Table of Contents


Sentencing of offenders

1.29 The Committee invited the Chairman of the ASC to comment on the sentence imposed on Mr Alan Bond following his guilty plea to criminal charges relating to the improper use of $1.2 billion of Bell Resources Ltd funds. The sentence of four years gaol seemed, on the surface, to lack parity with a much heavier sentence imposed on Ms Robyn Greenberg for an offence involving the misappropriation of considerably less money. Mr Cameron noted the dilemma faced by the ASC:


ASC investigation into the Aust-Home Group


1.30 Over recent months, the Committee has received extensive representations from the Justice for the Aust-Home Group (JAG). These representations concern an ASC investigation into the affairs of Aust-Home Investments Ltd and related companies (Austhome). The ASC investigation commenced in 1991 and did not conclude until 1995. While the ASC believes that the investigation demonstrated "serious criminality", [24] no prosecutions resulted. While it is not the Committee's practice to sit in judgment on complaints concerning individual ASC investigations, it nevertheless decided on this occasion to seek some preliminary information from the ASC and the Australian Taxation Office (ATO). [25] The Committee takes this opportunity to set out some relevant aspects of that information.

The Austhome scheme

1.31 The Austhome scheme began in 1989 and continued until 18 March 1992, when the ASC obtained an ex parte order in the Federal Court seeking the appointment of receivers to Austhome companies and the assets of individuals allegedly involved in the scheme. The ATO summarised the scheme, which was essentially a negatively geared property investment scheme, as follows:

1.32 It is the primary contention of the ASC that the Austhome scheme was not implemented in the manner in which it was represented to potential investors. In particular, the ASC contends that the false representation of material facts induced investors to contribute money in the form of interest payments to scheme companies when, in fact, no interest liability arose because the represented loans had not been made and/or could not be made. [27]

1.33 In response, JAG does not deny that the scheme involved a round-robin series of transactions, but states that all legal and accounting experts consulted by the scheme's promoters supported the scheme's validity and its implementation.


The ASC's contentions

1.34 In October 1995, the ASC issued a Report on its investigation into the affairs of Austhome. With regard to the conduct of the investigation, the Report states that: [28]

1.35 With regard to the conduct of the Austhome scheme, the ASC's Report states that: [29]


JAG's contentions

1.36 In general terms, JAG responds that:


ASC responses to JAG's contentions

1.37 The Committee put some of these contentions to the ASC through a series of questions on notice. In general terms, the ASC relies on its Report and further:


JAG's reply to the ASC's answers

1.38 On 13 June 1997, JAG replied to the answers provided by the ASC. In generally addressing the conduct of the Austhome scheme, the promoters did not suggest that they had been blameless, and acknowledged that, with the benefit of hindsight, they would have done many things differently. [44] Specifically:


The ATO's contentions

1.39 As noted in para 1.31 above, the ATO characterised the Austhome scheme as, essentially, a tax-based negatively geared property investment scheme. The ATO had initially issued a series of rulings to Austhome investors and the scheme's promoters approving tax deductions for interest expenses incurred. However, on making further investigations, the ATO found that "the facts actually applicable to the arrangements were fundamentally different to the facts set out in the rulings requests". Therefore, the ATO revoked the tax instalment deduction variation approvals it had given, and issued amended assessments to Austhome investors which disallowed the interest deductions claimed between 1989 and 1992. These amended assessments were issued "on the basis that the investors did not hold any income producing assets, and there were no loans in existence that could give rise to a deduction for interest". [58]

1.40 Some of the amended debit assessments were "quite large", given the substantial reductions in tax instalment deductions that had been granted to some investors. The average liability was around $15,000.

1.41 On 5 June 1992, the ATO held a meeting with Austhome investors and their lawyers. The meeting canvassed the ATO's position, investors' objection rights and the ATO's debt recovery mechanisms and options. After further negotiations with solicitors for the investors, in February 1993, the ATO agreed to a settlement arrangement. Under the arrangement:

1.42 The ATO reports that all but a handful of investors accepted the settlement offer.


Judicial consideration of the Austhome matter

1.43 As indicated above, aspects of the Austhome matter were considered by the Federal Court and the Queensland Supreme Court on a number of occasions. Some aspects are still under consideration by the Administrative Appeals Tribunal. [60] However, as yet, no court or tribunal has definitively judged the merits of the scheme.

