom it is given is one to whom s 109X applies. It was suggested to us, somewhat surprisingly perhaps, that whereas an Australian company may be given a notice by fax because s 109X does not apply and s 220 also does not apply (presumably because the notice is "given" not "served"), neither a natural person nor a foreign corporation may be given a notice by fax. In the end, I think that in the context of the provisions, and given their evident purpose, s 109X is inapplicable: the intention that it should not apply sufficiently appears.

At a glance

Court

Decision date

Source

Judgment (129 paragraphs)

Australian Securities Commission v Bank Leumi Le-Israel (Switzerland) and Ors [1996] FCA 1789 (18 September 1996)

Parties

Cases Cited (10)