Australian Securities & Investment Commission v Axis International Management Pty Ltd

• Jurisdiction: Australia Federal only
• Court: Federal Court (Australia)
• Judgment Date: 15 October 2008
• Neutral Citation: [2008] FCA 1605
• Date: 15 October 2008

FEDERAL COURT OF AUSTRALIA

Australian Securities & Investment Commission v Axis International Management Pty Ltd [2008] FCA 1605

PRACTICE AND PROCEDURE - leave to join Green Triton Ltd - Order 6 rule 8(1)(a) Federal Court Rules - application of general principles - arguable case established.

PRACTICE AND PROCEDURE - leave to serve out of jurisdiction - Order 8 rule 3(2) Federal Court Rules - application of general principles.

Corporations Act 2001 (Cth), ss 707(3), (4), 708, 708A, 727(1), 1324B, 1337B, Part 6D.2

Federal Court of Australia Act 1976 (Cth), s 21

Judiciary Act 1903 (Cth), s 39B(1A)

Federal Court Rules 1976 (Cth), O6 r 8(1), O8 r 2, O8 r 3(2), (3), O8 r 5

Bell Group Ltd (In Liq) v Westpac Banking Corporation (1996) 20 ACSR 760 cited

IMF (Australia) Ltd v Sons of Gwalia Ltd (Administrator Appointed) (2004) 211 ALR 231 cited

John Cooke and Co Ltd v Commonwealth (1922) 31 CLR 394 cited

Merpro Montassa Ltd v Conoco Special Products Inc (1991) 28 FCR 387 cited

Orrcon Operations Pty Ltd v Capital Steel and Pipe Pty Ltd (No 2) [2008] FCA 24cited

Review Australia Pty Ltd v Redberry Enterprise Pty Ltd [2003] FCA 1009cited

Western Australia v Vetter Trittler Pty Ltd (in liq) (1991) 30 FCR 102 cited

AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION v AXIS INTERNATIONAL MANAGEMENT PTY LIMITED

WAD 157 of 2008

GILMOUR J

15 OCTOBER 2008

PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 157 of 2008

BETWEEN:	AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION Plaintiff
AND:	AXIS INTERNATIONAL MANAGEMENT PTY LIMITED Defendant

JUDGE:	GILMOUR J
DATE OF ORDER:	15 OCTOBER 2008
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. Pursuant to order 6 rule 8, Green Triton Limited, of the offices of Portcullis TrustNet (BVI) Limited, Portcullis TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands be joined as a defendant to this action and be designated the eighth defendant.

2. The originating process be amended in terms of the minute of amended originating process filed herewith.

3. Pursuant to order 8 rule 3, the plaintiff have leave to serve the amended originating process and the statement of claim filed on 21 July 2008 on Green Triton Limited in the British Virgin Island by:

(a) leaving the documents at the offices of Portcullis TrusNet (BVI) Limited, Portcullis Trust Net Chambers, P.O. Box 3444, Road Town , Tortola, British Virgin Islands, being the registered office of Green Triton; and

(b) posting the documents by registered post to "Green Triton Ltd, of Portcullis TrusNet (BVI) Limited, Portcullis Trust Net Chambers, P.O. Box 3444, Road Town , Tortola, British Virgin Islands", being the registered office of Green Triton.

4. In respect of the first, second, third, fourth, fifth, sixth and seventh defendants, the minute of amended originating process stand as the amended originating process and further service on those defendants is dispensed with.

5. The plaintiff serve the proposed eighth defendant with the amended originating process and the statement of claim within 14 days of the date upon which the orders sought by the plaintiff in this application are made.

6. The costs of this application be the plaintiff's costs in the cause against the 8th defendant.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 157 of 2008

BETWEEN:	AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION Plaintiff
AND:	AXIS INTERNATIONAL MANAGEMENT PTY LIMITED Defendant

JUDGE:	GILMOUR J
DATE:	15 OCTOBER 2008
PLACE:	PERTH

REASONS FOR JUDGMENT

1 By notice of motion the plaintiff seeks leave to join Green Triton Limited. It also seeks certain consequential orders. The motion is supported by affidavits from Justin Duncan Jones affirmed on 13 and 14 October 2008; Gary Martyn Bertram sworn 14 October 2008; Noel Edward Singleton affirmed 26 May 2008; Michelle Gaye Singleton affirmed 26 May 2008; and Nicholas Joseph Furlan sworn 13 June 2008.