1.44 While it is difficult to draw unambiguous conclusions from the various judgments that have been delivered, it would be fair to say that concerns have been expressed about the conduct of the litigation, the conduct of the receivers and managers, and the conduct of the scheme's promoters. Given the effective abandonment of the ASC's application, these concerns have been expressed in judgments relating to the costs of the litigation.

1.45 On 26 August 1993, Mr Justice Hill summarised his view of the balance of conduct in the Austhome litigation in the following terms:

1.46 Mr Justice Hill was considering the issue of costs in relation to Mr and Mrs Bunt, who were directors of certain Austhome group companies. On 20 November 1995, Mr Justice Cooper similarly considered costs in relation to the receivership of two Berona companies which had been included as respondents in the Aust-Home litigation. His Honour noted that the conduct of the Berona respondents, to the extent that it was revealed in the investigation of the ASC, was a principal factor in the initiation of the proceedings against them. This conduct, which was conceded by the Berona respondents, included:

1.47 Again, His Honour ordered that, as between the ASC and the Berona respondents, the parties should bear their own costs.


Parliamentary consideration of the Austhome matter

1.48 The Austhome matter has been raised directly in the Parliament, [63] and, during 1995, representations were made to the Parliamentary Joint Committee on Public Accounts. Also during 1995, the matter was extensively considered by the Senate Legal and Constitutional References Committee as part of its inquiry into The Investigatory Powers of the Australian Securities Commission.

1.49 That Committee received many submissions dealing with Austhome, [64] which it used as a case-history on which to base recommendations for general changes to ASC investigative procedures. Many of that Committee's procedural recommendations have since been implemented by the ASC.

1.50 After examining the Austhome experience under section 1323 of the Corporations Law, that Committee conceded that "ex parte applications under section 1323 are sometimes necessary due to the reality of swift movements of money in the corporate world", but concluded that the section did not provide "any incentives for caution in the use of the ex parte procedure" and that innocent persons might suffer loss and damage without any right to compensation for the loss suffered. [65]

1.51 With regard to section 1323, that Committee recommended that, where the ASC obtains an ex parte order under that section, and the order is subsequently lifted, and no determinative order is made against the property the subject of the order, and no successful civil or criminal prosecution results against the respondent, then the respondent should have a statutory right to recover from the ASC damages for any loss incurred as a result of the original order. [66]

1.52 The Government of the day did not accept this recommendation, although it did accept the need for a time limit on the duration of ex parte orders:

1.53 The Committee understands that no such reforms have yet been made to section 1323.


The Committee's conclusions

1.54 The above outline indicates that the Austhome matter has had a prolonged, complicated and somewhat unfortunate history. While it has been before the courts, and assessed in detail by a Senate Committee, the promoters of, and some investors in, the scheme remain unsatisfied. They reiterate the view that what is required is a full public inquiry into the merits of their case.

1.55 Unfortunately, this Committee is not equipped to sit as a surrogate appellate court for each individual or organisation who seeks to challenge the actions of the ASC in a particular case. Where a particular case illuminates some urgent or more general or systemic concerns, the Committee may draw the attention of the Parliament to those concerns.

1.56 There are a number of points to be made about the Austhome matter:

1.57 Having examined the great mass of detail that has been provided both by JAG and by the ASC, the Committee considers that, ultimately, little would be achieved in again reconsidering the conduct of the Austhome investigation - either from the point of view of general regulatory policy, or of satisfactorily resolving the particular issues of concern to those involved. Therefore, the Committee does not intend to undertake a further formal investigation into Austhome.

1.58 However, the Committee notes that the potential problems inherent in the grant of interim orders under section 1323 of the Corporations Law, as identified by the Senate Legal and Constitutional References Committee, do not yet seem to have been remedied. The provision has not been amended as recommended by that Committee, nor as indicated in the government response to that Committee's report.

