27/04/2004 - 22:00

Key ASIC powers under threat

27/04/2004 - 22:00


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Key ASIC powers under threat

SOME of the major powers held by corporate watchdog the Australian Securities and Investments Commission are under threat, thanks to a High Court ruling.

On April 22 the High Court ruled that former One.Tel directors Jodee Rich and Mark Silbermann were not required to give discovery and file witness statements until the conclusion of evidence by ASIC’s witnesses during its civil penalty proceedings.

ASIC is seeking compensation of $93 million from the defendants and that Mr Rich and Mr Silbermann be disqualified from managing or being a director of any company for such period as the court sees fit.

The $93 million is for the reduction in value of One.Tel over a period of about eight weeks during the time One.Tel continued to trade because of the alleged failure of the defendants to properly discharge their responsibilities.

ASIC obtained an order in its Supreme Court proceedings that the defendants are required to give discovery and file witness statements prior to the commence-ment of the proceedings.

This order was appealed by Mr Rich and Mr Silbermann, initially to the New South Wales court of Appeal and then to the High Court.

Legal experts WA Business News spoke to said the High Court ruling struck at the heart of one of ASIC’s main powers – to seize documents that it can later use in civil proceedings. However, they qualified their comments by saying that they had not yet seen the High Court judgement.

The argument that Mr Rich and Mr Silbermann’s legal teams ran was that the documents could be incriminating.

Such an argument is usually used in criminal cases.

Normally such an argument does not work in civil proceedings, however, the ASIC orders, being of a regulatory nature, fall into the grey area between civil and criminal proceedings.

ASIC has refused to comment on whether the High Court ruling is a blow to their powers, or on anything related to the case.

However, it appears likely that ASIC will go to the Federal Government and seek for it to legislate to allow them to retain their seizure powers.

Jackson McDonald commercial litigation partner June Bartlett said it seemed, on the face of it, that the High Court decision could have a profound effect on ASIC’s powers to seek documents that they would use in their actions to disbar directors or for civil claims.

"These actions are sort of hybrid. They are regulatory actions," she said. "They have some powers that litigants in the normal course of corporate processes wouldn’t have.

"Perhaps, in this case, ASIC was in a worse position than a civil litigant."

Freehills litigation partner Konrad de Kerloy said the Rich-Silbermann win could also be seen as a win for honest company directors that became caught up in ASIC actions.

He said while there had been some outcry given the notoriety of the defendants, it could be seen as a "win for the little guy".

"Perhaps this will reduce some of the regulator’s power," Mr de Kerloy said.

The ASIC proceedings against Mr Rich and Mr Silbermann is scheduled to commence on July 5 in the NSW Supreme Court.



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