FEDERAL COURT OF AUSTRALIA
Culley v Australian Securities and Investments Commission [2010] FCAFC 43
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Citation: |
Culley v Australian Securities and Investments Commission [2010] FCAFC 43 |
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Appeal from: |
Culley v Australian Securities and Investments Commissioner [2008] FCA 1208 |
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Parties: |
BRIAN MALCOLM CULLEY v AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION |
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File number(s): |
VID 924 of 2009 |
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Judges: |
RYAN, MANSFIELD AND MCKERRACHER JJ |
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Date of judgment: |
19 May 2010 |
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Catchwords: |
ADMINISTRATIVE LAW – appeal under s 44 of the AAT Act – requirements of s 44 ADMINISTRATIVE LAW – appeal under s 44 of the AAT Act – ground raised for first time in the Federal Court – whether Court ought entertain such a ground. ADMINISTRATIVE LAW – appeal under s 44 of the AAT Act – discretionary relief – whether declaratory and consequential relief “appropriate”. CORPORATIONS LAW – Corporations Act 2001 (Cth), s 206F – requirement of timeliness – whether free-standing requirement imposed by law – discretionary factors going to exercise of power. |
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Legislation: |
Corporations Act 2001 (Cth), s 206F Administrative Appeals Tribunal Act 1975 (Cth), s 44 Federal Court of Australia Act 1976 (Cth), s 24 Administrative Decisions (Judicial Review) Act 1977 (Cth), s 5 |
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Cases cited: |
Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321 Culley v ASIC [2009] FCA 120 Culley v Australian Securities and Investments Commission [2008] AATA 58 Federal Commissioner of Taxation v Raptis (1989) 19 ALD 726 Ferriday v Repatriation Commission (1996) 69 FCR 521 Federal Commissioner of Taxation v Glennan (1999) 90 FCR 53 Halliday v Commissioner of Corporate Affairs (14 May 1990, Supreme Court of Victoria, O’Bryan J, unreported) House v The King (1936) 55 CLR 499 Hussain v Minister for Foreign Affairs (2008) 169 FCR 241 Kardas v Australian Securities Commission (1998) 29 ACSR 304 Kuswardana v Minister for Immigration and Ethnic Affairs (1981) 54 FLR 334 MacDonald v Secretary, Department of Family, Health, Community Services and Indigenous Affairs (2009) 180 FCR 378 Minister for Aboriginal Affairs v Peko-Wallsend (1986) 162 CLR 24 Minister for Immigration and Ethnic Affairs v Gungor (1982) 63 FLR 441 Murdaca v Australian Securities and Investments Commission (2009) 178 FCR 119 Re Refugee Tribunal; Ex parte Aala (2000) 204 CLR 8 Repatriation Commission v Owens (1996) 70 ALJR 904 Repatriation Commission v Warren (2008) 167 FCR 511 Secretary, Department of Social Security v Cooper (1990) 26 FCR 13 Thompson v Judge Byrne (1999) 196 CLR 141 Visnic v Australian Securities and Investments Commission (2007) 231 CLR 381 Water Board v Moustakas (1988) 180 CLR 491 |
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Date of hearing: |
3 May 2010 |
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Place: |
Melbourne |
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Division: |
GENERAL DIVISION |
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Category: |
Catchwords |
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Number of paragraphs: |
51 |
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Counsel for the Appellant: |
Mr J F Styring with Mr S J Krischock appeared pro bono |
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Solicitor for the Appellant: |
Bevan-Rhys James (pro bono) |
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Counsel for the Respondent: |
Mr S G E McLeish SC with Mr S B Rosewarne |
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Solicitor for the Respondent: |
Australian Securities and Investments Commission |
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IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY |
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GENERAL DIVISION |
VID 924 of 2009 |
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ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
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BRIAN MALCOLM CULLEY Appellant
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AND: |
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Respondent
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JUDGES: |
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DATE OF ORDER: |
19 MAY 2010 |
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WHERE MADE: |
MELBOURNE |
THE COURT ORDERS THAT:
2. Each party file and serve within 14 days hereof written submissions as to the costs of the appeal.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
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IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY |
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GENERAL DIVISION |
VID 924 of 2009 |
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ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN: |
BRIAN MALCOLM CULLEY Appellant
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AND: |
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Respondent
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JUDGES: |
RYAN, MANSFIELD AND MCKERRACHER JJ |
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DATE: |
19 MAY 2010 |
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PLACE: |
MELBOURNE |
REASONS FOR JUDGMENT
the court:
206F ASIC’s power of disqualification
Power to disqualify
(1) ASIC may disqualify a person from managing corporations for up to 5 years if:
(a) within 7 years immediately before ASIC gives a notice under paragraph (b)(i):
(i) the person has been an officer of 2 or more corporations; and
(ii) while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) (including that subsection as applied by section 526‑35 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006) about the corporation’s inability to pay its debts; and
(b) ASIC has given the person:
(i) a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and
(ii) an opportunity to be heard on the question; and
(c) ASIC is satisfied that the disqualification is justified.
(1A) To avoid doubt, the references in paragraph (1)(a) to corporations include references to Aboriginal and Torres Strait Islander corporations.