Background

2 In the substantive proceeding the plaintiff, Australian Securities and Investment Commission, seeks declarations against the first, second, third, fourth and fifth defendants to the effect that each has contravened subsection 727(1) of the Corporations Act 2001 (Cth) (“Corporations Act”) by making an offer for sale of shares in a company called Firepower Holdings Group Limited (“Firepower”) in circumstances where the Act provided that the offer needed disclosure to investors and where no prospectus or other disclosure document for the offer was lodged with the plaintiff. The motion for joinder is made because the plaintiff also seeks the same relief as against Green Triton. The allegations against that company are subjacent to the existing pleadings.

3 The reason those remedies were not sought against Green Triton when these proceedings were commenced was that the plaintiff, based on advice from agents in the British Virgin Islands, believed that Green Triton had been deregistered and therefore could not be sued. It is now apparent on the material before me that Green Triton has been re-registered, or at least is registered, and therefore it may be sued. The plaintiff submits that had Green Triton been registered at the time proceedings were commenced, it would have been appropriate for it to be joined in the proceedings.

Joinder

4 In order to establish the grounds that enliven the Court’s discretion to join Green Triton as the eighth defendant to these proceedings under Order 6 rule 8(1) of the Federal Court Rules 1976 (Cth) the plaintiff must satisfy the court that either (a) Green Triton ought to have been joined as a party or (b) Green Triton is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon.

5 A person ought to have been joined under Order 6 rule 8(1)(a) if a judgment of the Court will have a direct effect on the rights and liabilities of that person and not one that is merely indirect or inconsequential: Orrcon Operations Pty Ltd v Capital Steel and Pipe Pty Ltd (No 2) [2008] FCA 24 at [35]. This rule is permissive only but should be liberally construed so that all parties to disputes relating to the one subject matter may be dealt with at the one time: John Cooke and Co Ltd v Commonwealth (1922) 31 CLR 394 at 411.

6 The plaintiff must, however, show that it has an arguable case against the proposed defendant to the standard or being able to resist an application for summary judgment by the proposed respondent had that proposed party been sued in separate proceedings: Review Australia Pty Ltd v Redberry Enterprise Pty Ltd [2003] FCA 1009 at [5].

7 I have read the affidavits of the several investors together with the affidavits of Mr Jones, to which I have referred. The evidence which establishes at least an arguable case includes relevantly:

(a) The existence, at all material times, of the relevant companies, namely:

(i) the proposed eighth defendant; and

(ii) Firepower Holdings Group Limited.

(b) The issue of shares in Firepower to Green Triton on 2 June 2005.

(c) The absence at all material times of a prospectus, profile statement or offer information statement lodged with the plaintiff in relation to any offer of shares in Firepower: s 727(1).

(d) The fact that the shares that were the subject of the alleged contravening offers made by the eighth defendant were among those issued to it on 2 June 2005.

(e) The purpose of the issue of the shares to Green Triton was the sale or transfer of the shares: s 707(3), which is to be inferred on the basis of s 707(4) from the sales of shares by Green Triton that are described in the affidavits of Geoffrey Allan, Carol Ashworth, Darryl Edmondson and Nicholas Furlan, and from the transcript of Timothy Francis Johnston on 4 March 2008. In the transcript, Mr Johnston is recorded to say that, in effect, the eighth defendant was (among other things) to bring funds into Firepower through the sale of shares.

(f) The alleged contravening offers were made by the first defendant, Axis International Management Pty Ltd as agent on behalf of the eighth defendant.

(g) The fact that those offers were made on behalf of the eighth defendant, is referred to in the transcript of the examination of Timothy Francis Johnston on 5 March 2008. In the transcript, Mr Johnston is recorded to say that, in effect, the sixth defendant, Quentin Ward, in his position with the first defendant, had authority to make the offers shown in the share register on behalf of the eighth defendant.

(h) The absence of the exemptions set out in ss 708 and 708A: see s 707(3). The exemptions that are potentially relevant for the purpose of this application are those set out in ss 708(8) (sophisticated investors); 708(10) (offer through financial advisers); 708(11) (professional investors - to be read together with the definition of that term in section 9); 708(12) (offers to person associated with Firepower) and 708A(5), (11) and (12) (certain offers of quoted securities). The Investor Affidavits establish, to the requisite degree of proof, the absence of the exemptions found in s 708. Section 708A does not apply because Firepower has never been listed.

8 In the current proceedings Green Triton should be joined as the eighth defendant, in my opinion, as it is a party necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon and,...