FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Saxby Bridge Financial Planning Pty Ltd [2003] FCAFC 244

PRACTICE AND PROCEDURE – appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) – decision of the Tribunal to set aside orders of ASIC to revoke securities dealers licenses – whether notice of appeal complies with the requirements of O 53 r 3 - stating questions of law with precision in appeal from the Tribunal

ADMINISTRATIVE LAW - appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) – Chapter 7 of the Corporations Law - decision of the Tribunal to set aside orders of ASIC to revoke securities dealers licenses – appeal on question of law – whether any ground to set aside decision

CORPORATIONS – Chapter 7 of the Corporations Law – securities - revocation of dealers licenses under s 826(1) – proper construction of s 849 and s 851 of the Corporations Law - requirement to disclose interest of an associate – whether existence of associate relationship a question of law or fact

Administrative Appeals Tribunal Act 1975 (Cth) s 44

Corporations Law ss 9, 15, 16, 94, Chapter 7 Part 7.3, Division 3 of Part 7.4

Federal Court Rules O 53 r 3

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 applied

Australian Softwood Forests Pty Limited v Attorney-General (NSW); Ex rel Corporate Affairs Commission (1981) 148 CLR 121 referred to

Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515 applied

Bank of Western Australia Ltd v Ocean Trawlers Pty Limited (1995) 16 ACSR 501 applied

Beckwith v R (1976) 12 ALR 333 cited

Birdseye v Australian Securities and Investments Commission [2003] FCAFC 232 applied

Comcare Australia v Lees (1997) 151 ALR 647 referred to

Dennis Willcox Pty Ltd v Federal Commissioner of Taxation (1988) 79 ALR 267 referred to

Donald v Australian Securities and Investments Commission (2000) 104 FCR 126 applied

Dornan v Riordan (1990) 95 ALR 451 referred to

Heine Management Ltd v Australian Securities Commission (1993) 12 ACSR 578 applied

Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 applied

Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 referred to

R v Adams  (1935) 53 CLR 563 cited

Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Palme [2003] HCA 56 referred to

TNT Skypack International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 referred to

Vetter v Lake Macquarie City Council (2001) 202 CLR 439 applied

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v SAXBY BRIDGE FINANCIAL PLANNING PTY LTD (ACN 073 888 979), ABS SECURITIES PTY LIMITED (ACN 081 560 349) and JEFFREY JOSEPH BRAYSICH

N 756 of 2003

BRANSON, JACOBSON AND BENNETT JJ

5 NOVEMBER 2003

SYDNEY

THE COURT ORDERS THAT:

1.                  The appeal be dismissed.

2.                  The applicant pay the respondents’ costs.

REASONS FOR JUDGMENT

branson j

INTRODUCTION

1                     This is an appeal from a decision of the Administrative Appeals Tribunal (‘the Tribunal’) setting aside orders made by a delegate of the Australian Securities and Investments Commission (‘ASIC’) on 30 October 2001 revoking the securities dealers licences of the first respondent, Saxby Bridge Financial Planning Pty Ltd (‘SBFP’) and the second respondent, ABS Securities Pty Ltd (‘ABS’) and also setting aside a banning order made by the delegate against the third respondent, Jeffrey Joseph Braysich (‘Mr Braysich’).  I will refer to SBFP, ABS and Mr Braysich together as ‘the respondents’.

2                     The appeal is brought under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (‘the AAT Act’) which provides for an appeal ‘on a question of law’ from a decision of the Tribunal.  The jurisdiction of the Court under s 44(1) has been exercised in this case by a Full Court because the relevant decision was given by a presidential member of the Tribunal and the Chief Justice, after consulting the President of the Tribunal, considered that this was the appropriate course (s 44(3)(b) of the AAT Act).

3                     The amended notice of appeal (‘the notice of appeal’) filed on 13 August 2003 purports to identify twenty (20) questions of law raised on the appeal.  In large measure the questions seek to challenge the manner in which the learned Deputy President construed and applied the sections of the Corporations Law that empowered ASIC to make the orders which the Deputy President set aside. 

4                     The respondents challenged the validity of certain of the questions of law identified in the notice of appeal.  They argued that those questions are not of the character required by s 44(1) of the AAT Act.  This issue is considered further below.

relevant statutory provisions

5                     Chapter 7 of the Corporations Law is headed ‘Securities’.  The provisions principally relevant to this proceeding are contained in Part 7.3 which is comprised of ss 780-840.  Part 7.3 establishes a system of regulation of the securities industry based on a licensing regime.  References in this judgment to relevant provisions of Part 7.3 are references to those provisions as in force at the time of the conduct of the respondents by reference to which ASIC made its decision of 30 October 2001.

6                     A person may not carry on a securities business unless the person holds a dealers licence or is an exempt dealer (s 780).  Similarly, a person may not carry on an investment advice business unless the person is a licensee or an exempt investment adviser (s 781).

7                     A natural person may not act as a representative of a dealer (other than an exempt dealer) unless the dealer holds a dealers licence and the person holds a proper authority from the dealer (s 806).  Similarly, a natural person may not act as a representative of an investment adviser (other than an exempt investment adviser) unless the investment adviser is also a dealer and holds a dealers licence or holds an investment advisers licence and the person holds a proper authority from the investment adviser (s 807).

8                     ASIC’s powers to exclude persons from the securities industry are found in Division 5 of Part 7.3 which is comprised of ss 824-840.  ASIC’s power to exclude persons from the industry may in certain circumstances be exercised by written order; that is without a hearing (s 824 and s 825).  However, the powers relied on by ASIC in this case were powers exercisable subject to s 837 of the Corporations Law.  Section 837 prohibits ASIC from making certain orders without giving the person affected an opportunity to appear before it and make submissions and give evidence. 

9                     The two provisions relevantly relied on by ASIC when it made the orders which were the subject of review of the Tribunal were s 826(1) and s 829.

10                  Section 826(1) relevantly provides:

‘(1)      Subject to section 837, the Commission may, by written order, revoke a licence if:

…

(c)                the licensee contravenes a securities law;

…

(j)                 the Commission has reason to believe that the licensee has not performed efficiently, honestly and fairly the duties of a holder of a dealers licence or an investment advisers licence, as the case requires; or

(k)               the Commission has reason to believe that the licensee will not perform those duties efficiently, honestly and fairly.’

11                  Under s 827 ASIC was empowered to suspend a licence instead of revoking it where the conditions referred to in, inter alia, ss 826(1)(c), (j) or (k) were satisfied.

12                  Section 829 relevantly provides:

‘Subject to section 837, the Commission may make a banning order against a natural person (other than a licensee) if:

            …

(f)                 the Commission has reason to believe that he or she has not performed efficiently, honestly and fairly the duties of:

(i)                 a representative of a dealer; or

(ii)               a representative of an investment adviser; or

(g)               the Commission has reason to believe that he or she will not perform efficiently, honestly and fairly the duties of:

(i)         a representative of a dealer; or

(ii)               a representative of an investment adviser.’

13                  The term ‘securities law’ is defined by s 9 of the Corporations Law which constitutes a dictionary operative ‘[u]nless the contrary intention appears’.  A provision of Chapter 7 of the Corporations Law is a ‘securities law’ within the meaning of the Corporations Law.  Section 9 also contains the following definitions:

‘“dealer” means:

(a)               a person who carries on a securities business; or

(b)               2 or more persons who together carry on a securities business;

“investment adviser” means a person who carries on, or 2 or more persons who together carry on, an investment advice business;

“securities adviser” means a dealer, an investment adviser or a securities representative of a dealer or of an investment adviser;

 “securities representative” has the meaning given by section 94;’

14                  Section 94 of the Corporations Law provides:

(1)        Subject to subsection (2), a person is a securities representative of another person if, and only if, the first‑mentioned person:

(a)               is employed by; or

(b)               acts for or by arrangement with;

the other person in connection with a securities business or investment advice business carried on by the other person.

(2)        Except for the purposes of paragraph 88(1)(b)

(a)               a person who holds a proper authority from a securities licensee is a securities representative of the licensee; and

(b)               a person who holds an invalid securities authority from another person is a securities representative of the other person.

(3)        Subject to subsection (4), a person does an act, or engages in conduct, as a securities representative of another person if, and only if, the first‑mentioned person does the act, or engages in the conduct:

(a)               in connection with a securities business or investment advice business carried on by the other person;

(b)               while the first-mentioned person is a securities representative of the other person;

(c)                as employee or agent of, or otherwise on behalf of, on account of, or for the benefit of, the other person; and

(d)               otherwise than in the course of work of a kind ordinarily done by accountants, clerks or cashiers.

(4)        Except for the purposes of Division 4 of Part 7.3, a person who holds himself, herself or itself out to be a securities representative of another person does an act as a securities representative of the other person.’

15                  ASIC contended before the Tribunal that SBFP and ASB had relevantly contravened s 849 and s 851 of the Corporations Law.  Each of s 849 and s 851 forms part of Division 3 of Part 7.4 of the Corporations Law.  Division 3 of Part 7.4 is headed ‘Recommendations about Securities’.  Importantly s 848, which forms part of Division 3, provides:

‘For the purposes of this Division (other than section 851):

(a)               a recommendation made by a partner shall be deemed to have been made by each partner in the partnership; and

(b)               a recommendation made by a director, executive officer or secretary of a body corporate shall be deemed to have also been made by the body corporate.’

16                  Section 849 relevantly provides:

‘(1)      This section applies where a securities adviser makes a securities recommendation to a person (in this section called the “client”) who may reasonably be expected to rely on it.

(2)       The securities adviser shall:

(a)          if the recommendation is made orally – when making the recommendation, disclose to the client orally; or

(b)          if the recommendation is made in writing – set out in that writing, in such a way as to be no less legible than the other material in that writing;

particulars of:

(c)          any commission or fee, or any other benefit or advantage, whether pecuniary or not and whether direct or indirect, that the securities adviser or an associate has received, or will or may receive, in connection with the making of the recommendation or a dealing by the client in securities as a result of the recommendation; and

(d)          any other pecuniary or other interest, whether direct or indirect, of the securities adviser or an associate, that may reasonably be expected to be capable of influencing the securities adviser in making the recommendation.

…

(4)       If by making the recommendation the securities adviser does an act as a representative of another person, then:

(a)          without limiting the generality of Division 2 of Part 1.2, the other person is an associate for the purposes of subsection (2); and

(b)          subsection (2) does not apply in relation to a commission or fee that the other person has received, or will or may receive, from the client.’

17                  Section 851 provides:

‘(1)      A securities adviser who:

(a)          makes a securities recommendation to a person who may reasonably be expected to rely on it; and

(b)          does not have a reasonable basis for making the recommendation to the person;

contravenes this section.

