[16] The originator of a document wishing to make it available on the World Wide Web arranges for it to be placed in a storage area managed by a web server. This process is conventionally referred to as 'uploading'. A person wishing to have access to that document must issue a request to the relevant server nominating the location of the web page identified by its 'uniform resource locator (URL)'. When the server delivers the document in response to the request the process is conventionally referred to as 'downloading'."
30 Identification of the place or places at which persons involved in the LifeWealth 8 business uploaded documents and thereby made them capable of being downloaded anywhere in the world is not something on which any firm conclusions can be drawn on the evidence before me. But it cannot be said, on that evidence, that any such uploading activity took place in Australia; although it is plain that persons in Australia were capable of downloading such material in Australia and that many did so. I assume, without deciding, that the acts of uploading occurred outside Australia. That raises the question whether physical acts outside Australia which result in business communication with persons in Australia are, by reason of the territorial quality of the receipt of the communication, properly regarded as carrying on business in Australia. The question applies equally to a situation where a person outside Australia telephones persons in Australia or sends a messages by post or email to persons in Australia and, as a result of those acts performed by the person outside Australia, receives responses which amount to or lead to transactions forming part of some undoubted business activity.
31 It is my opinion that the circumstances outlined are, of themselves, insufficient to constitute the carrying on of business in Australia. Case law makes it clear that the territorial concept of carrying on business involves acts within the relevant territory that amount to or are ancillary to transactions that make up or support the business. Many of the cases concern persons acting as agents within the jurisdiction of enterprise bases and operating outside the jurisdiction. One view has traditionally been taken where the agent within the jurisdiction has authority to bind the principal to dealings there; while another view has been taken of cases in which the agent is empowered to do no more than receive proposals or orders within the jurisdiction (often, no doubt, in response to solicitation there) and retransmit them to the principal. The distinction is discussed in several cases, including Okura & Co Ltd v Forsbacka Jernverks Aktiebolag [1914] 1 KB 715. Buckley LJ, speaking of a situation of the latter kind, there said (at p.721):
"These being the facts, 101, Leadenhall Street is really only an address from which business is from time to time offered to the foreign corporation; the question whether any particular business shall or shall not be done is determined by the foreign corporation in Sweden and not by any one in London. In my opinion the defendants are not 'here' by an alter ego who does business for them here, or who is competent to bind them in any way. They are not doing business here by a person but through a person. That person has to communicate with them, and the ultimate determination, resulting in a contract, is made not by the agents in London, but by the defendants in Sweden. It follows from this that one of the essential elements which must be present before a write can be served in this country on the agent of a foreign corporation is lacking in this case. This appeal must, therefore, be dismissed."
32 By the same reasoning, the mere employment by a foreign company of a commercial traveller in Victoria to receive orders on commission and to forward them to its office abroad was held, in Pearce v Tower Manufacturing & Novelty Co Ltd (1898) 24 VLR 506, not to be carrying on business in Victoria.
33 Advances in technology making it possible for material uploaded on to the Internet in some place unknown to be accessed with ease by anyone in Australia with Internet facilities who wishes (or chances) to access it cannot be seen as having carried with them any alteration of principles as to the place of carrying on business developed at times when such communication was unknown. It has never been suggested that someone who by, say, letters posted in another country and addressed to recipients in Australia, seeks to interest those persons in business transactions to be entered into in the other country and in fact succeeds in concluding such transactions with some of them thereby carries on business in Australia, even though, depending on precise circumstances, the solicitation may contravene some other Australian law. There is a need for some physical activity in Australia through human instrumentalities, being activity that itself forms part of the course of conducting business.
34 Unless there is evidence of activities in Australia of placing material on the Internet or processing and dealing with inquiries or applications received by Internet, the question whether LifeWealth Labuan carried on business in Australia must be addressed by reference to the elements of the evidence that go beyond Internet solicitation of persons to be licensees of the LifeWealth 8 simulated stock market game.
The territorial aspect of carrying on business
35 The relevant concept of carrying on business in Australia is elucidated by s.21:
" Carrying on business in Australia or a State or Territory
(1) A body corporate that has a place of business in Australia, or in a State or Territory, carries on business in Australia, or in that State or Territory, as the case may be.
(2) A reference to a body corporate carrying on business in Australia, or in a State or Territory, includes a reference to the body:
(a) establishing or using a share transfer office or share registration office in Australia, or in the State or Territory, as the case may be; or
(b) administering, managing, or otherwise dealing with, property situated in Australia, or in the State or Territory, as the case may be, as an agent, legal personal representative or trustee, whether by employees or agents or otherwise.