Grounds for disqualification
(2) In determining whether disqualification is justified, ASIC:
(a) must have regard to whether any of the corporations mentioned in subsection (1) were related to one another; and
(b) may have regard to:
(i) the person’s conduct in relation to the management, business or property of any corporation; and
(ii) whether the disqualification would be in the public interest; and
(iii) any other matters that ASIC considers appropriate.
(2A) To avoid doubt, the references in subsection (2) to a corporation includes a reference to an Aboriginal and Torres Strait Islander corporation.
Notice of disqualification
(3) If ASIC disqualifies a person from managing corporations under this section, ASIC must serve a notice on the person advising them of the disqualification. The notice must be in the prescribed form.
Start of disqualification
(4) The disqualification takes effect from the time when a notice referred to in subsection (3) is served on the person.
ASIC power to grant leave
(5) ASIC may give a person who it has disqualified from managing corporations under this Part written permission to manage a particular corporation or corporations. The permission may be expressed to be subject to conditions and exceptions determined by ASIC.
2 Mr Culley applied, under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act”), to this Court by way of appeal from the disqualification imposed by ASIC. The application identified six questions of law and was determined by the primary Judge in the original jurisdiction of this Court. By virtue of s 24 of the Federal Court of Australia Act 1976 (Cth) (“the Federal Court Act”), an appeal lies from that determination to a Full Court.
3 On 30 October 2009 the learned primary Judge published reasons dealing with each of the six identified questions of law: see Culley v ASIC [2009] FCA 1208 (“the earlier reasons”). For present purposes, it is necessary only to have regard to the questions numbered 5 and 6 which his Honour examined. Those questions were in these terms;
(5) Whether the statutory power of disqualification contained in s 206F of the Corporations Act is subject to an implied requirement that it be exercised within a reasonable time; and
(6) Whether the respondent failed to exercise its statutory power of disqualification contained in s 206F of the Corporations Act within a reasonable time.
4 His Honour answered each of questions 5 and 6 “yes”. The point in question 5 had not been raised by Mr Culley before the Tribunal but was agitated for the first time before the primary Judge: see [39]-[60] of the earlier reasons. His Honour concluded that s 206F of the Corporations Act impliedly required that the power of disqualification be exercised by ASIC within a reasonable time; as much had been agreed between the parties: see [41]. Accordingly, his Honour answered question 6 by holding that ASIC’s delay, in the circumstances before him, had been unreasonable; see, especially, at [57]-[60]. That finding, we emphasise, was arrived at in the light of various concessions made on behalf of ASIC. Moreover, as the wording of question 6 required, it was a finding which turned on the particular factual circumstances of the case.
5 Despite his Honour’s answers to questions 5 and 6, he was not prepared to make the declarations sought by Mr Culley. As his Honour recorded in a second set of reasons published on 14 December 2009 (see [2009] FCA 1474) (“the later reasons”), the question of an implied requirement that the disqualification occur within a reasonable time had not been raised or decided in the Tribunal, but had been argued for the first time in this Court. That, in his Honour’s view, attracted the application of the remark made by Gummow J in Federal Commissioner of Taxation v Raptis (1989) 19 ALD 726, at 728, which had been referred to by a Full Court of this Court in Secretary, Department of Social Security v Cooper (1990) 26 FCR 13, at 18, that is;
There must be some difficulty… in finding as “error of law” in the failure in the Tribunal to make a finding first urged in this court.
The issue, his Honour perceived, in the light of authorities such as Ferriday v Repatriation Commission (1996) 69 FCR 521, Federal Commissioner of Taxation v Glennan (1999) 90 FCR 538, and Hussain v Minister for Foreign Affairs (2008) 169 FCR 241, was not merely one of whether “prejudice” might flow to ASIC if an argument not advanced below were allowed to be relied on in this Court; it was whether, as a matter of law, the Tribunal had erred in law in failing itself toaddress the question. In his Honour’s view, the existence of an implied requirement that the statutory power be exercised within a reasonable time and whether, in fact, that requirement had been satisfied;
were not matters which the Tribunal was bound to take into account independently of the parties’ submissions. It would have been necessary for the Tribunal to find the facts relating to the time taken by ASIC to investigate the matter and issue the show cause notice and the reasons for the delay. None of this occurred.
6 In the earlier reasons, having explained his conclusion that questions 5 and 6 should be answered in the affirmative, the learned primary Judge continued, at [62];
The period of Mr Culley’s disqualification expired in February 2009. The disqualification decision was made by the delegate and affirmed by the Tribunal. As presently advised I can see no practical purpose to be served by an order setting aside the Tribunal’s decision. Nor can I discern any useful purpose to be served by remitting the matter for further hearing and determination by the Tribunal. As is evident from these reasons it is my view that the Tribunal committed no reviewable legal error in the course of dealing with the appeal as presented to it. Mr Culley has had but limited success in his appeal to this Court and then only on a point which was not agitated before the Tribunal. This may also have implications for any costs order which may be sought.
7 Consequently, his Honour made orders for the filing of minutes of agreed orders to give effect to his reasons, or, if agreement were not able to be reached, for the filing of minutes of order which each party might contend should be made.
8 There was no agreement. ASIC submitted that his Honour ought to make only the order which he ultimately made, that the proceeding be dismissed. Mr Culley, as his Honour recorded at [8] of the later reasons, sought orders in these terms;
(1) Declare that the respondent’s show cause notice dated 13 October 2006 was not given by the respondent to the applicant pursuant to paragraph 206F(1)(b) of the Corporations Act 2001 within a reasonable time after the liquidator lodged his report with the respondent on 23 October 2002 about Construction Resources Pty Ltd.