(2)       For the purposes of subsection (1), a securities adviser does not have a reasonable basis for making a securities recommendation to a person unless:

(a)          in order to ascertain that the recommendation is appropriate having regard to the information the securities adviser has about the person’s investment objectives, financial situation and particular needs, the securities adviser has given such consideration to, and conducted such investigation of, the subject matter of the recommendation as is reasonable in all the circumstances; and

(b)          the recommendation is based on that consideration and investigation.

(3)       A person who contravenes subsection (1) is not guilty of an offence.’

background

18                  These background facts are taken largely from the reasons for decision of the Tribunal.  SBFP and ABS are part of the Saxby Bridge group of companies.  Mr Braysich does not formally hold the title of Managing Director of the Saxby Bridge group of companies but he is the key director of the group.  SBFP has held a securities dealers licence since 28 October 1996.  ABS has held a securities dealers licence since 27 May 1998.  Self employed financial planners provided investment advice as proper authority holders under ABS’s securities dealers licence.  Mr Braysich does not personally hold a securities dealers licence.

19                  On 8 May 2001 ASIC issued notice of concern with respect to each of SBFP, ABS and Mr Braysich.  The notice concerning SBFP expressed the concern of a delegate of ASIC that SBFP:

‘as a licensed dealer in securities:

(1)       may have contravened the requirements of s 849;

(2)       may have contravened the requirements of s 851;

(3)        may not have performed efficiently, honestly and fairly the duties of a holder of a securities dealer’s licence; and

(4)       hereafter will not perform those duties efficiently, honestly and fairly.’

20                  The notice gave extensive particulars of the concerns of the delegate which included allegations that SBFP had in various ways:

(a)                placed its interests in conflict with those of its clients;

(b)               made inadequate disclosure of commissions and interests; and

(c)                in effect, recommended inappropriate investment products to clients without conducting adequate research into the products or the investment objectives and financial needs of the clients.

The notice revealed that the delegate’s concerns arose out of a review of 83 SBFP client files in relation to eight out of 50 proper authority holders as at September 2000.

21                  The notice concerning ABS expressed the same concerns respecting its conduct as a licensed dealer in securities as were expressed in the notice concerning SBFP.  The important particular for present purposes given by the notice concerning ABS was that the management of its business had been undertaken by SBFP and the SBFP’s conduct had given rise to the concerns particularised in the notice concerning it.

22                  The notice issued concerning Mr Braysich expressed concern that he ‘will not perform efficiently, honestly and fairly the duties of a representative of a dealer or investment adviser’.  The particulars given by this notice effectively held Mr Braysich responsible for the conduct particularised in the notices concerning SBFP and ABS respectively.

23                  ASIC conducted a single hearing concerning SBFP, ABS and Mr Braysich.  The hearing lasted approximately 20 days.  On 30 October ASIC revoked the securities dealers licences of SBFP and ASB and prohibited Mr Braysich from doing an act as a representative of a dealer or investment adviser for a period of five years.

24                  Each of SBFP, ASB and Mr Braysich lodged an application with the Tribunal for review of the decision of the Tribunal.

the tribunal decision

Role of the Tribunal

25                  The Tribunal in its written reasons for decision noted that its role was to stand in the shoes of ASIC and make its own decision both as to compliance with the Corporations Law and, assuming a finding of non-compliance, as to whether enforcement action should be taken against the respondents.  It further noted that banning orders should only be made in the most serious cases (Donald v Australian Securities & Investments Commission (2000) 104 FCR 126; 35 ACSR 383 per Heerey J at [28]).

Evidence before the Tribunal

26                  Extensive expert and lay evidence was placed before the Tribunal.  The expert evidence of Mr Max Weston, called by ASIC, and Mr Don Wiggins, called by the respondents, assumed particular importance.  Each of Mr Weston and Mr Wiggins had reviewed files of SBFP and ABS.  They had not examined the same files.

27                  Mr Weston has extensive experience in the securities and financial advisory industry.  On the instructions of ASIC Mr Weston had examined 33 files of SBFP and ABS selected in the following way.  ASIC had established a pool of 101 files comprised of 10 files for each of 10 advisers.  From the pool of 101 files a sub‑pool of 33 files was created by a random selection of three to four files from each of the 10 advisers.

28                  Mr Wiggins is a self‑employed ‘compliance consultant’ who from 1985 to 1997 held senior managerial positions in respect of investment advisory services.  Mr Wiggins was instructed by the respondents to review 42 files randomly selected from a pool of 70 files presented to him.  The pool of 70 files had been created by the Chair of the Saxby Bridge Compliance Committee, a retired district court judge, who selected 10 files for each year between 1995 and 2001.

Section 849

29                  ASIC contended before the Tribunal that the evidence disclosed a serious failure on the part of SBFP and ABS to meet the disclosure obligations imposed on them by s 849 of the Corporations Law.  In particular ASIC contended that s 849(2)(c) had been contravened in relation to:

(a)                marketing allowances;

(b)               quantitatively inaccurate disclosure;

(c)                non-disclosure of benefits to associates; and

(d)               a compliance consultancy deed in respect of the Preston Vale Vineyard Project.

ASIC also contended that s 849(2)(d) had been contravened in respect of:

(a)                benefits dependent upon the volume of sales;

(b)               obligations to promote;

(c)                relationships with product promoters; and

(d)               underwriting agreements.

30                  ASIC provided the Tribunal with a table setting out the alleged non-disclosure and inadequate disclosures in respect of 18 investment products.  These investment products included 16 managed business investments (‘MBIs’) and two master trusts.

31                  In respect of the 18 investment products identified by ASIC, the Tribunal:

(a)                was not satisfied that there had been a breach of s 849 in respect of eight of the products;

(b)               found that minor breaches of s 849 had been demonstrated in respect of nine of the products; and

(c)                found significant breaches of s 849 in respect of one of the products, namely Preston Vale Vineyard Project.

Section 851

32                  ASIC contended before the Tribunal that SBFP and ABS had contravened s 851 of the Corporations Law by:

(a)                failing to have regard to clients’ investment objectives, financial situation and particular needs; and

(b)               failing to conduct adequate product research.

As to (a) above, ASIC submitted that SBFP and ABS either had inadequate procedures and systems for the assessment of client needs or there had been a systematic failure by representatives to follow whatever procedures were in place.

33                  At [146] of its written reasons for decision the Tribunal made the finding:

‘… that the Applicants sought to take appropriate steps to determine their clients’ needs.  Undoubtedly, there were deficiencies but the Tribunal’s overall impression is that these were inadvertent and the Applicants aimed to comply with the requirement that recommendations should accord with client needs.  The Tribunal is, therefore, satisfied that there was no breach of the Applicants’ obligations in this regard under s 851 of the Act.’

34                  The Tribunal further found at [242] that the product research conducted by SBFP and ABS was adequate and there was no breach of their obligations in this regard under s 851 of the Corporations Law.

Sections 826(1) and 829

35                  ASIC contended that the evidence before the Tribunal demonstrated that it was appropriate for the licences of SBFP and ABS to be revoked under s 826(1).  ASIC further contended that a banning order under s 829 against Mr Braysich was justified principally because SBFP and ABS were effectively under his control.  ASIC also contended that Mr Braysich’s evidence revealed that he was ‘not well attuned to the relevant requirements of the Corporations Law’, lacked an appreciation of the need to avoid conflicts of interest and was willing, where it suited his interests, to provide misleading information.  Particular emphasis was placed on Mr Braysich’s conduct in relation to certain debentures issued by Towerside Corporation Ltd (‘Towerside’). 

36                  The Tribunal noted at [305] that, over the period of nearly six years to June 2001 with which the Tribunal was concerned, the financial planning industry was undergoing significant change.  It also noted at [306] that the matter before it was extremely complex and the large amount of evidence made it difficult to prepare a comprehensive statement of reasons within a reasonable timeframe.  The Tribunal expressed the view at [306] that any contravention of the law had to be considered in the context that Saxby Bridge conducted a large business.

37                  The Tribunal noted that most of the contraventions of the law alleged by ASIC relate to the actions of SBFP and ABS in recommending certain MBIs to clients.  It observed that, for a while in the 1990s, MBIs were a popular form of investment.

38                  The Tribunal formed an ‘overwhelming impression’ that Mr Braysich sought to run a business which complied with its obligations under the Corporations Law and offered a quality service to its clients.  It concluded that the minor contraventions of s 849 which had occurred largely involved mistakes or systematic failures.  It further concluded that the significant breach of the disclosure requirements of s 849(2)(c) and (d) which had occurred in relation to the Preston Vale Vineyard Project arose from Mr Braysich’s personal relationship with the promoters of the scheme.  While noting that Mr Braysich failed to declare a clear conflict of interest it noted that he engaged solicitors to prepare loan and charge documentation with respect to his loan to Towerside Corporation and said that he informed the Saxby Bridge Compliance Department of the loan.

39                  The Tribunal did not find the Preston Vale Vineyard Project breach sufficient to persuade it that either Mr Braysich or SBFP and ABS had not performed, or would not in the future perform, their duties efficiently, honestly or fairly.  The Tribunal found that, apart from the breaches of s 849, the SBFP and ABS businesses were generally conducted efficiently and with honesty and fairness.  It found that proper systems were in place to achieve compliance with their obligations under the Corporations Law in accordance with accepted industry norms.  It concluded that the evidence before it did not support a finding that the businesses were run incompetently or inefficiently.

Conclusion of the Tribunal

40                  It is appropriate to set out those paragraphs of the reasons of the Tribunal in which it records its conclusions as to the orders that it was appropriate to make:

‘328.    In summary, the Tribunal made the following findings on the alleged contraventions of the law:

(a)               a number of minor and one significant breach of the s 849(2) disclosure requirements, the latter being in relation to the Preston Vale project;

(b)               no breach of s 851;

(c)                no breach of regulation 7.3.02.

Moreover, the Tribunal is not satisfied that either SBFP, ABS Securities or Mr Braysich had not performed their duties efficiently, honestly and fairly, or will not do so in the future.  The Tribunal must therefore determine whether it is appropriate to take enforcement action against the Applicants in respect of the breaches of s 849.

329.     As noted above, a range of enforcement action is open to ASIC and to the Tribunal standing in its shoes.  The exercise of those powers should be protective of the public interest and preventative in nature and not punitive.

330.     First, because the Tribunal is not satisfied that SBFP, ABS Securities and Mr Braysich have not performed their duties efficiently, honestly and fairly and will not do so in the future, the power to revoke SBFP’s and ABS Securities’ securities dealers licences pursuant to s 826(1) and to impose a banning order on Mr Braysich pursuant to [scil. s 829] is not open to the Tribunal.  Moreover, the Tribunal does not, in any event, consider such an order necessary for the protection of the public interest in this case.

