CATCHWORDS

CORPORATIONS LAW - remedial orders under ss 741(1), 742(2) - factors which may to be taken into account - orders compel conduct which may be in breach of foreign law - culpability of those in breach of relevant provisions - effect of orders on beneficial owners of shares - whether a general rule that in cases of non compliance with a secondary notice the appropriate order is only one for peremptory sale of shares to which notice relates - whether order under s 742(2) dealing with proceeds of sale of shares is an order "in relation" to shares - whether a secondary notice under s 719 may be given by fax - meaning of "give" - whether s 109X definition of "give" applicable - court's power to excuse contravention of Part 6.8 under s 743 - matters to be taken into account

WORDS AND PHRASES - "in relation to any of the shares" under s 742(2) of the Corporations Law - whether an order dealing with the proceeds of sale of shares is an order "in relation" to shares - "give" under s 719 of the Corporations Law - whether notice may be given by fax

Corporations Law s 6(1), s 9, s 109H, s 109X, s 110D, s 220, s 459, s 577, s 613(1),

s 708, s 709, s 710, s 711, s 717, s 718, s 719, s 720, s 721, s 722, s 723, s 741(1),        s 742(2), s 743, s 744(2), s 744(6), s 744(9), s 747, s 1322(4)(d), s 1324(2), s 1341(2)

Re North Broken Hill Holdings Ltd (1986) 10 ACLR 270 at 282, 283

Brunswick NL v Blossomtree Pty Ltd (1992) 7 WAR 226 at 234, 235

House v R (1936) 55 CLR 499 at 505

Pottinger v George (1967) 116 CLR 328 at 337

Rowell v Pratt [1938] AC 101 at 106

Metals Exploration Ltd v Samic Ltd (1994) 181 CLR 109 at 127, 128

Workers' Compensation Board (Q) v Technical Products Pty Ltd (1988) 165 CLR 642 at 653, 654

Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 619, 621, 625, 643

Racecourse Totalizators Pty Ltd v Hartley Cyber Engineering Pty Ltd (1989) 15 ACLR 457

Re Mannum Haulage Pty Ltd (1974) 8 SASR 451

CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd (1993) 116 FLR 456

Vicbar Pty Ltd v Development Constructions (Newcastle) Pty Ltd (1995) 13 ACLC 1,220 Pacific Capital Ltd v BBC Hardware Ltd (1995) 13 ACLC 1,652

Hastie & Jenkerson v McMahon [1990] 1 WLR 1575

NM Superannuation Pty Ltd v Hughes (1992) 27 NSWLR 26

AUSTRALIAN SECURITIES COMMISSION v BANK LEUMI LE-ISRAEL (Switzerland) & ORS

No. NG 973 of 1995

CORAM:       Lockhart, Foster and Lehane JJ

PLACE:          Sydney

DATE:            18 September 1996

IN THE FEDERAL COURT OF AUSTRALIA                               )

NEW SOUTH WALES DISTRICT REGISTRY                              )

GENERAL DIVISION                                                                    )              No.NG 973 of 1995

                                      ON APPEAL FROM A SINGLE JUDGE OF

                                        THE FEDERAL COURT OF AUSTRALIA

BETWEEN:   AUSTRALIAN SECURITIES COMMISSION                                  Appellant

AND:              BANK LEUMI LE‑ISRAEL (Switzerland)                               First Respondent

                        EBC ZURICH AG                                                                  Second Respondent

                        ANZ NOMINEES LIMITED

                        (A.C.N. 005 357 568)                                                                 Third Respondent

                        BB NOMINEES PTY LTD

                        (A.C.N. 055 564 835)                                                               Fourth Respondent

                        NATIONAL NOMINEES LIMITED

                        (A.C.N. 004 278 899)                                                                  Fifth Respondent

                        GALAH NOMINEES PTY LTD

                        (A.C.N. 000 847 638)                                                                 Sixth Respondent

                        STATTON NOMINEES PTY LTD

                        (A.C.N. 000 734 743)                                                             Seventh Respondent

                        OFFSET ALPINE PRINTING GROUP LTD

                        (A.C.N. 003 394 876)                                                                Eighth Respondent

                        ARKLOW PTY LTD

                        (A.C.N. 003 925 479)                                                                 Ninth Respondent

                        BANK LEUMI LE‑ISRAEL (Switzerland)                        First Cross-Appellant

                        EBC ZURICH AG                                                           Second Cross-Appellant

                        AUSTRALIAN SECURITIES COMMISSION                    Cross-Respondent

CORAM:       Lockhart, Foster and Lehane JJ

PLACE:          Sydney

DATE:            18 September 1996

                                                       MINUTE OF ORDERS

THE COURT ORDERS THAT:

1.         The appeal be dismissed with costs.

2.         The cross appeal of the first cross‑appellant be dismissed with costs.

3.         The cross appeal of the second cross‑appellant be dismissed with costs.

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

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    No.  NG 973  of  1995

                                  )

GENERAL DIVISION                  )

                             ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

              BETWEEN:      AUSTRALIAN SECURITIES COMMISSION

                                      Appellant

                   AND:      BANK LEUMI LE-ISRAEL (Switzerland)

                                      First Respondent

                             EBC ZURICH AG

                                      Second Respondent

                             ANZ NOMINEES LIMITED

                                      Third Respondent

                             BB NOMINEES PTY LTD

                                      Fourth Respondent

                             NATIONAL NOMINEES LIMITED

                                      Fifth Respondent

                             GALAH NOMINEES PTY LTD

                                      Sixth Respondent

                             STATTON NOMINEES PTY LTD

                                      Seventh Respondent

                             OFFSET ALPINE PRINTING GROUP LTD

                                      Eighth Respondent

                             ARKLOW PTY LTD

                                      Ninth Respondent

                             BANK LEUMI LE-ISRAEL (Switzerland)

                                      First Cross-Appellant

                             EBC ZURICH AG

                                      Second Cross-Appellant

                             AUSTRALIAN SECURITIES COMMISSION

                                      Cross-Respondent

COURT:    LOCKHART, FOSTER and LEHANE JJ.

DATE:     18 SEPTEMBER 1996

PLACE:    SYDNEY

                    REASONS FOR JUDGMENT

LOCKHART J.

     I agree with the reasons for judgment of Lehane J. and the orders proposed by him.

              I certify that this and the preceding one (1) page are a true copy of the reasons for judgment herein of the Honourable Justice Lockhart.

              Associate

              Dated:    18 September 1996

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    No. NG 973 of 1995

                                  )

GENERAL DIVISION                  )

  ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

                   BETWEEN:  AUSTRALIAN SECURITIES COMMISSION

                                                   Appellant

                       AND:  BANK LEUMI LE-ISRAEL (Switzerland)

                                            First Respondent

                             EBC ZURICH AG

                                           Second Respondent

                             ANZ NOMINEES LIMITED

                                            Third Respondent

                             BB NOMINEES PTY LTD

                                           Fourth Respondent

                             NATIONAL NOMINEES LIMITED

                                            Fifth Respondent

                             GALAH NOMINEES PTY LTD

                                            Sixth Respondent

                             STATTON NOMINEES PTY LTD

                                          Seventh Respondent

                             OFFSET ALPINE PRINTING GROUP LTD

                                           Eighth Respondent

                             ARKLOW PTY LTD

                                            Ninth Respondent

                             BANK LEUMI LE-ISRAEL (Switzerland)

                                       First Cross-Appellant

                             EBC ZURICH AG

                                      Second Cross-Appellant

                             AUSTRALIAN SECURITIES COMMISSION

                                            Cross-Respondent

CORAM:    LOCKHART, FOSTER and LEHANE JJ

DATE:     18 SEPTEMBER 1996

PLACE:    SYDNEY

                    REASONS FOR JUDGMENT

FOSTER J:    I am in agreement with the orders proposed by Lehane J, and with his Honour's reasons for judgment.

            I certify that this and the preceding one (1) page are a true copy of the reasons for judgment herein of the Honourable Justice M. L. Foster.