(3) Despite subsection (2), a body corporate does not carry on business in Australia, or in a State or Territory, merely because, in Australia, or in the State or Territory, as the case may be, the body:
(a) is or becomes a party to a proceeding or effects settlement of a proceeding or of a claim or dispute; or
(b) holds meetings of its directors or shareholders or carries on other activities concerning its internal affairs; or
(c) maintains a bank account; or
(d) effects a sale through an independent contractor; or
(e) solicits or procures an order that becomes a binding contract only if the order is accepted outside Australia, or the State or Territory, as the case may be; or
(f) creates evidence of a debt, or creates a charge on property; or
(g) secures or collects any of its debts or enforces its rights in regard to any securities relating to such debts; or
(h) conducts an isolated transaction that is completed within a period of 31 days, not being one of a number of similar transactions repeated from time to time; or
(j) invests any of its funds or holds any property."
36 This section does not, of course, provide any exhaustive or exclusive definition of carrying on business in Australia. This is made clear by the word "includes" in s.21(2). There remains scope for the operation and application of territorially based concepts of carrying on business derived from the general law. Before those concepts are examined, the scope and effect of s.21(3) should be noted.
37 Section 21(3) begins with the words, "Despite subsection (2)". It is thus expressed to have an effect that is unconstrained by the statements in s.21(2) as to particular acts and activities that are to be regarded as carrying on business in a particular territory. It follows that the statement in s.21(3) as to what does not constitute the carrying on of business in a territory is to be construed on the basis that it is neither confined nor expanded by anything in s.21(2). Section 21(3) refers to nine categories of activity, some of which are divided into subcategories (see paras (a), (b), (e), (f), (g) and (j)). A body corporate does not carry on business within the territory "merely because", in the territory, it engages in activity (a) "or" engages in activity (b) "or" engages in activity (c) "or" engages in activity (d) "or" engages in activity (e) "or" engages in activity (f) "or" engages in activity (g) "or" engages in activity (h) "or" engages in activity (j). The words "merely because" are, it seems, a modern version of "for the reason only that" in earlier corresponding provisions (see Companies Act 1961, s.344(3); Companies (New South Wales) Code, s.510(3)). Because the nine paragraphs (a) to (j) are separated by the word "or" (which appears at the end of each of the first eight) and the operation of the provision as a whole is conditioned by the words "merely because", the effect of s.21(3), as it seems to me, is that a body corporate does not carry on business in a particular territory if the only activity it engages in there is one of the nine. If it engages in several (or all) of them, the only effect of s.21(3) is to ensure that the undertaking of any one of the activities does not of itself produce a finding that business is carried on. Because s.21(3) operates by reference to each of the nine forms of activity separately, it does not, where several of the activities are engaged in, direct a finding that business is not carried on; but equally does not lead to any positive conclusion that business is carried on.
38 I return to the general law concept of carrying on business. According to those concepts, carrying on of business generally involves conducting some form of commercial enterprise, systematically and regularly with a view to profit (see, for example, Hyde v Sullivan (1956) 56 SR (NSW) 113 at p.119), although, as a number of cases emphasise, there may be a finding that business is carried on even where some of the usual elements are missing. The following passage in the judgment of Gibbs J in Smith (on behalf of National Parks and Wildlife Service) v Capewell (1979) 142 CLR 509 is instructive:
"The expression 'carry on business' in its ordinary meaning, signifies a course of conduct involving the performance of a succession of acts, and not simply the effecting of one solitary transaction. In Smith v Anderson (1880) 15 Ch D 247; [1874-80] All ER Rep 1121, where the Court of Appeal considered the effect of s 4 of the Companies Act 1862 (UK) which spoke of an 'association … formed … for the purpose of carrying on any … business', Brett LJ said, Ch D at 277-8; All ER Rep at 1130: 'The expression "carrying on" implies a repetition of acts, and excludes the case of an association formed for doing one particular act which is never to be repeated.'
