CATCHWORDS

ADMINISTRATIVE LAW - Administrative Decisions Judicial Review Legislation -application for review of decision that it is in the "public interest" to cause proceedings to be begun and carried on against the applicant pursuant to section 50 of the Australian Securities Commission Act 1989, as distinct from decision to begin and carry on the proceedings - objection as to competency - whether former decision a "decision" within the meaning of the Administrative Decisions  (Judicial Review) Act 1977 - whether applicant "aggrieved" by the decision.

ADMINISTRATIVE LAW - Administrative Decisions Judicial Review Legislation - whether decision an improper exercise of the power conferred by section 50 of the Australian Securities Commission Act 1989 - whether decision involved a failure to take into account relevant considerations - whether decision involved the taking into account of irrelevant considerations - whether decision manifestly unreasonable (Wednesbury unreasonableness) - error of law.

WORDS AND PHRASES - "decision" - "public interest" - "as a result of" - "investigation".

Australian Securities Commission Act 1989  ss. 1, 50.

Administrative Decisions (Judicial Review) Act 1977  ss. 3, 5.

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321

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

Lamb v Moss (1983) 76 FLR 296

Perry v Director of Public Prosecutions (1985) 6 FCR 578

Segenhoe Ltd v Akins (1990) 1 ACSR 691

DELOITTE TOUCHE TOHMATSU (formerly known as DELOITTE HASKINS & SELLS and DELOITTE ROSS TOHMATSU) v AUSTRALIAN SECURITIES COMMISSION

No NG 286 of 1994

Lindgren J

Sydney

16 January 1995

IN THE FEDERAL COURT OF AUSTRALIA     )

NEW SOUTH WALES DISTRICT REGISTRY     )    No G286 of 1994

GENERAL DIVISION                      )

BETWEEN:

DELOITTE TOUCHE TOHMATSU

(formerly known as DELOITTE HASKINS & SELLS and DELOITTE ROSS TOHMATSU)

Applicant

AND:

AUSTRALIAN SECURITIES COMMISSION

Respondent

CORAM:    Lindgren J

PLACE:    Sydney

DATE:     16 January 1995

                      MINUTE OF ORDERS

THE COURT:

1.   ORDERS that the proceedings stand over to Monday 23 January 1995 for the making of orders.

2.   DIRECTS the parties to supply to the Associate of Lindgren J forms of orders which they contend should be made (including any order as to costs) and written submissions in support thereof by 4.00 pm on Friday 20 January 1995.

NOTE:     Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA     )

NEW SOUTH WALES DISTRICT REGISTRY     )    No G286 of 1994

GENERAL DIVISION                      )

BETWEEN:

DELOITTE TOUCHE TOHMATSU

(formerly known as DELOITTE HASKINS & SELLS and DELOITTE ROSS TOHMATSU)

Applicant

AND:

AUSTRALIAN SECURITIES COMMISSION

Respondent

CORAM:    Lindgren J

PLACE:    Sydney

DATE:     16 January 1995

                    REASONS FOR JUDGMENT

NATURE OF PROCEEDINGS

By their further further re-amended application for an order of review filed in Court on 27 October 1994 (for convenience I shall refer to it simply as "the Application"), the applicant, Deloitte Touche Tohmatsu ("DTT"), applies for an order of review under s 5 of the Administrative Decisions (Judicial Review) Act 1977 ("the AD(JR) Act").  The decision in respect of which DTT seeks relief is described in the Application as follows:

     "the decision of the Respondent made on or about 29 March 1994 ('the Decision') and announced by Press Release
dated 21 April 1994 that it was in the public interest to cause proceedings to be begun and carried on by the Adelaide Steamship Company Limited ('the Company') against Deloitte Haskins & Sells ('DHS') and Deloitte Ross Tohmatsu ('DRT') in the Federal Court, South Australian Registry (Matter No: SG3036 of 1994) ('the Proceedings') pursuant to section 50 of the Australian Securities Commission Act 1989 ('the Act')."

In these Reasons I will use the above abbreviated forms of reference used by DTT in the Application.  The Australian Securities Commission ("the ASC") filed a notice of objection to competency under Order 54 r 4 of the Federal Court Rules stating as one ground of objection that the Decision was not a "decision" within the meaning of the AD(JR) Act.  My use of the expression "the Decision" does not pre-empt this question.

The nature of the Decision assumes particular significance in the case.  In its original application DTT had sought review of two decisions namely a decision of the ASC dated 21 April 1994 to cause the Proceedings to be begun and carried on, and a decision of the ASC that it was in the public interest for the Company to begin and carry on the Proceedings.   But on 23 June 1994 DTT filed an amended application seeking review only of the latter decision.  Since that time DTT has not sought review of the ASC's decision to begin and carry on the Proceedings.

