Re Strikers Management Pty Ltd Australian Securities Commission v Dimitri, Peter [1997] FCA 431

CATCHWORDS Corporations - s. 230(1)(c) of the Corporations Law - order prohibiting a person from managing a corporation - factors to be considered. Corporations Law, s. 230(1)(c) RE: STRIKERS MANAGEMENT PTY LIMITED; AUSTRALIAN SECURITIES COMMISSION -V- PETER DIMITRI NG 3789 of 1996 Burchett J Sydney 7 May 1997

IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. 3789 of 1996 ) GENERAL DIVISION ) RE: STRIKERS MANAGEMENT PTY LIMITED BETWEEN: AUSTRALIAN SECURITIES COMMISSION Applicant AND: PETER DIMITRI Respondent CORAM: Burchett J PLACE: Sydney DATE: 7 May 1997 REASONS FOR JUDGMENT BURCHETT J: Under s. 230(1)(c) of the Corporations Law, the Court is empowered, on an application such as the present, among others, to make an order prohibiting a person for such period as is specified in the order from managing a corporation. The basis of the order is that, first of all, the person has repeatedly breached relevant legislation, and secondly, on two or more of the occasions when that has happened, the person was a relevant officer of a body corporate - not necessarily the same body corporate on each occasion. Such an officer includes a director, and a de facto director. The present application is made by the Australian Securities Commission. It is made upon evidence which it is unnecessary to traverse in detail, for it amply makes out the case required under s. 230(1)(c). When the proceeding was commenced, the respondent, Mr Dimitri, indicated that he was going overseas, and gave an undertaking to the court specifying the date of his return. He has not complied with that undertaking, having, first, notified the applicant that he was ill, and obtained from the court an extension of the period of his undertaking, and subsequently, notified the applicant that regardless of his undertaking he did not intend to return. Remarkably, he proffered the ancient excuse: "I have married a wife, and therefore I cannot come" (see Luke 14:20). The marriage was apparently in Las Vegas. I mention the matter of the undertaking in order to make it perfectly clear that the order I am going to make is in no respect affected or influenced by what appears to be the flagrant contempt of court committed by the respondent. Whether it is in fact to be held such a contempt of court, and whether any penalty is to be inflicted on him in respect of it, are matters for another day, and are not the issue now before me. What is before me is simply the making of an order under s. 230, the basis of which is not, as I understand the authorities, punishment or, in any sense, the infliction of a penalty, but the protection of the public. Until some years ago, the equivalent power to make an order of this kind was limited to an order having a period of five years, as a maximum. When the present application was launched, it appears that no particular thought was given to whether under the current form of the section, which provides no such upper limit, an order for a longer period should be sought. At any rate, it was not done; and the application was limited to the previously applicable period of five years. However, I am asked to amend the application, so that an unlimited order may be made, or alternatively an order until further order. Notice has been given to the respondent, who does not appear, that an application would be made as I have indicated. I have given some anxious thought to whether, in all the circumstances, I should permit the application to be so amended, and should make an order as sought. I should say, first, that I do not think the alternative of an order until further order is really appropriate when final relief is being granted. An order in that form has traditionally been utilised for the purpose of interim relief, and I consider the Court should make up its mind what period of protective order the evidence justifies and requires. I think, on consideration, that five years is not long enough in this particular case. The evidence reveals repeated and serious matters falling within the terms of the section. The respondent was convicted on 4 May 1995 of breaches of s. 71(8) of the Companies (New South Wales) Code, involving a significant sum of money. He was convicted on 8 July 1996 of breaches of ss.170(7) and 229(1) of the Corporations Law. Again, significant sums of money were involved. He was made bankrupt on 1 April 1991, a bankruptcy which continued until it was annulled on 25 October 1996. Despite that, he acted as a de facto director of the company, Strikers Management Pty Limited, in which he was plainly the moving force, without seeking the leave of the Court to manage a corporation. It is clear that he did manage that corporation. He was thereby in breach of s. 229(1) of the Corporations Law. He also, on the evidence, and as I find, utilised shareholders' funds of that company for his personal purposes so as to be in breach of s. 232(6) of the Corporations Law. In effect, he "robbed Peter to pay Paul", transferring funds to his trustee in bankruptcy with a view to the obtaining of the annulment. Sums received from members of the public, as a result of the actions of the respondent, have been very substantial, and it appears that large sums are unlikely to be recovered. In all the circumstances, it seems to me that, as I have said, five years is not a sufficient period for the protection of the public. Notice having been given, and there having been nothing put on behalf of the respondent, who does not appear, I think I should grant leave to amend the application by deleting the limitation to five years. I have come to the conclusion that the proper order to make is one for a period of 10 years, to date from today's date. I make those orders. I also order that the respondent pay the costs of the proceeding, including any reserved costs. At the time the undertaking was given to the Court, to which I have referred, an amount of $5,000 was deposited in the trust account of the Respondent's solicitor, to abide the order of the Court. I add to the orders I have previously made that so much of the sum of $5000, or all of it, if that be necessary, as is required to meet the taxed or otherwise established costs of the applicant be paid out of the sum of $5000 held in the trust account of Robinson Creais. I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett. Associate: Date: Counsel for the Applicant: Ms L.A. Muston Solicitor for the Applicant: Ms N. Isbel of the Australian Securities Commission