Jansen v Australian Securities & Investment Commission

REASONS FOR JUDGMENT 1 On 7 November 2003, I made an order under s 206G of the Corporations Act 2001 (Cth) that the applicant be given leave to manage Markwell International Pty Ltd (Markwell), notwithstanding that he is a person disqualified from managing a corporation. These are my reasons for that decision. 2 The ineligibility of the applicant to manage a corporation until 2 May 2007 stems from his conviction on 3 May 2002 of conspiring to defraud the Australian Fisheries Management Authority (AFMA), in contravention of s 86A of the Crimes Act 1914 (Cth). He pleaded guilty to the charge. He was sentenced to 18 months imprisonment, suspended upon security of $5000 to be of good behaviour for two years, and upon paying the Commonwealth a pecuniary penalty of $2000. 3 The offence concerned a conspiracy with others between 1 December 1991 and 31 December 1992 to defraud the AFMA by dishonestly agreeing to cause and permit returns to the AFMA which falsely recorded catches of orange roughy fish. The conduct occurred soon after the decision to restrict, from the beginning of 1992, the catch of orange roughy in the 'South East Fishery'. The decision was taken by AFMA under the Fisheries Management Act 1991 (Cth). It was part of the policing support for the decision that masters of fishing vessels were required to complete and submit details of their catches of orange roughy, and to complete and submit details of the quantities of orange roughy landed for processing, at the end of each voyage. Fish processors were also required to complete and submit details of the quantities of orange roughy landed and received for processing. The applicant was the shore manager in Hobart of a fishing company which arranged with a Hobart fish processing company to understate the catch of orange roughy by 15%. In fact, the fishing company vessels completed over 70 voyages in the South East Fishery during 1992, and its returns lodged with AFMA understated the total orange roughy catch by some 27%. The agreed understatement percentage increased in percentage terms during 1992 to produce that result. 4 The sentencing judge recorded that, by reason of the decisions in Australian Fisheries Pty Ltd v Minister for Primary Industries and Energy (1992) 37 FCR 463 and La Macchia v Minister for Primary Industries and Energy (1992) 110 ALR 201, the introduction of the quota system for orange roughy in 1992 was largely invalid. The applicant (and the other conspirators) were therefore sentenced for participating in a conspiracy to understate orange roughy catches by misstatements in forms that they were not required to complete or submit, and which AFMA (as it was held) had no power to compel masters and fish processors to complete and submit. Nevertheless, his Honour concluded, the understatement in the submitted forms handicapped AFMA in the annual fixing of total allowable catches of orange roughy in succeeding years, so the conspiracy resulted in the deflection of AFMA from the performance of its public duties. It was also a conspiracy that was intended to carry forward into succeeding years, during which there was a valid system of fishing permits and quota allocations. The system introduced to effect the conspiracy involved a complex matrix of false records and coded symbols. It was also noted that the quantity and value of the undeclared fish caught was relevant to the extent of the criminality of the applicant and his fellow conspirators. The value was some $2.36 million worth of undeclared fish during 1992. 5 The mitigating factors taken into account included that the applicant was not the originator or designer of the conspiracy, that he had no significant prior convictions, that he had pleaded guilty, that there was a long delay between the commission of the offence and the sentencing, and that no significant convictions had arisen from any conduct in the years since 1992. 6 The sentencing remarks concerning the applicant included the following: 'Mr Jansen is 64 years old, and was 54 at the beginning of this conspiracy. He was a fishmonger for many years, but took up employment with Victrawl to avoid having to work in the early hours of the morning. He was having marital difficulties throughout 1992. His wife left him at the end of the year. He resigned from his job with Victrawl in early 1993 and returned to Victoria, his home State. In the mid 1990s he developed what his psychologist called "a gambling addiction of majestic proportion". He lost his house and nearly all his money. I was told that his assets are now worth less than $10,000, though a house and a car belonging to his new partner have apparently been put in his name. He is unemployed, and actively seeking work, being unable to retire comfortably in the way that many people his age are able to. He is troubled by symptoms of anxiety and depression.' 7 The applicant now resides in Queensland. His area of expertise is in the fish marketing and fish retailing industry. He sought employment in that industry without success during 2002. 8 On 23 December 2002, Markwell was incorporated. The applicant is one of three equal shareholders. He is not a director, but each of the shareholders either is a director or has nominated a family member as a director. In the applicant's case, it is his daughter. Markwell is in the business of processing fish and prawns, and intends to distribute them to the Australian domestic market. In due course, it may seek to export fish overseas. 9 The applicant is employed by Markwell as its operations manager. The material before me indicates that he is a stable and hard working employee, and that he has overcome the personal gambling problems he earlier had. The work he performs falls well within his professional expertise. He seeks leave to manage Markwell, so that he may be more directly involved with his other two 'partners', that is the other two shareholders, in its operations and in its strategic decisions. I am told the other two shareholders are aware of his previous conviction, and support the present application. 10 The respondent has taken a neutral attitude to the application. 11 The principles upon which an application such as the present should be addressed are not contentious. They are discussed in Re Magna Alloys & Research Pty Ltd (1975) 1 ACLR 203, and by Beaumont J in Re Hamilton-Irvine (1990) 2 ACSR 616. It is necessary that the Court be persuaded that an exception should be made to the statutory regime for the disqualification of directors. 12 In this matter, I think the shareholding structure of Markwell is of some significance. It has only three shareholders, including the applicant, and the other two shareholders are aware of his relevant background and are supportive of the application. The applicant has expertise in conducting the business which Markwell conducts, and at an operational level is using that expertise already. There are no particular risks to creditors of Markwell, or to those with whom it deals, which would be generated by the order sought. The respondent has helpfully indicated that it is not aware of any particular matters relevant to any risks to its creditors or to those with whom it deals which would be heightened if the order sought were to be made. 13 I also have regard to the nature of the offence, the elapse of time since it was committed, and the applicant's role in its commission as described in the sentencing judge's remarks. The offence was a significant one, albeit committed in a climate of dramatic regulatory change and in relation to regulatory prescriptions which were found to have been invalid. The applicant was noted as not having contravened the fresh regulatory prescriptions imposed during 1993, and as otherwise having no other relevant convictions. It was accepted that he was not an instigator or designer of the scheme which constituted the conspiracy. 14 Ultimately, the focus should be upon the protection of the public and the prevention of the corporate structure from being used to the financial detriment of investors, shareholders, creditors and persons dealing with the company: per Bowen CJ in Equ in Magna Alloys at 205. For the reasons already given, I am satisfied that the protection of investors and shareholders in Markwell does not call for the application to be refused. The structure of Markwell, and the nature of its business, in the light of the applicant's expertise, is also such as to lead me to the view that the creditors and those who deal with Markwell will not be at any particular risk by the applicant being permitted to assume the managerial role he seeks. As that is a significant feature of my reasoning, I propose to make the order sought specifically in relation to Markwell and specifically to confine it to the period whilst Markwell carries on the business of processing fish and prawns and distributing fish and prawns. I am, as is apparent, also satisfied having regard to the other information available about the applicant that there is no real risk of the public being adversely affected by making the order sought, or that there is any real risk of proper commercial standards being applied in the operation of Markwell. 15 I accordingly ordered pursuant to s 206G of the Corporations Act 2001 (Cth) that the applicant be granted leave to manage the corporation Markwell International Pty Ltd so long as the business of that corporation is the processing of fish and prawns and their distribution. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.