FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v McCormack [2017] FCA 672

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The decision of the Administrative Appeals Tribunal made on 14 December 2016 be set aside.

3.    The matter be remitted to the Administrative Appeals Tribunal to be heard and determined according to law.

4.    The respondent pay the applicant’s costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

O’CALLAGHAN J:

FACTS

1    From 2006 until September 2013 Mr McCormack was employed by the National Australia Bank (NAB) as a “wealth manager” and later “a financial planning manager”.

2    One of Mr McCormack’s clients was John William Wright (Mr Wright), who had previously been a client of another financial planner, Mr Bell. Mr Wright had become dissatisfied with the returns he was receiving from investments recommended by Mr Bell and, in 2011, asked Mr McCormack to assume the role of his financial planner.

3    Mr Wright would often give to Mr McCormack statements of account and such documents which Mr McCormack would then review, including for the purposes of forwarding them to Mr Wright’s tax accountant.

4    In June 2013, Mr McCormack was sorting through a number of statements of account from MLC, headed “MasterKey Custom”, which Mr McCormack knew was the name of one of MLC’s investment vehicles. One of those statements, in the name of “John Wright”, described the account as a “pension account”. That statement also said that Mr Bell was the adviser in relation to the account. This puzzled Mr McCormack because he knew that Mr Wright did not have a pension account.

5    Mr McCormack then contacted MLC and was told that the account the subject of the statement for the pension account had been closed, and that the monies in the account had been rolled over into a new account with an organisation called “Maritime Super”.

6    At his request, MLC then forwarded to Mr McCormack documents which showed that the balance in the pension account had been rolled into two separate accounts with Maritime Super. Those copy documents, which each bore November 2010 dates, comprised a rollover benefits statement, a withdrawal statement and three letters: one from MasterKey Custom to “Mr J Wright”, care of a PO Box in Port Melbourne; one from MasterKey Custom to Mr Bell; and another from MasterKey Custom to Maritime Super. The documents revealed that the two new accounts were in the name of “John Wright”, that he had been born in March 1941 and that he lived on Beach Road, Port Melbourne, Victoria. The documents also confirmed that Mr Bell was the advisor to “John Wright”. As will become apparent, Mr McCormack knew that his client, Mr Wright, was not born in March 1941 and that he did not live on Beach Road in Port Melbourne.

7    On 24 June 2013, suspecting that the “John Wright” Maritime Super accounts contained monies that had been siphoned off by Mr Bell from Mr Wright, Mr McCormack made two telephone calls to a representative of Maritime Super, pretending to be the person whom Mr McCormack believed was the fictitious “John Wright”. Maritime Super recorded the telephone calls in the ordinary course of its business.

8    In the first telephone call Mr McCormack obtained relevant account details. Having done so, he called back and the following exchange took place between someone identified as “Simone” from Maritime Super and Mr McCormack:

SIMONE: Welcome to Maritime Super, Simone speaking.

MR WRIGHT: Hi Simone, it’s John Wright again. I just spoke to you before…

SIMONE: Oh, yes.

MR WRIGHT: How are you going?

SIMONE: Good. How are you?

MR WRIGHT: I wonder if you – the salary sacrifice announcement you gave me for June-April of this year for that account, which is 76787, I wonder if you could tell me where the salary sacrifice, what company name is salary sacrificing?

SIMONE: Let me just see. We’ve got “GRN Australasia”. Let me just double check if that’s the same, though.

MR WRIGHT: Are you folks in Sydney, New South Wales?

SIMONE: No, no, I’m in Melbourne.

MR WRIGHT: Oh, okay.

SIMONE: I’ve just got to go back and look up the employer code. It’s coming up – the name’s coming up Melbourne 2000, but I don’t know if that’s just a code that we would use, because that seems – I haven’t heard of that one before.

MR WRIGHT: It’s the wrong postcode for Melbourne anyway.

SIMONE: Well, yeah. Let’s have a look.

SIMONE: Are you self-employed by any chance?

MR WRIGHT: No. GRN is an employment agency, so contracting. That’s what that would be.

SIMONE: Because this is coming up – so the employer code is ONP270, and the name, or the trading name, is Melbourne 2000 P/L, and then the contact details are your details.

MR WRIGHT: Yeah, okay. And GRN?

SIMONE: They haven’t contributed this financial year at all.

MR WRIGHT: But they did last year?

SIMONE: I have to go back to the old system.

MR WRIGHT: Where did you get that name from?

SIMONE: So it’s – so any employer that you’ve had, they’ll still show up. That doesn’t necessarily mean they’re contributing currently.

MR WRIGHT: Okay. What other employers have you got contributing?

SIMONE: Well, this financial year it’s just that Melbourne 2000. No-one else.

MR WRIGHT: Pty Ltd. What about previous financial years?

SIMONE: I’d have to go back to an old system.

MR WRIGHT: I thought the GRN came up as part of that?

SIMONE: No, no, it just came up as an employer that has contributed to your account. It means Maritime Super. So this financial year, no-one else has contributed to your account, except for that Melbourne 2000.

MR WRIGHT: Yes. What about since it’s come over (indistinct).

SIMONE: Yeah, I’d have to look at an old system for that.

MR WRIGHT: How long will it take you to do that?

SIMONE: I’m not sure. I could pop you on hold if you’ve got time to wait.

MR WRIGHT: Yes, you can.

SIMONE: Right.

MR WRIGHT: Thank you.

SIMONE: Thanks for holding, John. Yeah, unfortunately with our old system it wasn’t as quick as the new one. So the new one now, whenever someone, say whenever an employer contributes, it actually has the name next to it. With the old one, it never used to have the name, so I’ve got to go back and run reports.

MR WRIGHT: Yeah, I understand. Okay.

SIMONE: Unfortunately. But I can include that – when I print out those statements for you, those past statements, it will actually have the employer listed on those statements, or a code for those anyway.

MR WRIGHT: Yeah. I know that – I know what Melbourne 2000 is. It’s a financial planning firm.

SIMONE: Oh, okay.

MR WRIGHT: All right. No problem. As I said, I’ll call back when things are a bit quieter.

SIMONE: All right. But in the meantime, I’ve got it listed, so I can start working on it anyway.

MR WRIGHT: Okay. No problem. Well, actually, if you could just hold off on that and I’ll call you.

SIMONE: Okay.

MR WRIGHT: And then we’ll get that sorted at a later date.

SIMONE: All right. No problem.

MR WRIGHT: All right. Thank you.

SIMONE: That’s okay. Any time.

