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In the matter of RG Munro Futures Pty Ltd (In liq)

 

[2011] QSC 405

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

In the matter of RG Munro Futures Pty Ltd (In liq) & In the matter of Starport Futures Trading Corporation (In liq) [2011] QSC 405

PARTIES:

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
(applicant)
v
ROGER GARETH MUNRO
(first respondent)
RG MUNRO FUTURES PTY LTD (ACN 085 857 165) (IN LIQUIDATION)
(second respondent)
STARPORT FUTURES TRADING CORPORATION (USCN 2917 4448 100 981 262 652) (IN LIQUIDATION)
(third respondent)

FILE NO:

BS9846 of 2009

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

12 December 2011

DELIVERED AT:

Brisbane 

HEARING DATE:

6 December 2011

JUDGE:

Ann Lyons J

ORDER:

  1. Pursuant to section 1323(5) of the Corporations Act 2001 (Cth), paragraphs 2 to 5 of the orders made by His Honour Justice Martin on 19 November 2010 are vacated.
  1. Pursuant to section 1323(5) of the Corporations Act 2001 (Cth), the Registrar of the Supreme Court in Brisbane forthwith return to the First Respondent any and all passports delivered up by the First Respondent in accordance with paragraphs 4 and 5 of the orders made by His Honour Justice Martin on 19 November 2010.
  1. The originating application filed 8 September 2009 is otherwise dismissed.
  1. Save for the order made in paragraph 6 of the orders made by His Honour Justice Martin on 19 November 2010, the parties bear their own costs of and incidental to the proceedings, including any reserved costs. 

CATCHWORDS:

ProcedureCostsdeparting from the general rule – conduct of parties – other conduct – where order sought to end proceedings – where order sought that the parties will bear their own costs – where order sought that there be no order as to costs – whether parties have acted unreasonably or inappropriately – where applicant not acting unreasonably or inappropriately  no liability for whole or part of respondent’s costs incurred – where respondent not acting unreasonably no liability for whole or part of applicant's costs incurred.

Corporations Act 2001 (Cth), s 530(C), s 1323(5)

ASIC v Jorgensen & Ors [2008] QSC 233.

Australian Securities & Investment Commission v Krecichwost & Ors [2008] NSWSC 855, [2008] 72 NSWLR 49

Australian Securities and Investment Commission v Groves & Ors; in the matter of ABC Learning Centres Limited (Administrators Appointed) (Receivers and Managers Appointed) [2009] FCA 915, 73 ACSR 466,

Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; ex parte Lai Qin [1997] HCA 622

COUNSEL:

P McCafferty for the applicant

D Tucker for the respondent

SOLICITORS:

ASIC for the applicant

Tucker Cowen for the respondent

  1. The applicant, the Australian Securities and Investments Commission (ASIC), seeks an order to end proceedings that it commenced against the first respondent. It also seeks an order that the parties will bear their own costs of and incidental to the proceedings including any reserved costs, except for the order made by Martin J on 19 November 2010.

Background

  1. On 8 September 2010 ASIC made an ex parte application seeking orders for warrants to be issued to seize books and property pursuant to s 530(C) of the Corporations Act 2001. Orders were also sought requiring Dr Munro to deliver up his passport to the Registrar of this Court. Those orders were made by the Chief Justice on 8 September 2009.
  1. Those orders were made based on the affidavit of Brett Jamahl Crawford, an ASIC investigator, which was filed in support of that application.
  1. Mr Crawford deposed to the following:

i.At all relevant times Dr Munro was the sole director of Starport Futures Trading Corporation (Starport) and the sole director of RG Munro Futures Pty Ltd (RGMF). Starport is registered in the State of Delaware, USA, as an incorporated company.  He was not aware of any person other than Dr Munro who had undertaken any work on behalf of either Starport or RGMF.

ii.ASIC records and registers revealed that the respondents have never held financial licences pursuant to s 911A of the Corporations Act.

iii.ASIC had received four complaints about the respondents including one from the Queensland Crime and Misconduct Commission indicating that Dr Munro was providing investment services without holding a financial services licence.

iv.The liquidators of RGMF supplied information that at least 54 investors within and outside Australia had contributed more than $88,000,000 to RGMF and that the funds had been transferred into various Australian, US, UK and European trading, broking and bank accounts.

v.Mr Trevor King, a director of Eltran Pty Ltd, deposed that he invested funds with Starport and had losses of approximately $32,000,000. A further complainant, Mr Jonathan Merrison had invested funds with RGMF and indicated he had a potential loss of $7.1 million.

vi.Pursuant to s 13 of the ASIC Act, ASIC commenced a formal investigation on 24 December 2008 and was investigating suspected contraventions of;

(a) s 911A of the Corporations Act which required the need for an Australian Financial Services Licence;
(b) s 12DA of the ASIC Act in relation to misleading and deceptive conduct;
(c) s 12DB of the ASIC Act in relation to false and misleading representations, as well as s 408C of the Criminal Code (Qld) in relation to fraud.

vii.Some data on Dr Munro’s computer had been erased.

viii.The two red ledger books Dr Munro used to conduct the business were initially not produced under a s 19 notice

ix.When produced one of the ledgers appeared to have pages removed from the front and had incomplete information.

