Australia Law of North V Marra Developments Ltd †Free Samples

Question: Discuss about the Australia Law of North V Marra Developments Ltd (1981). Answer: introduction The leading case of North V Marra Developments Ltd (1981) was decided by the High Court of Australia on 9th December 1981. The Honble Stephen, Mason, Murphy, Aickin and Wilson JJ decided the case against the Appellant and in favor of the Respondant. Facts of the case As per the fact of the case, the Appellants are the member of a stock broking firm (Sydney Stock Exchange Ltd). The Appellants were initially trading in the name of NORTHS but are now considered as J. J. NORTH. In 1954, Marra (Respondent) was incorporated as a public company. There were various rural properties that were acquired by Marra in 1974 in New South Wales. Its ninety three percent issued and paid up capital was held by 5 families. The shares of the company were listed on Sydney Stock Exchange. But, prior to 1974 the true value of the company assets were not depicted with the help of the balance sheets of the company or the market value of the assets. Considering with the situation, the Appellants in around December 1972-February 1974 submitted that there is a need that market capitalization of the asset must be done so that the true value of the Marra assets can be determined. There were three recommendations that were given by the Appellant and all the three were accepted by the Respondent. It is alleged by J. J. NORTH that they have provided advisory services regarding the reorganization of the capital of Marra Developments Ltd. ("Marra") and advised on the takeover of Marra upon Scottish Australia Holdings Ltd. ("Scottish") and thus they are eligible for remunerations and the interest thereon from the Respondents. (Jade, 2017) Issue Thus the main issue that was developed from the facts of the case was whether the Appellant is liable to claim the remuneration with interest from the Respondent. Now, because of the acts that are undertaken by the appellant and the Respondent, the major duty that was violated is submitted herein under. The duties/responsibilities breached That the agreement amid the Appellant and the Respondent to carry out the scheme and the carrying out the scheme itself (of capitalization and takeover) are in violation of section 70 of the Securities Industry Act 1970 of New South Wales. The scheme itself and its conduct both are illegal in nature. (Armson, 2009) Because of the act, there is violation of section 1041A (Price Manipulation) and section 1041B of the Corporation Act 2001 (False Trading and Market Rigging). Reasons why the duties were breached The main reason because of which the duties were considered to be violated are: The acts of the appellant were against the statutory prohibition (section 1041A and section 1041B of the Act) and thus the actions were illegal so they are not permitted to take advantage of any statutory wrong; The Appellant presented a plan which was approved by the Respondents, wherein, share capital is restricted and the takeover must be on the basis of share to share basis. The prices of the shares are increased by appellant involvement of buying the shares. The three documents that are made by the appellant to the stock exchange proceed of the shares were also not true and are found to be misleading in nature. The actions of the Respondent and the appellant have resulted in enhancing the market price of the company so that there is completion of takeover. That the agreement that is submitted by the Appellant is illegal and is not enforceable as it is in violation of section 70and71of theActand the common law; Decision of the Court Supreme Court of New South Wales The Appellant filed a case, however, the same is rejected by the Supreme Court of New South Wales. It is submitted but Meares J, that the argument of the defendant that the acts of the Appellant involves illegality is valid as the acts are in violation of section 70 of the Securities Industry Act 1970. Court of appeal The Appellant filed an appeal to the Court of Appeal. The Court of Appeal also dismissed the appeal of the appellant, Against the decisions of the Court of Appeal, the Appellant filed the present appeal. High Court On 9th December 1981 the Honble Stephen, Mason, Murphy, Aickin and Wilson JJ submitted that the proposal which is recommended by the Appellant and which is later carried out by both the appellant and the defendant regarding the purchase/sale on the Stock Exchange in the Respondent is not found to be legal. It is decided that the agreement to carry out the scheme and the carrying out the scheme itself are in violation of section 70 of the Securities Industry Act 1970 of New South Wales. The scheme itself and its conduct both are illegal in nature. The court also held that the actions of the parties are not such which resulted in considering the same as conspiracy to deceive. Thus, the amount that is claimed by the Appellant cannot be recovered and the appeal stands dismissed. Reasons for the decisions and critically analyses of the decision The High Court decided that the amount that is claimed by the Appellant cannot be recovered and the appeal stands dismissed. The main reasons that are attributed by the High Court which form the basis of the decision is submitted below and is critically analyzed: (O'Connell, 2013) In the Corporation Act 2001, considering the observations that are made Mason J and the changes under the 1980 Act, few variations were made regarding the market rigging and the false market provisions. There were few amendments that were made to section 998 of the corporation Act 2001. It was found that the Respondent considered itself vulnerable to takeover mainly because its net assets value per share was slightly more that its existing market price. It is on the advice of the Appellant that it proposed bonus issues and the merger. The merger was on the basis of share to share and the shares of the takeover company was at a better price and thus it is required that the shares of the Respondent company must be boosted. The assume share price of the Respondent was used to calculate the share exchange ratio. The stockbrokers (Appellants) keep on buying the shares of the company in small volumes in order to increase the price of the respondent company and finally the takeover was successful. Later the Appellants claimed remuneration for