MR WRIGHT: Bye-bye.

SIMONE; Bye.

9    Later that day, Mr Wright came to visit Mr McCormack at his office at a NAB branch office. Mr McCormack showed Mr Wright the MLC pension account statement and the documents from Maritime Super and MasterKey Custom that Mr McCormack had earlier obtained from MLC. Mr Wright told Mr McCormack that he had never had an account with either MLC or Maritime Super and that he thought that Mr Bell, his previous financial planner, had stolen money from him by stealing his identity, establishing an account in his name and transferring funds to the accounts. Mr Wright said he wanted to find out how much money was in the accounts held with Maritime Super. It was at this point that Mr Wright and Mr McCormack, by now each apparently convinced that Mr Bell had stolen money from Mr Wright, resolved to withdraw the monies in the two accounts and transfer the full amount of those monies to Mr Wright.

10    During that meeting, Mr Wright telephoned Maritime Super in Mr McCormack’s presence and impersonated, or as the Tribunal put it, “falsely claimed” to be, the “John Wright” who held accounts at Maritime Super. Maritime Super also taped that conversation, which went as follows:

MR WRIGHT: Good afternoon. My name is John Wright, I’m just inquiring about my account please. Do you want my membership number?

JOHN: That would be great, thanks.

MR WRIGHT: XXXXX

JOHN: Thank you. How can I help you?

MR WRIGHT: I’m just wondering if I can get the initial application form.

JOHN: When was it done, sir?

MR WRIGHT: 2006, possibly.

JOHN: just your date of birth and address, please.

MR WRIGHT: XXXXXXX. And the only address you’ll have is XX XXX XX, XXXX XXXXXXXXX.

JOHN: I’ve got something for your allocated pension in front of me. Do you want your allocated pension or do you want your accumulation account?

MR WRIGHT: Both. Do you email it to my financial adviser?

JOHN: Just bear with me sorry. So do you want to run your old account, do you, as well? XXXXX. Hello?

MR WRIGHT: Hello, yeah, yeah. I’m just looking up the numbers. Yeah, I want them both, mate.

JOHN: I can email the pension application straight away, but the other application may take quite some time.

MR WRIGHT: Okay then.

JOHN: Because I’ve got to back to old archived records.

MR WRIGHT. Right.

JOHN: Is there something specific that you need from that file?

MR WRIGHT: No, no, no, no. I’m just with a new financial adviser, and I’m just trying to tidy everything up.

JOHN: How about I send you email copies to your new – I’ll forward those to the adviser.

MR WRIGHT: No, no, no. I’ll give you his direct email. It’s Gerard –

JOHN: Sorry, just bear with me.

MR WRIGHT: Okay, mate.

JOHN: So Gerard – G-E-R?

MR WRIGHT: G-E-R-A-R-D – gerard.j.mccormack – M-C-C-O-R-M-A-C-K – @nab.com.au

JOHN: All right. I’ll get those through within five working days, sir.

MR WRIGHT: Can you do it now, mate? I’m trying to get this sorted out and everything. There’s other things I need to sort of get done. Any chance you can just send it through now?

JOHN: I can get the pension application through today.

MR WRIGHT: Yeah, okay. If you do that, I’ll wait on hold.

JOHN: Just bear with us.

JOHN: I’ve emailed the pension application (indistinct). The accumulation application will take some time to dig out.

MR WRIGHT: Yeah, no. No worries, thanks very much.

JOHN: Just on that, Mr Wright, is there something specific you need?

MR WRIGHT: No, no, no. I’m just – like I said, I’m just with a new adviser with the National Bank and I’m just trying to put all my things together so I can have them all in one place.

JOHN: Rightio. Yep, well, we’ll chase that pension application – the other application through for you. Are you still there?

MR WRIGHT: Hello? Yes, could I just wait on hold while that comes through?

JOHN: I’ve sent the pension application. It’s already gone, sir.

MR WRIGHT: Okay. I’m just waiting for it to come up.

JOHN: You said to send it to the adviser.

MR WRIGHT: Yeah.

JOHN: Are you with the adviser?

MR WRIGHT: Yeah.

JOHN: Are you with the adviser?

MR WRIGHT: Yeah, I am, yeah.

JOHN: Well, I just emailed it, so. The accumulation application, we’ll have to go through our archives, so that will be about – could be up to a week, sir.

MR WRIGHT: Yeah, yeah, yeah.

JOHN: If that doesn’t come through in 10 minutes, give me a call. My name’s John Parker.

MR WRIGHT: Okay.

JOHN: Are you still there?

MR WRIGHT: Yeah. You don’t need to worry about the other application. It’s just this one’s the one I really need.

JOHN: Okay – gerard.j.mccormack@nab.com.au

MR WRIGHT: yeah. G-E-R-A-R-D –

JOHN: Yes, period-j-period-mccormack@nab period com period au.

MR WRIGHT: Yeah, that’s it.

JOHN: Yes, that’s gone sir. Thank you.

MR WRIGHT: Thank you. Bye-bye. Thank you.

11    In order to facilitate the transfer of money from the account in the name of “John Wright” at Maritime Super to Mr Wright, Mr McCormack assisted Mr Wright in downloading withdrawal forms from the Maritime Super website. Mr Wright then completed the withdrawal forms using the information that Maritime Super had been persuaded to provide as a result of the calls made by Mr McCormack and Mr Wright. In Mr McCormack’s presence, Mr Wright copied the signature of “John Wright” from the pension application form to two separate withdrawal forms. One asked to withdraw $260,000 from “John Wright’s” Maritime Super pension account. The other asked to withdraw $15,000 from “John Wright’s” Maritime Super Superannuation account. They obtained the account numbers, address, date of birth and member number that the form required to be completed from the various documents they had been given by MLC and Maritime Super.

12    That same day Mr McCormack faxed the two withdrawal forms to Maritime Super. The two sums, totalling $275,000, were paid into Mr Wright’s NAB accounts on 26 and 27 June 2013, respectively, in accordance with the purported withdrawal forms.

13    On 26 June 2013, Mr Wright received two separate phone calls from Maritime Super seeking confirmation that he had received the monies. On both occasions Mr Wright, again impersonating “John Wright”, confirmed receipt of the funds. The folly of what they had done soon became apparent.

14    On 27 June 2013, Mr McCormack paid a visit to Mr Bell. Doubtless expecting to confront Mr Bell, the wind was rather taken out of his sails when Mr Bell revealed to Mr McCormack that he had two clients called John Wright – Mr Wright, Mr McCormack’s new client, and another Mr Wright (who had a different middle name, was born in 1941, and lived in Port Melbourne). I shall refer to him in these reasons as Mr Wright no. 2.