Recommendation No 2:

The Committee recommends that time limits be imposed on the duration of interim orders under section 1323 of the Law, where those orders are obtained following an ex parte hearing.



[23] Corporations and Securities Committee, Committee Hansard, 21 March 1997, p CS 183.

[24] Australian Securities Commission, An Investigation into the Affairs of Aust-Home Investments Ltd and Others: A Condensed Report by the ASC under Section 17 of the ASC Law (hereinafter Aust-Home Report), (19 October 1995), p 7.

[25] See Appendices 1 and 2 to this Report.

[26] Letter of 19 February 1997 from the Assistant Treasurer. See Appendix 2, pp 95-96.

[27] Australian Securities Commission, Aust-Home Report, p 10.

[28] Australian Securities Commission, Aust-Home Report, pp 7-13.

[29] Australian Securities Commission, Aust-Home Report, pp 10-11 and 25-27.

[30] Corporations and Securities Committee, Committee Hansard, 21 March 1997, p CS 177 (Mr Cameron).

[31] See Appendix 1, p 51.

[32] See Appendix 1, pp 52-54.

[33] See Appendix 1, pp 58-60.

[34] See Appendix 1, p 48.

[35] See Appendix 1, p 60.

[36] See Appendix 1, p 69.

[37] See Appendix 1, pp 62-63.

[38] See Appendix 1, pp 61-62.

[39] See Appendix 1, pp 48-50.

[40] See Appendix 1, p 63.

[41] See Appendix 1, p 64.

[42] See Appendix 1, pp 65-66.

[43] See Appendix 1, pp 67-68.

[44] See Appendix 3, p 101.

[45] See Appendix 3, p 105.

[46] See Appendix 3, pp 105-6.

[47] See Appendix 3, pp 106, 109.

[48] See Appendix 3, p 103.

[49] See Appendix 3, p 107.

[50] See Appendix 3, p 108.

[51] See Appendix 3, p 106.

[52] See Appendix 3, pp 104-5.

[53] As described in an affidavit filed in the Federal Court proceedings G3004 of 1992, a computer printout, believed to have been produced directly from the ASC computer database, was contained in a red folder found by a person connected with Austhome in the ladies toilet near the court. This folder had previously been seen in the possession of a "young fair skinned woman with short blond hair who had been sitting in the courtroom during the proceedings." From this description, the deponent believed that the person referred to was the named employee of the ASC.

[54] See Appendix 3, pp 103-4.

[55] See Appendix 3, pp 104, 108.

[56] See Appendix 3, p 108.

[57] See Appendix 3, p 108.

[58] See Appendix 2, p 96.

[59] See Appendix 2, p 97.

[60] See, for example, Re Scott and Commissioner of Taxation, AAT Taxation Appeals Division, No DT96/1.

[61] Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 203. His Honour did order that the ASC should pay or indemnify Mr and Mrs Bunt for the costs of the receivers.

[62] Australian Securities Commission v Berona Investments Pty Ltd & Anor CLS 1995 FED 635. The ASC told the Committee that counsel for the Berona companies had conceded, among other things, that Austhome scheme moneys had been used to pay debts of the Berona companies, and property belonging to the Berona companies had been held out as property belonging to the Austhome scheme: see Appendix 1, pp 66-67.

[63] See, for example, Senate, Parliamentary Debates, 12 November 1992, p 2998 (Senator W O'Chee).

[64] Approximately 30% of the 147 submissions to the inquiry concerned the Austhome matter.

[65] Senate Legal and Constitutional References Committee, The Investigatory Powers of the Australian Securities Commission, (June 1995) p 39.

[66] Senate Legal and Constitutional References Committee, The Investigatory Powers of the Australian Securities Commission, (June 1995) p 40.

[67] Government Response to the Report by the Senate Legal and Constitutional References Committee on the Investigatory Powers of the Australian Securities Commission, (tabled in the Senate on 29 November 1995) para 43.

[68] See Appendix 1, p 69.