Australian Securities & Investments Commission v Terra Industries Inc [1999] FCA 525

Australian Securities & Investments Commission v Terra Industries Inc [1999] FCA 525

The failure of Terra Industries Inc and Peter Gray to timely lodge substantial shareholding notices contravened s 709(1) and seriously misinformed the market. The court held that, pursuant to s 741, it was appropriate to make orders vesting the relevant shares in ASIC for disposition to ensure statutory objectives—namely, an efficient, competitive, and informed market—were met. Such orders were not unfairly prejudicial to any party, and the powers of ASIC under a vesting order were not limited by pre-existing rights to disposal by third parties such as Gray. The seriousness of the contravention, including the continuing non-disclosure and misleading nature of interim notices, warranted...

Parties
Applicant: Australian Securities & Investments Commission; First Respondent: Terra Industries Inc; Second Respondent: PG Intercapital Ltd ACN 071 935 441; Third Respondent: Lost Ark Nominees Pty Ltd ACN 071 935 423; Fourth Respondent: Merrill Lynch Equities (Australia) Ltd ACN 006 276 795; Fifth Respondent: Merrill Lynch (Australia) Pty Ltd ACN 000 890 451; Sixth Respondent: Peter Gray
Jurisdiction
Australia
Judgment Date
30 April 1999
Procedural Posture
Proceeding for Orders and Declaratory Relief Following Contravention of Statutory Provisions / Judgment Following Trial
Outcome
Shares vest in ASIC; declarations of contraventions; costs orders as specified; liberty to apply reserved.
Legal Topics
Substantial Shareholding Disclosure, Remedial Orders in Relation to Shares, Vesting Orders, Market Misconduct, Powers of ASIC and Courts Under Corporations Law
Corporations Law Securities Law Substantial Shareholding Disclosure Remedial Orders in Relation to Shares Vesting Orders Market Misconduct Powers of ASIC and Courts Under Corporations Law

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Parties

Australian Securities & Investments Commission

Applicant

Terra Industries Inc

First Respondent

PG Intercapital Ltd ACN 071 935 441

Second Respondent

Lost Ark Nominees Pty Ltd ACN 071 935 423

Third Respondent

Merrill Lynch Equities (Australia) Ltd ACN 006 276 795

Fourth Respondent

Merrill Lynch (Australia) Pty Ltd ACN 000 890 451

Fifth Respondent

Peter Gray

Sixth Respondent

Procedural Posture

Proceeding for Orders and Declaratory Relief Following Contravention of Statutory Provisions / Judgment Following Trial

Legal Issues

  1. 1 Whether Terra Industries Inc and Peter Gray contravened s 709(1) of the Corporations Law by failing to give notice of substantial shareholding
  2. 2 Whether the court should grant a vesting order under s 741 of the Corporations Law vesting certain shares in ASIC
  3. 3 Whether the power to grant such orders is affected by existing rights and interests in the shares, especially in favour of Peter Gray

Ratio Decidendi

The failure of Terra Industries Inc and Peter Gray to timely lodge substantial shareholding notices contravened s 709(1) and seriously misinformed the market. The court held that, pursuant to s 741, it was appropriate to make orders vesting the relevant shares in ASIC for disposition to ensure statutory objectives—namely, an efficient, competitive, and informed market—were met. Such orders were not unfairly prejudicial to any party, and the powers of ASIC under a vesting order were not limited by pre-existing rights to disposal by third parties such as Gray. The seriousness of the contravention, including the continuing non-disclosure and misleading nature of interim notices, warranted...

Court Disposition

Shares vest in ASIC; declarations of contraventions; costs orders as specified; liberty to apply reserved.

Orders

  • Declaration that the first and sixth respondents contravened s 709(1) of the Corporations Law.
  • Shares in Coms 21 Limited (as described) still held by or registered in the name of any of the respondents vest forthwith in the applicant (ASIC).