15    Presumably at that point it dawned on Mr McCormack that Mr Bell must have mistakenly sent to Mr Wright account information and statements belonging to Mr Wright no. 2, which Mr Wright had then forwarded to Mr McCormack without looking at them carefully. Accordingly, as at 27 June 2013, the same day that the second of the two withdrawals had been paid into Mr Wright’s accounts, Mr McCormack (and Mr Wright) knew that there was no “fictitious” Mr Wright and that they had wrongly spirited away $275,000 from Mr Wright no. 2’s superannuation accounts with Maritime Super.

16    Rather than explaining the error to Maritime Super, or his employer (NAB), Mr McCormack decided that impersonation was again the better option. The evidence before the Tribunal was that Mr McCormack’s primary concern at that time was to rectify the accounts prior to the end of the financial year so that Mr Wright no. 2 would not be in breach of superannuation rules governing the amount of yearly contributions. Motivated by this concern, and knowing that Maritime Super and Mr Wright coincidentally banked with NAB, Mr McCormack called Maritime Super pretending to be Mr Wright no. 2, including by giving Mr Wright no. 2’s account number and date of birth, to find out the year-to-date contributions made by Mr Wright no. 2. Maritime Super recorded the conversation, which was exhibit T-24 before the Tribunal.

17    Apparently satisfied that Mr Wright no. 2 would not be put in breach of the relevant rules by doing so, Mr McCormack then proceeded to arrange for the funds in Mr Wright’s NAB accounts to be returned to Mr Wright no. 2’s Maritime Super accounts in two tranches, with $125,000 to be paid on 28 June 2013 and the balance of $150,000 to be paid on 1 July 2013.

18    Mr McCormack had also decided that he should send to Mr Wright no. 2 a cheque for the lost interest. To that end, he called Mr Wright no. 2 telling him that he was a “Craig Watson” and that he needed his residential address.

19    On 28 June 2013, Mr McCormack went to see his boss at NAB and disclosed to him what he had done.

20    The next day Mr McCormack, along with Mr Wright, went to visit Mr Wright no. 2 intending to apologise for what had happened.

21    Mr McCormack told Mr Wright no. 2 that he would shortly have all his money back. Unbeknown to Mr McCormack, however, NAB had frozen Mr Wright’s accounts. When he found out about the frozen accounts (later that day), Mr McCormack tried on a number of occasions to telephone Mr Wright no. 2. When that was unsuccessful, he drove past his house and tried to talk to him. Mr Wright no. 2 said that he could not talk to him. In any event, the accounts were unfrozen later that day and the refunds were processed later that day and the next day. Mr McCormack later resigned from NAB.

22    On 10 February 2016, a delegate of the applicant, the Australian Securities and Investments Commission (ASIC), banned Mr McCormack from providing financial services for five years.

23    Mr McCormack successfully appealed to the Administrative Appeals Tribunal (the Tribunal), which substituted the five-year ban with an order that “the banning order should not have been made and the applicant’s name should be removed from the register kept by the respondent under s 922A of the Corporations Act 2001 and the applicant treated as never having been banned”.

24    ASIC now appeals to this Court against the decision of the Tribunal.

THE LAW

25    ASIC’s power to make a banning order is contained in s 920A(1) of the Corporations Act 2001 (Cth) (the Act), which provides:

920A    ASIC's power to make a banning order

(1)    ASIC may make a banning order against a person, by giving written notice to the person, if:

(a)      ASIC suspends or cancels an Australian financial services licence held by the person; or

(b)      the person has not complied with their obligations under section 912A; or

(ba)    ASIC has reason to believe that the person is likely to contravene their obligations under section 912A; or

(bb)    the person becomes an insolvent under administration; or

(c)    the person is convicted of fraud; or

(d)    ASIC has reason to believe that the person is not of good fame or character; or

(da)    ASIC has reason to believe that the person is not adequately trained, or is not competent, to provide a financial service or financial services; or

(db)    the person has not complied with any one or more of his or her obligations under section 921F (requirements relating to provisional relevant providers); or

(dc)    both of the following apply:

(i)    a supervisor referred to in section 921F has not complied with any one or more of his or her obligations under that section in relation to a provisional relevant provider;

(ii)    both the supervisor and the provisional relevant provider are authorised to provide personal advice to retail clients, on behalf of the person, in relation to relevant financial products; or

(dd)    both of the following apply:

(i)  a provisional relevant provider has not complied with his or her obligations under subsection 921F(7);

(ii)    the provisional relevant provider is authorised to provide personal advice to retail clients, on behalf of the person, in relation to relevant financial products; or

(de)  ASIC has reason to believe that the person was authorised, in contravention of subsection 921C(2), (3) or (4), to provide personal advice to retail clients in relation to relevant financial products; or

(e)    the person has not complied with a financial services law (other than section 921E (relevant providers to comply with the Code of Ethics)); or

(f)      ASIC has reason to believe that the person is likely to contravene a financial services law; or

(g)      the person has been involved in the contravention of a financial services law by another person; or

(h)      ASIC has reason to believe that the person is likely to become involved in the contravention of a financial services law by another person.

…

(Emphasis added.)

26    A banning order is defined in s 920B(1) of the Act as a “written order that prohibits a person from providing any financial services or specified financial services in specified circumstances or capacities”. Section 920B(2) provides that a banning order may prohibit the person against whom it is made from providing a financial service: (a) permanently; or (b) for a specified period, unless ASIC has reason to believe that the person is not of good fame or character.

27    Section 1041H(1) of the Act is a financial services law: see paragraph (d) of the definition “financial services law” in s 761A. It relevantly provides that “[a] person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive”: see also Notes 1 and 2 to s 1041H(1).

28    Each of those provisions is contained in Chapter 7 of the Act. Chapter 7 is entitled “Financial Services and Markets”. The Object of that Chapter is set out in s 760A, which provides:

760A    Object of Chapter

The main object of this Chapter is to promote:

(a)    confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and

(b)    fairness, honesty and professionalism by those who provide financial services; and

(c)    fair, orderly and transparent markets for financial products; and

(d)    the reduction of systemic risk and the provision of fair and effective services by clearing and settlement facilities.

29    The only other provision to which it is necessary to make reference is s 1 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), which relevantly provides that the objects of that Act include providing “for ASIC’s functions, powers and business” and that “[i]n performing its functions and exercising its powers, ASIC must strive to…promote the confident and informed participation of investors and consumers in the financial system…”: ASIC Act, s 1(1)(b) and (2)(b).