331.     The effect of this is that the securities dealers licenses of SBFP and ABS Securities must be reinstated and the banning order on Mr Braysich must be lifted.  However, in the Tribunal’s view it is appropriate to impose conditions on the licenses of SBFP and ABS Securities with a view to securing more effective compliance with the s 849(2) disclosure requirements. ….’

the notice of appeal

41                  Section 44(1) of the AAT Act provides:

‘(1)      A party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law, from any decision of the Tribunal in that proceeding.’

42                  In Birdseye v Australian Securities and Investments Commission [2003] FCAFC 232 (‘Birdseye’) at [11] and [16] Branson and Stone JJ expressed agreement with the observation of Gummow J in TNT Skypack International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 at 178 that:

‘Section 44 of the AAT Act is expressed in narrower terms than the old s 196 of the Tax Act. This provided for appeals from the Board of Review which “involved” a question of law. The result was that if some question of law was involved, the whole of the decision of the Board was open to review, not merely the question of law … This no longer will be the case with appeals brought to this court under s 44 of the AAT Act.  The existence of a question of law is now not merely a qualifying condition to ground the appeal, but also the subject matter of the appeal itself ….’ (citations omitted)

43                  Order 53 of the Federal Court Rules regulates the practice and procedure to be followed in respect to appeals from the Tribunal.  Order 53 rule 3(2), (3) and (4) provide:

‘(2)      The notice of appeal shall be signed by the applicant or his solicitor and shall state -

(a)               the decision of the Tribunal from which the appeal is brought, the members constituting the Tribunal and the date when the decision was made;

(b)               the question or questions of law to be raised on the appeal;

(c)                the order sought; and

(d)               briefly, but specifically, the grounds relied upon in support of the order sought.

(3)        The Court may on such terms and conditions as the Court thinks fit, allow a notice of appeal to be amended.

(4)        On the hearing of an appeal, the applicant shall not, without the leave of the Court, raise any question of law or rely on any ground in support of the order sought other than those stated in the notice of appeal.’

44                  The notice of appeal in this case, as originally filed and as subsequently amended, does not, in my view, comply with the requirements of s 44(1) of the AAT Act and O 53 r 3(2).  In particular, the notice of appeal fails to comply with the requirements of O 53 r 3(2)(b), (c) and (d).

45                  In Birdseye at [17]-[18] Branson and Stone JJ, with whom in this regard Marshall J at [61] generally agreed, said:

‘A number of well known authorities has considered the distinction between a question of law and a question of fact (see, for example, Collector of Customs v Pozzolanic Enterprises Pty Ltd  (1993) 43 FCR 280 (FC); Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389).  However, very limited consideration has been given to how a question of law ought properly to be stated in a notice of appeal from a decision of the Tribunal having regard to the requirements imposed by O 53 r 3(2).  Those requirements include that the questions of law raised by the appeal are to be stated separately from the grounds relied upon in support of the order sought on the appeal.

In our view, O 53 r 3(2) discloses an intention that a question of law to be raised on an appeal from the Tribunal should be stated with precision as a pure question of law.  It is in the specification of the grounds relied upon in support of the orders sought that, in our view, one should expect to find the links between the question of law, the circumstances of the particular case and the orders sought on the appeal.  It is not necessary in this case to give consideration to questions such as whether an allegation of denial of natural justice can give rise to a question of law so as to found an appeal under s 44(1) of the AAT Act (see Clements v Independent Indigenous Advisory Committee [2003] FCAFC 143 esp per Gray ACJ and North J at [3]-[8] and Gyles J at [58]-[67]) and if it can, how the question of law should be stated.’

46                  The questions of law as stated in the notice of appeal as originally filed all utilised the formulary deprecated by Ryan J in Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515 at 524.  At the eleventh hour the notice of appeal was amended and the questions of law said to be raised on the appeal stated in the form which this Court must now consider.  These questions of law are not stated with precision as pure questions of law.  Most, if not all of them, call for an identification of the case actually advanced by ASIC before the Tribunal and for an evaluation of the evidence called in support of that case (see, for example, question 1 which is discussed in [77]-[82] below).  Others simply assume the existence of legal duties or obligations (see, for example, question 17 which is discussed in [84]-[93] below) or assume that a particular construction of a statutory provision is the proper construction (see, for example, question 20 which is discussed in [102]-[103] below).  It seems to me that the questions stated in the notice of appeal have been impermissibly drawn in a way calculated to cause this Court to review the decision of the Tribunal rather than to answer stated questions of law.  A strict application of O 53 r 3(4) would render the questions unarguable without the leave of the Court.

47                  The grounds which the notice of appeal specifies as being relied upon in support of the orders sought have remained unchanged throughout the life of the proceeding.  As formulated these ‘grounds’ are simply statements to the effect that the Tribunal made the legal errors sought to be identified by the stated questions of law; they do not indicate how the applicant relies on the stated questions of law to support the orders sought on the appeal.  Argument on the appeal was conducted by reference to these grounds rather than by reference to the questions of law stated in the notice of appeal.  Yet, as Gummow J observed in TNT Skypak v Federal Commissioner of Taxation, it is the questions of law that are the subject matter of the appeal.  The notice of appeal has been drawn in disregard of the distinction between the questions of law to be raised on the appeal (O 53 r 3(2)(b)) and the grounds relied upon in support of the orders sought (O 53 r 3(2)(d)).

48                  The orders sought on the appeal are stated as follows:

‘1.        Appeal allowed.

2.         Matter remitted to the Tribunal for determination according to law.

3.         Costs.’

The power of the Court to make orders on an appeal from a decision of the Tribunal are set out in s 44(4) and (5) of the AAT Act.  The orders that may be made include an order setting aside the decision of the Tribunal.  Where an applicant seeks to have a decision of the Tribunal set aside, its notice of appeal should, in my view, say so explicitly.  Attention would then be directed, as O 53 r 3(2)(d) requires, to whether the answer for which the applicant contends to a stated question of law supports, in the circumstances of the particular case, an order setting aside the decision of the Tribunal.  The necessary link between the answer to a question of law and the order sought on the appeal may be overlooked where, as in this case, the order sought is expressed as ‘appeal allowed’ (see, for example, the discussion of question 20 in [103] below).

proper construction of S 849 AND S 851 OF THE corporations law

49                  Argument on the appeal proceeded on the assumption that the conduct of an authorised representative of a holder of a dealers licence is to be treated as the conduct of the licence holder for the purposes of s 849 and s 851.  It seems that the hearing before the Tribunal had proceeded on the same basis.  Subsequently the Court sought supplementary written submissions from the parties to assist it in giving consideration to the proper construction of the two sections.

50                  ASIC by its supplementary submissions maintained the position that the conduct of an authorised representative of a holder of a dealers licence is to be attributed to the licence holder for the purposes of s 849 and s 851.  The respondents by their supplementary submissions contended that the conduct of an authorised representative of a licence holder is not to be attributed to the licence holder for the purposes of s 849 and s 851.

51                  The notice of appeal has been drawn on an assumption as to the proper construction of s 849 and s 851 of the Corporations Law.  For this reason it does not identify as a relevant question of law the question of whether the conduct of an authorised representative of a holder of a dealers licence is to be attributed to the licence holder for the purposes of s 849 and s 851.  ASIC takes the view that whenever an authorised representative of a holder of a dealers licence makes a securities recommendation without complying with the requirements of s 849 and s 851, the licence holder contravenes those sections.  It is this view which in large part explains ASIC’s dissatisfaction with the decision of the Tribunal. 

52                  It is not possible to address the questions stated in the notice of appeal without first giving consideration to the accuracy of the assumption that underlies them.  The respondent has not suggested that the form of the notice of appeal renders it inappropriate for the Court to give consideration to the proper construction of s 849 and s 851 of the Corporations Law.  It seems to me to be appropriate in the circumstances for this Court to give consideration to this issue.

53                  It is not in dispute that each of SBFP and ABS at all relevant times carried on a securities business within the meaning of s 780 of the Corporations Law.  As they each held a dealers licence they each had statutory authority to do so.  As each of SBFP and ABS is a corporation it could not itself interact with clients; in each case it dealt with clients through authorised representatives.  In no case was the authorised representative himself or herself authorised to carry on a securities business.

54                  ASIC’s supplementary submissions placed considerable weight on s 762 which appears in Part 7.1 of the Corporations Law.  Part 7.1, which consists of ss 760-766, contains provisions which have effect for the purpose of Chapter 7 ‘except so far as the contrary intention appears in [Chapter 7]’ (s 760).  Section 762 relevantly provides:

‘(1)      A reference to engaging in conduct is a reference to doing or refusing to do any act, including the making of, or the giving effect to a provision of, an agreement.

…

(4)       Conduct engaged in on behalf of a body corporate:

(a)               by a director, servant or agent of the body within the scope of the person’s actual or apparent authority; or

(b)               by any other person at the direction or with the consent or agreement (whether express or implied) of a director, servant or agent of the body, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, servant or agent;

shall be deemed to have been engaged in also by the body corporate.

(5)        Where, in a proceeding under this Chapter in respect of conduct engaged in by a person other than a body corporate, it is necessary to establish the state of mind of the person, it is sufficient to show that a servant or agent of the person, being a servant or agent by whom the conduct was engaged in within the scope of the servant’s or agent’s actual or apparent authority, had that state of mind.’

(6)        Conduct engaged in on behalf of a person other than a body corporate:

(a)               by a servant or agent of the person within the scope of the actual or apparent authority of the servant or agent; or

(b)               by any other person at the direction or with the consent or agreement (whether express or implied) of a servant or agent of the first-mentioned person, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the servant or agent;

shall be deemed to have been engaged in also by the first-mentioned person.’

55                  Section 762 has relevance for present purposes only if an authorised representative of a holder of a dealers licence, when acting as a securities adviser for the purposes of s 849 and s 851, is engaging in conduct ‘on behalf of’ the licence holder within the meaning of s 762.  It seems to me, for the reasons given below, that Chapter 7 of the Corporations Law discloses an intention to distinguish between conduct engaged in on behalf of a licence holder and conduct engaged in as a representative of a licence holder.

56                  The above distinction is, in my view, reflected in Part 7.3 of the Corporations Law which provides separately for the licensing of dealers and investment advisers (see Division 1) and the holding of proper authorities from dealers or investment advisers by those who act as representatives of dealers or investment advisers (see Division 3).  Significantly, s 806 and s 807, which require representatives of dealers and investment advisers to hold proper authorities, prohibit a natural person who does not hold a proper authority from doing ‘an act as a representative of’ a dealer or an investment adviser, as the case may be, rather than from engaging in conduct ‘on behalf of’ a dealer or an investment adviser.

57                  It is the above distinction between acting on behalf of a dealer or licence holder and acting as a representative of a dealer or investment adviser that, in my view, explains the presence of s 817 and s 848(b) in the Corporations Law.

