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LAW504 Business Law: Fame Decorator Agencies v. Jeffries Ltd

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Analyse the case of Fame Decorator Agencies pty Ltd V Jeffries Industries ltd(1998).

Write a report outlining the following:

1. Case introduction.

2. Outline the duties/responsibilities (eg CA s. 181) breached and explain why the duties were breached.

3. Discuss and critically analyse the court/tribunal decision and the reason for the decision in view of the Corporations Act. 


In Fame Decorator Agencies pty Ltd V Jeffries Industries ltd(1998)

It is a case that deals with falsification of prices of securities on the stock exchange. In this case Jefferies was a public company whose shares were listed on the stock exchange, Fame detector held shares of the Jefferies Company Mr J F O'Halloran, who principally controls the business of Fame, was formerly the Chairman of Directors of Jeffries. Along with ordinary shares in the company, in 1995 Fame also held convertible preference shares in the company. On 4 the February 1999, the preferences shares were to be converted, but the articles also provided other circumstances in which the shares could have been converted at higher date. One of theta circumstance was that if, prior to the completion date, Jeffries failed to pay a certain specified dividend on a particular date, and then each holder of a converting preference share had a right to accelerate the conversion date in respect of all or some of the holder's preference shares. (Constable, P., 2011. )The number of shares to be allotted as to be determined by formula by the company.  The formula sufficed that the  the weighted average sale price of all fully paid ordinary shares in Jeffries sold on the stock exchange during the twenty trading days immediately prior to the conversion date. Higher will be the total number of shares to be allotted with the lower average price shares of the ordinary shares during those twenty trading days. Both were inversely proportional to each other.  (Bowley, R.N., 2013)The market was highly speculative because the shares were thinly traded in the market. Now there was manipulation from the shareholders in the form that they placed a ferry large sell order to move up the average moving price of the ordinary shares just before the trading Waa closed, so that higher the moving average price of ordinary shares, they would have to issue less of shares, in that way on conversion the company won’t be at a loss, with the preference shares to be paid shares based on tee formula of the moving hare prices in the market.  Because of this large order the market moved from 35 cents to 13 cents... This was held to be the breach of the section s1041B and also misleading and deceptive conduct, and also on the basis that the people who were interested in the company, had an assumption about the share price of the money moving in the market, with no clue about the ongoing prosecution, because of which there was increment in the overall prices of the share of the company. They were under the assumption that the prices present in the market were reflecting the genuine interaction of demand and supply in the market, and all the decisions were taken on the basis of the same. (McIntyre, G., 2014)

As per Section 1041B which aims at protecting the integrity of the market prices of the shares, and thus indirectly protect the interest of the interested party in the shares of the company. It was mentioned that the market price of the trading shares might be affected by various factors because there may be presence of many factors genuinely that may affect the prices of these shares like the speculation activities and also the reputation of the company. However when the shares of a thinly traded company are was impersonified to give an impression of the high moving prices of them, to calculate the sales at the lowest rather than at the highest price in the market. so that alter the possibility of any of the purchaser to bid for the shares in the market, had both the purpose and the effect of creating an abnormal price in the market, and that was not allowed by the law, a and hence when the market price of Jefferies was manipulated by placing every large order of sell to give an impression that the market price of the shares was much higher than mentioned, it led to the breach of the section and hence the company was to be prosecuted accordingly. The overall act of the fame company on the share price of the Jefferies was to create and manipulate the market prices; hence it was to be accused for the same.( Latimer, P., 1999)

As per section 998 of the corporation act it was stated that none of the person will enter into any transaction that will manipulate the market price of the trading securities in the market. Just in the case of the Jefferies case, hence this section was also breached and the judge held the person liable for the default caused in this regard. There is difference between the individual buyer who is making the bid and the individual buyers, it was very much clear that the overall affect of the Fame industries was to manipulate the market prices; hence it was to be held guilty for the same.  It may not be very easily ascertainable in the individual actions to determine whether their action is falsifying the overall activities of the trading of the shares in the market. In this regard only it was stated that unless it was fully clear no person can be held liable about falsifying information, however in case of Jefferies it was evident since the movement of the prices was affected by the deliberate sales order that was placed, hence it was stated that were was abreact of the sec 998 and the respective person was to be held liable for the same. (Latimer, P., 2012)

As per section 995(2) of the corporation act it was stated that no person while he is dealing in any securities wills indulge in any activities that will eventually mislead or likely to mislead or present false impression about the prices of the security in the market. In case any person does the same he or she shall be held liable in that regard. The conduct of the fame company with the prices of the shares of Jefferies that were trading on the stack exchange as per the given provision of section 998 was to mislead they third parties who were interested in the company by giving them a false impression about the prices of the shares that were traded on the stock exchange. It was breach of duty to the third parties who believed in the genuine movements of the force of demand and supply to determine the prices of the stock in the market and also never thought that the seller were placing high bid, so that the prices will rice and there will be low allocation of shares on conversion. Hence it was breach of section 998 of the corporation act.  The overall finding of the contravention of section 995 was also correct, and the court held the seller guilty for both the section.( Huang, H., 2009)

A judgement was given by the court in this reagard where it was held that any person who indulged in any activities that led to manipulation of share prices in the market and effect the third party who believes in the genuyine movement of the prices in the market by the forces of the deamd and supply was to be held liable for such activity.It was fioegry and falsification of prices and hence led to criminal activities and can eb charged accordingly.  The judgement that was upheld in this case was that any person who enaged i estavlishing the lowest prices of the shares that were traded on the stock exchange for his personal motive to satisfy his contractual agreement was to ebg held liable for such activities and was to be punished , just in the case of fame vs Jefferies, wre ther was amanipulation in the prices of the shares to upheld the eprosnla motive of conversion of prefrenc shares of the company , for their own befit. The judge passed an order in this regard and all the oarties who were part of such falsification of prices and their movement in the stock exchange were hled liable in the court of law, and were made to pay the decdied penalities by the court of law. It wa ssted that trading on the stock exchange in a wronmgful manner can aso lead to criminal charges against the person concerned. This was the judgment that was made in this case.


Redefining market manipulation in Australia: The role of an implied intent element. Company and Securities Law Journal, 27(8), pp.8-22

 False Trading and Market Rigging on the Stock Exchange (Australia, Hong Kong, Malaysia, Singapore).

False Trading and Market Rigging on the Stock Exchange.Asia Pacific Law Review, 7(2), pp.247-258.

 Reforming the Regulation of Financial Market Manipulation.

DPP v JM: High Court clarifies the meaning of “artificial price under s 1041A. Butterworths Corporation Law Bulletin.

Ferocious Beast or Toothless Tiger-The Regulation of Stock Market Manipulation in Australia. Macquarie J. Bus. L., 8, p.54.

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