BETWEEN : THE INTEGRATED FINANCIAL GROUP PTY LTD (ACN 080 561 833)

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

File Number : [2004] WASC 75

Company law - Regulator's notice requiring production of records of superannuation fund - Production of incorrect collection of records - Some records of fund contained in collection - Whether collection was within scope of notice

Australian Securities and Industrial Commission Act 2001, s 28, s 33, s 37

Respondent (Defendant) : Mr C G Colvin SC & Mr M K Benter

Respondent (Defendant) : Australian Securities & Investment Commission

Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1982) 39 ALR 565

Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 21 WAR 425

Adler v Gardiner [2002] FCA 1141; (2002) 43 ACSR 24

Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VicLawRp 47; [1947] VLR 332

Australian Securities Commission v Lord (1992) 10 ACLC 50

Australian Securities Commission v Lucas (1992) 10 ACLC 11

Casinos Austria International (Christmas Island) Pty Ltd v Christmas Island Resort Pty Ltd, unreported; SCt of WA (Owen J); Library No 980726; 16 December 1998

Conlan v Registrar of Titles & Ors [2001] WASC 201; (2001) 24 WAR 299

Dunesky Bay and Wool Pty Ltd v Elder [1994] FCA 1006; (1994) 126 ALR 522

Earnshaw v Gorman & Sons Pty Ltd [2001] WASCA 50

Financial Custodian Corporation of Victoria Pty Ltd v Taylor (1991) 9 ACLC 1431

George v Rockett [1990] HCA 26; (1990) 170 CLR 104

Green v FP Special Assets Ltd (1990) 9 ACLC 75

Hart v Commissioner of the AFP [2002] FCAFC 392; (2002) 124 FCR 384

Investors Compensation Scheme Limited v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896

Kennedy v Wallace [2004] FCA 332

Moshirian v University of New South Wales [2002] FCA 179

Pacific Carriers Limited v BNP Paribas [2004] HCA 35; (2004) 208 ALR 213

Patrick Stevedores Operations No 2 Pty Ltd [1998] HCA 30; (1998) 195 CLR 1

Permanent Building Society v Wheeler (1992) 10 WAR 109

Royal Botanic Gardens and Domain Trust v South Sydney Council [2002] HCA 5; (2002) 186 ALR 289

Spotless Catering v Commonwealth of Australia, unreported, SCt of WA (Owen J); Library No 980102; 6 March 1998

1 MALCOLM CJ: In my opinion, these appeals should be dismissed for the reasons to be published by Templeman J with whom I agree. There is nothing I would wish to add.

2 TEMPLEMAN J: The respondent, the Australian Securities & Investments Commission ("ASIC") is conducting in an investigation into the Strategic Capital Superannuation Fund ("the Fund").

3 Until 4 April 2003, the trustee of the Fund was Strategic Capital Superannuation Services Pty Ltd. On that date, Deloittes Management Pty Ltd ("Deloittes") was appointed acting trustee pursuant to the Superannuation Industry (Supervision) Act 1993.

4 On 23 June 2003, in the course of its investigation, ASIC served a notice on Deloittes pursuant to s 33 of the Australian Securities & Investments Commission Act 2001 ("the ASIC Act"). The notice required production of inter alia:

"the backup tape of the computer records of the Strategic Capital Superannuation Fund."

5 The notice was expressed in those terms because on 27 May 2003 an employee of Deloittes had told an officer of ASIC that Deloittes had a daily backup copy of the computer records of the Fund. Then at a meeting on 10 June 2003, ASIC officers were told by the Deloittes' employees that the backup tape was in the form of a computer cassette tape.

6 Although the Deloittes employees gave that information to ASIC in good faith, it was (unbeknown to them) incorrect. The tape was in fact a backup tape belonging to Integrated Financial Group Pty Ltd, the appellant. The tape did, however, contain some records relating to the Fund.

7 Deloittes believed the tape to be the backup tape of the computer records of the Fund because that is how the tape was described by Anthony Glass, a Director of Strategic Capital (and also of the appellant) when he handed the tape to Deloittes on or about 7 April 2003, following its appointment as acting trustee.

8 Deloittes therefore responded to ASIC's notice by delivering the tape on receipt of the notice.

9 Subsequently, Mr Glass realised he had made a mistake. The appellant sought the return of the tape from Deloittes. On being told that Deloittes no longer had the tape, the appellant asked ASIC to return it. ASIC declined to do so.

