HA3021 Corporations Law

Gore v ASIC [2017] FCAFC 13-Case introduction 

The case of Gore vs. Australian Securities and Investments Commission implicated a plea by Mrs Marina Gore in opposition to 7.5 year ban on her for running a business in the industry of financial services under section 1324 of the Corporation Act 2001 and she paid 80 percent of the costs of ASIC from the total of 95 percent from time of joinder. Mrs Gore appealed in opposition to the declarations of primary judge that she was intentionally concerned in breaching of (a) section 727(1) of Corporation Act 2001 and section 727(2) of Corporation Act 2001 that is by offering the securities with no document of current disclosure and (b) section 12DA of ASIC Act 2001 (Cth) and section 1041H of Corporation Act 2001 through engaging in deceptive and misleading conduct. The ASIC cross appealed in opposition to term of injunction that it was not appropriate (Macredie, 2017).

Principal contraveners made different offers of securities, using corporate vehicles in two PPM (private placement memoranda) included in a website in Cayman Islands and British Virgin Islands. It was found by the primary judge that every PPM was included in the prospectus for the issue of shares to the investors and no such other “disclosure document” or the prospectus had been lodged with ASIC in a manner conforming to Pt 6D.2 of Act. There are basically three issues that came up in appeal of Mrs Gore that are:

First, it was held by the primary judge that ASIC failed to prove the purposes of establishing accessorial liability of Mrs Gore but ASIC did not need to prove that she knew a factual element out of three factual elements which comprises a breach of s 727 (1) and (2) (Dowd & Uljans, 2017). One element was that the offer for the securities required disclosure to the investors in Pt 6D.2 of Act. In case, Mrs Gore know that offers for the securities required disclosure to the investors under Pt 6D.2, subsequently the finding of the primary judge that she was an accessory to principals of breaching of  s 727 cannot stand (Benchmark, 2017). It was also argued by Mrs Gore that the primary judge made a mistake in identifying another element that is she knew that offers for the securities were not lodged with ASIC (CCH Australia Limited, 2018).

Secondly, it was held by the primary judge that Mrs Gore was intentionally concerned in making a representation expressed by each offers for the securities, that is money spent by Australian self-managed superannuation funds (SMSFs) in future and would be utilised for purchase of the property by offeror while each of representations was deceptive or misleading or probably deceive or mislead (Thompson & Harris, 2017). It was found by the primary judge that Mrs Gore was aware that the representations made by the key people, did not have practical grounds for doing that. Hence, representations were considered to have been misleading. The findings of the primary judge were challenged by Mrs Gore that she had concrete and actual information that every PPM (private placement memoranda) suggested that representation. Apart from this, she challenged that it was made exclusive of the reasonable grounds (Russell Mc Veagh, 2018).

Thirdly, it was held by the primary judge that the purpose of solution of injunction in s 1324 (1) that was not to penalize the person enjoined in fact it was to defend or protect the public (Ashurst, 2017). It was complained by Mrs Gore that term of the restrictions on her was extreme and unnecessary. On the other hand, it was argued by the ASIC argued that the primary judge should have interpreted power to enjoin that is to take account of a disciplinary aspect. It was also argued by ASIC that 7.5 year term of restraint was deliberately inappropriate (Narushimha & Rooy, 2018).

ASIC face difficulties in pursuing the civil actions and prove that Mrs Gore conduct in breach of CA had taken place. Apart from this, the criminal fault elements are also established in relation to every physical elements of the contravention alleged. It was important for ASIC to prove that Mrs Gore was aware about the characteristics that should be included in the offer and the disclosure to the investors about the current documents is important and mandatory.  But Mrs Gore was aware of legal requirements that should be fulfilled under the Act (Judicial Commission of New South Wales, 2018).                                      

The duties/responsibilities breached 

There were four contraventions breached that includes section 727(1) of Corporation Act 2001 and section 727 (2) of Corporation Act 2001and section 12DA of ASIC Act 2001 (Cth) and section 1041H of Corporation Act 2001. The contravention of the provision of Corporations Act can result in criminal and civil liability both for achieving coherence in law. Section 727 (1) prohibits the offers of securities with no prospectus. The disclosure document is important to make an offer of the securities or the distribution of an application form is important. The duties are considered as breached as the disclosure of the current document among the investors is important. 1041H includes the civil liability that is deceptive or misleading conduct.

