20 January 2020
ASIC v Helou  FCA 1634
The recent decision of Beach J in ASIC v Helou  FCA 1634 is a reminder of the need for regulators to communicate where they have potentially overlapping investigations, particularly where related class actions are also afoot or anticipated.
In ASIC v Helou, Beach J dismissed applications by the defendants, Mr Helou and Mr Hingle, to permanently stay or dismiss ASIC’s proceedings on the basis that they were an abuse of process as ASIC and the ACCC had previously brought actions related to the same underlying facts. In dismissing the applications, Beach J outlined a protocol that his Honour proposes to adopt to coordinate regulatory and class action proceedings that arise from the same factual circumstances, should a similar issue arise in the future.
Mr Helou was the former CEO and a director of Murray Goulburn Co-operative Co Limited (MG) and MG Responsible Entity Limited (MGRE). Mr Hingle was the CFO.
On 20 June 2019, ASIC commenced proceedings against Mr Helou and Mr Hingle. ASIC alleged that, between 1 May 2015 and 27 April 2016, MG, MGRE and their directors and officers engaged in conduct concerning the non-disclosure of material information to the ASX and the market generally, and misleading and deceptive conduct relating to securities.1 ASIC sought disqualification orders under s 206C or, alternatively, s 206E of the Corporations Act 2001 (Cth) (Corporations Act).
By this point in time, multiple proceedings had already been brought in relation to substantially the same conduct and facts. These included:
- proceedings brought by the ACCC in April 2017 against MG, Mr Helou, and Mr Hingle (over which Beach J had also presided, and which had since been resolved)2
- proceedings brought by ASIC in November 2017 against MG and MGRE (which had since been resolved)
- two class actions brought in May 2016 and August 2018 against (variously) MG, MGRE, and their directors (the first of which remained afoot; the latter having settled).
Mr Helou and Mr Hingle applied to permanently stay or dismiss the 20 June 2019 ASIC proceedings as an abuse of process, claiming that ASIC could have brought the current claims as part of the earlier ASIC proceedings, but chose not to.
ASIC explained that the reason for the delay between the earlier ASIC proceeding and this proceeding was that it was awaiting the outcome of the ACCC proceeding, because it took the view that it was preferable to avoid running two disqualification proceedings by independent regulators against the same defendants simultaneously.3
Justice Beach ultimately dismissed Mr Helou and Mr Hingle’s applications for a stay or permanent dismissal. However, his Honour did not endorse ASIC’s strategy of waiting.4 Instead, his Honour found that it led to two unsatisfactory outcomes: first, his Honour considered he would not have dealt with the penalty phase of the earlier ACCC proceedings had he been aware of ASIC’s intentions; secondly, the delay had the tendency to disrupt the trial and disposition of the May 2016 class action.5
Justice Beach noted that this case highlighted a broader problem to be addressed concerning the coordination and disposition of multiple regulatory actions and class actions concerning the same events, circumstances and parties.6 To address this problem, Beach J set out the following protocol that he proposed to adopt in his own docket in such circumstances:7
- The first mover in any regulatory action should inform the Court at the first case management hearing whether they have sued all targets and, if not, the timing for completion of that course (but without necessarily identifying the additional targets). This also applies to any second regulatory mover.
- The court should be updated at the pre-trial case management hearing and at trial or the hearing of any penalty phase of the particular regulatory action.
- If a defendant is common to two or more regulatory proceedings or perceives that they are likely to be so, that defendant should draw that circumstance to the Court’s attention in the first regulatory action. The stance of the potential second mover regulator can then be ascertained by the defendant or by the Court of its own motion.
- If any one or more class actions have been instituted involving the same set of circumstances and this becomes known to a regulator, whether an actual or potential mover, the regulator should proceed efficiently and expeditiously to crystallise its position in terms of whether it is to institute, inter alia, civil penalty proceedings, and if so against whom.
- No class action should be set down for trial without the Court being satisfied that it has obtained from the parties or any regulator(s) sufficient information concerning the four points outlined above.
- No regulatory proceeding should be set down for trial or penalty hearing without the Court being satisfied that it has obtained from the parties or any regulator(s) sufficient information concerning the first three points outlined above.
Significance for regulators
While the implications of this decision and Beach J’s protocol are, at present, limited to matters on Beach J’s docket that raise similar issues, the decision serves as a reminder of the broader importance of communication between regulators where multiple agencies are involved in regulating conduct arising from broadly the same facts. It also raises the prospect that, once proceedings are afoot, it may be appropriate to apprise the Court of the likelihood of further related litigation.
The decision also serves as a prompt for agencies to carefully consider the interaction of regulatory investigations or litigation and related class actions. If a regulator becomes aware of a class action involving the same set of circumstances, Beach J expects the regulator to proceed efficiently and expeditiously to crystallise its position in terms of whether to institute proceedings. Furthermore, Beach J has clearly indicated that where natural persons are involved across both regulatory and class action proceedings, and penalty privilege issues will arise, his Honour will endeavour to dispose of the regulatory proceedings first.
Commonwealth agencies will also bear in mind the overarching obligations and requirements of the Legal Services Directions 2017 (LSDs), including acting as a model litigant (per 4.2 of the LSDs) and reporting significant matters and multiple agency matters to OLSC (per 3.1 of the LSDs). In circumstances where there is the potential for multiple regulatory actions and interaction with class actions, compliance with the LSDs will assist the Commonwealth to coordinate the management of regulatory and class action proceedings that arise from the same factual circumstances.
1 ASIC v Helou  FCA 1634 at , .
2 ACCC v Murray Goulburn Co-Operative Co Limited  FCA 1964.
3 ASIC v Helou  FCA 1634 at .
4 ASIC v Helou  FCA 1634 at .
5 ASIC v Helou  FCA 1634 at - .
6 ASIC v Helou  FCA 1634 at .7 ASIC v Helou  FCA 1634 at -.
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