The recent decision of the Full Federal Court in Maxi EFX Global AU Pty Ltd v ASIC shows that documents may remain within a company’s possession notwithstanding the fact that such documents are physically located overseas and held by third-party service providers.
Background
Maxi EFX Global AU Pty Ltd trading as EuropeFX provided an online platform for investors to trade foreign exchange currencies and other derivatives. In July 2019, ASIC commenced an investigation under s 13 of the Australian Securities and Investments Commission Act 2002 (Cth) (‘the ASIC Act’) into EuropeFX.
As part of that investigation, ASIC issued EuropeFX with a notice to produce 19 categories of documents, pursuant to s 33(1) of the ASIC Act (‘the Notice’). In response to the Notice, EuropeFX produced in excess of 10,000 documents but these were not all of the documents requested under the Notice.
The proceedings
ASIC sought an order from the Federal Court to compel EuropeFX to comply with the Notice. EuropeFX opposed the order and argued, among other things, that EuropeFX did not have ‘possession’ of many of the documents requested under the Notice as they were under the physical custody of third-party service providers located in Belize, Cyprus and Israel.
The primary judge rejected that assertion and found that because EuropeFX had the right to request or require the third-party providers to return documents relating to EuropeFX’s business, the documents were within EuropeFX’s possession.
On appeal, the Full Federal Court agreed with the primary judge and held that the following factors did not release EuropeFX from its obligations under the Notice:
- the failure of one third-party provider to reply to a letter from EuropeFX requesting production;
- that at least one third-party provider sought to charge a fee for returning the documents;
- that the Notice required the production of a very large number of documents, causing inconvenience and expense to EuropeFX.
Telling against EuropeFX was the fact that it held a contractual right of access in its agreements with the third-party providers.
The Full Court also noted that:
- a notice issued pursuant to s 33 of the ASIC Act is not like a subpoena or discovery in litigation – it is broader in scope and more coercive in effect;
- the use of the expressions ‘relating to’ and ‘referring to’ in the Notice did not make it inoperative for lack of precision or clarity.
The upshot
‘Possession’ for the purposes of s 33 of the ASIC Act is determined by inquiring whether the party has de facto power over the documents, and not whether the party has in fact, physical control and custody over the documents.
The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.