THE DECISION OF THE Tribunal

30    The Tribunal found that Mr McCormack had breached s 1041H of the Act because he engaged in misleading or deceptive conduct in relation to a financial product or service and was relevantly involved in Mr Wright’s conduct. On the question of liability the Tribunal held (at [45]-[48]) as follows:

It is not possible to conclude otherwise than there must be a connection between a beneficial interest in a superannuation entity, being Maritime Super, and the misrepresentations made by Mr McCormack when attempting to identify the beneficial interest held by the person named John Wright. While it is correct to say, as does Ms Ellyard, that the connection is indirect and directed primarily towards ownership rather than the product itself, I find that it does not take the conduct outside of what is contemplated by s. 1041H of the Corporations Act. I find that Mr McCormack did breach s. 1041H(1) by his misleading conduct when speaking with Maritime Super and arranging for withdrawal of the monies in the account name of John Wright. Mr McCormack carried out that conduct in his capacity as a financial planner.

I also find that Mr McCormack was involved in a contravention of s. 1041H by reason of his conduct which, in effect, facilitated [Mr Wright] obtaining from Maritime Super two application forms for withdrawal of monies from the John Wright account. Mr McCormack was also present when [Mr Wright] completed those forms and forged the signatures of [Mr Wright no. 2]. That conduct satisfies what is set out in s. 79 of the Corporations Act where a person has aided, abetted, counselled or procured the contravention; or has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or has conspired with others to effect the contravention.

Section 1041H of the Corporations Act falls under Chapter 7. The expression financial services law is defined in s. 761A to include a provision of Chapter 7 amongst others. There can be no doubt that Mr McCormack’s contravention of s. 1041H constitutes a contravention of a financial services law.

Having made the findings I have regarding Mr McCormack’s contravention of a financial services law, ASIC’s power to make a banning order pursuant to s. 920A of the Corporations Act is enlivened.

31    The Tribunal held, nonetheless, that no banning order should be made. Its reasons for so deciding are best explained by quoting, perhaps more extensively than would normally be desirable, from the relevant part of the Tribunal’s reasons for decision (McCormack and Australian Securities and Investments Commission [2016] AATA 1021), where the Tribunal said:

(1)    At [62]:

It should be apparent from the circumstances of Mr McCormack’s offending, that it cannot be said to fall within the category of actions taken by financial planners in the ordinary course of dealing with clients and their investment requirements. The circumstances encountered by Mr McCormack must, on any assessment, be regarded as highly unusual. Mr McCormack’s actions were the result of a number of coincidental factors which led to the belief that his newly acquired client, [Mr White], had a basis for expressing to him that he had some concerns about his previous financial adviser, Mr Bell, and his belief that some of his funds had been dissipated while Mr Bell was his financial adviser.

(2)    At [63]:

Having instilled in Mr McCormack’s mind that something may have been amiss with the way in which [Mr Wright’s] account had been handled, it is understandable that Mr McCormack would have been sensitive to any matter which, at least to his mind, may have been the cause of the problem. Therefore, when [Mr Wright] provided to Mr McCormack documents which included a statement described as a Rollover Benefits Statement which had the name John Wright as the individual’s details, including a post office box address, which disclosed that the sum of $109,649.03 had been rolled over into a Maritime Super account, it is understandable that his suspicion was aroused. [Mr Wright] was not aware that Mr Bell had two clients with the name John Wright, nor was Mr McCormack. The chance of that occurring must be regarded as, at least, very slim. It is also understandable that Mr McCormack had some concerns about making enquiries of Mr Bell, given what [Mr Wright] had told him about Mr Bell.

(3)    At [64]:

Having established the basis for the action he took, while not in any way condoning or accepting that it should be excused on those grounds, it should be apparent that the risk of such an event occurring again must be extraordinarily low.

(4)    At [65]:

I of course have concern about the way in which Mr McCormack then proceeded to recover the moneys for his client, [Mr Wright]. It is clear that Mr McCormack gave no consideration at all to the possibility that the impression he had formed may be incorrect or of the consequences of his actions should that be the case. While I have no doubt that Mr McCormack’s concern was solely for that of his client, the actions he took can only be properly described as foolhardy. His conduct was also deliberately deceptive as, at all times, he knew that he was not entitled to the information he sought from Maritime Super nor was the withdrawal of funds from that account lawfully obtained. It was, as ASIC described, misleading and deceptive conduct of a serious nature.

(5)    At [67]:

Mr McCormack’s explanation for in effect attempting to cover up his wrongdoing was that he was seriously embarrassed by his own actions and simply wanted the matter to go away. While I accept that explanation, it does raise the question as to whether Mr McCormack was seriously of the view that the entire matter could simply be brushed aside. It should have been apparent to Mr McCormack at that stage that all of the facts would eventually be disclosed and that it was in his interest to admit to his conduct in full. While I can understand the embarrassment which Mr McCormack must have felt at that time, it is of some concern that he was not able to overcome that and provide a full and accurate account of what occurred.

(6)    At [68]:

However, I accept [counsel for Mr McCormack’s] submissions that Mr McCormack’s conduct in dealing with what he believed to be misappropriated funds is not indicative of the way in which he normally performs his role as a financial planner. Subsequent to these events, Mr McCormack has undertaken further studies to enhance his skills in that field. Furthermore, there was no evidence of any complaints by clients which might suggest Mr McCormack’s performance as a financial planner should be questioned. It does appear to be an aberration…I accept that Mr McCormack was not motivated by financial gain and no allegations of dishonesty were levied against him. While commonly, fraud may be understood to include dishonesty, the Corporations Act appears to distinguish those expressions.

(7)    At [69]:

[Counsel for Mr McCormack] also submitted that Mr McCormack’s conduct did not result in any loss or detriment to consumers of financial products and financial services and therefore there was no evidence to suggest that Mr McCormack posed a risk to the investing public.

