Assignment on Business Law Jefferies Industries Limited
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Added on 2020-04-07
Assignment on Business Law Jefferies Industries Limited
Added on 2020-04-07
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Running head: BUSINESS LAW ASSIGNMENTBusiness law AssignmentName of the StudentName of the UniversityAuthor Note
1BUSINESS LAW ASSIGNMENTFame Decorator agencies Pty Limited v Jefferies Industries Limited and Ors [1998] NSWC 157 The sale of shares in Jefferies Industries Limited conducted on 28 April 1995 was heldto be in contravention of section 995 and 998 of the Corporations Act. The appellant, Fame,preferred an appeal against this finding and pleaded to set aside the order. ASC contended thatthe findings were relevant and that other share transactions conducted by Fame in Jefferiescontravened section 995 and 998 of the Corporations Law. As per the facts of the case, Jefferies is a public company, shares are listed on the StockExchange, and appellant had all its shares held in Jefferies. Mr. J F O’Halloran exercises controlover the Fame and was director of the Jefferies formerly. The sale of the shares was conducted inthe manner in which Stock Exchange Automated Trading System (SEATS) operates. As per theSEATS system, if Fame wishes to sell shares in Jefferies, it is important that bids are accepted inthe sequence mentioned in the evidence. The transaction of shares that was held on 28 April gave rise to several disputes amongvarious persons with respect to the significance of such transactions regarding the conversion ofthe preference shares. The appellate court was required to determine the primary issue whethersales of 20000 shares of Jefferies at 14c and 74000 shares of Jefferies at 13c were incontravention of section 995 and 998 of the Corporations Law. Duties breachedThe appellant was held to have committed a breach of section 998 and 995 of the Actwhile selling the shares of Jefferies. According to section 998(1) of the Corporations Act, any
2BUSINESS LAW ASSIGNMENTperson is forbidden from creating or acting with an intention or any such conduct is likely tocreate any false or misleading appearance with respect to the market for the price of or for anysecurities. This provision is a counterpart of section 124 of the present Australian statute ofSecurities Industry Act 1980 (Cth) and section 70 of the Securities Industry Act 1970 (NSW)and section 9 (a) (i) and 10 (b) of the Securities Exchange Act 1934 (USA) and Rule 10b-5 thatwas incorporated in pursuant of section 10(b). According to section 995 of the Corporations law states that no person is permitted toengage in conduct that is misleading or deceptive or is likely to mislead or deceive while dealingin securities (Coffee, Sale & Henderson, 2015). This provision was incorporated having regard tosection 52 of the Trade Practices Act 1974 (Cth). The primary objective behind the incorporationof this provision was simple and rational as the legislature believed that section 52 is applicableto several cases with respect to securities, hence there should be a similar provision that shalldeal with cases involving conduct of the parties engaged in securities. In this case, the conduct of the appellant, Fame, with respect to sales of shares in Jefferieswas held to be misleading and deceptive towards the third parties. Critical analysis of the decisionMr. O’ Halloran adduced evidence for justifying his conduct while placing orders on 28April, that he was under the pressure of obtaining quick cash for the purpose of fulfilling hisfinancial commitments (Sealy & Worthington, 2013). The court did not consider his contentionand did not rely on his evidence. As per the findings of Cohen J with respect to the evidenceadduced by Mr. O’Halloran, he was not under any financial pressure and that he had sufficientmoney to pay off any urgent debts. This establishes the fact that O’Halloran did not have any
3BUSINESS LAW ASSIGNMENTneed to obtain quick cash and deliberately sold the last 94000 shares on 28 April at a price thatwas lower than the former sale price. His conduct reveals that he intentionally created anartificially low figure for conversion calculation that were made in respect of preference shares. The appellant argued that his conduct cannot be held as misleading and that he was notengaged in any form of manipulative conduct. He further argued that on 28 April he had anintention to take the advantage of and grab the opportunity available in the market situation.However, such situation did not result from any form of collusion between the appellant and anyother person (Hannigan, 2015). The appellant agreed to the fact that he acted in his own interestand wanted to obtain financial benefits. The appellant acknowledged that he went accepted thevarious offers to purchase shares in Jefferies that had been placed in the market before 28 Apriland were still in place. The appellant went into the market before the close of trading on 28 April and cleared allthe current offers that were available to purchase the shares at the current offer prices. Asdiscussed above that section 998 of the Corporation law forbids a person from creating anythingin market that is false or misleading in its appearance for the sake of price of any securities, theappellant contends that his conduct does not amounts to any misleading or false appearance. Inthis context, the court referred to North v Marra Development Ltd [1981] HCA 68; [1981] 148CLR 42 to explain the purpose of section 998 of the Corporations Act. The case dealt withsection 70 of the Securities Industry Act 1970 (NSW), which aims at safeguarding the securitiesmarket against activities that would lead to managed or artificial manipulation (French et al.,2014). The section aims at ensuring that the market signifies the forced of genuine demand andsupply. The phrase ‘genuine supply and demand’ excludes any buyers and sellers who conducttransactions for the purpose of maintaining or setting the market price.
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