ASIC media releases are point-in-time statements. Please note the date of issue and use the internal search function on the site to check for other media releases on the same or related matters.

Monday 15 May 2017

17-135MR Application of Criminal Code in civil proceedings under Corporations Act

The Federal Court has agreed to further consider whether it is necessary to prove fault according to Chapter 2 of the Criminal Code in civil proceedings relating to certain breaches of the Corporations Act. 

In the matter of ASIC v Whitebox Trading Pty Limited & Anor (NSD383/2016), ASIC asked the Federal Court to clarify the law following its decision in Gore v ASIC [2017] FCAFC 13 (Gore) in February.

In Gore, the Court considered that ASIC had to prove Criminal Code fault elements to obtain civil remedies in relation to breaching the Corporations Act by offering securities without a current prospectus.

ASIC has previously acted on the basis that it was only necessary to prove Criminal Code fault elements in criminal proceedings.  In agreeing to further consider the issue the Court said, “The consequences to ASIC (and, indeed, other regulators where this position may obtain, that is an identified body of conduct giving rise to separate and distinct civil and criminal remedies) are significant.”

Background

Section 3.2 of the Criminal Code states, “In order for a person to be found guilty of committing an offence the following must be proved: (a) the existence of such physical elements as are, under the law creating the offence, relevant to establishing guilt; (b) in respect of each such physical element for which a fault element is required, one of the fault elements for the physical element.” Fault elements include intention and recklessness.

In Gore, the Court reasoned that it was necessary for ASIC to prove the relevant Criminal Code fault elements when seeking a declaration and injunctions for a breach of section 727 of the Corporations Act (offering securities without a current prospectus). Section 727 is an offence provision and section 1308A of the Act provides that Chapter 2 of the Criminal Code applies to all offences against the Corporations Act.

Gore was an appeal decision of the Federal Court. As ASIC was successful in the relevant aspects of that proceeding, it could not test the reasoning by seeking special leave to appeal to the High Court. The appellant in Gore did not seek such leave.

In deciding to further consider the matter, the Court indicated that Gore is not a binding authority as to the application of the Criminal Code in civil proceedings relating to contraventions of the Corporations Act. 

In ASIC v Whitebox Trading Pty Ltd, ASIC is alleging a contravention of the market manipulation provisions of the Corporations Act (refer: 16-078MR). The Gore issue is to be considered by a Full Court of the Federal Court as a preliminary issue on a date to be fixed during the period 6-9 June 2017.

Last updated: 15/05/2017 12:19