(2) Declare that the power given by section 206F of the Corporations Act 2001 for the respondent to prohibit the applicant from managing a corporation was not exercised within a reasonable time after the liquidator lodged his report with the respondent on 23 October 2002 about Construction Resources Pty Ltd.
(3) The decision of the Administrative Appeals Tribunal made on 8 July 2008 is set aside.
(4) The matter is remitted to the Administrative Appeals Tribunal to be heard and decided again without the hearing of further evidence and limited to the question whether the decision of the respondent under review should be set aside by reason of the delay of the respondent.
(5) The respondent pay the applicant’s costs of and incidental to the appeal.
9 His Honour declined to make any of those orders which he regarded as inappropriate in the sense described in authorities like Minister for Immigration and Ethnic Affairs v Gungor (1982) 63 FLR 441. In that case, Sheppard J held, at 454, that the powers conferred on this Court by sub-ss (4) and (5) of s 44 of the AAT Act are not at large, and are to be “read in context” so as to comprehend the making of an order which is “appropriate by reason of [the Court’s] decision”. In the view of the primary Judge, the orders which Mr Culley had sought were not, in that sense, appropriate to be made by this Court.
10 Accordingly, his Honour decided to dismiss the proceeding, observing, at [20] of the later reasons;
I do not consider that any challenge to the exercise of ASIC’s powers under s 206F could give rise to a question of law that is amenable to resolution by the Court under s 44(1) of the AAT Act. The Tribunal committed no error of law in failing to deal with an issue that was not raised before it. The present was not a case in which the Tribunal had material before it which would have enabled it to find, independently of any submissions by the parties, that some statutory precondition to the exercise of its powers was lacking. It was not invited to give consideration to the temporal aspects of the way in which ASIC dealt with the matter. Nor was it urged to make a finding that delay had precluded ASIC from making the impugned decision. Questions five and six did not, therefore, constitute questions of law which should have been considered by the Court.
The appeal to the Full Court
11 On 23 December 2009, Mr Culley instituted an appeal to this Court. In essence, he sought to re-agitate what had been questions 5 and 6 considered by Tracey J. The notice of appeal contained these grounds and sought the following orders;
GROUNDS OF APPEAL
1 The learned judge erred in concluding that question 5 of the appellant’s Further Amended Notice of Appeal did not give rise to a question of law that was amenable to resolution by the Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth)…
2 The learned judge ought to have concluded that question 5 was a question of law that was amenable to being raised for the first time on an appeal from the Administrative Appeals Tribunal.
3 The learned judge erred in concluding that question 6 of the appellant’s Further Amended Notice of Appeal did not give rise to a question of law that was amenable to resolution by the Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth)…
4 The learned judge ought to have concluded that question 6 was a question of law that was amenable to being raised for the first time on an appeal from the Administrative Appeals Tribunal.
ORDERS SOUGHT:
1 The appeal be allowed.
2 The order of the Honourable Justice Tracey made on 14 December 2009 be set aside.
3 A declaration that the respondent’s show cause notice dated 13 October 2006 was not given by the respondent to the appellant pursuant to paragraph 206F(1)(b) of the Corporations Act 2001 within a reasonable time after the liquidator lodged his report with the respondent on 23 October 2002 about Construction Resources Pty Ltd.
4 A declaration that the power given by s 206F of the Corporations Act 2001 for the respondent to prohibit the appellant from managing a corporation was not exercised within a reasonable time after the liquidator lodged his report with the respondent on 23 October 2002 about Construction Resources Pty Ltd
5 The decision of the Administrative Appeals Tribunal made on 8 July 2008 be set aside.
6 The matter be remitted to the Administrative Appeals tribunal to be heard and decided again without the hearing of further evidence and limited to the question of whether the decision of the respondent under review should be set aside by reason of the delay of the respondent.
Mr Culley also sought his costs of the hearings before the AAT and in this Court.
1 The Court ought to have held that there is no implied requirement under s 206F of the Corporations Act 2001 (Cth) that the respondent issue a notice under s 206F(1)(b) within any period less that 7 years after the conditions in s 206F(1)(a) have been satisfied.
2 The Court ought to have held that the only implied requirement under s 206F of the Corporations Act 2001 (Cth) is that the respondent makes a decision whether or not to disqualify a person from managing a corporation under s 206F of the Corporations Act 2001 (Cth) within a reasonable time of the issue of a notice under s 206F(1)(b)
3 The Court ought to have held that the respondent did not fail to exercise its power to disqualify the appellant from managing a corporation within a reasonable time after the issue of a notice under s 206F(1)(b)
4 Alternatively, the Court ought to have held that the respondent did not fail to exercise its power to disqualify the appellant from managing a corporation within a reasonable time after the conditions of 206F(1)(a) had been satisfied.
5 Alternatively to 3, the Court ought to have held that the appellant had not established that the respondent failed to exercise its power to disqualify the appellant from managing a corporation within a reasonable time after the issue of a notice under s 206F(1)(b).
