summary by someone LAW

a) Summary Mr Schwartz, who was disqualified from managing a corporation pursuant(IN ACCORDANCE) to section 206B(1)(b)(ii) of the Corporations Act 2001 No. 50 (Cth) (“the Act”), sought leave under section 206G(1)(c) of the Act to manage Babybelle Pty Limited (“Babybelle”). Evidence filed by Mr Schwartz in support of his application indicated that Mr Schwartz was currently responsible for the day to day running of Babybelle, raising questions as to whether Mr Schwartz had and continued to contravene(BREACH) the Act. On the basis of the evidence in suppOort of the application and applying the legal principles established by Lindgren J in Adams v Australian Securities and Investments Commission (2003) 46 ACSR 68, Gordon J dismissed(ORDER TO LEAVE) the application. (b) Facts    On 14 April 2005, Mr Schwartz pleaded guilty to serious dishonesty offences, namely receiving Youth Allowance payments from Centrelink in the period 31 July 2001 to 31 December 2001, to which he had no entitlement.  During this period, Mr Schwartz had ceased (BRING TO AN END)study and commenced casual employment.  He had failed to inform Centrelink of his change in circumstances and under-declared his earnings.  Following his conviction, Mr Schwartz was prohibited(RESTRICTED)P; from managing corporations under section 206B(1)(b)(ii) of the Act, which provides for automatic disqualification where a person is convicted of an offence that involves dishonesty and is punishable by imprisonment for at least three months. Mr Schwartz was disqualified from managing corporations until 14 April 2010, being five years from the date of his conviction, pursuant to section 206B(2)(a) of the Act.  By way of ex parte application dated 7 August 2007, Mr Schwartz sought leave under section 206G(1)(c) of the Act to manage Babybelle.  In support of the application, evidence was led to the effect that:

The offences committed by Mr Schwartz occurred some six to eight years ago.

Mr Schwartz had repaid his debts and attended counselling.

Since 1 March 2007, the registered office of Babybelle had been Mr Schwartz’s home address.

Mr Schwartz was responsible for the day to day running of Babybelle including financials, executing government department forms and selling items over eBay.

If leave was not granted, Babybelle may be forced to cease trading as Mr Goodman could no longer actively manage the business.

Babybelle was incorporated on 1 September 2005 (five months after Mr Schwartz was convicted of the offence) and its sole director and shareholder was Mr Goodman. Mr Goodman also provided evidence in support of the application. (c) Decision   In considering the application, Gordon J applied the legal principles in Adams v Australian Securities and Investments Commission (2003) 46 ACSR 68 being that:

The applicant bears the onus of establishing that the court should make an exception to the prohibition.

The objectives of the Act are to protect the public, not punish the offender, and to deter others from engaging in similar conduct and abusing the corporate structure to the disadvantage of stakeholders.

Leave will not be granted on the sole basis that the offender is suffering hardship.

The court will have regard to the nature of the offence committed by the applicant, the applicant’s involvement in committing the offence, the applicant’s character (including their conduct in the period in which they were removed from management), the structure of the company that the applicant seeks leave to manage, the nature of the business of that company and the interests of stakeholders. The court will also consider any risks to stakeholders and the public should leave be granted.

Gordon J expressed a concern that the evidence given in support of the application indicated that Mr Schwartz was, in fact, already managing Babybelle. Gordon J considered the evidence filed by Mr Schwartz in support of his application to be unsatisfactory and noted that there was no evidence in relation to:

Mr Scwartz’s relationship with Mr Goodman;

Mr Goodman’s role in managing the business;

Babybelle’s current operations, including who it does business with; or

whether Mr Goodman was to retain his shareholding.

In the circumstances, Gordon J rejected the application but noted that Mr Schwartz could make a fresh application if evidence becomes available addressing outstanding issues