Nenna v Australian Securities and Investments Commission

1. This application under s 206G(1) of the Corporations Act 2001 (Cth) is not invalid by reason of non-compliance with s 206G(2). THE COURT ORDERS THAT:
2. Gary Wayne Stokes have leave to manage G W Stokes Pty Ltd (ACN 160 938 714) on the condition that G W Stokes Pty Ltd not engage in activities other than as trustee of the G W Stokes Super Fund (ABN 33 948 010 382).
3. There be no order as to the costs of this application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

SIOPIS J: 1 The Court set down for hearing, on 28 July 2016, an application by the Australian Securities and Investments Commission (ASIC) for the imposition of penalties on Mr Gary Wayne Stokes and Mr Terence Martin Quinn. Prior to the hearing, the parties filed a minute of proposed consent orders, which included orders that Mr Stokes and Mr Quinn be disqualified, pursuant to s 206C of the Corporations Act 2001 (Cth), from managing a corporation for three years. 2 On 26 July 2016, in anticipation of the Court making an order disqualifying him from managing a corporation, Mr Stokes filed an application for leave to manage G W Stokes Pty Ltd on condition that G W Stokes Pty Ltd not engage in activities other than as trustee of the G W Stokes Super Fund. 3 Section 206G of the Corporations Act relevantly provides as follows: (1) A person who is disqualified from managing corporations may apply to the Court for leave to manage: (a) corporations; or (b) a particular class of corporations; or (c) a particular corporation; if the person was not disqualified by ASIC. (2) The person must lodge a notice with ASIC at least 21 days before commencing the proceedings. The notice must be in the prescribed form. (3) The order granting leave may be expressed to be subject to exceptions and conditions determined by the Court. … 4 In support of his application, Mr Stokes also filed an affidavit dated 26 July 2016. 5 At the penalty hearing on 28 July 2016, in anticipation of the Court making an order disqualifying him from managing a corporation, Mr Stokes made submissions in support of granting him the leave sought in the application filed on 26 July 2016. 6 On that occasion, ASIC advised the Court that it did not oppose the making of the orders sought by Mr Stokes, should the Court make the consent order disqualifying Mr Stokes from managing a corporation for three years. On 28 July 2016, the Court reserved its decision. 7 On 19 August 2016, the Court made, inter alia, an order under s 206C disqualifying Mr Stokes from managing a corporation for three years from the time and the date of the order. After I had made that order, counsel for Mr Stokes moved for the relief Mr Stokes sought in his application filed on 26 July 2016. I granted the relief sought on the application of counsel for Mr Stokes, and I said I would give my reasons later. These are the reasons. 8 As mentioned, Mr Stokes commenced this proceeding on 26 July 2016. Section 206G(2) of the Corporations Act requires that a person who seeks relief under s 206G(1) must lodge a prescribed notice with ASIC at least 21 days before commencing a proceeding. 9 Mr Stokes accepts that he did not give the prescribed notice to ASIC before commencing this proceeding. However, Mr Stokes has applied for a declaration under s 1322(4)(a) of the Corporations Act that his application under s 206G(1) of the Corporations Act is not invalid by reason of the non-compliance with s 206G(2). 10 A similar application was made by the applicant in the case of Nenna v Australian Securities and Investments Commission (2011) 198 FCR 32 (Nenna). In that case, Middleton J, after having engaged in a comprehensive analysis of the authorities, made a declaration in the terms sought. This is notwithstanding, that Mr Nenna's conduct in ignoring the notice requirement in s 206G(2) was said to be deliberate. 11 Like Middleton J in Nenna, I am of the view that it is appropriate that the declaration sought by Mr Stokes under s 1322(4)(a) of the Corporations Act should be made. I also accept ASIC's submissions that s 1322(6)(a)(iii) and s 1322(6)(c) of the Corporations Act apply in that it is just and equitable that the declaration be made, and that no substantial injustice has been, or is likely to be, caused to any person. 12 Accordingly, the declaration sought under s 1322(4)(a) of the Corporations Act will be made. 13 In relation to Mr Stokes' application for leave to manage G W Stokes Pty Ltd on condition that G W Stokes Pty Ltd does not engage in activities other than as trustee of the G W Stokes Super Fund, Mr Stokes has deposed to the following facts. 14 Mr Stokes is the sole director, secretary and shareholder of G W Stokes Pty Ltd. Mr Stokes is also the only member of the G W Stokes Super Fund; and, with investment advice that he occasionally receives from the Westpac Banking Corporation, he makes the investment decisions for the G W Stokes Super Fund. The G W Stokes Super Fund is managed administratively by Heffron Services Pty Limited. 15 Further, said Mr Stokes, his advice was that, if leave was refused, he would be required to cause G W Stokes Pty Ltd to be removed as trustee, and he would have to appoint himself and another person to act with him, as joint trustees. 16 In my view, it is clear that the activities which Mr Stokes undertakes in managing the G W Stokes Super Fund, as a director of the trustee, G W Stokes Pty Ltd, are very different from those as managing director of Padbury Mining Limited, a listed public company. Further, it is apparent that the same public interest considerations reflected in the need to protect the investing public from the conduct which led to the making of the disqualification order under s 206C of the Corporations Act, do not apply in relation to Mr Stokes' activities as a director of the trustee company of his superannuation fund. It is also apparent that if leave was not granted, Mr Stokes would, in any event, as a joint trustee, be involved in the management of the G W Stokes Super Fund. 17 The aforementioned circumstances weigh in favour of giving Mr Stokes the leave he seeks. Further, I observe that ASIC does not oppose granting Mr Stokes the leave he seeks. 18 Accordingly, I will make the order that Mr Stokes have leave to manage G W Stokes Pty Ltd on the condition that G W Stokes Pty Ltd not engage in activities other than as trustee of the G W Stokes Super Fund. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.