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Wednesday 21 June 2017

17-192MR Decision on application of Criminal Code in civil proceedings under Corporations Act

The Full Federal Court has held that it is not necessary for ASIC 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) (Whitebox), 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.

The Full Federal Court agreed with ASIC’s submissions in Whitebox and ruled "Chapter 2 of the Criminal Code is not engaged in, and does not apply to, proceedings brought for a contravention of a civil provision, including a civil penalty provision…"

The decision affirms ASIC's approach in civil proceedings.


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.

ASIC applied to have the issue determined as a separate question in Whitebox, and was heard by the Full Federal Court on 8 June 2017. In Whitebox, ASIC is alleging a contravention of the market manipulation provisions of the Corporations Act (refer: 16-078MR).

Last updated: 30/03/2021 09:32