58                  Section 817, which appears in Division 4 of Part 7.3 of the Corporations Law, is concerned specifically with the liability of a principal for the conduct of a person who engages in conduct as the principal’s representative.  Section 817 provides:

‘Where a person engages in conduct as a representative of another person (in this section called the principal), then, as between the principal and a third person (other than the Commission), the principal is liable in respect of that conduct in the same manner, and to the same extent, as if the principal had engaged in it.’ (emphasis added)

59                  The operation of s 817 is affected by s 822(2), which also appears in Division 4 of Part 7.3 of the Corporations Law.  Section 822(2) relevantly provides:

‘Nothing in section 817 …:

(a)               affects a liability arising otherwise than by virtue of this Division;

(b)               notwithstanding paragraph (a) of this subsection, entitles a person to be compensated twice in respect of the same loss or damage; or

(c)               makes a person guilty of any offence.’

60                  ASIC submitted that s 822(2)(a) limits the operation of s 817 to Division 4 of Part 7.3 of the Corporations Law.  If this submission is correct s 817 has a very limited operation and is irrelevant for present purposes on any construction.  However, in my view, this submission reflects a misunderstanding of the effect of s 822(2)(a).  Except for the liability created by s 819, Division 4 of Part 7.3 does not create liabilities to third persons or to ASIC; it assumes that the conduct of a representative of another person could give rise to a liability.  That assumed liability must derive either from statute or the common law.  As between the principal and a third party, s 817 discloses an intention that the principal should be vicariously liable for the conduct of its representative. 

61                  The purpose of s 822(1)(a), in my view, is to make it plain that s 817 is not intended to affect any liability that the principal might have independently of s 817 in respect of the conduct of its representative.  It is the resultant possibility of liability by reason of s 817 and liability under another statutory provision or at common law arising in respect of the same conduct that creates the need for s 822(2)(b).  So understood, s 822 does not limit the operation of s 817 in the way submitted by ASIC. 

62                  In my view, careful attention to the language of ss 848, 849 and 851 confirms that s 762 is not intended to deem the conduct of an authorised representative of a holder of a dealers licence acting as a securities adviser to be the conduct of the licence holder.  Each of these three sections appears in Division 3 of Part 7.4 of the Corporations Law.  It appears that a person who contravenes s 849 is guilty of an offence by virtue of s 1311 of the Corporations Law.  A person who contravenes s 851 of the Corporations Law is not guilty of an offence (s 851(3)).

63                  ASIC submitted that s 848, which is set out in [15] above, ‘operates at the representative level, not at the dealer level’.  Nothing in the language of s 848 supports the submission that the operation of the section is so confined.  Further, the submission appears to overlook s 809 of the Corporations Law which provides:

‘A body corporate shall not do an act as a representative of a dealer or of an investment adviser.’

64                  In my view, s 848(b) strongly suggests that s 762 is not intended to reach to the making of recommendations within the meaning of Division 3 of Part 7.4 of the Corporations Law.  If s 762 itself reaches to the making of such recommendations, s 848(b) would have a significance only in the unlikely event that a director, executive officer or secretary of a corporate securities adviser acts outside his or her actual or apparent authority.  The justification, on this reading, for not referring in s 848(b) to an agent of the body corporate (cf s 762) is unclear.  Further, the justification for excluding s 848 from operating in respect of s 851 is hard to identify.

65                  The terms of s 849 and s 851 respectively make it clear that the sections can only be contravened by a ‘securities adviser’.  The definitions of ‘securities adviser’ and ‘dealer’ in s 9 of the Corporations Law mean that, unless a contrary intention appears in respect of either or both of s 849 and s 851, each of SBFP and ABS is a securities adviser within the meaning of the sections.  Subject to a contrary intention appearing, the authorised representatives of SBFP and ABS respectively are also securities advisers within the meaning of s 849 and s 851 (see s 9 and s 94(2)(a)).  It is thus necessary to determine in respect of each section whether the term ‘securities adviser’ is intended to mean:

(a)                the person who actually makes the securities recommendation whether personally, as a partner in a partnership, or as a director, executive officer or secretary of a body corporate (see s 848);

(b)               if that person is an authorised representative of another person, that other person; or

(c)                both of the above.

66                  It is convenient to consider s 849 first.  The terms of s 849 are relevantly set out in [16] above.  Section 849 is concerned to ensure that a client of a securities adviser is informed of any interest that might influence the recommendation made by the securities adviser.  The section recognises the possibility that the securities adviser may be acting as the representative of another person.  It requires disclosure both of the interest that the securities adviser may personally have in the recommendation and the interest that the other person may have in the securities adviser making the recommendation (s 849(2) and (4)).  Nothing in the section suggests that a client is intended to receive disclosure, whether oral or in writing, from the person who actually makes the securities recommendation, plus, where that person is an authorised representative of another person, additional disclosure, presumably in writing, from that other person.  A legislative intent that, where the recommendation is made by an authorised representative of another person, both the authorised representative and that other person must comply with s 849 seems for this reason to be unlikely.  It is plainly not intended that any person represented by the person making the recommendation is to comply with the section to the exclusion of the person who actually makes the recommendation (see s 849(4)).  The strong inference, it seems to me, is that only the person who actually makes the securities recommendation is required to comply with s 849.  In doing so, of course, that person will be required to disclose the interests of any person whom he or she represents (s 849(2)(c)).

67                  This inference is strengthened by the fact that, as is mentioned above, a person who contravenes s 849 is guilty of an offence.  The construction of s 849 for which ASIC contends would mean that the holder of a dealers licence could be guilty of an offence even though it had no knowledge of the conduct giving rise to the contravention.  Indeed, on the construction for which ASIC contends, the holder of a dealers licence could be guilty of an offence notwithstanding that the conduct giving rise to the contravention was engaged in in disregard of clear instructions given by the licence holder.  Where the language of a provision is unclear it is legitimate to favour a construction which avoids such an extension of a penal provision (R v Adams  (1935) 53 CLR 563 at 567-8; Beckwith v R (1976) 12 ALR 333 at 339). 

68                  The inference that only the person who actually makes the securities recommendation is required to comply with s 849 is, in my view, strengthened by the language of s 850 and in particular the language of s 850(2) which draws a distinction between the knowledge of the dealer or investment adviser and the knowledge of the representative of the dealer or investment adviser. 

69                  In my view, little can be found in the statutory context provided by Chapter 7 which favours the construction urged on the Court by ASIC.  A number of factors, in my view, suggest against that construction.  It is not necessary to adopt such a construction to protect third parties.  As against a third party, a licence holder is liable for the conduct of its authorised representatives (s 817).  Further, for the reasons outlined below, the scheme of regulation of the securities industry contained in Part 7.3 does not require strict liability on the part of the licence holders for contraventions of s 849 by their authorised representatives.

70                  So far as ASIC is concerned, ASIC may only grant a licence to a person or company if it has no reason to believe that the person or company will not perform efficiently, honestly and fairly the duties of a holder of a licence of the kind applied for (s 783 and s 784).  ASIC has power to revoke a licence if it has reason to believe that the licensee has not, or will not, perform efficiently, honestly and fairly the duties of the holder of the relevant licence (s 826).  Regulation 7.3.02(1) of the Corporations Regulations imposed on holders of a dealers licence a duty to ensure that each representative of the holder:

‘(a)      is adequately supervised in the performance of duties that he or she is required by the holder to perform; and

(b)        is sufficiently trained in relation to those duties before acting as a representative; and

(c)               keeps up to date in relation to those duties by means of continuing training programs.’

These provisions adequately arm ASIC to proceed against the holder of a dealers licence who does not act to ensure that its authorised representatives are properly trained with respect to their obligations as securities advisers and properly supervised in the carrying out of those obligations.  Any authorised representative who is personally unsuitable to practice in the securities industry can be dealt with by ASIC under s 829 of the Corporations Law which authorises the making of banning orders against unlicensed persons.

71                  Nor would rejection of the construction for which ASIC contends render s 826(1)(c) otiose.  First, as is mentioned above, a licence holder may be a natural person and may make a securities recommendation.  Perhaps more significantly, there are numerous ‘securities laws’ within the meaning of s 826 which could be breached by a corporate licence holder (eg ss 787, 788, 790, 791, 810 and 811).

72                  I conclude that the holder of a dealers licence does not contravene s 849 of the Corporations Law by reason only of the fact that an authorised representative of the licence holder fails to make the disclosures required by s 849(2).

73                  The terms of s 851 of the Corporations Law are set out in [17] above.  The section, in effect, requires a securities adviser, before making a securities recommendation to a person, to give consideration to whether the recommendation is appropriate having regard to two classes of information.  First, the information that the adviser has concerning the person’s financial objectives, circumstances and needs, and secondly, the outcome of reasonable investigations of the subject matter of the recommendation.  Again, the language of the section suggest against an intention that the section apply to a person who is not in fact involved in the making of the relevant recommendation.  The fact that s 848 does not have an operation in respect of s 851 speaks strongly against that intention.  The language of s 851 does not seem calculated to accommodate the possibility that the ‘securities adviser’ whose conduct is in issue is the principal of the adviser who makes the relevant recommendation.  Substantial difficulties of construction seem to me to arise if, for example, the terms of s 851(2) are sought to be applied to a licence holder in circumstances in which one of its authorised representatives has, contrary to the instructions of the licence holder, disregarded the result of investigations of an investment product the subject of the recommendation.  Is the licence holder’s investigation of the circumstances of the subject matter of the recommendation to be disregarded in such circumstances for the purpose of s 851(2)(a)?

74                  Even though s 851 does not create an offence, I conclude that the section discloses an intention that a ‘securities adviser’ within the meaning of the section is a dealer, investment adviser or securities representative of a dealer or of an investment adviser who actually makes a securities recommendation to a person.  It does not, in my view, disclose an intention that a licence holder will contravene the section by reason only of the fact that an authorised representative of the licence holder makes a recommendation to a person without having a reasonable basis for making it. 

75                  Again, in my view, the construction of the section for which ASIC contends is unnecessary to achieve the apparent purpose of Chapter 7.  The regulatory scheme contained in the chapter, for the reasons discussed above, does not require a licence holder to be strictly liable for the conduct of its authorised representative.  So far as third parties are concerned, s 817 is apt to make the licence holder liable to pay the compensation provided for by s 852.  Perhaps most significantly, the words of s 817 which I have highlighted in [58] above disclose an intention that the conduct of a representative of a licence holder is not to be attributed to the licence holder for the purpose of the regulatory powers of ASIC.

QUESTIONS OF LAW

76                  I turn to consider the questions of law stated in the notice of appeal.

Question 1:

‘Whether, unless the Tribunal was satisfied that SBFP and ABS had not performed or would not perform their duties “efficiently, honestly and fairly”, the Tribunal had no power under s 826(1) of the Corporations Law to revoke their securities dealers licences.’