            Associate:

            Date:   18 SEPTEMBER 1996

IN THE FEDERAL COURT OF AUSTRALIA                               )

NEW SOUTH WALES DISTRICT REGISTRY                              )

GENERAL DIVISION                                                                    )              No.NG 973 of 1995

                                      ON APPEAL FROM A SINGLE JUDGE OF

                                        THE FEDERAL COURT OF AUSTRALIA

BETWEEN:   AUSTRALIAN SECURITIES COMMISSION                                  Appellant

AND:              BANK LEUMI LE‑ISRAEL (Switzerland)                               First Respondent

                        EBC ZURICH AG                                                                  Second Respondent

                        ANZ NOMINEES LIMITED

                        (A.C.N. 005 357 568)                                                                 Third Respondent

                        BB NOMINEES PTY LTD

                        (A.C.N. 055 564 835)                                                               Fourth Respondent

                        NATIONAL NOMINEES LIMITED

                        (A.C.N. 004 278 899)                                                                  Fifth Respondent

                        GALAH NOMINEES PTY LTD

                        (A.C.N. 000 847 638)                                                                 Sixth Respondent

                        STATTON NOMINEES PTY LTD

                        (A.C.N. 000 734 743)                                                             Seventh Respondent

                        OFFSET ALPINE PRINTING GROUP LTD

                        (A.C.N. 003 394 876)                                                                Eighth Respondent

                        ARKLOW PTY LTD

                        (A.C.N. 003 925 479)                                                                 Ninth Respondent

                        BANK LEUMI LE‑ISRAEL (Switzerland)                        First Cross-Appellant

                        EBC ZURICH AG                                                           Second Cross-Appellant

                        AUSTRALIAN SECURITIES COMMISSION                    Cross-Respondent

CORAM:       Lockhart, Foster and Lehane JJ

PLACE:          Sydney

DATE:            18 September 1996

                                                  REASONS FOR JUDGMENT

LEHANE J:  This appeal raises questions relating to the provisions of the Corporations Law (the Law) providing for the disclosure of substantial shareholdings in Australian companies and for ascertaining the identity of persons, other than those whose names appear in the register of members, holding beneficial interests in such shares.

Statutory Background

(a)        Substantial shareholdings

Part 6.7 of the Law provides for the disclosure of substantial shareholdings in listed companies.  It is unnecessary to describe its complex provisions in detail.  It is sufficient to say that s 708 provides that a substantial shareholding is (unless another percentage is prescribed) an entitlement to at least 5% of the voting shares of a listed company.  "Entitlement" to a share is defined by reference to the concept of "relevant interest": a complex concept, now familiar in Australian corporate law, defined in Division 5 of Part 1.2 of the Law.  A substantial shareholder of a company is a person who has a substantial shareholding in it.

Section 709 requires a substantial shareholder of a company to give the company a notice informing it of certain particulars relating to the shareholder and the interest of the shareholder in the company's shares.  The notice is to be given within two business days after the shareholder becomes aware of the interest giving rise to the substantial shareholding.  Then, under s 710, a substantial shareholder is required to notify the company of changes in the shareholder's entitlement.  Finally, if a person ceases to be a substantial shareholder, notice of that is to be given to the company under s 711.

(b)        Underlying beneficial interests

Part 6.8 provides a mechanism by which the identity of persons holding interests in shares in a listed company may be discovered.  The mechanism involves the giving of what are described as primary notices and secondary notices.  The relevant definitions, in s 717, are as follows:

            "primary notice", in relation to shares in a company, means a written notice addressed to the holder of the shares requiring the holder to give to the body giving the notice a written statement setting out:

                        (a)        full particulars of the holder's relevant interest in the shares and of the circumstances because of which the holder has that interest; and

                        (b)        so far as is known to the holder:

                                    (i)         full particulars of the name and address of every other person (if any) who has a relevant interest in any of the shares;

                                    (ii)        full particulars of each such interest and of the circumstances because of which the other person has that interest; and

                                    (iii)       full particulars of the name and address of each person (if any) who has given to the holder of the shares relevant instructions in relation to any of the shares and of those relevant instructions, and the date or dates on which those relevant instructions were given;

            "relevant instructions", in relation to shares, means instructions or directions:

                        (a)        in relation to the acquisition or disposal of the shares;

                        (b)        in relation to the exercise of any voting or other rights attached to the shares; or

                        (c)        in connection with any other matter relating to the shares;

            "secondary notice", in relation to shares in a company, means a written notice addressed to a person requiring the person to give to the body giving the notice a written statement setting out:

                        (a)        full particulars of any relevant interest that the person has in any of the shares and of the circumstances because of which the person has that interest; and

                        (b)        so far as is known to the person:

                                    (i)         full particulars of the name and address of every other person (if any) who has a relevant interest in any of the shares;

                                    (ii)        full particulars of each such interest, and of the circumstances because of which the other person has that interest; and

                                    (iii)       full particulars of the name and address of each person (if any) who has given to the person to whom the notice is addressed relevant instructions in relation to any of the shares and of those relevant instructions, and the date or dates on which those relevant instructions were given.

Section 718 provides for the giving of primary notices.  A primary notice may be given either by the Australian Securities Commission (the Commission) or by the company.  The Commission may act of its own motion; alternatively, the company, or one of its members, may request the Commission to give a notice in relation to particular shares and, if that happens, the Commission is obliged to give a primary notice to the holder of
those shares unless the Commission considers that in all the circumstances it would be unreasonable to do so.

Section 719 deals with the giving of secondary notices.  Again, those notices may be given by the Commission or by the company whose shares are in question.  In either case, the notice may be given if a primary notice, or an earlier secondary notice, reveals that a person has a relevant interest in, or has given relevant instructions in relation to, shares.  Again, the Commission may of its own motion give a secondary notice and, unless in all the circumstances it considers that it would be unreasonable to do so, must give such a notice if requested to do so by the company concerned or one of its members.

Section 720 authorises the Commission to provide to a company information received by the Commission as a result of giving a primary or secondary notice relating to the company's shares; if the notice was given at the request of the company or a member, the Commission must give the information to the company or member except to the extent that the Commission considers that it would be unreasonable in all the circumstances to do so.

The Commission is empowered by s 721, on request by a person who receives a primary notice or secondary notice, to excuse the recipient from providing information sought by the notice, to permit the information to be provided in a particular form or to determine that information will not be passed on to the company or a member.  A request for the exercise of that power must, however, be made before the end of two business days after
the day on which the notice was received (the Court has power to extend that period under para 1322(4)(d) of the Law) and it is to be exercised only where the Commission "is satisfied that there are special reasons" for the exercise of the power.  The obligations of the recipient of a notice, both where it has lodged a request under s 721 and where it has not, are provided for in sections 722 and 723, as follows:

            Compliance with notices

            722 (1)  [Comply within two days]  A person who receives a primary notice or secondary notice in relation to shares in a company shall, unless before the end of 2 business days after the day on which the person receives the notice the person lodges a request under subsection 721(1) in relation to particular information that the notice requires the person to give, comply with the notice before the end of 2 business days after that day.

            722 (2)  [Notify company of compliance]  Where a company gives to a person a primary notice or secondary notice in relation to shares in the company, the person shall, forthwith after lodging a request under subsection 721(1) in relation to particular information that the notice requires the person to give, notify the company in writing of the request.

            Consequences of Commission's decision on a request

            723  Within 2 business days after the day on which the Commission notifies a person of its decision on a request that the person lodged under subsection 721(1) in relation to a primary notice or secondary notice in relation to shares in a company, the person shall:

                        (a)        if the Commission has given to the person pursuant to the request a certificate under subsection 721(2):

                                    (i)         except as provided in the certificate, comply with the notice;

                                    (ii)        if the company gave the notice and the certificate states that specified information need only be given to the company in a specified form - give the information to the company in that form; and

                                    (iii)       if the company gave the notice - give a copy of the certificate to the company; or

                        (b)        otherwise - comply with the notice.