In Kirkwood v Gadd [1910] AC 422; [1908-10] All ER Rep 768 Lord Loreburn LC said (AC at 423): 'What is carrying on business? It imports a series or repetition of acts.' In the same case Lord Atkinson (at 431) referred with apparent approval to the statement of Brett LJ in Smith v Anderson . Similarly, in Premier Automatic Tickets Issuers Ltd FC of T (1933) 50 CLR 268 at 298, Dixon J, in a passage frequently quoted, said that 'the carrying on or carrying out of any profit-making undertaking or scheme' in a taxation statute, 'appears to cover, on the one hand, the habitual pursuit of a course of conduct, and, on the other, the carrying into execution of a plan or venture which does not involve repetition or system …'. The decision in Cornelius v Phillips [1918] AC 199; [1916-17] All ER Rep 685, is not authority for any different view of the meaning of the expression. It was there held that a money-lender had carried on the business of money-lending at an hotel which was not his registered address although he had effected only one transaction at the hotel. In that case, which was recently discussed and distinguished in Yango Pastoral Co Pty Ltd v First Chicago Aust Ltd (1978) 21 ALR 585; 53 ALJR 1, the single transaction which fell within the statutory prohibition was conducted by a person who was, on any view, carrying on a money-lending business. Similarly, in Lowe v Cant [1961] SASR 333, it was held that a milk vendor who had been allotted a zone under regulations governing the supply of milk and who, on one occasion, delivered milk to a householder in another zone, had carried on business as a retail vendor of milk within a zone other than that allotted to him. Again, there was no doubt that the milk vendor was carrying on business as such or that the isolated transaction which occurred outside his allotted zone was done in the course of carrying on that business. In these cases, although the defendant engaged in only one transaction of the kind proscribed, that transaction was done in the course of carrying on a business. A single transaction may amount to the carrying on of a business, although no other transaction has so far been effected, if it is proved that there was an intention to carry on a business and that the transaction was undertaken in pursuance of that intention: Fairway Estates Pty Ltd v F C of T (1970) 123 CLR 153 at 164-5. It seems clear that a solitary transaction of sale or purchase of skins in New South Wales will only constitute an offence against s 105(a) of the Act, if the sale or purchase has been made by the defendant with the intention that it shall be the first of several transactions in a business which he thereby commences to carry on, or if it has been made in the course of a business which the defendant is carrying on elsewhere."
39 As the very last part of that statement indicates, a company may be found to be carrying on business "in" a particular geographic area even though the bulk of its business is conducted elsewhere. Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 concerned a company that operated overland tours in which passengers were transported by bus and provided with food and camping accommodation purchased by the company in fulfilment of its contractual obligations to customers. The despatch of busloads of passengers through Western Australia and the undertaking of commercial transactions there in support of their transportation entailed the carrying on of business in Western Australia. And this was so even though none of the tours ever started or finished in Western Australia and it was rare for anyone to join a tour in Western Australia (and anyone who did so always left it outside Western Australia). It was held by majority (Gibbs, Stephen, Mason and Jacobs JJ, Barwick CJ dissenting) that this was sufficient to warrant a finding that the company carried on business in Western Australia, even allowing for the operation of statutory exceptions of the kind now found in s.21(3) of the Corporations Act.
40 Dunlop Pneumatic Tyre Co Ltd v Aktien-Gesellschaft Fur Motor Und Motorfahrzeugbau Vorm Cudell & Co [1902] 1 KB 342, concerned a German company which hired a stand at a trade fair in London for nine days and placed there an employee whose function it was "to explain the working of the articles exhibited, and to take orders for and press the sale of the defendants' goods". The employee was held to be "a person sent over by the defendant corporation as their representative to do for them in this country business of theirs, which, not being a concrete entity, they could not do for themselves like an ordinary individual, namely, the business of exhibiting and vending their wares at the show at the Crystal Palace".
41 In Actiesselskabet Dampskib "Hercules" v Grand Trunk Pacific Railway Company [1912] 1 KB 222, it was held that the activity of raising loans in London for use in the company's railway operations in Canada amounted to carrying on business in England. The rationale appears from the judgment of Buckley LJ (at p.228):
"The cardinal factors are that the company does acts within the jurisdiction which are part of its business as a company, and does them at a fixed place within the jurisdiction. The raising of this loan capital is part of the company's business, and it is done here by a London committee constituted of the directors resident in England. They are the company's agents in this country for that purpose."
The applicants' basic contention
42 The applicants say that the LifeWealth 8 business was carried on in two distinct phases: first, from December 2002 to 1 May 2003, by the individual promoters on behalf of the company proposed to be formed in Malta; and, second, from 2 May 2003 until it ceased operation or was disposed of in late 2004, by BVICo (as I have said, the evidence is equivocal as to whether incorporation of BVICo occurred in March 2003 or May 2003). According to the applicants, the LifeWealth 8 business was never conducted by LifeWealth Labuan which only ever acted as a holding company.