6 Alternatively to 4, the Court ought to have held that the appellant had not established that the respondent failed to exercise its power to disqualify the appellant from managing a corporation within a reasonable time after the conditions in s 206F(1)(a) had been satisfied.
ASIC accordingly sought orders that the appeal be dismissed, and that the appellant pay its costs of the appeal.
13 Had ASIC not advanced the contention which we have just outlined, we would have considered it appropriate simply to have upheld the primary Judge’s order for dismissal of the proceeding. That would have been appropriate because the grant of relief under s 44(4) and (5) is clearly discretionary, and no error of the kind discussed in, for example, House v The King (1936) 55 CLR 499,has been identified in his Honour’s reasoning.
14 However, because the arguments advanced before the Full Court have differed from those relied on at first instance, we consider it desirable to examine the competing contentions of the parties as to the proper construction of s 206F of the Corporations Act. Before doing so, it is convenient to make some observations about the nature of the appeal to this Court.
The nature of the appeal
15 At [12] et seq of the later reasons, the primary Judge considered whether it was open to Mr Culley to raise an argument for the first time in this Court. His Honour, as we have said, referred to what had been said by Gummow J in Raptis, and by Bowen CJ in Kuswardana v Minister for Immigration and Ethnic Affairs (1981) 54 FLR 334. We agree, for the reasons which the learned primary Judge gave at [14]-[18], that the Tribunal’s failure to make a finding of fact it is required to make - sometimes called a “jurisdictional finding” – may ground an “appeal” on a question of law pursuant to s 44, irrespective of whether the fact has been put in issue before the Tribunal.
16 In a case like the present, however, where no submission on a factual issue has been made to the Tribunal, and where the fact to be found was not a precondition of jurisdiction, this Court’s power to entertain such a question of law is discretionary: see, for example, Water Board v Moustakas (1988) 180 CLR 491. In that case, speaking of the general rule against an appeal based on a point not taken at first instance, Mason CJ, Wilson, Brennan and Dawson JJ said, at 497;
Where all the facts have been established beyond controversy or where the point is one of construction or of law, then a court of appeal may find it expedient and in the interests of justice to entertain the point, but otherwise the rule is strictly applied.
The factors going to the exercise of that discretion in the context of a s 44 “appeal” were discussed by a Full Court of this Court in Hussain v Minister for Foreign Affairs (2008) 169 FCR 241. There, their Honours, at 256, approved an observation by Lindgren and Bennett JJ in Repatriation Commission v Warren (2008) 167 FCR 511, that this Court will “more readily permit a matter to be raised for the first time on appeal from the Tribunal” where:
(a) the matter is a pure question of law, such as a question as to the validity of a regulation: see Kuswardana 54 FLR at 343; 35 ALR at 195; Tefonu 44 FCR at 367; or a question as to whether the tribunal had applied the correct standard of proof on the true construction and application of legislation: Ferriday v Repatriation Commission (1996) 69 FCR 521 at 527-528 per Lee J;
(b) the matter goes to a misapprehension that was shared by the parties before the tribunal and therefore by the tribunal itself: see Perpetual Trustee Company (Canberra) Ltd v Commissioner for Revenue (ACT) (1994) 50 FCR 405 at 418-419 per Wilcox J; such as a shared misapprehension as to the applicable law: cf Thomas v Repatriation Commission (1994) 50 FCR 112 at 120 per Beazley J; or
(c) the matter goes to a condition precedent to the availability of a power, the exercise of which will have a serious impact on the individual: see Kuswardana 54 FLR 334; 35 ALR 186.”
17 Mr Styring of Counsel, who appeared with Mr Krischock of Counsel for the appellant, submitted that question 5 in the further amended notice of appeal before the primary Judge could be brought within any of categories (a), (b) and (c) identified in the passage from Warrenwhich we have just quoted. However, in our view, question 5 falls unequivocally only into category (a). The existence of an implied temporal limit on ASIC’s power was clearly not a condition precedent to the availability of the power as required for it to come within category (c). We also very much doubt whether it was the subject of a shared misapprehension in the sense required for it to fit within category (b). In any case, Lindgren and Bennett JJ in Warrendid not purport to do more than outline categories of questions likely to lead to a favourable exercise of the discretion to allow them to be agitated for the first time before this Court. It does not follow that this Court will always decline to entertain a question which cannot be brought within one of their Honours’ three categories. The form of question 5 and the considerations adverted to by the Full Court in Hussain make it impossible for us to conclude that the learned primary Judge’s discretion miscarried when he decided to entertain that question.
18 The discretion to which we have referred is subject to the stringent requirement of s 44 of the AAT Act that the “appeal” to this Court be “on a question of law”. The principal authorities on that requirement have been collected by Ryan J in MacDonald v Secretary, Department of Family, Health, Community Services and Indigenous Affairs (2009) 180 FCR 378, at 382. It is there emphasised, as well as in Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321, which is cited in MacDonald, that a s 44 question must be “stated with precision as a pure question of law”: Birdseye, per Branson J, at 325. In our view, what was question 5 before the primary Judge comfortably satisfies that criterion.