10 On 23 February 2004, the appellant issued a writ against ASIC in which it sought delivery up of the tape and ancillary relief of various kinds.

11 Also on 23 February 2004, the appellant applied for a mandatory interlocutory injunction requiring ASIC to deliver up the tape and an order restraining ASIC from disclosing or using the information contained on the tape, other than certain specified matters.

12 On 22 March 2004, ASIC applied for summary dismissal of the appellant's claim pursuant to O 16 r 1 of the Rules of the Supreme Court, or for an order, in the alternative, that the statement of claim be struck out.

13 Both applications came before a Judge in Chambers on 30 March 2004. On 28 April 2004, his Honour dismissed the appellant's application for interlocutory relief and gave summary judgment on ASIC's application.

14 The appellant's principal submission before the Judge was that the tape produced by Deloittes was not within the scope of the notice, and was not, therefore, received lawfully by ASIC.

15 The Judge did not accept that submission. He accepted ASIC's submission that the obligation imposed on Deloittes by the notice must be understood in the light of the circumstances in which the notice came to be issued. He said (at par [93] of his reasons):

""To construe the notice in the context of the circumstances in which it was given, is consistent with the principle that what is required is sufficient clarity of description to identify that which is to be produced and to show it is something ASIC is entitled to require. The essence of the description is to identify 'with reasonable clarity' what documents the recipient is required to produce. The question is whether the words are sufficiently clear to show what is required. The principle does not require the words of the description to be divorced from the circumstances in which the notice was issued. Those circumstances may, in my view, include the common knowledge and understanding of ASIC and the recipient of the notice. I do not mean by this that what is meant by a notice is to be determined by the opinion of ASIC or its officer alone. But a common understanding between ASIC and the recipient that a particular description describes the same thing would be sufficient, provided the words of the description could reasonably be construed as referring to, or including, that thing. The requirement for clarity is not to be applied 'in a precious or hypercritical fashion'."

"In the present case, it was Deloittes who described the backup tape as "the backup tape of the records of the Strategic Capital Superannuation Fund". They described it that way because that is what they thought it was. The Deloittes notice gave the description which Deloittes had given ASIC. Both Deloittes and ASIC knew what tape was being referred to because of the communication between them. They were both referring to the same physical item. There is no dispute in this case that a tape of that description was one, the production of which could lawfully be required by ASIC under s 33 of the ASIC Act."

"In my view, in these circumstances the production of the tape did properly respond to the notice. Deloittes was obliged to produce the tape to ASIC and ASIC was lawfully entitled to receive and retain it and deal with it in accordance with s 37 of the ASIC Act."

18 With the leave of the Court, the appellant now appeals against the decisions of the primary Judge, on the following grounds:

"(a) The Learned Judge erred in law and in fact in finding that the production of the backup tape ('Tape') the subject of the Proceedings properly responded to the Respondent's notice ('Notice') to Deloitte Management Pty Ltd ('Deloittes').

(b) The Learned Judge erred in fact in finding that the Respondent and Deloittes intended and understood the description in the Notice to refer to the Tape irrespective of whether as an objective fact the Tape met the characteristics attributed to it by the Notice.

(c) The Learned Judge erred in law in finding that it was sufficient for the Tape to respond to the Notice if the Respondent and Deloittes intended and understood the description in the Notice to refer to the Tape as a physical item without regard to whether as an objective fact the Tape met the characteristics attributed to it by the Notice.

(d) The Learned Judge should have held that:

(A) The Notice must identify the physical nature of the book to be produced and the characteristics of the book in sufficient terms to show that the Notice is within power;

(B) The Notice required the production of a physical computer back up tape which as an objective fact was the back up tape of the computer records of the Strategic Capital Superannuation Fund;

(C) The Notice did not require the production of the back up tape in the possession of Deloittes irrespective of the true characteristics of the tape and the Notice would have been beyond power if it had done so; and

(D) The Appellant therefore had an arguable case that the Tape did not respond to the Notice as, although it was a computer back up tape, it was not the back up tape of the computer records of the Fund as specified in the Notice."