77                  Section 826(1) is set out in [10] above.  The legal question of whether the power of ASIC, and standing in its shoes on review, the Tribunal, to revoke a licence under s 826(1) of the Corporations Law is dependent upon the circumstances identified in s 826(1)(j) and (k) plainly attracts the answer, No.  The language of s 826(1) clearly indicates that the power granted by the section to revoke a licence is a power which may be exercised in any one of the circumstances identified in s 826(1)(a) to (k).  Neither party contended to the contrary.

78                  The issue which is presumably sought to be ventilated by question 1 is whether the Tribunal, in reviewing the decision of the applicant, was entitled on the evidence before it to exercise the power to revoke the licences of the respondent in reliance on any circumstance other than the circumstances identified in s 826(1)(j) and (k).  Although, for the reasons given above in [41] – [47], I consider that this question is inappropriately formulated, it is convenient to give consideration to the issue presumably sought to be raised by the question.

79                  The notice of concern issued to SBFP expressed the concern of the delegate of ASIC that SBFP, as a licensed dealer in securities:

‘(1)      may have contravened the requirements of s 849;

(2)       may have contravened the requirements of s 851;

(3)        may not have performed efficiently, honestly and fairly the duties of a holder of a securities dealer’s licence; and

(4)       hereafter will not perform those duties efficiently, honestly and fairly.’

The notice of concern issued to ABS was relevantly expressed in identical terms.

80                  I have concluded above that neither s 849 nor s 851 of the Corporations Law is a section that a holder of a dealers licence could be found to have contravened by reason only of the contravention of the section by an authorised representative of the licence holder.  There was no other basis upon which it was suggested that the Tribunal should have been satisfied that SBFP and ABS had contravened s 849 and s 851.

81                  In the circumstances the power of the Tribunal under s 826(1) to revoke the securities dealers licences of SBFP and ABS could only have been exercised in reliance on s 826(1)(j) and (k).

82                  On the view of the proper construction of s 849 and s 851 which I have taken, question 1 need not be further considered.

Question 2-16:

83                  I do not consider it necessary to set out questions 2-16 inclusive.  Each of these questions is affected by the assumption as to the proper construction of s 849 and s 851 which I have concluded is erroneous.  On the view that I have taken, the questions do not fall to be answered. 

Question 17:

‘Whether the Tribunal was required, but failed, to consider whether the Third Respondent had not performed his duties as a representative of a dealer “efficiently, honestly and fairly” for the purposes of s 829 of the Corporations Law by reason of:

(a)               his failure to attend training sessions for proper authority holders at SBFP;

(b)               his conduct in relation to the Towerside Debentures; and

(c)               his failure to disclose to ASIC the sale of the business of SBFP and ABS.’

84                  The respondents contended that question 17 is not a question of law within the meaning of s 44(1) of the AAT Act.  At best question 17 is a question of mixed law and fact.  Moreover, it does not identify the basis of the requirement the existence of which is implicit in the question.

85                    The discretion vested in ASIC by s 829 of the Corporations Law (as set out in [12] above) is expressed in general terms.  For that reason it is unconfined ‘except in so far as there may be found in the subject‑matter, scope and purpose of the statute some implied limitation on the factors to which the decision‑maker may legitimately have regard’ (Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 per Mason J at 40).  No requirement to consider the three matters identified in the question can be identified by implication from s 829.

86                  Despite its language, question 17 is probably not intended to be directed to the nature and extent of the discretion created by s 829 of the Corporations Law.  Rather, the question is probably intended to call into question whether the Tribunal failed to comply with an obligation, presumably imposed on it by the AAT Act, to give proper consideration to the evidence and other material before it.  So understood, the question is not, in my view, stated in a way which complies with the requirements of O 53 r 3 of the Federal Court Rules.  If question 17 were stated in a way which sought an answer to the question of the extent of the duty of the Tribunal to give consideration to the evidence and other material before it, the answer to the question might be found to depend on additional unstated questions; for example, questions such as the proper construction of s 837 of the Corporations Law, and the proper ambit of the hearing before the Tribunal.

87                  Section s 837 of the Corporations Law prevents ASIC from making a banning order against a person without complying with subsection (2) of that section.  Section 837(2) is concerned to give the person an opportunity to appear and make submissions and give evidence.  As the respondents pointed out, the notice of concern in respect of Mr Braysich did not, either directly or by reference to the notices of concern respecting SBFP and ABS, refer to the matters identified in subparagraphs (a) and (c) of question 17.  The Statement of Matters and Contentions provided by ASIC to the Tribunal proposed that the notices of concern, subject to certain amendments not presently relevant, be together treated as ASIC’s Statement of Matters and Contentions before the Tribunal. In the circumstances, the issue of whether the Tribunal, expressly or implicitly, gave ASIC leave to rely on facts and contentions outside the ambit of its Statement of Matters and Contentions is an issue of fact.

88                  For the above reason, the issue of whether the Tribunal was required to consider whether Mr Braysich had not performed his duties as a representative of a dealer ‘efficiently, honestly and fairly’ for the purposes of s 829 by reason of the matters identified in subparagraphs (a) and (c) of question 17 is not a question of law within the meaning of s 44(1) of the AAT Act.  No appeal to this Court, in my view, lies on question 17 so far as it depends on subparagraphs (a) and (c).

89                  In my view it would be inappropriate for the above reason to answer question 17 so far as it depends upon subparagraphs (a) and (c).  However, in case I am wrong in taking that view, I record that I am not satisfied that ASIC ever became entitled to rely on evidence concerning the topics identified in subparagraphs (a) and (c) of question 17.

90                  So far as Mr Braysich’s conduct concerning the Towerside debentures is concerned, it is clear that the Tribunal did consider, at least to some extent, Mr Braysich’s conduct in relation to the Towerside debentures.  At [298] of its reasons for decision the Tribunal observed:

‘The Respondent pointed, in particular, to Mr Braysich’s conduct in relation to the Towerside debenture issue and the conflict between his personal interests and those of potential investors.  The Respondent also pointed to Mr Braysich’s failure to give consideration to disclosure requirements in relation to alleged breaches of subsection 849(2).  The Respondent contended that the conduct referred to reflects poorly on Mr Braysich’s character and that it would be open to the Tribunal to conclude that he is not of good fame and character so that a permanent banning order could be justified.  However, the Respondent said that it does not seek to have a banning order imposed on Mr Braysich for more than five years.’

91                  The Towerside debentures were considered by the Tribunal in the context of the investment product, Preston Vale Vineyard Project (‘Preston Vale’).  At [65] the Tribunal noted that the investment products recommended by SBFP and ABS were the subject of extensive and extremely complex evidence.  It indicated that its discussion of the evidence ‘has, therefore, necessarily been selective and its treatment in less depth because of the practicalities of decision‑writing and the need to be accessible to the reader’.

92                  At [308]-[310] the Tribunal made the following findings:

‘308.    Mr Braysich gave evidence over a number of days in the course of the hearing and the Tribunal has before it a large volume of material concerning Mr Braysich’s personal involvement in the Saxby Bridge business.  The overwhelming impression formed by the Tribunal is that Mr Braysich sought to run a business which complied with its obligations under the Corporations Act and offered a quality service to its clients.  There was no evidence of fraud or dishonesty, nor is the Tribunal satisfied that there was any intention by Mr Braysich, SBFP or ABS Securities to mislead.  The Tribunal finds that Mr Braysich intended and made substantial efforts to comply with his obligations under the Act.  Undoubtedly, there were substantial improvements in compliance over the six year period.  Mr Braysich sought to be in the vanguard of securities dealers taking their compliance obligations seriously and, according to Mr Dally, committed appropriate resources to achieving this.

309.     The Tribunal has, nevertheless, found a number of minor contraventions of s 849 which largely involved mistakes or systemic failures.  The Tribunal also found a significant breach of the s 849(2)(c) and (d) disclosure requirements in relation to the Preston Vale project.  That breach appears to be largely attributable to Mr Braysich’s conduct and arose from his personal relationship with the promoters of the project.  He failed to declare a clear conflict of interest.  It should be noted, however, that Mr Braysich engaged his solicitors, Lane and Lane, to prepare loan and charge documentation with respect to his loan to Towerside Corporation and he states he informed the Saxby Bridge Compliance Department of this.

310.     The Preston Vale breach is not sufficient to persuade the Tribunal that either Mr Braysich or SBFP or ABS Securities have not performed or will not perform in the future their duties “efficiently, honestly or fairly”. …’

93                  Presumably for the reasons identified in [91] above, the Tribunal’s discussion in its reasons for decision of Mr Braysich’s conduct in respect of the Towerside debentures is limited.  Nonetheless, even if it be assumed that question 17, so far as it involves Mr Braysich’s conduct in relation to the Towerside debentures, is a question of law within the meaning of s 44(1) of the AAT Act, it has not been established that the Tribunal did not consider whether Mr Braysich had not performed his duties as a representative of a dealer ‘efficiently, honestly and fairly’ for the purposes of s 829 by reason of his conduct in relation to the Towerside debentures.  In truth, as it seems to me, ASIC wishes to challenge the appropriateness of the impression which the Tribunal formed of Mr Braysich as recorded in [308] of its reasons for decision.  It is not surprising that difficulties have been found to attend the formulation of that challenge in a way which satisfies the requirements of s 44(1) of the AAT Act and O 53 r 3 of the Federal Court Rules.

Question 18:

‘Whether the Tribunal was required, but failed, to consider the power under s 825 of the Corporations Law to revoke the securities dealers licences of SBFP and/or ABS on the ground that both entities had ceased to carry on business by 30 October 2001.’

94                  Section 825 of the Corporations Law authorises ASIC, by written order, to revoke a licence held by a body corporate if, amongst other things, ‘the body ceases to carry on business’.  It is not suggested that ASIC has acted under s 825 to revoke the licences held by SBFP and ABS.  For this reason no decision made by ASIC under s 825 was the subject of review by the Tribunal.

95                  As is mentioned above, on 30 October 2001, following a lengthy hearing, a delegate of ASIC acted under s 826 of the Corporations Law to revoke the securities dealer licences of SBFP and ABS.  No record of the decision of the delegate of ASIC nor any written reasons of the delegate have been placed before the Court.  Whether the delegate knew at the time of his or her decision that SBFP and ABS had ceased to carry on business is not known to the Court.  Nor is it known what, if any, consideration may have been given by ASIC, once the decision of 30 October 2001 had been challenged by the respondents, to place SBFP and ABS on notice of an intention to issue a written notice under s 825 should the Tribunal set aside the decision under review.