(8)    At [71]:

Although I accept some of the submissions made by ASIC regarding the way in which the conduct should be viewed, it should be obvious that there was never any intention by either Mr McCormack or [Mr Wright] to misappropriate funds belonging to another person. Once it was discovered that the funds withdrawn from Maritime Super were in fact the funds of [Mr Wright no. 2], there was never any question that those monies would not be returned to [Mr Wright no. 2] or that if [Mr Wright no. 2] had in fact suffered any detriment as a consequence of the withdrawals, that Mr McCormack would not make good that deficit. That being the case, there could be no basis upon which NAB would become liable for any loss

(9)    At [72]:

ASIC also contended that a preparedness to distance oneself from the offending conduct may also be a relevant matter to the imposition of a banning order as can a failure to gain an insight into what the person has done wrong. While I accept that contention, respectfully, that is not an accurate description of Mr McCormack’s conduct after he discovered his gross error. Rather than distance himself from that conduct, he took immediate steps to redress the error and refund the moneys to JIW including any losses which may have been incurred. He also visited [Mr Wright no. 2] personally to apologise. I accept that Mr McCormack’s subsequent less than full disclosure of exactly what occurred may be the cause for some concern about his character overall. However, as was apparent to me in the course of Mr McCormack’s oral examination at the hearing, his serious embarrassment at what is now obvious to him was remarkably foolish behaviour, inhibited his forthright disclosure.

(10)    At [80]:

In my opinion, the facts of this case require the discretion to be exercised in the context of considering the protection of the public, deterrence and the maintenance of investor and consumer confidence in the financial services industry.

(11)    At [81]:

It seems to me that in respect of the first consideration, as was stated by the Full Court of the Federal Court in Australian Securities Commission v Kippe (1996) 20 ACSR 679 [at 687-688]…is clearly characterised as protective.

(12)    At [82]:

If that statement [in Kippe at 687-688] is correct, and I accept that it is, then a banning order should only be made where the evidence discloses that there is a (perceived) real threat that the conduct complained about or conduct in similar circumstances is likely to arise again in the future. Furthermore, that threat must be a threat to the public interest and public confidence in the securities and futures industry. Such a threat would ordinarily be apparent where the conduct complained of was conduct which involved the holder of a financial services licence performing the duties common to his or her role in that capacity.

(13)    At [83]:

However, that was clearly not what gave rise to ASIC making a banning order in Mr McCormack’s case. While it may not have been a unique situation, the confluence of circumstances which preceded Mr McCormack adopting the approach he did in order to recover monies he was firmly of the view had been wrongfully taken from [Mr Wright] would, realistically, be unlikely to ever arise again were Mr McCormack to continue to work as a financial planner. Furthermore, I have no doubt whatsoever that Mr McCormack is acutely aware of the impropriety of the actions he took to recover that money. He was solely motivated by and focused on the fact that his client’s funds had been misappropriated. As he said in his oral evidence, he would never take that course of action again in the same or similar circumstances. Given his flawless conduct as a financial planner other than in the circumstances of this case, I accept his evidence that he has always carried out his duties as a financial planner so as to benefit his clients.

(14)    At [84]:

Furthermore, ASIC did not suggest that Mr McCormack’s conduct constituted dishonesty. Therefore, while the methods he adopted in order to recover what he firmly believed was JWW’s money were clearly inappropriate, it was obvious from his oral evidence that he is now acutely aware of his reckless approach to solving that problem. Furthermore, because he has received significant adverse publicity in the press as a consequence of his actions and a subsequent ban from acting as a financial planner, even if the circumstances or similar circumstances were to arise again, I find it highly improbable that he would repeat his conduct. Therefore, the imposition of a ban, for whatever length of time, would have no effect whatsoever in alleviating a threat to the public interest or confidence in the financial services industry. Its sole purpose would be to penalise Mr McCormack for the poor judgement he exercised in dealing with that matter. That is not a ground, on its own, which would justify making such an order.

(15)    At [85]:

As for the deterrent effect of a banning order, given the extraordinary circumstances in which this conduct arose, and the unlikelihood of it being repeated, I find it is highly unlikely that a banning order would have any deterrent effect to others who might consider similar conduct. That is because the confluence of the circumstances in this case which gave rise to Mr McCormack’s conduct is unlikely to arise again. It would of course be different if his conduct were related to the ordinary tasks conducted by a financial planner in the provision of financial products or services. If that were the case, it is likely that a banning order would have a deterrent effect to others performing the same activities. Given the highly unusual circumstances of this case, I find that the banning order would be unlikely to have a deterrent effect. That is essentially because it is highly unlikely that any other financial planner would find themselves in similar circumstances. In fact, the adverse publicity to which Mr McCormack has been exposed as a consequence of his actions in this matter, coupled with the fact that Mr McCormack has now been prevented from working as a financial planner since 10 February 2016, should deter any other person who might find himself or herself in similar circumstances from attempting similar recovery action.

(16)    At [86]:

…I cannot envisage how a banning order in Mr McCormack’s circumstances could have the effect of maintaining investor and consumer confidence. No consumer or investor in financial products or services suffered any financial detriment as a consequence of what Mr McCormack did. It is significant in this context that a breach of s. 1041H is not an offence and that failure to comply with that section of the Corporations Act may give rise to a civil liability under s. 1041I. Section 1041I provides for the recovery of any loss or damage suffered by a person for the reason of a contravention. Regardless, Mr McCormack ensured that JIW did not suffer any loss or damage as a consequence of his conduct.

(17)    At [87]:

In addition, the circumstances of Mr McCormack’s offending were so unusual that it is difficult to foresee a consumer or investor in financial products finding themselves in a similar situation. Therefore, I find that a banning order made for the purposes of maintaining investor and consumer confidence in these circumstances would be ineffective.

(18)    At [89]:

I find that a banning order would not serve to protect the public. Nor would it serve to deter like conduct because of the very remote possibility of the same or similar circumstances arising in the future. It would have no effect in maintaining investor and consumer confidence in financial markets which, on the evidence before me, was not in any event affected by Mr McCormack’s conduct. No person suffered any financial detriment and therefore no loss or damages claim could arise. Mr McCormack accepted that his conduct in attempting to recover his client’s money for him was wrongful and an aberration on his part. The only purpose a banning order could serve in these circumstances is to penalise Mr McCormack. That, by itself, is plainly an inappropriate purpose.

THE GROUNDS OF APPEAL

32    The grounds of appeal are as follows:

(1)    That the Tribunal applied an incorrect legal test in approaching the matter before it on the basis that a banning order under s 920A of the Act can be made only where the evidence discloses that there is a real threat that the conduct complained about or conduct in similar circumstances is likely to arise again in the future.

(2)    That the Tribunal misunderstood one of the concepts relevant to imposition of a banning order under s 920A of the Act, namely, the concept of maintaining the public interest or confidence in the financial services industry, by finding that a banning order cannot have that function if no person suffers any financial detriment as a consequence of conduct which breaches s 1041H of the Act.

(3)    That the Tribunal, in substance, failed to take into account a relevant consideration when exercising the discretion under s 920A of the Act, namely, the concept of maintaining the public interest or confidence in the financial services industry.