Those provisions may serve various functions.  For instance, they may be used by the Commission in aid of its powers to investigate possible corporate wrongdoing.  It is evident, however, and authority confirms, that the primary purpose of the provisions is to maintain an informed market in listed shares of Australian companies (Re North Broken Hill Holdings Ltd (1986) 10 ACLR 270 at 282, 283; Brunswick NL v Blossomtree Pty Ltd (1992) 7 WAR 226 at 234, 235).  That object explains the very short times set for compliance and explains also the necessity for the provisions to have (under s 110D of the Law) extraterritorial operation: they would have little practical value if they could be circumvented simply by holding shares through a nominee incorporated and resident outside Australia and carrying on no business in Australia.  So much is not now in controversy between the parties.

(c)        Remedies

Part 6.10 of the Law gives the Court power to make certain orders where there is a breach of obligations under Part 6.7 or Part 6.8.  Subsection 741(1) deals with defaults by substantial shareholders.  It provides:

            741 (1)  [Possible orders]  Where a person (in this section called the "substantial shareholder") is, or at any time after the commencement of
this Chapter has been, a substantial shareholder in a company and has contravened section 709, 710 or 711, the Court, on the application of the Commission or of the company, whether or not the contravention continues, may make such order or orders as it thinks just, including (without limiting the generality of the foregoing):

                        (a)        a remedial order; and

                        (b)        for the purpose of securing compliance with any other order made under this section, an order directing the company or any other person to do or refrain from doing a specified act.

Subsection 742(2) provides for orders which may be made where there is a contravention of s 722 or 723, as follows:

            742 (2) [Such orders in relation to the shares as the Court thinks just]  On the application of:

                        (a)        the Commission;

                        (b)        the company; or

                        (c)        a member of the company who was entitled, or members of the company who were together entitled, to not less than 5% of the total voting rights of all the members having at the date of the notice a right to vote at general meetings of the company;

            the Court may make in relation to any of the shares such order or orders as it thinks just, including, but without limiting the generality of the foregoing:

                        (d)        a remedial order; and

                        (e)        for the purpose of securing compliance with any other order made under this subsection, an order directing the company or any other person to do or refrain from doing a specified act.

Subsection 613(1) tells us what remedial orders are:

            613 (1)  [Interpretation]  A reference to a remedial order, in relation to the Court, is a reference to any one or more of the following orders:

                        (a)        an order restraining the exercise of any voting or other rights attached to shares;

                        (b)        an order directing a body corporate not to make payment, or to defer making payment, of any amount or amounts due from the body corporate in respect of shares;

                        (c)        an order restraining the acquisition or disposal of, or of an interest in, shares;

                        (d)        an order directing the disposal of, or of an interest in, shares;

                        (e)        an order vesting in the Commission shares or an interest in shares;

                        (f)        an order directing a body corporate not to register the transfer or transmission of shares;

                        (g)        an order that an exercise of the voting or other rights attached to shares be disregarded;

                        (h)        an order cancelling an agreement or offer relating to a takeover scheme or takeover announcement, or a proposed takeover scheme or proposed takeover announcement, or any other agreement or offer in connection with the acquisition of shares;

                        (j)        an order declaring an agreement or offer relating to a takeover scheme or takeover announcement, or a proposed takeover scheme or proposed takeover announcement, or any other agreement or offer in connection with the acquisition of shares to be voidable.

Subsection 744(2) provides that the Court is not to make an order under any of a number of sections, including sections 741 and 742, if it is satisfied that the order would unfairly prejudice any person.  Section 743 limits the orders which the Court may make, where it is satisfied that in all the circumstances a contravention ought to be excused, to orders restraining the exercise of voting or other rights attached to shares or that an exercise of such rights be disregarded.

Finally, the Court is given wide powers under Part 9.5 of the Law.  Particularly, subs 1324(2) empowers the Court by mandatory injunction to enforce compliance with requirements of the Law.

Facts

In April 1995 each of the third to seventh respondents was a shareholder in the eighth respondent (OAP).  During that month the Commission gave a primary notice to each of those shareholders in relation to its shares in OAP.  The information which they gave in compliance with those notices revealed that 4,038,600 shares in OAP (16.97% of its issued capital) were held on behalf of the first respondent (Leumi) and 5,293,771 (22.25% of OAP's issued capital) on behalf of the second respondent (EBC).

Leumi and EBC are both incorporated in Switzerland.  Leumi is a bank and EBC is a finance company.  Each, as part of its business, holds securities on behalf of other persons.  Neither carries on business in Australia.  Each held its interest in the OAP
shares on behalf of other persons.  The primary Judge held that Leumi was a bare trustee whose relevant interest in the OAP shares was to be disregarded, by virtue of s 39 of the Law, and was accordingly not a substantial shareholder of OAP.  His Honour also held, however, that EBC was not a bare trustee, was a substantial shareholder and had breached its obligation to give a notice under s 709.  Neither of those conclusions is now challenged.

In April 1995 the Commission sent secondary notices to both Leumi and EBC.  In the case of Leumi, a secondary notice and a covering letter were sent by fax to Leumi's office in Zurich.  The transmission was sent and received on 20 April 1995, though Leumi said that it was not received by an officer having responsibility for the matter until May.  The original notice and covering letter were sent by courier and were delivered to the Zurich office on 24 April 1995.  On 27 April 1995 Leumi faxed a letter to the Commission.  The letter claimed that:

            ... we are subject to Swiss law, in particular Swiss Secrecy Regulations.  Therefore ... our bank would clearly and seriously infringe applicable Swiss law by furnishing you with the statement required by the Commission as per the said notice.

            ...

            We trust that you and the Commission understand our position which is in compliance with applicable Swiss law and appreciate your and the Commission's comprehension.

Leumi claimed that letter amounted to a request, under s 721 of the Law, that for special reasons the information sought should not be given to the Commission.  The Commission
denied that the letter constituted such a request.  If the secondary notice was effectively given by fax, the letter was in any event too late.  If the notice was not effectively given by fax but was effectively given when delivered by the courier, then if it could be read as a request of the relevant kind it was made within time.  Without prejudice to its contention that Leumi had not made an effective request under s 721, the Commission asked its delegate to make a decision under that section on the assumption that a request had been made.  The delegate decided that the request should be refused and that decision was notified to Leumi's solicitors on 6 September 1995.

A further secondary notice was given to Leumi in October 1995, but there is no issue in this appeal relating to that notice.

A similar course was followed in relation to EBC.  A secondary notice was given by fax, to its address in Switzerland, on 20 April 1995; the original was sent by courier and was delivered in Switzerland on 24 April 1995.  On 21 April 1995 EBC sent a fax to the Commission acknowledging the fax of 20 April and stating simply that:

            Due to Swiss secrecy regulations we cannot, however, provide the requested details about the ownership of subject shares.

Again, the Commission took the position (with some evident justice) that fax from EBC did not constitute a request under s 721 of the Law but nevertheless submitted it for consideration by the Commission's delegate on the unadmitted assumption that it was such
a request.  The delegate refused the request on 5 September and EBC was notified of his refusal on 6 September.

Neither Leumi nor EBC has provided the information sought by the secondary notices.  At a meeting between the Commission and EBC's solicitors in May 1995, and subsequently by letter, EBC offered to sell the shares in OAP held for it on terms acceptable to the Commission.  It may be inferred that the offer was not accepted.

In October and November 1995 two competing takeover offers were made for all ordinary shares in OAP.  Both were made by way of Part C statement.  One of the offerors was the ninth respondent, Arklow Pty Ltd.  The offers, each having been extended, were open until 28 and 29 December 1995 respectively.

The proceedings

The Commission commenced proceedings in the Court in which it sought relief against Leumi and EBC.  The relief was sought on the basis that each had failed to comply with the secondary notices given to it and that each also, being a substantial shareholder in OAP, had failed to give the notice required by subs 709(1) of the Law.  The Commission sought declarations accordingly and consequential relief including orders requiring Leumi and EBC to comply with their obligations under the Law and orders vesting in the Commission the shares in OAP held on behalf of Leumi and EBC.

The primary Judge (Sackville J) summarised the issues between the parties in the following list of questions, which I shall number so that I may conveniently refer to them later:

            1.         Were Leumi and EBC obliged to comply with the secondary notices, having regard to the secrecy provisions of Swiss law?