43 In support of the first part of this contention, the applicants point to the fact that one of the human actors, Mr Levick, registered "LifeWealth 8" as a business name and opened a bank account of his own styled "Life Wealth 8". Both these things were done in Australia. There is in evidence a search of the register under the Business Names Act 1962 of this State which shows "Life Wealth 8" as having been registered in respect of Mr Levick from 31 October 2002 to 25 January 2003.
44 In pursuing the question whether LifeWealth Labuan at any stage carried on business in Australia, it is convenient to begin with the evidence emerging from contemporary documents that have been introduced into evidence. Each side tendered a quantity of documents. They are replete with references to "LifeWealth 8" but only rarely explicit in identifying which of the corporate entities is referred to. I shall therefore concentrate on documents that unambiguously relate to or concern LifeWealth Labuan as distinct from any other entity. Having obtained, from the contemporary documents, whatever indications there are of relevance to the question of LifeWealth Labuan's carrying on business in Australia, I shall consider what inferences may be drawn from them and then test those resultant inferences against the affidavit and oral evidence.
Documentary evidence - company searches
45 The annual return of LifeWealth Labuan shows its shareholders to be Green Co Ltd, Botany Holdings Ltd, Plover Ltd, GEBO Equity Investments (Labuan) Ltd and Bumiputra-Commerce Corporate Services Ltd. There is, as I understand it, no dispute that each of these companies is incorporated in Malaysia and that the first four companies are owned by and under the actual control of, respectively, Mr Kotlar, Mr Levick, Mr Campbell and Mr Walker.
46 The annual return records the directors of LifeWealth Labuan as Signatory Investments Pty Ltd, Global Offshore Services Ltd (a Malaysian entity) and Bumiputra-Commerce International Trust (also a Malaysian entity).
47 An ASIC search of Signatory Investments Pty Ltd as at 17 November 2004 shows the directors to be Mr Kotlar (appointed 30 October 2002), Mr Walker (appointed 16 July 2003) and Mr Campbell (appointed 30 October 2002). Mr Levick is shown as a former director (appointed 30 October 2002) whose appointment ended on 24 March 2003. Each of the four is shown as having his address in Australia: Mr Kotlar at Glenelg East in South Australia, Mr Walker at North Turramurra in New South Wales, Mr Campbell at Broadbeach in Queensland and Mr Levick at Kingsford in New South Wales. The shares in Signatory Investments are shown as held in equal proportions by Mr Levick, Mr Kotlar and Mr Campbell.
48 An opinion of Ms Felicia Ho, a member of the Malaysian bar, introduced into evidence concludes that the purported appointment of Signatory Investments as "controlling director" of LifeWealth Labuan "is null and void", although Ms Ho says that, based on the annual return as filed, Signatory Investments is one of the three directors, the other two being the two Malaysian entities disclosed by the annual return to which I have referred. By contrast, in a letter of February 2005, Mr Azli Noor of Bumiputra-Commerce Trust Ltd says that he has no documents on file substantiating either the appointment of Signatory Investments as a director or its being given the powers of a "controlling director". He says that listing of Signatory Investments as a director in the annual return was "a mistake".
Documentary evidence - shareholders agreement
49 There is in evidence an agreement dated 8 February 2003 between Mr Campbell, Mr Kotlar, Mr Levick and Mr Walker entitled "Shareholders Agreement" and signed by all of them. Clause 1.1 defined "Company" as "Life Wealth Limited". The first recital says that "the Company is a company incorporated in Labuan, Malaysia of which the abovementioned [i.e, the four named partes] are all shareholders". The second recital reads:
"AND WHEREAS the Company is an online network marketing company that has developed intellectual property with its principle [sic] place of business being St Julian's Malta (Head Office)."
50 Clause 2.0 said that the affairs of the company were to be managed by a board of four directors, with each of Campbell, Kotlar, Levick and Walker being entitled to elect one director while remaining a shareholder. Clause 2 went on to deal with directors' remuneration and with directors' decision making, with some matters requiring unanimous agreement and others by a resolution passed by majority vote at a meeting or by unanimous written consent divorced from a meeting. There was in clause 2.9 the following provision ("Shareholder" referring to each of Campbell, Kotlar, Levick and Walker):
"2.9 Each Shareholder shall, for so long as he/she is the owner of the shares of the Company devote such time and effort as may reasonably required to carry on the business of the Company and the Shareholder shall use his/her best efforts, skill and abilities to promote the interests of the Company. Each shareholder agrees that he/she will not engage, without consent of the other Shareholders, in a business which is directly competitive to that of the company."