their services provided. Because of the above facts, it is submitted by Mason J that any activity which gave the market false or misleading appearance is prohibited under statue. The acts of the appellant were against the statutory prohibition and thus the actions were illegal so they are not permitted to take advantage of any statutory wrong; That there is a plan that is presented by the appellant and which was approved by the Respondents. The plans include that there should be restricting of the defendants share capital, that they would establish the share price of the Respondents on the Sydney stock exchange @$16.50 or thereabouts and the takeover must be on the basis of share to share basis. The prices of the Respondent shares are increased because of the appellant involvement of buying the shares so that the takeover takes place adequately. These actions of the appellant were not regarded as legal in concern with section 70 of the 1970 act (E.T. Fisher Co. Pty. Ltd. v. English Scottish and Australian Bank Ltd.(1940). Also, the three documents that are made by the appellant to the stock exchange proceed of the shares were also not true and are found to be misleading in nature. The price of the share @$16.50 was referred as the "market sale price", sale price",, "market price" and "market value". Even though theses terms were used there is no evidence to the extent and the nature of the appellants actions in the market and thus it can misguide the reader of the document regarding the importance that is attached with the price of the shares((Scott v. Brown, Doering, McNab Co.(1892). That the court found that section 70 aims at protecting the market for securities against any kind of manipulation or artificial dealing. There must be true demand and supply by the parties to the stock exchange. It is not true that the aim of the section is only to curb colorable or fictitious transactions. Those transactions which are not on the face of it are found to be colorable but are in fact are on the nature that they might mislead or create a false market price of the shares will defiantly come within the preview of section 70 of the Act. The actions of the Respondent with the help of the appellant which has resulted in enhancing the market price of the company of the respondent so that there is completion of takeover is an act which in contract to the provisions of section 70 of the Act. Thus, an illegal act cannot justify any benefits to be accrued in favor of the default. So, the appellant itself at fault cannot claim remuneration for an illegal act. The court held that the appeal of the appellant is not found to be favorable not because the agreement in which they are relying is in violation of section 70 but mainly because the actions in which they indulged into are itself illegal in nature. It is submitted by the court that the main object of the plaintiff in buying shares of the Respondent at premium so that they can deceive the public but in fact it is the Respondents themselves who are buying the shares in the shield of the Appellants. The main object of the purchase is to cheat the public by providing a false image of the share price of the Resonant. So, on those grounds it is decided by the High court that the appellant is not rightful in suing the Respondents and claim their remunerations on the basis that the acts in which they indulge into are itself illegal in nature. The relevance of the decision to the development of Australian corporations law In the leading case there were series of observations that were made in relation to section 70 of the 1970 Act. Mainly the interpretation of the section signifies that there must be presence of some element in order for the application of the section. Thelaw submitted by Majon J is now not applicable in the current law. however, based on the observations that are made by the Honble Judhe there were changes that were brought in Securities Industry Act 1980 (Cth) (1980 Act). (O'Connell, 2013) In the Corporation Act 2001, considering the observations that are made Mason J and the changes under the 1980 Act, few variations were made regarding the market rigging and the false market provisions. There were few amendments that were made to section 998 of the corporation Act 2001. The words of the section 998 (1) submits that [a] person must not create, or do anything that is intended or likely to create the requisite false or misleading appearance. With the introduction of these changes the fundamental of likelihood is introduced; Few changes were also made under section 998 (5); However, again the market rigging and the false trading provisions were amended by the Financial Services Reform Act 2001 (Cth). The main changes that are brought in are that civil penalty provisions are made under Part 9.4B which includes few misconduct provisions inclusive of market rigging and false trading in (section 1041B of the corporation Act 2001) This change has reflect a doubt that it is very troublesome and expensive for the law to be applied by applying criminal standard of proof and it is more efficient and appropriate to apply the civil sanctions. Thus, now civil case can be brought which is based on the violation of section 1041B (1) by complying with civil standards of the balance of probabilities and there is no need for the establishment of any kind of fault or intention. Now if there is violation of section 1041 B (1) then a liability of @ $200,000 be imposed to an individual and @ $1 million for a body corporate. Thus, the leading case of North V Marra Developments Ltd and with the current reforms that are brought in then there is no need for the establishment of any kind of fault or intention. References Books/Articles/Journals Ann O'Connell (2013) Protecting the Integrity of Securities Markets What is an Artificial Price?: DPP (Cth) v JM, Melbourne Law School. Emma Armson (2009) False Trading and Market Rigging in Australia,Corporate Law Teachers Association Conference, ANU College of Law. Legislation Companies Act 1961. Securities Industry Act 1970 (NSW) Case laws E.T. Fisher Co. Pty. Ltd. v. English Scottish and Australian Bank Ltd.(1940) 64 CLR 84 North V Marra Developments Ltd (1981). Scott v. Brown, Doering, McNab Co.(1892) 2 QB 724 Online Material Jade (2017) North V Marra Developments Ltd (1981) (Online). Available at: https://jade.io/article/66955. Accessed on 1st October 2017.