19 However, what was question 6 before the primary Judge was not a pure question of law of that type. In substance, it was a subsidiary question of fact flowing from an affirmative answer to question 5. In form it is, at best, a question of mixed fact and law requiring the Court to apply its conclusion of a need for ASIC to act within a reasonable time to the circumstances of the case which had been before the Tribunal. It is no part of this Court’s function under s 44 to resolve such a question. As the High Court said in another of the authorities collected in Macdonald, Repatriation Commission v Owens (1996) 70 ALJR 904, at 904, the allocation of merits review to the Tribunal (or, before it, the relevant delegate) and of judicial review to this Court is one which is “critical to the correct operation of the administrative review process”. As we have indicated, we consider that even the most cursory reading of the terms of question 6 reveals that it is not a question of law on which s 44 is predicated. The Court should therefore decline to answer question 6. It is, accordingly, unnecessary to make further reference to it. We turn then to consider the proper construction of s 206F of the Corporations Act.
Is the power in s 206F subject to an implied requirement that it be exercised within a reasonable time?
20 Question 5 before the primary Judge was, it will be recalled, in these terms:
Whether the statutory power of disqualification contained in s 206F of the Corporations Act is subject to an implied requirement that it be exercised within a reasonable time.
We have reproduced the text of s 206F at [1] of these reasons.
21 At [41] of the later reasons, the primary Judge records that “the parties are agreed that the answer to Question 5 must, having regard to authority, be: ‘yes’”. It emerged during the hearing before this Court, however, that what was said to have been an agreement between the parties was (or is now) based on different understandings of the respects in which the power is subject to such an implied requirement. On the one hand, the appellant contends for an overriding requirement for ASIC to act within a reasonable time of the lodging of a liquidator’s report about the second corporation’s inability to pay its debts. That requirement was said to exist independently of the express seven year retrospective time frame expressly provided for by the prefatory words of s 206F(1)(a). On the other hand, ASIC, as appears from its notice of contention (set out at [12] above) argued that, while timeliness may be taken into account by a delegate of ASIC or the Tribunal in exercising the general discretion to disqualify or in attaining the state of satisfaction stipulated by s 206F(1)(c) that disqualification is justified, no time less than the seven years specified in s 206F(1)(a) can be imported as a condition precedent to the exercise of the power. We shall now examine these competing contentions in more detail.
The appellant’s contentions as to the construction of s 206F
(1) For the purposes of this section:
(b) a relevant body is a section 600 body at a particular time if, and only if, within the period of 7 years ending at that time, a liquidator of the body has, under:
(i) subsection 533(1); or
(ii) a previous law corresponding to subsection 533(1);
reported, or lodged a report with respect to, a matter relating to the ability of the body to pay its unsecured creditors; and
(c) a person shall be taken to be a relevant person in relation to a relevant body that is or was a section 600 body if, and only if, the person was a director of the body at any time during the period of 12 months ending on the day of the beginning of the winding up of the body.
(2) The Commission may give to a person who is a relevant person in relation to 2 or more relevant bodies that are, at the time of service, section 600 bodies a notice in writing requiring the person to show cause why the Commission should not serve on the person a notice under subsection (3).
(3) Where the Commission:
(a) has served on a person a notice under subsection (2); and
(b) has given the person an opportunity of being heard in relation to the matter;
the Commission shall, unless it is satisfied that it is not appropriate to do so, serve on the person a notice in writing prohibiting the person, for such period not exceeding 5 years as is specified in the notice, from managing a corporation.
(4) Where:
(a) the Commission has served a notice under subsection (2) on a person who is a relevant person in relation to 2 or more relevant bodies that were, at the time of service, section 600 bodies; and
(b) those 2 bodies have at any time been related to each other, or any of those bodies has at any time been related to any other of those bodies, as the case may be;
the Commission shall have regard to that fact in considering whether or not it is appropriate to serve on the person a notice under subsection (3).
23 In Kardas, his Honour observed, at 313;
A statutory power (such as the power of prohibition under s 600) conditioned upon the occurring of a certain event (such as the making of a s 533 report in respect of two or more companies) will often be subject to an implied requirement that it be exercised within a reasonable time: Koon Wing Lau v Calwell (1949) 80 CLR 533 at 573–4; [1949] ALR 97; Giris Pty Ltd v FCT (1969) 119 CLR 365 at 383; [1969] ALR 369; Re Federal Commissioner of Taxation; Ex parte Australena Investments Pty Ltd (1983) 50 ALR 577 at 578; Repatriation Commission v Morris (1997) 26 AAR 284 at 289. I am satisfied that the s 600 power is subject to such a requirement.
24 The second proposition advanced on behalf of the appellant was that, if it failed to discharge the implied obligation to act within a reasonable time, ASIC (and, relevantly, the Tribunal) committed jurisdictional error in purporting to exercise the power of disqualification conferred by s 206F. In this regard we were referred to familiar authorities on jurisdictional error, such as Re Refugee Tribunal; Ex parte Aala (2000) 204 CLR 82. In particular, Counsel relied on what was said in that case by Hayne J, at 143 [168], where his Honour observed that the obligation on an administrative decision maker “to accord procedural fairness is an obligation affecting how the decision maker is to go about the task of decision making. It is a limitation on the power to decide.”
25 Acceptance of these two propositions was said, in written submissions filed on behalf of the appellant, to entail that “jurisdictional error invalidated the decision or order of the Tribunal, thus engaging paragraph (c) of Hussain”.