  1. On 14 September 2009 the matter was again heard before the Chief Justice. Dr Munro and the second and third respondents were legally represented and orders were made allowing Dr Munro to claim legal professional privilege in relation to documents which had been seized under warrants which had issued on 8 September 2009.
  1. On 20 August 2010 Dr Munro applied to the court seeking a discharge of two of the orders made on 8 September 2009 specifically the orders that related to the surrender of his passport and the prohibition on him leaving the country.
  1. On 19 November 2010, Martin J published reasons varying the 8 September orders and his passport was returned.
  1. ASIC’s investigation is now complete and a decision has been made by the Commonwealth Director of Public Prosecutions (CDPP) that there are no reasonable prospects of convictions being secured in relation to the charges recommended by ASIC. A decision was therefore made by ASIC not to pursue Dr Munro or the second or third respondents.
  1. By this application therefore ASIC seeks orders the effect of which will bring an end to the proceedings against the first respondent. Signed consents have already been obtained with respect to the second and third respondents. Dr Munro however seeks an order that the applicant pay his costs.

Should ASIC pay Dr Munro’s costs?

  1. ASIC submits that the appropriate order is that each party bear their own costs. In other words, that there be no order as to costs. ASIC argues that the authorities favour an order that there be no order as to costs.
  1. The first respondent Dr Munro, however, has submitted in reliance on the decision of Australian Securities & Investment Commission v Krecichwost & Ors[1] that the applicant should pay his costs. Mr Tucker on behalf of the respondent argues that Dr Munro is the sole director and that the companies have been in liquidation since 2008. He indicates that there has been no finding that Dr Munro was not compliant and in fact Martin J found that Dr Munro was substantially compliant but tardy.
  1. Mr Tucker submits that 13 notices in all were issued and that the respondent had responded reasonably and cooperated in every respect. In particular, his solicitor attended meetings with the liquidators who advised that they were satisfied with Mr Munro’s cooperation. It is now argued that ASIC’s ex parte application for warrants to search his home, to seize his passport and to ban him from travelling were wholly unnecessary. In particular, he considers they were unnecessary given his cooperation with each and every notice issued by ASIC.
  1. It is also argued that Dr Munro has incurred considerable legal expenses in dealing with this proceeding, including instructing solicitors to review the large volumes of supporting material served and to appear on 14 September 2009 to ensure that his claims for legal professional privilege were protected and that any personal documents incorrectly seized were returned as well as liaising with ASIC in relation to the inspection of the material. He also indicated that affidavit material has had to be prepared in accordance with the orders of the Chief Justice and he has had to prepare for this present application.
  1. It is submitted therefore that Dr Munro has incurred legal expenses in circumstances where he states no charges were ever laid against him and the Commonwealth Director of Public Prosecutions has rejected ASIC’s briefs on the basis of insufficient evidence. There are no civil proceedings on foot by ASIC or any of the other respondents seeking relief against him.
  1. In my view the usual order in circumstances such as these is that each party should pay their own costs unless there is some clear evidence that ASIC has acted in an inappropriate or unreasonable way. I consider that the current authorities support an order in the terms sought by the applicant. In particular, Australian Securities and Investment Commission v Groves & Ors; in the matter of ABC Learning Centres Limited (Administrators Appointed) (Receivers and Managers Appointed)[2]Lindgren J stated:

“54. In my opinion the parties should be left to bear their own respective costs. There has not been an adjudication upon the merits and it is not possible to say what the ultimate outcome of the proceeding would have been. In all the circumstances, the test that is to be applied to the conduct of the antagonists is one of reasonableness in the light of the nature of the particular proceeding and all the circumstances. In Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; ex parte Lai Qin (1997) 186 CLR 622; 143 ALR 1, McHugh J said (at CLR 625; ALR 4) that where both parties appear to have acted reasonably, the proper exercise of the discretion as to costs will usually be that the Court will make no order as to costs. Similarly, in Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 at 202-3; 116 ALR 523 at 531-2 11 ACSR 136 at 145, Hill J applied a test of reasonableness to the conduct of ASIC’s predecessor, the Australian Securities Commission in respect of a discontinued proceeding under s 1323 of the Corporations Law and determined that each party should bear its own costs.”