(4)    That the Tribunal misunderstood or failed to have regard to the concept of general deterrence by finding that a banning order would not deter like conduct because of the very remote possibility of the same or similar circumstances arising in the future.

(5)    That the Tribunal, in substance, failed to take into account a relevant consideration when exercising the discretion under s 920A of the Act, namely, general deterrence.

(6)    That the Tribunal misunderstood the meaning of dishonesty by:

(a)    finding that fraud is distinguishable from dishonesty in the context of the Act; and/or

(b)    in substance, finding that an allegation of misleading or deceptive conduct under s 104IH of the Act cannot include an element of dishonesty.

(7)    That the Tribunal failed to take into account a relevant consideration when deciding not to exercise the discretion to make a banning order in s 920A of the Act, namely, the dishonesty of Mr McCormack.

(8)    That the Tribunal failed to consider a number of submissions made by ASIC that Mr McCormack had engaged in dishonest conduct resulting in an error of law due to the following:

(a)    a failure to comply with the requirements of s 43(2B) of the Administrative Appeals Tribunal Act 1975 (Cth);

(b)    a failure to accord procedural fairness to ASIC; and/or

(c)    a failure of the Tribunal to constructively exercise its jurisdiction.

(9)    That the Tribunal failed to take into account a relevant consideration when exercising the discretion under s 920A of the Act, namely, the legislative object of promoting “fairness, honesty and professionalism by those who provide financial services” in s 760A(b) of the Act .

(10)    That the Tribunal failed to take into account a relevant consideration when exercising the discretion under s 920A of the Act, namely, that ASIC in exercising its powers must strive to “promote the confident and informed participation of investors and consumers in the financial system” pursuant to s 1(2)(b) of the ASIC Act.

(11)    That the Tribunal’s decision not to exercise the discretion in s 920A of the Act to impose any period of banning, including in light of the admitted conduct in circumstances of dishonesty which contravened s 1041H was manifestly unreasonable, illogical and irrational.

CONSIDERATION

33    For the reasons that follow, each of the grounds of appeal must succeed.

The Tribunal misapplied s 920A

34    Mr Lloyd SC, who, with Dr Bender, appeared for ASIC, submitted that the Tribunal identified a wrong legal test, or failed to apply a correct legal test, and thus made errors of law in two principal respects.

35    Citing Australian Securities Commission v Kippe (1996) 67 FCR 499 (Kippe) at 507-508, the Tribunal asserted that “[i]f that statement [in Kippe] is correct, and I accept that it is, a banning order should only be made where the evidence discloses that there is a (perceived) real threat that the conduct complained about or conduct in similar circumstances is likely to arise again in the future” (emphasis added).

36    That proposition is incorrect, as ASIC submitted.

37    First, the High Court overruled Kippe (1996) 67 FCR 499 in Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at [38] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ, so it is an unlikely starting point for the proposition.

38    Secondly, and more fundamentally, the cases have long made it clear that courts take into account a wide variety of factors in determining whether a banning order (or, in the case of directors, a period of disqualification) should be imposed. The notion adopted by the Tribunal that “a banning order should only be made where the evidence discloses that there is a (perceived) real threat that the conduct complained about or conduct in similar circumstances is likely to arise again in the future” is, with respect, a startling one and it is quite wrong: see by way of example only Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at [42]-[43] per McHugh J; and Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler [2002] NSWSC 483; 42 ACSR 80 at [56], where Santow J, in a well-known and widely cited passage, lists 15 propositions relevant to what McHugh J in Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 called (at [43]) the “synthesis from which the judges make a value judgment concerning whether to order disqualification and, if so, the period of disqualification that should be imposed”.

39    Ms Ellyard, counsel who appeared for Mr McCormack, submitted that the statement at [82] of the Tribunal’s reasons that “a banning order should only be made where the evidence discloses that there is a (perceived) real threat that the conduct complained about or conduct in similar circumstances is likely to arise again in the future” must be read in the context of what the Tribunal said at [80] that “…the facts of this case require the discretion to be exercised in the context of considering the protection of the public, deterrence and the maintenance of investor and consumer confidence in the financial services industry”.

40    I do not accept that submission. Accepting, as Ms Ellyard submitted, that courts are not to comb “through the words of a decision-maker with a fine appellate tooth-comb, seeking a verbal slip” (citing Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 291), I see no reasonable basis, whether it be context or anything else, for reading the words at [80] of the Tribunal’s reasons as meaning anything less than the words mean as a matter of ordinary English.

41    The Tribunal also found that a banning order could not have the effect of maintaining investor and consumer confidence because no consumer or investor in financial products “suffered any financial detriment as a consequence of what Mr McCormack did”: McCormack and Australian Securities and Investments Commission [2016] AATA 1021 at [86]. That statement is also wrong as a matter of law.

42    The Tribunal was bound to take into account, as a factor among others, maintaining public interest or confidence in the financial services industry. That much is apparent from the decision of the Tribunal in Re Howarth and Australian Securities and Investments Commission [2008] AATA 278; 101 ALD 602 at [201]. The Tribunal in this case cited that decision and quoted from it as follows:

So much in our professional and business lives depends on trusting that what is stated is in fact so. So much depends on not taking advantage of others. The confidence of those in the financial services industry depends on it and the public is entitled to expect a financial services industry that operates on an ethical basis.

(Re Howarth and Australian Securities and Investments Commission [2008] AATA 278; 101 ALD 602 at [201]. The difficulty is that the Tribunal, having quoted that passage, paid no apparent regard to it in its reasons.)

43    The objects clause of the Act also expressly refers to the promotion of “confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services”: the Act, s 760A(a). Similarly, the objects clause of the ASIC Act requires ASIC when performing its functions and exercising its powers to strive to “promote the confident and informed participation of investors and consumers in the financial system”: ASIC Act, s 1(2)(b).

44    It is apparent therefore that there is no basis for the proposition that the effect of maintaining investor and consumer confidence in financial products is necessarily predicated on a consumer, or anyone else, suffering financial detriment as a consequence of a contravention of the Act. The Tribunal was wrong to suggest otherwise.

The Tribunal failed to take into account or misunderstood general deterrence

45    ASIC further submits that the Tribunal made a legal error because it misunderstood the concept of general deterrence or simply failed to take it into account.