The respondent’s contentions as to the construction of s 206F
26 In contending for its construction of s 206F, ASIC made reference to the reasoning of another Full Court of this Court (North, Kenny and Foster JJ) in Murdaca v Australian Securities and Investments Commission (2009) 178 FCR 119, the effect of which was summarised in ASIC’s written submissions as follows:
(a) s 206F(1) comprises, in ascending order of importance:
2.1.1 a trigger mechanism (the conditions, filters or gateway) embodied in s 206F(1)(a);
2.1.2 a procedural fairness requirement (the giving of a show cause notice and an opportunity to be heard): s 206F(1)(b); and
2.1.3 a merits decision captured in the requirement that ASIC be satisfied that disqualification is justified: s 206F(1)(c) and (2);
(b) the power to disqualify a person from the management of corporations must be exercised for the purposes for which it was granted, namely the protection of all those persons who deal with corporations from the consequences of the actions of those corporate officeholders who, either though incompetence or dishonesty or a combination of the two, bring about the failure of corporations and thus cause loss to others, and the maintenance of professional management standards in the public interest;
(c) s 206F does not give reports prepared by liquidators pursuant to s 533 of the Corporations Act any particular status or weight, and ASIC may approach the exercise of its power of disqualification under s 206F(1)(c) in any way it thinks fit, subject to complying with s 206F(1) and (2) and respecting the purposes for which the disqualification power was granted;
(d) the merits consideration by ASIC is intended to take place only once in the process; the preconditions provided for in s 206F(1)(a) and (b) are jurisdictional requirements which must be satisfied before ASIC’s power to disqualify under s 206F is enlivened.
27 In its submissions ASIC accepted that the language of s 206F accommodates an implication that the power of disqualification be exercised in a reasonably timely fashion. That obligation, it was submitted;
1. (i) falls on the shoulders of the decision maker in deciding, under s 206F(1)(c), whether he or she is “satisfied that the disqualification is justified”; and
2. (ii) whether it has been performed is to be measured from the issue of the “show cause” notice under s 206(1)(b).
28 Mr McLeish SC, who appeared with Mr Rosewarne of Counsel for ASIC elaborated that submission as follows in their written outline;
To construe [s 206F] as being subject to an implied requirement that a show cause notice be issued within any shorter period [than the seven years expressly fixed by s 206F(1)(a)] would be inconsistent with Parliament’s intention as articulated in the express words of the section. The circumstances in which a court may construe a statutory provision by reading words into it are extremely limited, and this is particularly so where the words of the provision are clear and unambiguous: AMS v AIF (1999) 199 CLR 160, Gaudron J at [63].
29 In AMS v AIF (1999) 199 CLR 160, to which reference was made, Gaudron J said, at 183 [63], referring to her earlier judgment in Thompson v Judge Byrne (1999) 196 CLR 141, at 158, and the authorities there cited, that:
clear words can only be read as subject to some unexpressed limitation if that is necessary to avoid absurdity, some conflict with another provision of the statute in question or a result which cannot reasonably be supposed to have been intended by the legislature.
Consideration
30 For the reasons which follow, we have concluded that the language and structure of s 206F exclude any implied requirement for ASIC to exercise its power of disqualification within any shorter period than the seven years immediately before the giving of a “show cause” notice under s 206F(1)(b).
31 Section 206F was part of the Corporations Act as originally enacted. The corresponding provision, identically numbered, had been present in the Corporations Law, which was the immediate predecessor of the Corporations Act having been inserted in the Corporations Law by the Corporate Law Economic Reform Project Act 1999 (Cth). In light of that legislative history, it is unnecessary to call in aid, in construing s 206F, any extrinsic material as we can discern in s 206F no ambiguity to warrant recourse to s 15AB of the Acts Interpretation Act 1901 (Cth). It is clear enough from its terms and its location in Pt 2D.6 of the Corporations Act that the legislature, in framing s 206F, has been concerned to strike a balance between two competing interests.
32 The section reflects on the one hand, the interest of the public in the existence of a facility for removing from the pool of managers those who are, or have been, officers of two or more corporations which have been wound up for inability to pay their debts. As a result, the public and the market are afforded a measure of protection from those who, as was said in Murdaca (supra), at 143;
either through incompetence or dishonesty or a combination of the two, bring about the failure of corporations and thus cause loss to others (Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at [47]-[50]).
In the same passage, their Honours discerned in s 206F a concern with “the maintenance of professional management standards in the public interest (Visnic v Australian Securities and Investments Commission (2007) 231 CLR 381 at [11] and [26]).”
33 On the other hand, the legislature has recognised the need for corporate officers not to be exposed to disqualification as a result of corporate failures separated by an inordinate length of time. In our view, the concern, which we have imputed to Parliament, to strike a balance between these competing interests has been accommodated by fixing in s 206F(1)(a) a “window” of seven years within which two or more corporate collapses must occur in order for an officer involved in them to be at risk of disqualification from managing any other corporation.
34 The intention which we have divined from the language and structure of s 206F is inconsistent with an interpretation of the section which would confine ASIC’s power of disqualification within a narrower retrospective “window” than the seven years expressly stipulated in s 206F(1)(a).