96                  In the circumstances it is not clear how an appeal on a question of law can be said to arise from the fact that, as we were informed, ASIC submitted to the Tribunal that ASIC was empowered under s 825 of the Corporations Law to revoke the licences of SBFP and ABS.  Mr Bathurst QC, who appeared for ASIC before this Court, argued that it is ‘against the public interest to have corporations which are substantially defunct, so far as at least the carrying on the business is concerned, continuing to hold a licence which of course they could make use of at any time’.  This argument appears consistent with the policy which apparently lies behind s 825(a) of the Corporations Law.  However, the extent, if any, to which, as a matter of law, it impinges on the discretion which the Tribunal is required to exercise when reviewing a decision of ASIC made under s 826 will depend on the facts of the particular case.

97                  It may be that question 18 reflects a concern on the part of ASIC that the decision of the Tribunal which is the subject of this appeal prevents ASIC from now acting under s 825(a) of the Corporations Law.  However, no question was stated in the notice of appeal that raised this issue and it was not argued before us.  I therefore express no view on it.

98                  In my view, question 18 is not a question of law on which an appeal from the decision of the Tribunal lies to this Court under s 44(1) of the AAT Act.

Question 19:

Whether the Tribunal was required, but failed, to consider whether the sale of the business in Ground 10 above was a contravention of s 790 of the Corporations Law by the Respondents.’

99                  The reference in question 19 to ‘in Ground 10 above’ may be presumed to be a slip which arose in the course of amendment of the notice of appeal.  It should, I think, be understood as a reference to ground 11 in section 4 of the notice of appeal.  Ground 11 reads:

‘The Tribunal erred in failing to consider whether the failure of SBFP and ABS to disclose to ASIC the sale of their businesses amounted to contraventions of s 790 of the Corporations Law.’

100               Section 790 of the Corporations Law imposes on the holder of a dealers licence the duty, within twenty-one days after the licensee ceases to carry on the business to which the licence relates, to lodge with ASIC written particulars of that fact.

101               No mention is made in the notice of concern which, as is mentioned above, effectively became ASIC’s Statement of Matters and Contentions before the Tribunal, of s 790 of the Corporations Law.  In my view, question 19 is not a question of law within the meaning of s 44(1) of the AAT Act on which an appeal may be brought from the Tribunal’s decision for the same reasons as are given in [87] above.

Question 20:

‘Whether, in contravention of s 43(2B) of the Administrative Appeals Tribunal Act 1975 (Cth), the Tribunal failed to refer to the material or evidence on which it based its findings:

(a)               that there were deficiencies in the Applicants’ performance of their obligations under s 851 but that these were inadvertent;

(b)               that Monpro was not an “associate” for the purposes of s 849(2) of the Corporations Law in relation to securities recommendations to invest in the following products: Budplan 3, Budplan 4, Budplan 5, Budplan “A”, Lemon Myrtle No 1, Central Highlands Wine Grape Project No 4, Diamond Ridge Wine Grape Project No 1;

(c)               that all contraventions of s 849 apart from those concerning recommendations to invest in the Preston Vale Project were “minor” contraventions.’

102               For the reasons given in [41] – [47] above, question 20 is inappropriately formulated.  The question of law that is presumably intended to be raised by question 20 is a question concerning the proper construction of s 43(2B) of the AAT Act.  Section 43(2B) provides:

‘Where the Tribunal gives in writing the reasons for its decision, those reasons shall include its findings on material questions of fact and a reference to the evidence or other material on which those findings were based.’

103               However, question 20 is drawn on an assumption as to the proper construction of s 849 and s 851 that I have concluded above is false.  Additionally, the question assumes two other things, neither of which is self-evidently right.  First, that a failure to comply with s 44(2B) of the AAT Act can be relied upon to support an order that the decision of the Tribunal be set aside (see Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Palme [2003] HCA 56 per Gleeson CJ and Gummow and Hayne JJ at [41] and McHugh J at [55]).  Second, that each of the findings identified in the question is a ‘material question of fact’ within the meaning of s 43(2B) of the AAT Act.  No argument was addressed to this Court on the accuracy of these additional assumptions.  The view that I have taken of the proper construction of s 849 and s 851 of the Corporations Law, renders it unnecessary for their validity to be further explored.  In any event, as is mentioned above, the way in which question 20 is stated does not comply with the requirements of s44(1) of the AAT Act and O53 r 3(2) of the Federal Court Rules.

conclusion

104               I would dismiss the appeal with costs.

Associate:

Dated:  5  November  2003

REASONS FOR JUDGMENT

Jacobson & Bennett JJ

Introduction 

105               We have had the benefit of reading in draft the reasons for judgment of Branson J.  We see the force of her view that ss 849 and 851 of the Corporations Law do not extend to the holder of a dealers licence by reason merely of the conduct of an authorised representative.  However, in the absence of full oral and written argument directed specifically to this issue, we do not wish to express a concluded view on that question.

106               It seems to us that many of the questions raised by the Australian Securities and Investments Commission (“ASIC”) in the Amended Notice of Appeal are not in truth questions of law or, to the extent that they are, no error of law is disclosed in the Administrative Appeals Tribunal’s (“the Tribunal”) reasons.  Accordingly, the appeal can be determined without deciding the question of the proper construction of ss 849 and 851 of the Corporations Law addressed by her Honour.

107               We agree with Branson J that, in order to conform with s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act”) and O 53 r 3(2) of the Federal Court Rules, it is necessary to state questions which are pure questions of law.  We also agree that the questions should be stated with precision but the issue for consideration in an appeal under s 44(1) of the AAT Actmust always be whether, on a proper analysis, the question is one of law rather than a question of fact or a question of mixed fact and law.

108               Many of the questions in the Amended Notice of Appeal are not stated with precision.  In Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515, Ryan J said (at 524) that it is not legitimate to call in aid the grounds stated in the notice of appeal to read down the questions or to distil from them what are in truth questions of law.  Nevertheless, because of the complexity of this matter, it seems to us to be useful to set out a brief narrative of the Tribunal’s reasons for decision in order to understand how the questions are said to arise, why many are not questions of law and why no error is disclosed.  We do not propose to set out a full summary of the Tribunal’s reasons which were lengthy and detailed.

The Tribunal’s Reasons

109               The Tribunal stated at [5] of its reasons that Mr Braysich was one of the founding members of the Saxby Bridge business and that he was the controlling director of the Saxby Bridgegroup of companies.

110               The Tribunal noted at [18] that its role was to stand in the shoes of the decision-maker.  If it found that the respondents had failed to comply with the provisions of the Corporations Law, the Tribunal had to decide whether the correct or preferable decision should involve enforcement action, “especially if it makes adverse findings as to their performing their duties efficiently, honestly and fairly”.

111               The purpose of the proceedings was referred to at [21].  It was protective, not punitive, and orders could be made even though no dishonesty was involved.  However, a banning order should only be made in the most serious cases; Donald v Australian Securities and Investments Commission (2000) 104 FCR 126 (“Donald v ASIC”) at  [28] (per Heerey J).

112               The Tribunal noted at [53] that the obligations under s 849(2) extended to disclosure of benefits received by an associate of a securities adviser.  Reference was made to the definition of “associate” in the Corporations Law and, at [54] to the decision of Owen J in Bank of Western Australia Ltd v Ocean Trawlers Pty Limited (1995) 16 ACSR 501 (“Ocean Trawlers”) in which his Honour considered the meaning of that term.

113               The Tribunal stated at [65] that the evidence was extremely complex and voluminous.  Accordingly, it said that its discussion of the evidence was “selective” and “in less depth” to accommodate the practicalities of writing the decision. 

114               As Branson J noted at [30] of her Honour’s reasons, ASIC contended that there had been non-disclosure or inadequate disclosure under s 849(2) in relation to 18 investment products including 16 Managed Business Investments (“MBI’s”).  The Tribunal’s findings in relation to the MBI’s were set out in tabular form commencing at page 24 of the reasons.  The table for each of the MBI’s gives a brief description of the investment and a list of items omitted from disclosure to clients.  The Tribunal’s findings as to whether there was any non-disclosure in the recommendations for investment in each MBI are stated in bullet point form.

115               There was an issue before the Tribunal as to whether a company known as Monpro Limited (“Monpro”) was an associate of Saxby Bridge Financial Planning Pty Ltd (“SBFP”) or ABS Securities Pty Ltd (“ABS”).  That issue was concerned with investment in an MBI known as the Central Highlands Wine Grape Project No 4 (“the Central Highlands Project”).  In its findings on the Central Highlands Project, the Tribunal stated in bullet point form that Monpro was not an associate of SBFP or ABS.

116               A summary of the Tribunal’s findings of breach of s 849(2) is set out in [80].  The Tribunal found “minor” breaches in relation to recommendations for investment in nine investment products.  It found “significant” breaches of s 849(2)(c) and (d) with respect to the Preston Vale Project.

117               The Tribunal considered the relevant law and policy statements on s 851 at [84] – [89].  It said at [90] that it would address ASIC’s contentions of breach of s 851 in two parts, namely, first whether SBFP and ABS had regard to the client’s investment objectives, financial situation and needs and, second, whether SBFP and ABS had conducted adequate product research.  It referred, in dealing with the question of client needs, to the evidence of ASIC’s expert, Mr Weston.  It stated his evidence which was that, in the files he reviewed, 92.9% of securities recommendations were made without a reasonable basis, that is, in contravention of s 851.

118               After extensive references to the evidence, including the evidence of the respondents’ expert, Mr Wiggins, the Tribunal stated its findings commencing at [141].  It recognised at [141] the need for a dealer to take all “reasonable steps” to ensure that its proper authority holders were fulfilling their obligations under the Corporations Act 2001 (Cth) (or the equivalent obligations under the Corporations Law).

119               The Tribunal stated its conclusion that there were no breaches of s 851 in [146] as follows:

            “In conclusion, the Tribunal finds that the Applicants sought to take appropriate steps to determine their clients’ needs.  Undoubtedly, there were deficiencies.  But the Tribunal’s overall impression is that these were inadvertent and the Applicants aimed to comply with the requirement that recommendations should accord with client needs.  The Tribunal is, therefore, satisfied that there was no breach of the Applicants’ obligations in this regard under s 851 of the Act.”

120               The Tribunal considered that the obligations imposed on SBFP and ABS by s 851 were “to give such consideration to, and conduct such investigation of, the subject matter of a recommendation to a client as is reasonable in all the circumstances”; see at [234].  It said that the factual issue for the Tribunal was whether SBFP and ABS conducted adequate product research about the investment products they recommended to clients; see at [235].

121               The Tribunal concluded at [242], on the basis of the evidence before it, that the research undertaken was adequate and that there was no breach of the respondents’ obligations in this regard under s 851.

122               The Tribunal considered the question of whether there was adequate supervision of representatives and found, at [272] that reasonable steps were taken.  The Tribunal also found at [272] that, notwithstanding breaches of s 849, it was not satisfied that the respondents failed adequately to supervise representatives.

123               The Tribunal considered that a realistic approach had to be taken when examining a financial advisory business involving a large number of employees in three States with proper authority holders conducting business on their own account; see at [306].  The Tribunal went on to say that, in its view, any contraventions of the law had to be considered “in the context of the operation of the business as a whole”.