46    The Tribunal in this case found that a banning order would not deter like conduct because the same or similar circumstances would be unlikely to occur in the future. The Tribunal stated that the “unlikelihood of [the conduct] being repeated” means that “it is highly unlikely that a banning order would have any deterrent effect to others who might consider similar conduct”: McCormack and Australian Securities and Investments Commission [2016] AATA 1021 at [85]. The Tribunal went on to say that “[i]t would of course be different if his conduct were related to the ordinary tasks conducted by a financial planner in the provision of financial products or services. If that were the case, it is likely that a banning order would have a deterrent effect to others performing the same activities”: McCormack and Australian Securities and Investments Commission [2016] AATA 1021 at [85].

47    Counsel for ASIC referred to the statement in Australian Securities and Investments Commission v Adler [2002] NSWSC 483; 42 ACSR 80 at 97-99 that general deterrence is “fundamental in determining whether to impose a disqualification order and if so for what period”: see also Gillfillan v Australian Securities and Investments Commission [2012] NSWCA 370; 92 ACSR 460 at [183], [243], [330]. The same principles apply under s 920A of the Act. Those propositions are obviously correct and counsel for Mr McCormack did not contend otherwise.

48    The Tribunal, in considering the issue of general deterrence, was wrong to characterise as the – or a – relevant consideration the unlikelihood in the future of two people having the same name. The relevant conduct to which the Tribunal ought to have directed its attention was what Mr McCormack did when he telephoned or otherwise made contact with, or was involved in the making of contact with, providers of financial services (MLC and Maritime Super). That conduct, the Tribunal itself elsewhere said was: “deliberately deceptive”; “serious”; involved the making of “false claims”, “impersonations” and assisting with the forging of signatures; and “related to the ordinary task conducted by a financial planner in the provision of financial products or services”. Thus, in the Tribunal’s own words, “it is likely that a banning order would have a deterrent effect to others performing the same activities of similar contravening conduct occurring in the industry.”

49    The Tribunal also found (at [85]) that:

…the adverse publicity to which Mr McCormack has been exposed as a consequence of his actions in this matter, coupled with the fact that Mr McCormack has now been prevented from working as a financial planner since 10 February 2016, should deter any other person who might find himself or herself in similar circumstances from attempting similar recovery action.

50    ASIC submitted, and I agree, that such a finding “conflates personal deterrence with general deterrence and focuses on Mr McCormack’s specific actions in attempting to recover his client’s funds, rather than the conduct of lying to a financial institution and facilitating the provision of false information to a financial institution”.

The Tribunal wrongly held that ASIC did not allege dishonesty and in any event misunderstood the concept of dishonesty under the Act

51    The Tribunal’s assertion (at [68] and [84]) that ASIC did not allege that Mr McCormack’s actions were dishonest is also incorrect.

52    ASIC made repeated and unambiguously plain allegations of dishonesty. In its statement of facts, issues and contentions, for example, ASIC contended:

(1)    “Rosenberg’s case, unlike the current case, did not involve any element of dishonesty”;

(2)    “[e]ven during the investigation by his employer, NAB, the applicant still would not come clean about his dishonest conduct”; and

(3)    “...here there was not just an isolated act of dishonesty but rather multiple acts followed by further dishonesty by the applicant in order to cover up his wrongdoing”.

53    ASIC’s counsel also made repeated and forceful allegations of dishonesty in the course of oral submissions to the Tribunal. Counsel said, among other things, that:

(1)    “[w]e have also got in this case this element of dishonesty and an element of dishonesty that isn’t just an isolated incident”;

(2)    Mr McCormack’s behaviour was “certainly reckless…and it goes beyond that to dishonesty”;

(3)    Mr McCormack “doesn’t seem to understand that [impersonating somebody] is completely wrong and dishonest”; and

(4)    Mr McCormack’s forging of Mr Wright No. 2’s signature to facilitate the withdrawal of funds from Maritime Super and then again falsely representing that he was Mr Wright No. 2 was “dishonest conduct” and amounted to “blatant lies”.

54    The Tribunal’s failure to consider these submissions, which were open (to say the least) on the evidence, is an error of law that infected its decision not to impose a banning order. That failure constitutes a failure to accord procedural fairness (see Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 at [23]-[30] per French CJ, at [63]-[76] per Hayne, Kiefel and Bell JJ and at [88]-[113] per Gageler J) and a constructive failure by the Tribunal to exercise its jurisdiction (see Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; 197 ALR 389 at [24]-[25], [87] and [95]; NABE v Minister for Immigration & Multicultural & Indigenous Affairs (No 2) (2004) 144 FCR 1 at [63]).

55    It is also a failure to have regard to a relevant consideration because dishonesty is, self-evidently, a factor that should be taken into account in imposing a banning order. That is especially so where, as counsel for ASIC put it, “[t]he Respondent has failed to explain how assisting to facilitate the provision of forged signatures and false information to a financial institution and lying to a financial institution on multiple occasions to obtain information is not dishonest conduct”.

56    The Tribunal also, with respect, erred in asserting that while “commonly, fraud may be understood to include dishonesty, the Corporations Act appears to distinguish those expressions”: McCormack and Australian Securities and Investments Commission [2016] AATA 1021 at [68]. The Act does not make such a distinction.

57    Mr McCormack’s counsel also submitted, in substance, that his actions were not capable of constituting dishonesty because he had not intentionally deceived anyone. That submission must be rejected.

58    The Tribunal itself described Mr McCormack’s actions as being, among other things, “deliberatively deceptive” and improper. And, as counsel for ASIC put it in oral argument:

...there can be no serious doubt that Mr McCormack’s conduct was dishonest. He knowingly indicated that he was someone he was not when he impersonated that person. He participated in arranging a forgery and transmitting it to get funds. He assisted his client to pass off as somebody who that person was not.

59    But in any event, a lack of a subjective intent to deceive is irrelevant. As Gzell J said in Australian Securities and Investments Commission v Macdonald (No 12) [2009] NSWSC 714; 259 ALR 116 at [19]-[22]:

[19] But whether a person has acted honestly for the purposes of ss 1317S(2) or 1318(1) [of the Corporations Act] is not confined to a consideration of the subjective intention of the person in question. The lack of a subjective intention to deceive cannot avoid a conclusion that a person failed to act honestly if a reasonable person would have concluded that the conduct was dishonest.

[20]     … dishonesty may exist in the absence of any subjective intention to deceive (R J Elrington Nominees Pty Ltd v Corporate Affairs Commission (SA) (1989) 1 ACSR 93 at 110; Corporate Affairs Commission v Papoulias (1990) 20 NSWLR 503 at 506).