            2.         Was service of the secondary notices on Leumi and EBC in Switzerland authorised by the Corporations Law, having regard to the provisions of Swiss law governing service of documents in Switzerland?

            3.         Was service of the secondary notices by fax authorised by the Corporations Law?

            4.         Were the secondary notices invalid by reason of any prejudgment of issues by the ASC?

            5.         Did the ASC fail to consider properly requests made by Leumi and EBC under s 721 of the Corporations Law?

            6.         Did Leumi and/or EBC contravene the substantial shareholder provisions of the Corporations Law?

            7.         Should Leumi and/or EBC be excused from any contraventions, by reason of s 743 of the Corporations Law?

            8.         Assuming Leumi and EBC have contravened the Corporations Law, what relief should be granted to the ASC?

His Honour answered questions 1, 2 and 3 "yes" and questions 4, 5, and 7 "no".  He answered question 6 "yes" as to EBC and "no" as to Leumi.  No issue arises in the appeal as to questions 1, 4, 5 or 6.  Particularly, there is no appeal against his Honour's conclusion that Leumi and EBC were obliged to comply with the secondary notices or his
decision that Leumi did not, but EBC did, contravene the substantial shareholder provisions of the Law.

As for question 8, his Honour made the following declarations:

            2.         Leumi contravened section 722(1) of the Corporations Law, in that Leumi, having received on 20 April 1995 a Secondary Notice dated 18 April 1995 under section 719(1) of the Corporations Law, in relation to shares in OAP, failed to comply with the Secondary Notice before the end of two business days after 20 April 1995.

            3.         EBC contravened section 722(1) of the Corporations Law in that EBC, having received on 20 April 1995 a Secondary Notice dated 18 April 1995 under section 719(1) of the Corporations Law, in relation to shares in OAP, failed to comply with the Secondary Notice before the end of two business days after 20 April 1995.

            4.         EBC contravened section 722(1) of the Corporations Law in that EBC, having received on 24 April 1995 a Secondary Notice dated 20 April 1995 under section 719(1) of the Corporations Law, in relation to shares in OAP, failed to comply with the Secondary Notice before the end of two business days after 24 April 1995.

            5.         EBC contravened section 709(1) of the Corporations Law in that EBC, being a substantial shareholder in OAP, failed to give a written notice to OAP before the end of two business days after the day on which EBC became aware of the relevant interest or interests by reason of which EBC was a substantial shareholder in OAP.

His Honour ordered that Leumi and EBC each dispose of its shares by instructing its nominees to sell them to the highest bidder under an offer current at the date of his orders or made or announced before midnight on 27 December 1995, such that all the shares were to be sold in that way not later than the last day for acceptance of any of those offers.  (We were told that all the shares have now been sold as contemplated by those
orders).  Certain ancillary relief was granted, the terms of which do not matter for present purposes.  What does matter is that his Honour declined to make orders requiring either Leumi or EBC specifically to comply with its obligations under the Law or "freezing" the shares or their proceeds of sale by vesting them in the Commission conditionally, i.e. pending compliance by Leumi and EBC with the secondary notices.

The appeal and the cross appeals

By its amended notice of appeal the Commission appeals against his Honour's refusal to make orders enforcing compliance by Leumi and EBC with the secondary notices and by EBC with its obligation to give notice of its substantial shareholding.  Disregarding matters no longer pressed by the Commission, the Commission seeks, in addition to the orders made by the primary Judge, orders enforcing the obligations of disclosure of Leumi and EBC under s 722 and of EBC under s 709 of the Law and (on the basis that the shares have now been sold in accordance with the primary Judge's order) orders vesting the proceeds of sale of the shares in the Commission pending compliance by Leumi and EBC with their respective obligations of disclosure under the Law.  Leumi and EBC have both filed notices of contention in which they seek to uphold his Honour's decision "to the effect that the shares in question be directed to be sold and the proceeds of sale not be frozen" on the basis that the Court has no power to make orders to freeze or direct the disposition of the proceeds of sale of the shares as a sanction for contravention of sections 722 or s 723 of the Law.

Both Leumi and EBC have cross appealed.  Leumi's cross appeal is from the declaration that Leumi, having received a secondary notice on 20 April 1995, failed to comply with it before the end of two business days after 20 April 1995 and his Honour's refusal to extend the period for Leumi to lodge a request under para 721(1)(a) of the Law.  The grounds are that his Honour erred in holding that the Law authorises service of a secondary notice by fax and that he erred in declining to consider Leumi's application under para 1322(4)(d) of the Law to extend the time for making a request under s 721 of the Law.  The relief sought by Leumi is principally an order setting aside the declaration which I have mentioned and substituting one that Leumi, "having lodged a request under s 721(1)(a) of the Corporations Law in respect of a Secondary Notice dated 18 April 1995 given to it on 24 April 1995, or alternatively on 20 April 1995, in relation to shares in OAP, and having been advised by the Australian Securities Commission on 6 September 1995 that such request was refused, failed to comply with the Secondary Notice before the end of two (2) business days after 6 September 1995"; and, secondly, if it be held that service by fax was authorised, an order extending the time for lodging a request under s 721.

EBC cross appeals on the same bases as Leumi, but goes further.  EBC contends that his Honour erred in construing s 719 of the Law as authorising service of a secondary notice in Switzerland by fax or by courier; it also asserts that his Honour erred in holding that there was not a real and appreciable risk that EBC and its officers and agents would contravene certain provisions of Swiss law if they complied with the notice and that, on that basis, his Honour was wrong in refusing to exercise his discretion under s 743 to
excuse EBC's contraventions (assuming EBC to have been guilty of contraventions).  Accordingly, EBC seeks orders setting aside both the declarations - those numbered 3 and 4 in his Honour's order - as to EBC's failure to comply with s 722 and, alternatively, an order that EBC's contraventions be excused under s 743.  Senior counsel for Leumi indicated that if EBC were to succeed on the grounds of appeal not raised in Leumi's own notice of appeal, Leumi would seek to amend its notice so as to rely on those grounds as well.

In summary, the issues in the appeal and the cross appeals, common to Leumi and EBC, are as follows:

1.         Was his Honour right in declining to make orders specifically enforcing compliance by Leumi and EBC with their obligations under the Law?

2.         Was his Honour right in refusing an order vesting the shares or their proceeds, conditionally or otherwise, in the Commission?

3.         Has the Court power to make an order vesting in the Commission the proceeds of sale of shares, or otherwise to "freeze" those proceeds?

4.         May a secondary notice under s 722 be given by fax?

The additional grounds on which EBC relies give rise to the following further issues:

5.         Does s 719 of the Law authorise the giving of a secondary notice in a manner which infringes the law of the place where the notice is given?

6.         Should his Honour have held that there was a real and appreciable risk that EBC, if it complied with the secondary notice, would breach article 271 of the Swiss Penal Code?

7.         Should any contraventions of s 722 have been excused under s 743?

Some of those issues involve a consideration of provisions of Swiss law canvassed in detail before his Honour.  It is convenient to consider those matters before turning to the issues which I have identified.

Swiss Law Provisions

His Honour was referred to three provisions of Swiss law and the Commission, Leumi and EBC each tendered expert evidence as to their effect.

Two of the provisions impose obligations of secrecy.  Article 273 of the Swiss Penal Code penalises a person "who tries to discover a manufacturing or business secret in order to give it to a foreign government or individual, or to a foreign company, or to the agents of any of the above" or gives such a secret to such a body or person.  His Honour held that there was a real and appreciable risk that article would be held to prohibit EBC
or Leumi from giving information in response to the Commission's notices to the extent that those holding interests in their OAP shares are Swiss domiciliaries.  His Honour held that there was also a small risk that Leumi or EBC would be in breach of the article if information were disclosed as to the interests of non‑Swiss domiciliaries in the shares.  In either case, his Honour held, there would be no breach if the clients of Leumi and EBC authorised or consented to disclosure of the information.  His Honour's conclusions as to article 273 are not challenged.