124               The Tribunal then set out its findings at [308] – [310].  The passages are quoted by Branson J at [92] of her Honour’s reasons and we will not repeat them.  In summary, the Tribunal found that there was no evidence of fraud or dishonesty and that Mr Braysich, SBFP and ABS did not intend to mislead investors.  It repeated its findings about contravention of s 849 but said that the Preston Vale Project was not sufficient to persuade the Tribunal that Mr Braysich, SBFP or ABS had not performed or would not perform their duties efficiently, honestly and fairly.

125               The Tribunal then turned to consider the question of enforcement action.  It set out at [311] – [314] the range of action which was open.  It repeated at [315] its remarks about the protective nature of the exercise of the powers.  The Tribunal referred at [316] to [319] to various authorities which pointed to the need to consider issues such as the seriousness of any contraventions when deciding whether to revoke a licence or make a banning order.

126               The Tribunal then stated its conclusions at [328] to [331].  Those passages are quoted by Branson J at [40] of her Honour’s reasons and we will not repeat them.

QUESTION 1.  Whether, unless the Tribunal was satisfied that SBFP and ABS had not performed or would not perform their duties “efficiently, honestly and fairly”, the Tribunal had no power under s 826(1) of the Corporations Law to revoke their securities dealers licences.

QUESTION 2.  Whether, if the Tribunal was satisfied that SBFP and ABS had contravened s 849, it had power under s 826(1) to revoke the licences.

127               These questions, though not stated with the degree of precision ordinarily required to conform with s 44(1) of the AAT Actand the Federal Court Rules, seem to us to raise questions of construction of s 826(1) of the Corporations Law.  As such, they raise questions of law but, for reasons set out below, no error is disclosed in the Tribunal’s reasons.

128               The questions can be dealt with together.  The effect of them is to ask whether it is a necessary pre-condition of the exercise of the power to revoke the licence under s 826(1)(c) that the Tribunal have reason to believe, under s 826(1)(j) or (k), that the licensee has not or will not perform its duties efficiently, honestly and fairly.

129               In our view, it is plain that on the proper construction of s 826(1)(c) it is not a necessary pre-condition that the Tribunal should have reason to believe the matters stated in
s 826(1)(j) or (k).  Section 826(1)(c) states an independent source of power to revoke a licence which is not conditional upon a belief that the licensee has not or will not perform in the manner stated in s 826(1)(j) or (k).

130               Mr Bathurst QC who appeared with Mr Lynch and Mr Scruby for the applicant, pointed with some force to the first sentence of [330] of the Tribunal’s reasons to support his submission that the Tribunal had fallen into error.  It is true that the sentence is cast in the language of power and that, read in isolation, it suggests that the Tribunal proceeded on the basis that the power was not open in the absence of a positive finding under s 826(1)(j) or (k).

131               The principles upon which we should exercise our jurisdiction are so well known that they hardly need repetition or citation of authority.  We must not be over-zealous in considering the Tribunal’s reasons.  We must read them fairly and in their full context.

132               There are various passages in the Tribunal’s reasons which indicate that it was aware that it had the power to revoke the licenses by reason solely of the breaches of s 849.  The clearest indication of this is found at [328] where, after summarising its findings of contraventions of s 849, the Tribunal stated that it was not satisfied that the licensees or Mr Braysich had failed, or would fail, to perform efficiently, honestly and fairly.  The Tribunal then stated that it must therefore determine whether it was appropriate to take enforcement action against the respondents in respect of the breaches of s 849.

133               These statements in [328] make it plain that the Tribunal did not regard a failure to act efficiently, honestly and fairly as a pre-condition to the exercise of the power to revoke the licences.  If it did, there would have been no reason to determine whether it was appropriate to take enforcement action.  It is clear from [329] that the type of enforcement action which was “open” included revocation of the licences.

134               Moreover, the reference in [329] to the exercise of the power in the public interest indicates that the Tribunal was aware that it had a discretion as to the appropriate mode of enforcement action.

135               Once the process of reasoning set out in particular at [328] to [329] is looked at, it seems to us to be clear that the Tribunal’s statement that the power was “not open” must be read as meaning no more than that the Tribunal was not prepared, in the exercise of its discretion, to invoke it.  When read as a whole, the effect of the first sentence of [330] is that the Tribunal was not prepared to exercise its discretion to revoke the licences because the contraventions of s 849 were not sufficiently serious to warrant such an order.

QUESTION 3.  Whether, in circumstances where the Tribunal was satisfied that SBFP and ABS sought to take appropriate steps to protect their clients’ needs, it followed that that SBFP and ABS had not contravened s 851 of the Corporations Law.

QUESTION 4.  Whether, in circumstances where the Tribunal was satisfied that SBFP and ABS had been deficient in determining client needs, but that such deficiencies were inadvertent, it followed that that SBFP and ABS had not contravened s 851 of the Corporations Law.

QUESTION 5.  Whether, in circumstances where the Tribunal was satisfied of the matters in both paragraph 3 and paragraph 4, above, it followed that SBFP and ABS had not contravened s 851.

QUESTION 6.  Whether the Tribunal was entitled to conclude that SBFP and ABS had not breached s 851 in circumstances where it failed to consider whether they made securities recommendations without a reasonable basis for doing so. 

136                Questions 3, 4 and 5 can be dealt with together.  They purport to raise questions of construction of s 851.  However, even if they do, the short answer to these questions is that they disclose no error of law on the part of the Tribunal.

137               The questions seek to tease out of the Tribunal’s conclusions in [146] of its reasons (which we have quoted at [119] above) errors in its approach to the proper construction of s 851.  It is true that in [146] the Tribunal did not say that it was satisfied that the respondents had “a reasonable basis” for the recommendations.  There are, however, other passages in the Tribunal’s reasons which indicate that it addressed that question; see for example [234] and [235] to which we referred at [120] above.

138               Moreover, the suggestion in question 3 that the Tribunal’s finding that the respondents sought to take appropriate steps to determine their clients’ needs is inconsistent with s 851, cannot be sustained.  For there to be a contravention of s 851(1), the securities adviser must not have a reasonable basis for making the recommendation.  Section 851(2)(a) specifically provides that one of the criteria which the securities adviser must satisfy in order to have a reasonable basis for the recommendation is that regard must be had to the client’s investment objectives, financial situation and particular needs as follows:

            “in order to ascertain that the recommendation is appropriate having regard to the information the securities adviser has about the person’s investment objectives, financial situation and particular needs, the securities adviser has given such consideration to, and conducted such investigation of, the subject matter of the recommendation as is reasonable in all the circumstances”

139               The first sentence in [146] of the Tribunal’s reasons, following the Tribunal’s consideration and findings in [141] and [145], was a finding that the respondents sought to take the proper steps to satisfy that test.  The Tribunal’s conclusion, taking into account its findings on matters such as the state of the industry and the conduct of the business, was that the steps taken were reasonable in all the circumstances.       

140               So too, we are unable to agree with the suggestion in question 4 that the Tribunal’s findings of “deficiencies” and “inadvertence” are inconsistent with s 851.  The question of whether s 851 has been contravened involves a consideration of the issue of reasonableness.  Deficiencies resulting from inadvertence bear on that question.

141               Question 5 is no more than a reformulation of questions 3 and 4 and accordingly nothing further needs to be said about that question.

142               Question 6 purports to raise as a question of law of a failure to make a finding on a material fact in issue; see Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at [38] and [69].  However, this question does not arise because the Tribunal did make such a finding.  It did so in [146], in particular in the last sentence of that paragraph.  It did not use the language of reasonableness but that is the effect of what it found.  Its remarks in [234] and [235] show that it addressed that question.  So too do its findings in [146].

QUESTION 7.  Whether the Tribunal was required, but failed to consider whether SBFP and ABS contravened s 849(2) in making recommendations to invest in Debentures issued by Rivermax Pty Ltd and Towerside Pty Ltd.

143               This is said to be a question of law because ASIC contends that the Tribunal failed to consider its submission that SBFP and ABS contravened s 849(2) in making recommendations about two forms of securities which were offered in connection with the Preston Vale Project.  Dennis Willcox Pty Ltd v Federal Commissioner of Taxation (1988) 79 ALR 267 (at 276-277) is authority for the proposition that the question of whether a tribunal has overlooked a submission “worthy of serious consideration” is a question of law.

144               In order to determine this question, it is necessary for us to describe, briefly, the nature of the project and ASIC’s contentions as to the respondents’ non-disclosures.

145               The Preston Vale Project was a scheme for the cultivation and processing of wine grapes and the acquisition of the land on which the vineyard was situated.  Prescribed interests of the type considered by the High Court in Australian Softwood Forests Pty Limited v Attorney-General (NSW); Ex rel Corporate Affairs Commission (1981) 148 CLR 121 were offered to investors.  Two other forms of securities were also offered.  They were debentures in the companies which, directly or indirectly, owned the shares in another company which was the manager of the Preston Vale Project.

146               The companies in which the debentures were offered were Towerside Pty Limited (“Towerside”) and Rivermax Pty Limited (“Rivermax”).  Towerside, through its wholly owned subsidiary, Rivermax, owned all of the issued capital in Southern Wine Corporation Ltd which was the project manager.  Mr Dean Scook and Ms Carol Hardie were the promoters of the Preston Vale Project.  They were the majority shareholders.

147               ASIC’s contention before the Tribunal was that the respondents contravened s 849(2) by failing to disclose to investors the existence of loans made by SBFP or a related company of the promoter of the Preston Vale Project.  Indeed, this contention was raised in the Notice of Concerns issued by ASIC’s delegate.

148               The Tribunal found that the non-disclosure of loans of $460,000 to the promoters was, together with the non-disclosure of other benefits received by Mr Braysich and SBFP, a significant breach of s 849(2).  However, ASIC contends that this finding was made only in relation to the offering of interests in the Preston Vale Project and that its submissions that these loans ought to have been disclosed when investment in the debentures in Rivermax and Towerside was recommended were not addressed.

149               The respondents submitted that the question of whether there were separate contraventions of s 849(2) in relation to investments in the debentures was not an issue before the Tribunal.  Mr Wood pointed to the Notice of Concerns in which the non-disclosure of the loans to the promoters was particularised under the heading of the Preston Vale Project.    However, we were taken to the written submissions filed in the Tribunal by ASIC and by the present respondents.

150               It appears to us that those submissions disclose that the Rivermax and Towerside debenture issues were raised by ASIC and dealt with by the respondents.  Nevertheless, we agree with Branson J’s remarks at [87] of her Honour’s reasons, when dealing with a similar question, that the issue of whether the Tribunal expressly or impliedly gave ASIC leave to rely on facts outside the ambit of the Notice of Concerns is a question of fact.