19 ASIC's power to issue notices to produce documents is defined by s 28 and s 33 of the ASIC Act. Section 28 (which is to be found in Division 3) provides that a power conferred by that Division may only be exercised in certain specified circumstances. Those include circumstances in which it has been alleged or it is suspected that there has been a contravention of the corporations legislation. That is the basis on which the Deloittes notice was issued, pursuant to s 33 of the ASIC Act. The section provides:

"ASIC may give to a person a written notice requiring the production ... of specified books that are in the first-mentioned person's possession and relate to:

20 Thus, a combination of s 28 and s 33 empowers ASIC to require production of - and therefore the power to receive - "specified books". It is not in dispute that "books" includes computer records.

21 It is clear from these provisions that par (A) above is without substance. The notice was specific. It identified a tape which did exist in fact. And having regard to the investigation then being pursued by ASIC, the issuing of the notice was undoubtedly within power.

22 Paragraphs (B), (C) and (D) may be taken together. The underlying contention is that ASIC had no power to receive the tape, because the tape did not answer the description given in the notice.

"The backup tape of the computer records of (the Fund)."

The appellant submits the tape delivered to ASIC did not answer that description because it was one of its own backup tapes. Although the appellant accepts that the tape did contain some financial records relating to the Fund, it contends that in reality, the tape was something quite different from that specified in the notice.

24 ASIC's submission to the contrary is that although the notice specified the document as being "the backup tape of the computer records of the (Fund)", it must be regarded as a reference to the tape which the appellant had provided to Deloittes on 7 April 2003, in the particular circumstances known to them both.

25 In Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1982) 39 ALR 565 at 570, the Full Court of the Federal Court said, in relation to a notice served pursuant to s 155 of the Trade Practices Act 1974:

" ... the notice must convey, with reasonable clarity, to the recipient what information he is required to furnish or what documents he is required to produce."

26 In Pyneboard, the principle was applied in the case of alleged ambiguity in the subject notices. There is no ambiguity here, in the sense that the notice was quite specific. However, I respectfully agree with the primary Judge that the notice clearly conveyed to Deloittes that production was required of the tape which Deloittes had told ASIC was the backup tape of the computer records of the Fund. That is the very reason Deloittes produced the tape, not having itself made any attempt to identify its contents.

27 And because the tape did contain some information relating to the Fund, ASIC was entitled to receive it.

28 That is the way the primary Judge approached the matter in par [93] of his reasons, to which I have referred above.

29 It is common ground that if ASIC had the power to receive the tape, it had the power to retain it. That is because s 37(5) of the ASIC Act empowers ASIC to retain books produced under a s 33 notice for so long as necessary for the purposes of an investigation. The evidence is that ASIC has retained the tape for precisely that purpose.

30 Indeed s 37 provides a further answer to the appellant's claims. It applies where books are produced "under a requirement" made under Division 3.

31 The appellant contends that there was no requirement to produce the tape actually produced by Deloittes. That is true, given that the appellant had the tape which did answer the description in the notice. However, for the reasons given above, the requirement set out in the notice was clearly valid.

32 Equally clearly, in my view, when ASIC receives a book in response to a valid notice, it must be entitled to inspect the book, to ensure that there has been compliance.

33 It is provided by s 37(5) that the person to whom books have been produced may retain them "for so long as is necessary" for a number of identified purposes. These include any of the purposes referred to in s 28(a), (b) or (d), namely:

"(a) for the purposes of the performance or exercise of any of ASIC's functions and powers under the corporations legislation; or

(b) for the purposes of ensuring compliance with the corporations legislation; or

...

(d) for the purposes of an investigation under Division 1."

34 I see nothing in s 37(5) which would confine ASIC's power of retention to books falling strictly within the ambit of a notice. In my view, s 37(5) applies to any books actually produced in response to a s 33 notice.

35 These conclusions inevitably dispose of the action. That is to say, the question to be tried has been answered adversely to the appellant at the interlocutory stage. Nothing remains to be tried. Indeed, when counsel for the appellant was asked what remained in the action, he said only that he would like to ask "a couple of questions" directed (as I understood him) to clarifying the extent of the "documents" contained on the tape which responded strictly to the notice. But in my view, this would be irrelevant, once it is accepted that the tape contains some information relating to the Fund.

36 Counsel referred also to possible issues which are not raised by the pleadings. Such matters are equally irrelevant.

37 In these circumstances, I consider that the primary Judge was correct in acceding to ASIC's application for summary judgment.