Article 47 of the Swiss Banking Law prohibits a bank or its officers from divulging secrets entrusted to them.  His Honour held that article applies to Leumi (which is a bank) but not to EBC (which is not).  His Honour held that the provision by Leumi of the information required by the secondary notice would constitute a breach of article 47 by Leumi and its officers who provided the information, if Leumi's clients had not consented to its provision.  Swiss law neither requires a bank in such circumstances to seek its clients' consent to the provision of information nor prohibits a bank from seeking consent.  There was a conflict of expert evidence as to whether there is a general practice among Swiss banks to seek their clients' consent to the disclosure of information in circumstances such as these; on the evidence his Honour was unable to find that there is any such general practice.  Again, his Honour's conclusions as to article 43 were not challenged.

Article 271 of the Swiss Penal Code is a provision of a different character.  It provides, among other things, that a person "who, without authorisation, carries out, on Swiss
territory, actions which fall within the province of the public authorities, [and] any person who carries out such acts for a foreign State, individual, or organisation, [and] any person who sanctions such acts, shall be punished by imprisonment or, in serious cases, "reclusion" (apparently, a particular form of imprisonment).  The questions which arise are whether service of the notices, by fax or by courier, breached article 271 and whether, if they provided information in compliance with the notices, Leumi and EBC, and their officers, would be punishable as aiders and abettors.  His Honour held that service by courier was likely to have breached the article; that there was a risk that service by fax breached the article, but that the risk of a successful prosecution was significantly less in the case of service by fax than where documents are served by courier; and that there was some risk that Leumi and EBC would, if they complied with the notices, be liable as aiders and abettors but that the risk of prosecution for aiding and abetting was, on the evidence, although not fanciful, not real and appreciable.  Again, his Honour held that there was no appreciable risk of prosecution of Leumi or EBC or their officers if they obtained their clients' consent before making disclosure.  EBC challenges his Honour's conclusion that the risk of prosecution based on aiding and abetting cannot be described as real and appreciable.

Issues on the appeal

1.         Was his Honour right in declining to make orders specifically enforcing compliance by Leumi and EBC with their obligations under the Law?

His Honour dealt with this issue as follows (Appeal Book p 1329):

            Mr Lindsay did not press for an order directing Leumi and EBC to comply with the secondary notices.  To comply with such an order would expose the corporations and their officers to the risk of prosecution under Swiss law.  In my view, any relief should be confined to declaratory relief and to orders affecting the shares or the proceeds of their sale.  The shares, for the purposes of international law, are located within Australia.

Senior Counsel for the Commission submitted that his Honour was wrong in suggesting that the Commission did not press for orders directing Leumi and EBC to comply with the notices.  The Commission says that its claims for orders requiring disclosure lie at the heart of the proceedings.

That latter statement seems, with respect, somewhat to exaggerate the position.  In a passage to which senior counsel for the Commission directed us (Appeal Book p 1166) the following exchange occurs:

            HIS HONOUR: ...  I note by the way that in your written submissions you refer to the proposition that the ASC did not intend to abandon their claim for orders for the provision of information required by the [Law] to be disclosed.  I had not understood you to abandon it, I had not understood you to press it very strongly which is what I had intended to say, but having made your position clear I do not think there is really anything more that needs to be said about that.

            MR LINDSAY:  I agree with that, your Honour, thank you.

That exchange took place in the course of argument as to the form of the orders to be made; that is to say after delivery of his Honour's judgment.  In any case, I would not interfere with his Honour's exercise of his discretion in this respect.  If (as his Honour found) it was possible to grant other relief which was likely in substance to compel
disclosure without necessarily requiring Leumi or EBC (or their officers) to act in breach of Swiss law, his Honour's decision was one which was, at least, clearly open to him.  If, as I think (for reasons which will appear), that was not possible, the same conclusion results from considerations relevant to the second issue arising on the appeal, to which I shall now turn.

2.         Was his Honour right in refusing an order vesting the shares or their proceeds, conditionally or otherwise, in the Commission?

As has been seen, the Court may make a "remedial order" where there is a breach of an obligation to lodge a notice of a substantial shareholding or to comply with the requirements of a secondary notice; and one of the remedial orders which may be made is an order vesting in the Commission shares or an interest in shares.  Before the primary Judge, the Commission sought orders vesting in the Commission the shares in OAP held on behalf of Leumi and EBC on the basis that the shares or, if the Court should order their sale, the proceeds of sale would be "frozen" unless and until the disclosures required by the Law were made.

His Honour declined to make an order vesting the shares pending disclosure, for the reason that such an order would unfairly prejudice the two bidders for all the issued shares in OAP and therefore (s 744(2)) could not be made.  Particularly, his Honour held that there was nothing in the evidence to suggest that the offers were made otherwise than in good faith and for genuine commercial motives and that, although each bidder knew that the shares in OAP had been the subject of interlocutory injunctions and that the
Commission was seeking vesting orders, they were entitled to expect that they might operate in a market unimpeded by orders which might lock up a substantial proportion of OAP's share capital for a considerable period.  Having thus formed the conclusion that any relief granted must be such as would ensure the sale of the shares to the highest bidder, his Honour proceeded to consider whether, subject to that condition, an order should be made vesting in the Commission the shares or their proceeds pending disclosure.

Having held that making the shares available for purchase by the highest bidder would, as closely as was practically possible, achieve the statutory object of establishing an informed market, lead to the best price being realised for shareholders and overcome any unfair prejudice which would otherwise be experienced by bidders, the primary Judge considered (on the assumption that he had power to make such an order) the alternative of allowing the shares to be sold and then freezing the proceeds of sale until the identity of the beneficial shareholders should be made known.  This, he held, would not be an entirely futile exercise, since it would emphasise the importance of compliance with the disclosure provisions in Part 6.8 of the Law.  But in the end his Honour declined to make such an order.  His reasoning appears in the following passage (Appeal Book p 1332):

            But the probabilities are that any disclosure would be made after all shares in OAP had been acquired by one or other of the bidders.  To my mind this would smack of punishment of the beneficial shareholders rather than pursuing the objectives underlying Part 6.8 of the Corporations Law.  I do not think that the degree of culpability of Leumi and EBC is such as to warrant freezing the proceeds of sale.  Their actions have been prompted by genuine concerns about the operation of Swiss law.  Even though I have found that the predicament they are facing did not entirely arise out of
circumstances beyond their control, they have not acted dishonestly or in a manner that can be characterised as reckless.  They have raised in these proceedings matters of considerable importance and complexity that have not previously been determined by Australian courts.

The Commission accepted that in deciding upon the appropriate remedy the Judge exercised a discretion of a kind which the Court will review only in accordance with the well‑known principles stated in House v R (1936) 55 CLR 499 at 505.  The Commission contended, however, that the Judge's exercise of discretion, applying those principles, could not stand.  In essence the Commission's complaint was, as I understood it, that in circumstances where the Judge recognised that it was possible to make an order which would in practical effect ensure the provision of the information required by the notices and thus promote the principal object of the provisions of the Law, the refusal to make such an order would both set at nought the statutory purpose in this particular case (because the market would remain uninformed) and, perhaps more importantly, encourage others in the future to evade the statutory objects by holding shares in Australian companies through foreign institutions bound by foreign secrecy laws.  As an aspect of that general submission, the Commission argued that the Judge was wrong, having had regard to Swiss law in considering the construction of the provisions, to have regard to it again in connection with the exercise of his discretion as to remedy.  The Commission submitted also that the Judge failed to take into account, or at least to give appropriate weight to, the investigatory objects of the provisions, particularly in circumstances where (as was the case) the giving of the notices was instigated by the Australian Stock Exchange in the course of an investigation which it had commenced into dealings in shares in OAP.  Additionally, the Commission contended that the Judge was mistaken in
the way in which he took into account the position of the ultimate beneficial owners: it was they, the Commission said, who were "calling the shots"; it was their refusal to consent to disclosure which led to the breaches by Leumi and EBC.  As counsel for the Commission put it in their written submissions:

            The undisclosed identity of those persons lies at the heart of the obligations of disclosure for which the Corporations Law provides.  Those persons are the ones who make the ultimate decision as to whether or not to permit disclosures to be made.  They are the ones who ultimately benefit from share dealings made by Bank Leumi and EBC as their agents.  It makes no sense to ignore this.  To do so is to undermine the intent of the Corporations Law.