151               Even if an error of law was made, we do not think it contributed to the Tribunal’s decision; see Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 384 (per Toohey and Gaudron JJ).  The Tribunal found that the non-disclosure of the loans relating to the Preston Vale Project resulted from the close relationship between Mr Braysich and the promoters; see at [80] and [309] of the Tribunal’s reasons.  The Tribunal also found at [308] that its overwhelming impression of Mr Braysich was that his conduct involved no fraud or dishonesty.  The submission that consideration by the Tribunal of other breaches (if indeed they were not considered) when offering related securities in the same project might have had some impact cannot be sustained.

QUESTION 8.  Whether the Tribunal was required, but failed, to consider whether SBFP and ABS were under a contractual obligation to promote the Central Highlands Project.

QUESTION 9.  Whether the evidence was capable of supporting a conclusion that SBFP and ABS were not obliged to disclose the existence of the above contractual obligation.

QUESTION 10.  Whether the Tribunal was required to conclude that, in circumstances where the above obligation existed, Monpro was not an “associate” of SBFP and ABS for the purposes of s 849.

QUESTION 11.  Whether the Tribunal correctly concluded that, in circumstances where the above obligation existed, SBFP and ABS were not obliged, when making recommendations to invest in the Central Highlands Project, to disclose any benefits that Monpro would or may receive in connection with such recommendations.

152               Question 8 seems to us to be intended to call into question whether the Tribunal failed to give proper consideration to the evidence before it.  Accordingly, in our view, it is a question of fact.

153               However, we will state briefly the material on which this question and the other questions which we have grouped under this sub-heading arise.

154               ASIC contended before the Tribunal that SBFP and ABS failed to disclose to investors the contractual obligation undertaken by SBFP to Monpro to market and sell investment in the Central Highlands Project.  That obligation was contained in an agreement made between SBFP and Monpro.  ASIC also contended that Monpro was an associate of SBFP and ABS and, accordingly, that SBFP and ABS were required to disclose Monpro’s interests under s 849(2)(c) and (d).

155               In its table of findings for the Central Highlands Project the following appears in the Tribunal’s reasons under the heading of matters omitted from disclosure to clients:

            “The marketing agreement obliges SBFP and ABS Securities ‘to promote, market and sell’ the product, and ‘comply with all reasonable and lawful directions’ of Monpro.  However, Saxby Bridge notes that its sales of this product pre-date the agreement, and in any event the obligation is qualified by another provision in the Agreement that requires the Sub-Agent to ‘comply with all laws and regulations from time to time in force that applied to the promotion and marketing’”

156               The Tribunal’s findings were stated in short form as follows:

·        “The evidence does not lead the Tribunal to conclude that Monpro Ltd  is an ‘associate’ of SBFP and ABS Securities;

·        The Tribunal is not satisfied on the evidence of any non-disclosure.”

157               It seems to us to be clear from the passage of the Tribunal’s reasons set out at [155] above that the Tribunal did consider whether SBFP and ABS were under a contractual obligation to promote the Central Highlands Project.  Thus, no error is disclosed.

158               Question 9, which asks whether the evidence was capable of supporting the conclusion is not framed as a question of law.  Whether evidence is capable of supporting a conclusion is a question of fact; see Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at [24], [78] and [108].  

159               ASIC’s real complaint, if there be one, is that the Tribunal appears to have found in the passage we quoted at [155] that sales of the product pre-dated the marketing agreement.  That seems to be an incorrect finding because the prospectus for the Central Highlands Project bore the same date as the marketing agreement.  Nevertheless, it was a finding of fact which is immune from review.

160               Questions 10 and 11 can be dealt with together.  They purport to raise questions of law as to whether Monpro was an associate.  There is some force in the argument that the obligations of SBFP under the marketing agreement to market and sell the investment and to comply with Monpro’s directions necessarily made Monpro an associate of SBFP.  Whether facts are necessarily within a statutory description of a word or phrase is a question of law; see Vetter at the paragraphs referred to in [158] above.

161               However, a difficulty arises because, as Owen J said in Ocean Trawlers (at 526), the definition of “associate” in s 15 of the Corporations Law is subject to the limitations or qualifications contained in s 16.  One of the qualifications is that, under s 16(1)(a), a person is not an associate of another person merely because one of them acts on another’s behalf in the proper performance of the function attaching to “a business relationship”.

162               Whilst it might at first sight seem surprising that the obligations undertaken by
SBFP in the marketing agreement could fall within the business relationship qualification, as Hayne J said in Heine Management Ltd v Australian Securities Commission (1993) 12 ACSR 578 (at 594), it would be unwise to attempt a definition of that term.  In any event, as is clear from Owen J’s remarks in Ocean Trawlers (at 527-528), the question of whether a relationship falls within the limitation contained in s 16(1)(a) is a question of fact.

QUESTION 12.  Whether the Tribunal failed to consider a submission, worthy of serious consideration, that SBFP and ABS were contractually obliged to underwrite the issue of units in the APT Eucalypt Project 2000-2001.

QUESTION 13.  Whether the evidence was capable of supporting a conclusion that SBFP and ABS were not obliged to disclose the existence of the above underwriting obligations when making recommendations to invest in the APT Eucalypt Project 2000-2001.

163               Question 12 is said to be a question of law upon the ground that it falls within the principle that a failure to consider a submission worthy of serious consideration is a question of law.  However, the substance of ASIC’s contention is that a particular item of evidence has not been dealt with or taken into account by the Tribunal.  Thus, in truth, the question is one of fact rather than a question of law.

164               The piece of evidence which the Tribunal is said to have overlooked was an underwriting agreement made between ABS and two other companies under which ABS agreed to underwrite the acquisition of 87 timber lots in the APT Eucalyptus Project.

165               Question 13, which asks whether the evidence was capable of supporting a conclusion that SBFP and ABS were not obliged to disclose the existence of the underwriting obligations is not a question of law; see the paragraphs in Vetter referred to at [158] above.

QUESTION 14.  Whether, before considering whether it had power under s 826(1) of the Corporations Law to revoke the licences of SBFP and ABS, the Tribunal was entitled to classify as “minor” and “significant” contraventions of s 849(2) of the Corporations Law by those entities.

QUESTION 15.  Whether the Tribunal acted contrary to the requirement of s 43(2B) of the AAT Act, in not identifying or referring to the material or evidence upon which it relied for so categorising the contraventions of s 849 that it found.

166               We are prepared to assume that question 14 is a question of law.  However, no error is disclosed.  The Tribunal said on a number of occasions that revocation of a licence is only warranted in the most serious cases; see at [21] where Heerey J’s decision in Donald v ASIC was cited.  It is therefore clear in our view that the Tribunal’s classification of the breaches into “minor” and “significant” was a prelude to its consideration of the appropriate form of enforcement action.

167               Question 15 is based upon an assumption that the Tribunal was required by s 43(2B) of the AAT Actto refer to the evidence or other material on which it relied for its classification of the contraventions of s 849(2) of the Corporations Law into “minor” and “significant” breaches.  However, s 43(2B) only requires the Tribunal to give a reference to the evidence or other material on which its findings on material questions of fact are based.  The classification of the breaches into “minor” and “significant” was not a finding of fact.  It was a value judgment as to the seriousness of the offences.  Accordingly, question 15 does not arise.

QUESTION 16.  Whether the Tribunal erred in not considering the matters identified in Grounds 2, 3, 4 and 5 as matters that ought to have been taken into account when deciding whether SBFP’s and ABS’s licences should be revoked.

168               The reference in this question to the matters raised in grounds 2, 3, 4 and 5 embraces questions 3 to 13.  Question 16 seems to us to be no more than a reformulation of those questions which we have already answered.  In any event, the question as formulated in question 16 is a question of fact.

QUESTION 17.  Whether the Tribunal was required, but failed, to consider whether the Third Respondent had not performed his duties as a representative of a dealer “efficiently, honestly and fairly” for the purposes of s 829 of the Corporations Law by reason of:

(a)               his failure to attend training sessions for proper authority holders at SBFP;

(b)               his conduct in relation to the Towerside Debentures; and

(c)               his failure to disclose to ASIC the sale of the businesses of SBFP and ABS.

169               We agree with the reasons given by Branson J at [84] to [93] of her Honour’s reasons for the view that this is not a question of law.

QUESTION 18.  Whether the Tribunal was required, but failed, to consider the power under s 825 of the Corporations Law to revoke the securities dealers licences of SBFP and/or ABS on the ground that both entities had ceased to carry on business by 30 October 2001.

170               We also agree with the reasons given by Branson J at [94] to [97] for the view which her Honour expressed at [98] of her Honour’s reasons that this is not a question of law.

QUESTION 19.  Whether the Tribunal was required, but failed, to consider whether the sale of the business in Ground 10 above was a contravention of s 790 of the Corporations Law by the Respondents.  

171               We agree with the views expressed by Branson J at [99] to [101] of her Honour’s reasons.  Accordingly, in our opinion, this is not a question of law.

QUESTION 20.  Whether, in contravention of s 43(2B) of the AAT Act, the Tribunal failed to refer to the material or evidence on which it based its findings:

(a)          that there were deficiencies in the Applicants’ performance of their obligations under s 851 but that these were inadvertent;

(b)       that Monpro was not an “associate” for the purposes of s 849(2) of the Corporations Law in relation to securities recommendations to invest in the following products:  Budplan 3, Budplan 4, Budplan 5, Budplan “A”, Lemon Myrtle No 1, Central Highlands Wine Grape Project No 4, Diamond Ridge Wine Grape Project No 1; and

(c)        that all contraventions of s 849 apart from those concerning recommendations to invest in the Preston Vale Project were “minor” contraventions.

172               Except that we have not found it necessary to reach a concluded view on the proper construction of ss 849 and 851 of the Corporations Law, we agree with Branson J’s remarks at [102] to [103] of her Honour’s reasons. 

173               Nevertheless, as her Honour observed at [103], the question makes two assumptions, neither of which is self-evidently correct.  As to the first assumption, namely that a failure to comply with s 43(2B) of the AAT Actcan be sufficient of itself to support an order that the decision be set aside, there is authority of a Full Court (Sweeney, Davies and Burchett JJ) in Dornan v Riordan (1990) 95 ALR 451 which supports the proposition for which ASIC contends.  Finkelstein J took a different view in Comcare Australia v Lees (1997) 151 ALR 647 (at 656-659) but, as the Full Court had expressed a contrary view in Dornan v Riordan, he was bound by that authority.

174               It is unnecessary for us to decide whether Finkelstein J’s views should be preferred to those of the Full Court.  It seems to us that question 20 can be disposed of because of the second assumption contained in it.  This is, that each of the findings identified in the question is a material question of fact.  We do not consider that on the material before us we are in a position to make a positive finding on that assumption.

Conclusion

175               We would dismiss the appeal with costs.

Associate:

Dated:              5 November 2003