[22]     In my view a person acts honestly for the purposes of ss 1317S(2) and 1318(1), in the ordinary meaning of that term, if that person’s conduct is without moral turpitude in the sense that it is without deceit or conscious impropriety, without intent to gain improper benefit or advantage and without carelessness or imprudence at a level that negates the performance of the duty in question. That conclusion may be drawn from evidence of the person’s subjective intent. But a lack of such subjective intent will not lead the court to conclude that a person has acted honestly if a reasonable person in that position would regard the conduct as exhibiting moral turpitude.

The Tribunal failed to take into account the objects of the Act set out in s 760A

60    It is plain from the Tribunal’s reasons that it had no regard to ASIC’s submission that s 920A of the Act must be construed with reference to the objects clause in s 760A: see McCormack and Australian Securities and Investments Commission [2016] AATA 1021 at [58], where the submission is set out, but not dealt with.

61    The Tribunal also said that the objects provision in s 1(2)(b) of the ASIC Act “adds little if anything to the issue of whether a banning order should be made”: see McCormack and Australian Securities and Investments Commission [2016] AATA 1021 at [59].

62    The Tribunal was, with respect, wrong to ignore ASIC’s submission about the objects clause in the Act, as it was with respect to the relevance of s 1(2)(b) of the ASIC Act (in particular, that it is to be accorded “little weight”).

63    Objects clauses have a role to play in statutory construction. As the Full Court recently summarised the position in Australian Building and Construction Commissioner v Powell [2017] FCAFC 89 at [48] per Allsop CJ, White and O’Callaghan JJ:

…an “objects” provision within a statute “does not control clear statutory language” but, rather, is properly to be considered as an aid in construing the statute: Minister for Urban Affairs and Planning v Rosemount Estates Pty Ltd (1996) 91 LGERA 31 at 78 per Cole JA; CSL Australia Pty Ltd v Minister for Infrastructure and Transport (No 3) [2012] FCA 1261; 297 ALR 289 at 314 [99] per Robertson J. Such a provision does not definitively determine the meaning of the statutory text. This is not, however, to say that a statement of the legislative object is not an important assistance in interpreting the words of the statute; it is one aspect of considering the meaning and reach of the words used by Parliament.

64    In this case, as ASIC submitted:

The Tribunal failed to take those objects into account because it did not use s 920A to address concerns about fairness, honesty and professionalism, in particular, Mr McCormack’s conduct in lying to financial institutions and being a party to the provision of fraudulent signatures and false information to a financial institution. This error of law meant that s 920A was not used to have the necessary effect of deterring others from failing to adhere to the standards contemplated by s 760A(b).

65    As to s 1(2)(b) of the ASIC Act, ASIC has, and therefore the Tribunal has, a statutory obligation to take the matters in s 1(2)(b) of the ASIC Act into account when exercising the power in s 920A. The Tribunal failed to do so because it dismissed the relevance of the provision when it said that it “adds little if anything to the issue of whether a banning order should be made”.

66    The point is important. As ASIC put it:

The failure [to have regard to s 1(2)(b) of the ASIC Act] led to a miscarriage of the exercise of the Tribunal’s discretion because a failure to impose any banning period at all in a situation where an individual has lied multiple times to a financial institution to obtain investor information and has been a party to fraudulent signatures would be inconsistent with the requirements of s 1(2)(b). That was not an exercise of the power that would “strive” to “promote the confident and informed participation of investors and consumers in the financial system”. Investors and consumers participating in the financial system could not be confident that their information and assets were safe if a financial advisor could engage in that type of behaviour and receive no sanction.

67    In Panganiban v Australian Securities and Investments Commission [2016] FCA 510; 338 ALR 119, Bromwich J said this of the relevance of s 1(2)(b) (at [15]):

Banning orders under s 920A of the Corporations Act are one of the mechanisms used by ASIC to address concerns about shortcomings of such persons as financial advisors in respect of fairness, honesty and professionalism. Such a sanction, appropriately applied, has the necessary effect of deterring others from failing to adhere to those standards. That in turn facilitates ASIC’s statutory obligation, in performing its functions and exercising its powers, set out in s 1(2) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). In particular, ASIC is required, in performing its functions and exercising its powers, to “promote the confident and informed participation of investors and consumers in the financial system”: see s 1(2)(b) of the ASIC Act.

The Tribunal’s decision not to make a banning order was unreasonable, illogical and irrational

68    ASIC submitted that the Tribunal’s decision not to ban Mr McCormack for any period of time in light of his serious dishonest conduct was manifestly unreasonable, illogical and irrational, and that that was an error of law: see Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 at [23]-[30] per French CJ, at [63]-[76] per Hayne, Kiefel and Bell JJ and at [88]-[113] per Gageler J.

69    ASIC submitted that “[t]he finding[s] that the circumstances were highly unusual”, were “a result of coincidental factors” and “that the risk of the event occurring again must be extraordinarily low” ignore “the real problem”, which was that Mr McCormack:

…impersonate[d] someone to obtain private information that he was not entitled to from a financial institution and facilitate[ed] the forging of signatures and documents to provide to a financial institution, knowing that the information was false. That was admitted conduct. To impose no banning order at all in those circumstances of serious dishonesty is manifestly unreasonable and irrational.

70    ASIC also submitted that it was manifestly unreasonable and irrational to impose no banning order when the Tribunal itself “found that Mr McCormack’s conduct was ‘deliberately deceptive’ and that ‘at all times, he knew that he was not entitled to the information he sought from Maritime Super nor was the withdrawal of funds from that account lawfully obtained’ and that the conduct was ‘clearly inappropriate’”.

71    ASIC further submitted that it was manifestly unreasonable and irrational to impose no banning order on the basis that no loss had resulted; the logical result of such an approach, ASIC submitted, would be that “…a financial planner who unsuccessfully committed a fraud by attempting to steal funds would also apparently escape a banning order…because no loss would have been suffered”.

72    Finally, ASIC took issue with the Tribunal’s finding that it had “no doubt whatsoever that Mr McCormack is acutely aware of the impropriety of the actions he took to recover that money. He was solely motivated by and focused on the fact that his client’s funds had been misappropriated”. ASIC submitted that it was manifestly unreasonable and irrational to impose no banning order in circumstances where Mr McCormack was “acutely aware” that what he had done was improper.

73    I agree with each of those submissions.

CONCLUSION

74    For those reasons, I will allow the appeal and order that the decision of the Tribunal made on 14 December 2016 be set aside, that the matter be remitted to the Tribunal to be heard and determined according to law and that the respondent pay the applicant’s costs.

Associate:

Dated:    15 June 2017