The Judge was wrong, therefore, so it was said, in regarding an order the effect of which was to compel disclosure as a form of "punishment" which it was not the object of the provisions to impose.  The Judge, the Commission argued, was preoccupied with a perceived need to enable the shares to be sold and failed to take other essential matters into account.

Although those submissions have obvious force, I am persuaded by the argument for Leumi and EBC that the primary Judge's discretion did not miscarry.  First, his Honour had a discretion as to remedy, albeit one to be exercised judicially: there is a range of possible remedies, of which those are to be selected which are appropriate to the circumstances of the case.  Secondly, the circumstances were unusual in that, at the time when his Honour had to consider what remedy was appropriate, there were two
competing bids for all the shares in OAP by parties evidently unrelated to those who held interests in the shares covered by the notices.

Thirdly, I do not think that the criticism can be sustained that the Judge took account of irrelevant matters or failed to take account of essential ones.  It is, in general terms, unexceptionable, as an exercise of discretion, to refuse specific relief if that relief would compel a breach of the law: see, e.g., Pottinger v George (1967) 116 CLR 328 at 337.  Indeed, in Rowell v Pratt [1938] AC 101 at 106, Lord Wright said bluntly that a judge "cannot compel a man to commit a criminal offence".  I cannot think it is a wrong exercise of discretion to take into account that specific relief, or relief having a similar practical effect, may compel conduct which is in breach of foreign law; thus I think that the Judge was right in having regard to Swiss law in considering the appropriate remedy: to do so in my view is not, as the Commission contended it was, to give Swiss law primacy over Australian law.  It is clear that his Honour took into account the primary object of the disclosure provisions: he considered that in the particular circumstances their primary object would be adequately served, having regard to the other considerations to which he referred, by an order for sale to the highest bidder without an order freezing the shares or their proceeds.  It is clear also (Appeal Book p 1281) that he took into account - albeit in a somewhat different context - the possible investigatory object of the provisions but, rightly in my view, regarded that as a subsidiary object.  His Honour was clearly right in taking into account the degree of culpability of Leumi and EBC (Metals Exploration Ltd v Samic Ltd (1994) 181 CLR 109 at 127, 128) and I can see no basis for interfering with his findings on that subject.  Finally, I do not think his Honour's
treatment of the position of the ultimate beneficial owners ("ultimate wrongdoers" as counsel for the Commission described them) discloses error.  There was no evidence as to who they were (which distinguishes this case from, for instance, Re North Broken Hill Holdings Ltd (1986) 10 ACLR 270), where they were resident or domiciled or what their grounds or motives may have been for refusing their nominees permission to disclose their identity.  Certainly, there was no basis for a conclusion that they had, so far as Australian or any other law was concerned, any obligation to permit disclosure.  I do not think his Honour was wrong in taking account, as a discretionary matter going to remedy, of the fact that an order he was asked to make might punish those persons, by depriving them of their interest in the shares or their proceeds, for (and during the continuation of) failure to make a disclosure which their nominees, but not (for anything that appears) they themselves, had an obligation to make.

I think, therefore, that we should not interfere with the exercise by the primary Judge of his discretion as to remedy.  Two things should, however, be emphasised: one is that the existence of the two offers for the shares in OAP was an important consideration in this case and made it somewhat unusual; secondly, there were a number of other discretionary considerations which led his Honour to conclude that, having made declarations, the only consequential relief required was an order that the shares be sold.  I would not assent to the general proposition, put to us in argument by counsel for Leumi, that in most cases of non compliance with a secondary notice the appropriate order will be (only) one for a peremptory sale of the shares to which the notice relates.  It is not, I think, as counsel described it, impermissibly to "conflate" obligation with remedy to say that the
evident policy of the Law is that the identity of beneficial owners of shares in Australian listed companies should, if required by a notice given under the Law, be disclosed, not that such a holder should generally be able to avoid the obligation of disclosure, where it is required, by prompt sale.  For instance (and it should be stressed that this is only an example) an order for sale of a large parcel may well, despite whatever publicity the proceedings may receive, be highly disruptive to the market in the shares concerned unless the sale takes place over a substantial period; but if nevertheless disclosure is not made, and is not compelled, during that period the market remains uninformed and the policy of the Law is not given effect.  Again, a nominee company which is fully aware of the requirements of Australian law and of the remedies available for breach may not evoke much sympathy if it persists in a practice of acquiring Australian shares on behalf of clients without obtaining instructions which would permit disclosure of their identity if required.  That is to say no more than that the question, what is the appropriate remedy, is a discretionary one which in each case will have to be answered having regard to the particular circumstances; there is in my view no general rule.

3.         Has the Court power to make an order vesting in the Commission the proceeds of sale of shares, or otherwise to "freeze" those proceeds?

This is the issue raised by the notices of contention filed by Leumi and EBC.  On the view which I have taken concerning his Honour's exercise of discretion as to remedy, the answer to the question does not affect the outcome of the appeal.  I think I should, nevertheless, consider it: it raises a short point of statutory construction.

Whereas s 741 provides simply that where a substantial shareholder fails to notify the existence, alteration or cessation of its substantial shareholding the Court may make orders, including remedial orders, subs 742(2) provides that where the recipient does not comply with a primary or secondary notice the Court may in relation to any of the shares make orders, including remedial orders.  The question which therefore arises is whether an order dealing with the proceeds of sale of shares - e.g. vesting them in the Commission or requiring their payment into Court, in either case pending compliance with secondary notices - is an order "in relation to" the shares.

It is necessary to take into account some other provisions of the Law.  I have already set out subs 613(1) which gives content to the phrase "remedial order".  Subsection 744(6) provides that an order under s 742 may include such ancillary or consequential provisions as the Court thinks just and reasonable.  Subsection 744(9) applies where shares are vested in the Commission, e.g. by a remedial order made under s 742: the Commission is empowered, "subject to any directions of the Court", to get in, sell or otherwise dispose of or deal with the shares; and s 577 applies, so that the Commission is required to deal with the proceeds of sale as unclaimed moneys under Part 9.7: thus (subs 1341(2)), if someone claims to be entitled to the proceeds, and the Commission is satisfied as to the entitlement, then the Commission is required to pay them to the claimant.

Counsel for Leumi submitted that there was no power to make an order to the effect that the proceeds of a sale of shares be held by the Commission pending compliance with the secondary notice.  It is not an order "in relation to" the shares.  He cited Workers'
Compensation Board (Qld) v Technical Products Pty Ltd (1988) 165 CLR 642 for the proposition that though the phrase "in respect of" (and similarly "in relation to") has a wide meaning, it "gathers meaning from the context in which it appears and it is that context which will determine the matters to which it extends" (per Deane, Dawson and Toohey JJ at 653, 654).  Counsel for the Commission, on the other hand, stressed the width of the words "in relation to" and argued that an order in relation to the proceeds of sale of shares was an order in relation to the shares themselves; in addition, he pointed to the power in subs 744(6) to make ancillary orders and submitted that an order vesting proceeds, in the way the Commission sought, could be justified under that provision.

The matter is very much one of impression.  There is, I think, no doubt that an order vesting the shares might be coupled with a direction that the Commission exercise its power to sell the shares vested, e.g. by accepting the highest current offer: that is clearly enough an order of the kind contemplated by para 744(9)(a).  If such a sale is made, then the Commission will receive the proceeds and will be required to deal with them in the way the Law provides.  I find it difficult, however, to see that an order that the proceeds should, instead, be retained and not disbursed until a secondary notice is complied with is properly to be described as an order ancillary to one either vesting the shares or directing their sale; and I do not think that such an order can be justified independently as one "in relation to" the shares.  Matters might well be different where, in a proper case, a mandatory order was made requiring compliance with a secondary notice: where such an order was made, a further order requiring, pending compliance, that shares be sold and their proceeds be paid into Court, or that the proceeds of sale of shares directed to be
vested in the Commission not be disbursed, could I think be justifiable as ancillary to the mandatory order enforcing compliance with the Law.