A person should not engage in the conduct for a financial service or a financial product. Mrs Gore was involved in the contravention that is by engaging in deceptive conduct and it was depicted by her that the currencies invested by the Australian SMSFs to PPM would be used for purchase of the property in the future. Apart from this, 1324 injunctions are included in which a person engage in conduct that comprises contravention of Act, attempt to contravene or aiding a person to contravene this act. This was not considered as offense.

It is considered by the Court in Gore that elements of contravention should be similar irrespective of the questions that arise in civil or criminal proceedings, that is with effect that need for proving a fault element in criminal code applies in the civil actions along with the proceedings and in that civil penalty is required. The failure of proving the elements made it difficult for Australian Securities and Investment Commission.

Discussion and critical analysis of the decision

Mrs. Gore appealed against the declarations of primary judge that was knowledgeably concerned in four contraventions, which were s 727 (1) and (2) of the Corporations Act 2001 (Cth) along with s 1041H and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). The primary judge ordered that she be restrained for 7½ years from carrying out business in financial services industry as well as to pay 80% of the 95% of the costs of the ASIC from the duration of her joinder (Jade, 2017). The contraventions committed by Mrs. Gore were serious and she was significantly involved in establishment as well as development of BVI scheme and was personal beneficiary of it as well.

Her involvement had caused a damaging effect on number of SMSF investors along with those having limited savings whose whole investments had been lost. The restraint by injunction upon her from doing such acts is appropriate as there was a huge probability that she would have engaged in similar activities in future, if she had not been restrained.

It was considered by his Honor that till the time of his making final orders, Mrs. Gore was subjected to t interim injunctive restraints for about 2 ½ years but the argument of ASIC to restrain Mrs. Gore for life was rejected by primary judge and concluded to restrain her for further 7 ½ years. However, it had been argued by Mrs. Gore that the order to pay 805 of the 95% costs of the ASIC was unreasonable as there were 18 defendants and she had only been found liable for the contraventions.

The position of Mrs. Gore was significantly different from others who were consented to a period of either 10 years or 7 ½ years. Her physical involvement and relative seriousness of her misconduct as well as her role being the director of the company should be the primary consideration in ordering injunction in order to minimize the risk of further injury to the public investing in future (Globe Business Media Group, 2017).   

Reason for the decision in view of the Corporations Act

The case provides an appropriate reminder to the directors, corporate advisors and officers regarding potential exposure to personal liability in the form of an accessory for the breach of the Corporations Act 2001 concerning the securities issues requiring disclosure under Pt 6D.2 (Macredie, 2017). The primary judge found and declared that Mrs. Gore was knowingly concerned in the contravention of;

In order to claim in accessorial liability, the contravention of s 79 of CA 2001 is essential and the person should knowingly concerned in the commission of offence being an intentional contributor. Thus, the court granted injunctions restraining all the defendants from engaging in businesses concerning financial services, financial products as well as superannuation (asic.gov.au, 2017).

Relevance of the decision to the development of Australian corporations law (ACL) & impact of the decision on the operation of companies in Australia

In Gore v ASIC [2017], the Full Federal Court considered s 727 of the Corporations Act 2001 which prohibit certain conduct and provide a basis for either criminal proceedings under Pt 9.4 of CA or civil remedies under CA. ASIC had not supposed criminal offences and required only relief for the civil contraventions. Though, the Full Court held that physical and fault elements applying under criminal procedures for an offence under s 727 were also applicable in civil remedy proceedings .It is notable that the case was not a civil penalty proceeding, wherein, ASIC demanded civil injunctive relief instead of penalty against the defendant for her accessorial liability for contravening s 727, which is considered as an offence provision by s 1311 of the Act. As s 1308A of the CA provides that the criminal procedures are applied to the offences against CA, the court determined the applicability of criminal code (AGS, 2017).

ASIC emphasized on the recommendations required in corporations of Australia such as;

ASIC has decided to continue reviewing the financial reports of all the proprietary companies along with the unlisted public companies on the basis of complaints as well as other intelligence (Gilbert + Tobin, 2017). It was announced by the ASIC that the Federal Court has agreed to consider whether it is essential to prove fault as stated by Chapter 2 of the Criminal Code in civil proceedings regarding certain breaches of the CA (Ags.gov.au, 2017).

References

Ags.gov.au, 2017. Express law. [Online]
Available at: http://www.ags.gov.au/publications/express-law/el259.html
[Accessed 8 May 2018].

