11-22AD Decisions in ASIC’s proceedings against parties associated with fuel technology company
Tuesday 8 February 2011
ASIC notes the findings made by the Federal Court in Perth today regarding its civil proceedings against various parties associated with fuel technology company, Firepower Holdings Group Ltd (Firepower BVI).
The Federal Court made declarations that Axis International Management Pty Ltd (Axis), Owston Nominees No 2 Pty Ltd (Owston) and Mr Quentin Ward contravened section 727(1) of the Corporations Act (the Act) regarding several offers made to Australian investors for the sale of Firepower BVI shares. Section 727(1) of the Act prohibits offers for the sale of shares or the distribution of an application form for an offer for the sale of shares within one year of the original issue of the shares where the shares were issued or acquired with the purpose of being on-sold, unless a prospectus is or has been lodged with ASIC or unless certain exemptions apply.
The Federal Court found that declarations and publicity orders were an appropriate form of relief for the contraventions of s727(1) of the Act.
The publicity orders proposed against Owston may be the subject of further hearing given the company was placed into liquidation in November 2010.
The Federal Court found that Seaswan Holdings Pty Ltd (Seaswan) did not contravene the Act when offering Firepower BVI shares for sale and therefore dismissed the proceedings against that company.
ASIC’s proceedings focused on offers to sell shares in Firepower BVI to Australian investors that it alleged took place between September 2005 and June 2006. ASIC alleged that individuals and entities associated with Firepower BVI made offers to sell shares in breach of the Act. The proceedings followed an ASIC investigation into the sale of shares in Firepower BVI to approximately 1400 Australian investors who paid nearly $60 million for the shares. Firepower BVI was placed into liquidation in October 2008.
ASIC commenced the proceedings with the regulatory aim of clarifying the obligations of parties associated with the issuer of shares when offering shares for sale to members of the public without a disclosure document and the remedies available where a contravention was found.
On 21 July 2008, ASIC commenced proceedings in the Federal Court in Perth against Axis, Owston, Seaswan, Sattvic Pty Ltd (Sattvic), Mr Timothy Francis Johnston and Mr Ward. The trial in respect of all defendants other than Sattvic commenced on 15 October 2010 before Justice Gilmour and ran for three days. ASIC sought the following orders from the Court:
Declarations that the conduct of the corporate defendants and Mr Ward contravened the Act;
Orders disqualifying Mr Johnston and Mr Ward from managing a company in Australia; and
Publicity orders requiring Seaswan and Owston to disclose information, both by letter and advertisement, to investors that would enable them to assess any rights they may have to recover their money or to pursue other compensation actions that may be available to them.
For further information, refer to ASIC advisory 08-163.
Next stage of proceedings
The matter has been adjourned to a date to be fixed for the hearing concerning the disqualifications orders sought against Mr Johnston and Mr Ward.
The trial regarding ASIC’s allegations against Sattvic is scheduled to commence on 8 March 2011.