Those conclusions are, perhaps, reinforced by a consideration of submissions made on behalf of Leumi on a closely related matter, but going principally to discretion.  Counsel for Leumi submitted, and I agree, that the primary function of the Court is to make orders finally disposing of matters or controversies, and that it would generally be an  inapt use of judicial power to make conditional orders of the kind sought requiring the supervision by the Court of future conduct.  Accepting the general correctness of that, there is, as counsel conceded, an exception in cases where a mandatory order requiring compliance with the Law is made.  Given that a construction of the provisions is open which would not permit an order "freezing" proceeds except where a mandatory order requiring compliance is made, I think those further considerations support its adoption as the construction to be preferred.

Counsel for the Commission suggested that a "freezing" order might alternatively be justified on the basis of the jurisdiction of the Court to grant a Mareva injunction: Jackson v Sterling Industries Ltd (1987) 162 CLR 612.  It is clear, however, that a Mareva injunction is not available in that way as, in effect, final relief.  It is available only to achieve a more limited and interim purpose: Jackson at 619 per Wilson and Dawson JJ, 621 per Brennan J, 625 per Deane J and 643 per Gaudron J.

4.         May a secondary notice under s 719 be given by fax?

Section 719 provides that the Commission or a company may "give" a secondary notice.  Section 722 imposes obligations on a person who "receives" a secondary notice.  Part 6.8 does not itself include any provision as to the way in which a secondary notice is to be given.  In coming to the conclusion that a secondary notice may be given by fax, provided at least that it is actually received by the person to whom it is directed, his Honour relied on the very short time limit within which the provisions require, in order to keep the market fully informed, information to be given; the absence of a provision requiring a secondary notice to be executed or signed in any particular way; and the fact that the provisions impose obligations on one who "receives" a notice as opposed to one to whom a notice is "given".  There are obvious considerations of convenience favouring a construction, if one is open, which would permit the giving of a notice by fax.

The difficulty lies in s 109X of the Law.  That section reads as follows:

            109X (1) [Application of section]  For the purposes of any provision of this Law that requires or permits a document to be served on a person, whether the expression "serve", "give" or "send" or any other expression is used, the document may be served:

            (a)        on a natural person:

                        (i)         by delivering it to the person personally; or

                        (ii)        by leaving it at, or by sending it by post to, the address of the place of residence or business of the person last known to the person serving the document; or

            (b)        on a body corporate other than:

                        (i)         a company; or

                        (ii)        a recognised company; or

                        (iii)       a registered body;

                        by leaving it at, or sending it by post to, the head office, a registered office or a principal office of the body corporate.

            109X (2) [Operation of other provisions or court powers]   Nothing in subsection (1):

            (a)        affects the operation of any other provision of this Law or any other law of the Commonwealth or of this or another jurisdiction that authorises the service of a document otherwise than as provided in that subsection; or

            (b)        affects the power of a court to authorise service of a document otherwise than as provided in that subsection.

            109X (3) [Service on director or secretary]  In addition to the methods of service referred to in subsection (1), a document may be served on, or delivered to, a director or secretary:

            (a)        in their capacity as a director or secretary; or

            (b)        for the purposes of a proceeding in respect of conduct they engaged in as a director or secretary;

            by leaving it at, or posting it to, the alternative address notified to the ASC under subsection 242(1), (2) or (8).

Leumi and EBC are, of course, bodies corporate to which para (1)(b) of the section applies.  A secondary notice is a "document" for the purposes of the section: see the definition in s 9.  It is a document which a provision of the Law permits to be given to, and thus, for the purposes of the section, to be served on a person.  Therefore the section is to be read, as it applies to the secondary notices given to Leumi and EBC, as providing
that a secondary notice may be given to Leumi or EBC by leaving it at, or sending it by post to, the head office, a registered office or a principal office of Leumi or EBC, as the case may be.

Sections 220 of the Law deals with the service of documents on a company: i.e., broadly speaking, one incorporated under the Law or under legislation which it replaced.  Subsection 220(1) provides that:

            A document may be served on a company by leaving it at, or by sending it by post to, the registered office of the company.

Sections 109 and 220 are thus similarly expressed.  It is well established that s 220 provides exclusively for the service of documents, e.g. particularly statutory demands under s 459E.  Counsel referred to such cases as Racecourse Totalizators Pty Ltd v Hartley Cyber Engineering Pty Ltd (1989) 15 ACLR 457, Re Mannum Haulage Pty Ltd (1974) 8 SASR 451, CFC Corporation Pty Ltd v Lanier (Australia) Pty Ltd (1993) 116 FLR 456, Vicbar Pty Ltd v Development Constructions (Newcastle) Pty Ltd (1995) 13 ACLC 1,220 and Pacific Capital Ltd v BBC Hardware Ltd (1995) 13 ACLC 1,652.  We could not, it was contended, apply to s 109X a construction different from the well established construction of the substantially identical words in s 220.  To do so would, further, leave subs 109X(2) with little, if any, work to do.  It should also be noted that the Law expressly provides for the service of certain documents by fax: s 747, dealing with the service of documents on a securities exchange.

Those are powerful considerations.  Nevertheless, it must be borne in mind that s 109X has effect for the purposes of the Law except so far as the contrary intention appears (subs 6(1)): there is, therefore, a question whether a contrary intention appears in Part 6.8.  Additionally, s 109H must be kept in mind.  It provides:

            109H  In the interpretation of a provision of this Law, a construction that would promote the purpose or object underlying the Law (whether that purpose or object is expressly stated in the Law or not) is to be preferred to a construction that would not promote that purpose or object.

When one compares the provisions of Part 6.8 with, for instance, those of Part 5.4, it is evident that the latter provisions, so far as they relate to the service of documents and their receipt, are drawn with much greater precision than the former.  Particularly, subs 459E(1) permits a person to "serve" on a company a demand; events which may follow the service of a demand, and time limits applicable to them, are consistently described by reference to the time when the demand was "served": see e.g., sections 459(2)(a)(ii), 459F(b), 459G(1), 459G(2), 459Q(a).  The contrast with Part 6.8 is quite striking.  Whereas sections 718 and 719 authorise the Commission or a company to "give" a notice, sections 721 and 722 speak of action which may, or must, be taken by a person who "receives" (rather than "is given") a notice.  Then, subs 721(3) refers to a refusal "by written notice to the person"; subs 722(2) speaks of a requirement to "notify the company in writing" of a request; and s 723 speaks of the day on which the Commission "notifies a person of its decision on a request".  Additionally, the verb "give" and various derivatives of it are used in Part 6.8 in contexts where clearly s 109X is not, or may not be, applicable: see, e.g., the opening words of the definitions of
"primary notice" and "secondary notice" in s 717 ("to give to the body giving the notice"), paras 721(1)(a) and (c) and 721(2)(d), (e) and (f).  Additionally, if the construction for which Leumi and EBC contend is right, different requirements, as to giving a notice, apply according to whether or not the person to whom it is given is one to whom s 109X applies.  It was suggested to us, somewhat surprisingly perhaps, that whereas an Australian company may be given a notice by fax because s 109X does not apply and s 220 also does not apply (presumably because the notice is "given" not "served"), neither a natural person nor a foreign corporation may be given a notice by fax.  In the end, I think that in the context of the provisions, and given their evident purpose, s 109X is inapplicable: the intention that it should not apply sufficiently appears.

Authorities cited by his Honour (Hastie & Jenkerson v McMahon [1990] 1 WLR 1575 and NM Superannuation Pty Ltd v Hughes (1992) 27 NSWLR 26) establish clearly enough that there is nothing in the nature of facsimile transmission which excludes it as a means of giving or serving a document.

Accordingly, in my view, a primary or secondary notice may be given by fax.  I agree, however, with the view of the primary Judge that time limits and obligations consequent on the giving of a notice are enlivened, when it is given by fax, only upon actual receipt of the notice in full and in legible form.

Because of my conclusion that the primary Judge's decision as to the appropriate remedies should not be disturbed, it is unnecessary for me to consider the further submission of counsel for Leumi as to an extension of time under s 1322(4)(d).

5.         Does s 719 of the Law authorise the giving of the secondary notice in a manner which infringes the law of the place where the notice is given?