  1. That decision was supported in principle by the Queensland decision of ASIC v Jorgensen & Ors[3] where the Chief Justice stated that “having regard to the issue of public protection, which the applicant is obliged to address, and its being publicly funded, the public should not be penalised, but rather assisted with a costs order, where the applicant has acted reasonably in the matter.” In determining whether ASIC had acted reasonably in the circumstances of that case the Chief Justice relied on the assessment of external administrators.
  1. Whilst a decision was made in Krecichwost that ASIC pay the costs of a person under investigation I consider that the circumstances were indeed unusual. In that decision Young CJ indicated that:

“However, as a result of the order, the 8th defendant was left in a situation where, for almost a year, her funds were frozen without compensation. It may well be that the funds were invested at interest so that there was no actual loss in money, but a recently divorced woman not being able to touch her capital for such a period, usually suffers prejudice. She has not behaved unreasonably, the proceedings have been withdrawn against her, it would appear, because after full investigation ASIC does not have sufficient evidence to mount a case on which it could be confident to succeed and she is being asked to bear her own costs as well as suffer the prejudice of having her assets frozen.”

  1. His Honour continued:

“It seems to me that when one pays regard to all these factors, the justice of the case means that ASIC should pay the 8th defendant’s costs of the proceedings.”

  1. In my view the decision in Krecichwost is entirely distinguishable to the present case. In that decision it was clear that ASIC was conducting an investigation into a company and it suspected that the eighth defendant had been conveyed property of that company by one of the company’s officers without consideration. ASIC obtained against the eighth defendant an ex parte order that she be restrained from dealing with a property at Queenscliff in New South Wales. The eighth defendant appeared represented by solicitors and consented to the order against her being continued.
  1. In Krecichwost, Young CJ stated quite clearly that each case must be decided on its own facts and merits. His Honour continued that the order for costs that he made in that case against ASIC may well have been different had ASIC asked the eighth defendant for an undertaking not to dispose of the subject property before launching proceedings. His Honour continued:

“I can understand that investigators get nervous about notifying potential defendants in asset freezing matters to avoid the possibility of the potential defendant taking early evasive action. However, where land is in question, time is needed to dissipate and it normally does not cause prejudice to seek an undertaking within a short term. After all, ex parte relief must always be considered to be the exception rather than the rule and in a free democracy such as Australia, courts should not make ex parte orders unless absolutely necessary.”

  1. In my view, the circumstances in that case were quite different to the facts in this case. The eighth defendant was not a director of the company. In the present case Dr Munro was the sole director of the company and in particular no orders restraining his property were sought.
  1. I agree with the approach of McHugh J in Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; ex parte Lai Qin[4], where he indicated that in cases such as the present where both parties have acted reasonably the proper exercise of the court’s discretion will mean that the court will make no order as to costs.
  1. In the circumstances of this case considering the factual background particularly given the complaints to ASIC, the amount of money invested and unaccounted for, as well as the fact that the Queensland Crime and Misconduct Commission was one of the complainants, I consider that ASIC was entirely justified in making the investigation that it did. I consider that there is no evidence before me that it has acted unreasonably. The applicant is entitled to the orders sought.

Orders

a.Pursuant to section 1323(5) of the Corporations Act 2001 (Cth), paragraphs 2 to 5 of the orders made by His Honour Justice Martin on 19 November 2010 are vacated.

b.Pursuant to section 1323(5) of the Corporations Act 2001 (Cth), the Registrar of the Supreme Court in Brisbane forthwith return to the First Respondent any and all passports delivered up by the First Respondent in accordance with paragraphs 4 and 5 of the orders made by His Honour Justice Martin on 19 November 2010.

c.The originating application filed 8 September 2009 is otherwise dismissed.

d.Save for the order made in paragraph 6 of the orders made by His Honour Justice Martin on 19 November 2010, the parties bear their own costs of and incidental to the proceedings, including any reserved costs. 

Footnotes

[1] [2008] NSWSC 855, [2008] 72 NSWLR 498

[2] [2009] FCA 915, 73 ACSR 466,

[3] [2008] QSC 233.

[4] [1997] HCA 622

Close

Editorial Notes

  • Published Case Name:

    In the matter of RG Munro Futures Pty Ltd (In liq) & In the matter of Starport Futures Trading Corporation (In liq)

  • Shortened Case Name:

    In the matter of RG Munro Futures Pty Ltd (In liq)

  • MNC:

    [2011] QSC 405

  • Court:

    QSC

  • Judge(s):

    A Lyons J

  • Date:

    12 Dec 2011

Litigation History

No Litigation History

Appeal Status

No Status