36 To acknowledge that lapse of time is one of a number of factors available to be weighed in the exercise of a discretion falls far short of imposing, as a condition for its exercise, a requirement that some action be taken within a reasonable time. In our view, the observations of Heerey J in Kardas (supra), do not support the implied imposition of such a condition. There, it will be remembered, his Honour was dealing with s 600 of the Corporations Law, a legislative predecessor of s 206F but, as appears from the extract set out at [22] above, one in different terms. We regard his Honour as saying no more, in that case, than that a decision maker acting under such a provision ought to discharge his or her functions with reasonable promptness, and so much was to be inferred from the terms in which the power was conferred. His Honour was not, it appears to us, elevating that requirement to a free-standing condition precedent to the exercise of the power, or erecting a legal constraint on ASIC’s “power to decide” of the type identified by Hayne J in Aala (supra). The authority to which Heerey J referred in Kardas, and upon which extensive submissions were made before us, Halliday v Commissioner of Corporate Affairs (14 May 1990, Supreme Court of Victoria, O’Bryan J, unreported), illustrates the point.
37 In Halliday, O’Bryan J was hearing an appeal de novo from a delegate of the respondent Commissioner who had prohibited the appellant from being a director, a promoter, or being in any way involved in the management, of a corporation without the Court’s leave. In allowing the appeal, his Honour said, at page 8 of the transcript of his ex tempore reasons, that;
…delay between 1981 and 1989 was a relevant circumstance. One aspect of delay important in this appeal is the time taken to bring this proceeding to a conclusion. This proceeding commenced by service of a notice to show cause, dated 1 July 1987. The hearing between Mr Perry [the respondent’s delegate] did not commence until 24 March 1988 and concluded on 21 April 1989. A decision was not announced until 15 June, almost two years after the show cause notice issued. During this period the applicant has faced uncertainty as to his future with Spectra Systems and possibly financial detriment. One would hope it is exceptional for a proceeding of this nature to be so protracted. The interests of the community and commercial persons are not served by long delays in this area of the law.
Taking all these matters into consideration, I propose to allow this appeal….
As O’Bryan J’s remarks were made in the course of a de novo appeal from a decision of a delegate, his Honour was performing the function which has been performed in the case now before the Court by the Tribunal. Thus, because he was exercising the discretion for himself, it was entirely correct for his Honour to have regard, in the sense which we have described at [35] above, to the lapse of time up to the disqualification of Mr Halliday.
38 That O’Bryan J saw himself as exercising de novo the discretion originally reposed in the delegate of the Commissioner is made clear by this further passage which appears at pp 2-3 of the transcript of his reasons:
I consider the appeal should be allowed on the ground that in the circumstances of the case no order of prohibition should have been made.
It is of the utmost importance to recognise that s 562A was not enacted to impose a penal sanction in the sense of punishment upon a relevant person in respect of past conduct, but to restrict a person’s future corporate activities in the public interest when that person’s past conduct has shown a want of fitness to direct, promote or manage the affairs of a corporation.
It is necessary to consider the circumstances in which the relevant companies became insolvent. The conduct of the applicant at the time of insolvency and since are also relevant matters. In considering the conduct and behaviour of a relevant person one must ascertain whether dishonesty, or incompetence or lack of commercial morality, contributed to the insolvency and whether the applicant should be entrusted to direct, promote or manage the affairs of a corporation now or only at some time in the future.
39 The same view is reiterated at pp 7-8 of his Honour’s reasons where he observed:
I declined to examine the reasons of Mr Perry for making a prohibition order because I was of the opinion that this Court is to stand in place of Mr Perry. The discretions exercisable by Mr Perry pursuant to s 562A have to be exercised by this Court alone unfettered by the reasons of Mr Perry.
This Court is required to enquire de novo into the questions involved in the appeal and arrive at its own decision upon the evidence. The Court is equipped to determine, for itself, issues of credibility and whether past conduct by a director has shown a want of fitness to direct, promote or manage the affairs of a corporation in the future.
40 In Halliday the three relevant companies, which were related to each other, had respectively been wound up in March 1981, August 1981 and November 1984. The notice to show cause under what was then s 562A(3) of the Companies (Victoria) Code was served on 1 July 1987, well within the seven year window ascertained by reference to the dates of lodgement of the triggering liquidator’s reports. Nevertheless, his Honour was influenced by a number of factors not to prohibit Mr Halliday from being a director or promoter of a corporation without the leave of the Court.
41 Principal among the discretionary factors which weighed with O’Bryan J in Halliday was the lapse of time, not between the triggering liquidator’s reports and the service of the show cause summons which, as we have already noted, was within the expressly permitted seven years, but between the winding up of the first two companies in 1981 and the decision to disqualify. The significance of that lapse of time as a discretionary factor, not a bar to the exercise of the power to disqualify, was made clear by these further passages at pp 7 and 8 of his Honour’s reasons:
In these circumstances, should an order of prohibition be made by this Court. Two matters weigh against making an order at this time. The first is the applicant’s general good character established by the evidence. The second is the long interval between insolvency of the applicant’s principal companies and today.
In this period of almost nine years, the applicant has not been associated with another failed company, save Gilliat. He was a director of Spectra Systems until June 1989 and no evidence was tendered to show that Spectra is in financial difficulty.