AGS, 2017. Express law. [Online]
Available at: http://ags.gov.au/publications/express-law/el256.html
[Accessed 8 May 2018].

Ashurst, 2017. Full Federal Court clarifies criminal fault position. [Online]
Available at: https://www.ashurst.com/en/news-and-insights/insights/whats-new-full-federal-court-clarifies-criminal-fault-position-171003/

asic.gov.au, 2017. 17-192MR Decision on application of Criminal Code in civil proceedings under Corporations Act. [Online]
Available at: http://asic.gov.au/about-asic/media-centre/find-a-media-release/2017-releases/17-192mr-decision-on-application-of-criminal-code-in-civil-proceedings-under-corporations-act/
[Accessed 8 May 2018].

Benchmark, 2017. Daily Insurance. [Online]
Available at: https://benchmarkinc.com.au/benchmark/insurance/benchmark_16-02-2017_insurance.pdf

CCH Australia Limited, 2018. Gore vs Australian Securities And Investments Commission, Federal Court of Australia, Full Court, 13 February 2017. [Online]
Available at: https://iknow.cch.com.au/document/atagUio2828560sl824183022/gore-v-australian-securities-and-investments-commission-federal-court-of-australia-full-court-13-february-2017

Dowd, G. & Uljans, J., 2017. Gore no more - ASIC not required to prove intention in civil penalty proceedings. [Online]
Available at: https://www.lexology.com/library/detail.aspx?g=60631530-7cd7-47ea-902b-847bda6f4ee8

Gilbert + Tobin, 2017. ASIC Update - May 2017. [Online]
Available at: https://www.gtlaw.com.au/insights/asic-update-may-2017
[Accessed 8 May 2018].

Globe Business Media Group, 2017. Full Federal Court clarifies the fault position for civil proceedings post Gore v ASIC: ASIC, in the matter of Whitebox Trading Pty Ltd v Whitebox Trading Pty Ltd [2017] FCAFC 100. [Online]
Available at: https://www.lexology.com/library/detail.aspx?g=e320a7a2-97a9-4f7a-9c52-ba10bcce327d
[Accessed 8 May 2018].

Jade, 2017. Gore v Australian Securities and Investments Commission [2017] FCAFC 13. [Online]
Available at: https://jade.io/article/520906
[Accessed 8 May 2018].

Judicial Commission of New South Wales, 2018. Previous decisions of interest. [Online]
Available at: https://nswca.judcom.nsw.gov.au/previous-decisions-of-interest/

Macredie, R., 2017. Gore v Australian Securities and Investments Commission [2017] FCAFC 13. [Online]
Available at: https://www.linkedin.com/pulse/gore-v-australian-securities-investments-commission-2017-macredie

Macredie, R., 2017. Gore v Australian Securities and Investments Commission [2017] FCAFC 13. [Online]
Available at: https://www.linkedin.com/pulse/gore-v-australian-securities-investments-commission-2017-macredie
[Accessed 8 May 2018].

Narushimha, H. & Rooy, J. V., 2018. Full Federal Court clarifies the fault position for civil proceedings post Gore v ASIC: ASIC, in the matter of Whitebox Trading Pty Ltd v Whitebox Trading Pty Ltd [2017] FCAFC 100. [Online]
Available at: https://www.lexology.com/library/detail.aspx?g=e320a7a2-97a9-4f7a-9c52-ba10bcce327d

Russell Mc Veagh, 2018. Gore v Australian Securities and Investments Commission [2017] FCAFC 13. [Online]
Available at: https://www.russellmcveagh.com/media/assets/3315914-Gore-v-ASIC-2017-FCAFC-13-v4.pdf

Thompson, B. & Harris, R., 2017. The Banking Litigation Law Review - Edition 1. [Online]
Available at: https://thelawreviews.co.uk/chapter/1147463/australia

Are you getting torn between stringent deadlines and maintaining a remarkable performance in your academic life? Share your concerns with Assignmenthelp.us. From composing your assignments from scratch to refining them to perfection, our 1500+ PhD assignment experts have got it all covered.

These prolific assignment writers will enable you to abide by university guidelines, maintain appropriate style and tone, include relevant information, and cite your resources accurately. Further, our range of assignment writing services comes at economical prices, coupled with yearlong discounts. So, don't wait and think. Seek assignment help from us to put an end to all your academic concerns instantly!