This is the first of the additional points in EBC's notice of cross‑appeal.  It arises because his Honour held that service by courier infringed, and service by fax possibly infringed, article 271 of the Swiss Penal Code.  His Honour's conclusion that the obligations imposed on the recipient of a secondary notice apply extraterritorially is not challenged and, in my view, is clearly right: and that is so whether or not compliance by the recipient would breach a requirement of foreign law.  As his Honour recognised, however, it is a different question whether s 719 permits the giving of a secondary notice, including by an Australian regulatory authority, where the giving of it may infringe foreign law.  As his Honour pointed out, the interests protected by the Swiss provisions inhibiting disclosure (the protection of private and commercial confidences) are different from the interest (the integrity of a foreign government's sovereignty within its own territory) protected by article 271.  EBC argued that the considerations relied upon by the primary Judge - particularly considerations relating to the short time limits required if the statutory scheme were to be effective - were not sufficient to displace the presumption that s 719 should not be construed so as to permit breach of the laws of another sovereign state.  The solution, counsel for EBC said, was for government to make suitable
arrangements with foreign sovereigns to ensure that notices may be given speedily without infringing local law.

In my view that submission should be rejected.  Once it is accepted - as, for the reasons given by the trial Judge, in my view it must be - that s 722 operates extraterritorially so as to impose obligations on foreign corporations, even where performance of the obligations would result in breach of local law, it is, as his Honour says, but a short step to conclude that a notice may be given under s 719 to a foreign corporation in the same way as it can be given to a local corporation, even though the giving of it may infringe the law of the place where the notice is received.  Indeed it is not easy to see by what precise process of construction a different result could be reached: particularly, a result which differentiated between the giving of notices in jurisdictions which permitted that to be done in the way contemplated by s 719 and the giving of them in jurisdictions which did not.  Once again, it is a matter of construing the provisions in the light of s 110D (which, unless a contrary intention appears, gives them application to all bodies corporate, whether formed or carrying on business in Australia or not) and s 109H (which requires the Court to prefer a construction that would promote the purpose or object underlying the provisions to one that would not).  The purpose of the provisions is the maintenance of an informed market; plainly the legislature thought it necessary, for the promotion of that object, to provide for a very quick mechanism for giving notices and responding to them.  In my opinion the Judge was right in holding that s 719 authorises the giving of a notice even where to do so may infringe the law of a foreign country.

6.         Should his Honour have held that there was a real and appreciable risk that EBC, if it complied with the secondary notice, would breach article 271 of the Swiss Penal Code?

This is a somewhat narrow point, involving a finding, on expert evidence, as to Swiss law.  A conclusion favourable to EBC would have no practical consequences, given the conclusions I have already reached, unless it led in turn to a conclusion favourable to EBC on the next and final issue, which, as senior counsel for EBC frankly told us, he approached "with some misgiving or concern".

Be that as it may, the issue is whether it should be held that there is a real and appreciable risk that EBC and its officers or agents would contravene article 271 as aiders and abettors if EBC complied with the secondary notice.  The only one of the three experts who dealt with this matter explicitly, as it relates to the secondary notices, was Dr Peter Nobel, who gave evidence for EBC and whose qualifications, as the Judge said, are impressive.  Dr Nobel swore two affidavits, dated 28 July 1995 and 15 November 1995 respectively.  In his first affidavit, Dr Nobel expressed the view that the employees or agents of the Commission who were involved in sending the secondary notice to EBC by mail (sic) or facsimile breached article 271.  He added that the Swiss Federal Court had held that the term "aiding and abetting" "denotes any action, assistance or preparation which facilitates the punishable activity and is therefore to be punished as a completed offence"; here, Dr Nobel said, the "punishable activity" was the sending of the notices; accordingly it was his opinion "that officers, employees and agents of EBC who provide
information to the [Commission] in answer to the Notices could be held in breach of article 271 of the Swiss Penal Code, as aiders and abettors".

In his second affidavit, Dr Nobel answered a number of specific questions which had been put to him.  They included the question "what is the degree of possibility of EBC's officers, employees and agents being held in breach of Article 271 and/or Article 273 PC?".  Dr Nobel answered this question shortly: he said

            In my opinion there is a real and appreciable risk of liability.  That risk is not merely a fanciful one.

He then referred to the likelihood of publicity of any charge and the undesirable consequences of that publicity.  There was then a further question which was directed to ascertaining Dr Nobel's views about the effect of a particular decision of the Swiss Federal Court and his agreement, or otherwise, with what other experts said as to the likelihood that persons in Switzerland answering interrogatories might be held liable as aiders and abettors.  In answer to that question, Dr Nobel described the decision in some detail: it was one relating to the liability of a Zurich lawyer who instructed his assistant to help with the taking of evidence for the purpose of Australian proceedings.  Dr Nobel then said this:

            As this judgment does not relate to the status of witnesses or persons answering notices in any way [the statement of the Commission's expert] is in my opinion misleading.  The case does indicate the seriousness with which breaches of Article 271 are treated by the Swiss courts.

            In the light of the Federal Court's very broad definition of the term "aiding and abetting" quoted above ("any action, assistance or preparation which facilitates the punishable activity"), I am of the opinion that the judgment creates the real and appreciable risk that Article 271 could also be applied to witnesses or persons answering notices.  That risk is not fanciful.

In the light of that and other evidence Sackville J found that there was some risk that Leumi and EBC, and their officers and agents, would contravene article 271 as aiders and abettors if they complied with the secondary notices.  His Honour continued (Appeal Book p 1254):

            However, it is necessary to have regard to the lack of authoritative guidance on this issue under Swiss law and the rather general character of Dr Nobel's reasoning on this point.  I think that the risk of a prosecution based on aiding and abetting, although not fanciful, cannot be described as real and appreciable.  If the disclosure to the ASC were made with the authority of the clients of Leumi and EBC, I think that the risk of prosecution of the Swiss corporations, or their servants or agents, as aiding and abetting any contravention by the [Commission] of art. 271, is not appreciable.

Two things are evident, I think.  One is that his Honour was dealing with a slightly different question from that posed to Dr Nobel.  The other is that, as it related to the issue with which his Honour was concerned, his Honour was justified in describing the reasoning of Dr Nobel as rather general in character.  That, no doubt, is simply a consequence of the particular questions he was asked.  I would not disturb his Honour's finding on this issue.

7.         Should any contraventions of s 722 have been excused under s 743?

I have already mentioned the diffidence with which senior counsel for EBC approached this matter in his oral submissions.  In my view the Judge's decision not to excuse the contraventions he found was well within the permissible bounds of judicial discretion and, for what it may be worth, was in my view right.  His Honour recognised a number of factors which weighed in the balance in favour of EBC (and Leumi): particularly, that it is no light matter to enforce Australian laws in circumstances which infringe the legislative policies of other countries and that, on the evidence, there could be no suggestion that EBC (or Leumi) had acted in bad faith or with the deliberate object of circumventing Australian law.  The force of the former consideration was, however, considerably reduced by the possibility (and, as it turned out, the actuality) of taking it into account on the question of remedy.  The force of both was outweighed by the significance, in relation to the policy of Part 6.8, of the very substantial proportion of the issued capital of OAP controlled by each of EBC and Leumi.  Section 743 does not state exhaustively the matters to be taken into account on an application to excuse a breach; the considerations which his Honour took into account were relevant and important.

Conclusion

The result of my conclusions on the issues arising on the appeal and cross‑appeals may be

shortly stated: the appeal and both cross‑appeals should be dismissed, in each case with costs.

                                                     I certify that this and the preceding 43 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane.

                                                     Associate: 

                                                     Dated:  18 September 1996

Heard:                                          21 May 1996

Place:                                            Sydney

Decision:                                       18 September 1996

Appearances:Messrs G C Lindsay SC and G O Blake of counsel instructed by P J Stepek as solicitor for the Australian Securities Commission appeared for the appellant.

                                                     Messrs D F Jackson QC and R W White of counsel instructed by Atanaskovic Hartnell appeared for the first respondent.

                                                     Messrs R A Conti QC and F Kunc of counsel instructed by Freehill Hollingdale & Page appeared for the second respondent.