42 We consider that in Kardas, Heerey J similarly confined himself to the facts of that particular case. His Honour acknowledged that O’Bryan J in Halliday had been conducting a hearing de novo when, as Heerey J pointed out in Kardas, at 313, he “held that a delay of almost two years between the service of a show cause notice and a decision to prohibit would be too long.” It is significant that, in that reference, Heerey J focused exclusively on the delay between the service of the show cause notice and the decision to prohibit or disqualify. It is true, however, that Heerey J went on in Kardas to say, at 314;
Once a liquidator’s report in respect of a second “s 600 company” triggers the power of disqualification, that power, if it is to be exercised at all, should be exercised with reasonable promptness. A person potentially the object of that power should not be kept in an indefinite state of uncertainty. More importantly, since the purpose of a s 600 disqualification is prophylactic rather than punitive, there should be as little delay as possible in taking steps to protect the public.
43 Nevertheless, his Honour did not advert to the consequences of non-compliance with the requirement to which he held, in the passage quoted at [23] above, the power of disqualification was subject. Moreover, his Honour expressed the requirement by utilising the expression “within a reasonable time.” As he himself acknowledged in what follows, that concept is ambulatory according to the circumstances of each case. His Honour there said, also at 314;
What is a reasonable time will depend on the circumstances. The affairs of companies vary greatly in their complexity. But the Commission does not, as it were, start from scratch. It will, ex hypothesi, have the benefit of a liquidator’s report and no doubt the liquidator would usually be willing and able to provide further information and explanation on request.
To recapitulate the chronology of the present case, the following dates are relevant:
Infobank liquidator’s report 1 December 1993
Show cause notice 17 May 1995
Hearing commences 16 April 1996
Hearing concludes 27 February 1997
Notice of prohibition 30 July 1997
Total elapsed time 3 years 8 months
In my opinion, this was well beyond the bounds of reasonableness. Neither counsel engaged in any analysis of the course the hearing took. It may be that, for example, some of the delay in the hearing was attributable to Mr Kardas or his legal representatives. But the power the Commission sought to exercise was subject to a limit that it be exercised within a reasonable time and it was up to the Commission to keep that constraint in mind and conduct its investigation and hearing accordingly.
44 Those remarks make clear that his Honour regarded ASIC as merely “constrained” in the exercise of a discretion by the lapse of time, and not precluded by it from even considering whether to exercise the power. That is made clear by the last paragraph of the judgment where his Honour concluded:
The decision of the Delegate of 30 July 1997 will be set aside. Since the time in which the Commission could lawfully issue a notice of prohibition has now passed, there is no point in remitting the decision to the Delegate for reconsideration. There will be an order that the Commission pay the costs of Mr Kardas, including reserved costs. [emphasis added]
45 The fact that his Honour even considered remitting the decision for reconsideration by the delegate suggests that he did not regard ASIC as precluded, as a matter of law, from imposing a disqualification on Mr Kardas. However, the use of the word “lawfully”, which we have emphasised, does not make clear whether his Honour regarded the requirement to exercise the power “with reasonable promptness” as a condition precedent to its exercise at all.
46 It should be remembered that Heerey J in Kardas was reviewing the decision of the ASIC delegate pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) (“the AD(JR) Act”) and was not required to determine whether an appeal lay “on a question of law” in the sense used in the AAT Act. Among the grounds of review afforded by s 5(1) of the AD(JR) Act is:
(e) that the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made;
47 As explained by s 5(2) of the AD(JR) Act:
The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to:
… …
(b) failing to take a relevant consideration into account in the exercise of a power;
… …
(h) an exercise of a power in such a way that the result of the exercise of the power is uncertain; and
…
48 Under s 16 of the AD(JR) Act his Honour had a discretion to make, among other orders;
(a) an order quashing or setting aside the decision, or a part of the decision, with effect from the date of the order or from such earlier or later date as the court specifies;
49 In our opinion the preferable view is that Heerey J in Kardas regarded the delegate as having failed to take into account a relevant consideration, namely, the need to exercise the power within a reasonable time. From that premise his Honour apparently reasoned that, had the consideration been taken into account, it would have been decisive in the delegate’s exercising his discretion by declining to impose any disqualification.
50 If the analysis which we have just undertaken be wrong, we would decline to follow Kardas, preferring the approach to s 206 and its predecessors taken by the Full Court in Murdaca (supra) and by O’Bryan J in Halliday. That approach, in our view, compels the conclusion that, if a notice to show cause is given within the period of seven years after the lodging of the first triggering liquidator’s report, any lapse of time is only a consideration relevant to the exercise of the discretion to disqualify which is conferred by the prefatory words of s 206F(1) and, perhaps, to the attainment of the satisfaction stipulated in s 206F(1)(c) that the disqualification is justified.
Conclusion
51 For the reasons we have endeavoured to explain, if “an implied requirement that it be exercised within a reasonable time” is synonymous with a “condition precedent for the exercise” of the power conferred by s 206F, we would uphold ASIC’s contention, answer question 5 “no” and dismiss the appeal accordingly. If we be wrong in our understanding of question 5, we consider that the learned primary Judge correctly perceived that, however s 206F be interpreted and applied, the declaratory and consequential relief sought by Mr Culley is not “appropriate” in the sense used in s 44(4) of the AAT Act. On either view, therefore, the appeal must be dismissed. We shall direct that the parties within 14 days file written submissions as to the orders for costs which should be made in consequence of this outcome of the appeal.
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I certify that the preceding fifty-one-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Ryan, Mansfield and McKerracher. |
Associate:
Dated: 19 May 2010