The Proceedings are brought against the first to fifth respondents as individuals who were at relevant times
directors of the Company, against the sixth respondent, DHS, as the Company's auditor at relevant times down to 24 November 1989, and against the seventh respondent, DRT, as the Company's auditor at relevant times after that date.  DTT is a partnership carrying on the business of accountancy within Australia which, it was not disputed, it formerly carried on successively under the names DHS and DRT.  It is not in issue that DTT "stands in the shoes" of DHS and DRT for all purposes in connection with the Application.  The Proceedings are fixed for hearing to commence on 19 April 1995 with an estimated hearing time of 6-9 months.

DTT claims the following relief in the Application:

     "1.  Declarations [sic] that the Decision is invalid and contrary to law.

      2.  Orders [sic] setting aside or quashing the Decision the subject of this Application.

      3.  An Order that the Respondent refrain from pursuing or further conducting proceedings No. SG3036 of 1994 in the Federal Court, South Australian District Registry."

By its notice of objection to competency, the ASC objects to this Court's jurisdiction to hear and determine the Application on the following grounds:

     1.   The Decision is not a "decision" within the meaning of the AD(JR) Act;

     2.   The Decision is not "made under an enactment" within the meaning of the AD(JR) Act;

     3.   DTT is not a "person aggrieved" within the meaning of the AD(JR) Act.

FACTUAL BACKGROUND

 

The following account of the factual background is based on a "Submission paper" prepared by officers of the ASC which was before a meeting of the ASC on 29 March 1994 when the ASC resolved that it cause the Proceedings to be begun and carried on in the name of the Company ("the Submission paper") and on the amended statement of claim filed in the Proceedings.  The "facts" have not been the subject of findings by a Court.

The Proceedings arise out of the payment of a dividend by the Company for the year ended 30 June 1990.  Contrary to what the Company's profit and loss accounts for that year showed, profits were not available out of which the dividend could be paid.  In the Proceedings the Company seeks to recover damages from its former directors and auditors, in the case of the latter, quantified as the amount of the dividend (some $228,000,000) and interest which have together been referred to as amounting to some $340,000,000.

The following chronological account of events is sufficient
for present purposes.

5 February 1990

The Company's directors announced to the Australian Stock Exchange ("ASX"), inter alia, that the Company would pay a minimum fully franked dividend of 32 cents per share.  As at this date shares in the Company were trading at $5.32 per share.

27 April 1990

In respect of the half-year ended 31 December 1989, an interim dividend of 36 cents per share was paid amounting to $131,486,296 (also referred to as $131,488,000) comprising $15,374,324 satisfied by the issue of bonus shares under a bonus share plan, and $116,112,972 satisfied by payment in cash.

August 1990

An internal valuation was made of the Company's net worth in a sum of $1.815 billion.

12 September 1990

The Company's directors released to the ASX an announcement of an intended final dividend of 25 cents per share payable on 23 November 1990.

5 October 1990

The Company's directors resolved to approve of the profit and
loss account for the year ended 30 June 1990 and balance sheet as at 30 June 1990, consolidated profit and loss account of the Adsteam Group for that year and consolidated balance sheet of the Adsteam Group as at that date, directors' statements and directors' reports.  Two directors, Messrs Spalvins and Russell, signed the directors' statements and directors' reports which were annexed to the financial statements of the Company and of the Adsteam Group. 

The Company's directors' report announced a proposal to declare a final dividend of 25 cents per share amounting to $97,026,798 (rounded at $97,027,000) payable on or before 23 November 1990.  Subject to a qualification not presently relevant, the auditors' report of DRT dated 5 October 1990 was to the effect that the balance sheets, profit and loss statements and notes attached and the statement of directors gave a true and fair view of the state of affairs of the Company and of the Adsteam Group as at 30 June 1990 and of the profit of the Company and of the Adsteam Group for the year ended on that date.

The profit and loss account for the Company for the year ended 30 June 1990 reported, inter alia, the following items:

     "Operating profit after income tax         $217,123,000

      Retained profits at the beginning of

      financial year                            $243,476,000

      Total available for appropriation         $460,599,000

      Dividends provided for or paid            $202,924,000

      Retained profits at the end of the

      financial year                           $257,675,000"

Note 21 to the Company's accounts stated that the amount reported in respect of "Dividends provided for or paid" in the profit and loss account was calculated as follows:

     "Final dividend under-provided                   $4,000

      Interim dividend 36c per share

      (last year 47c per share)                 $131,488,000

      Special dividend (last year

      17c per share)                                      -

      Final dividend 25c per share

      (last year 36c per share)                  $97,027,000

                                                $228,519,000

      Less Bonus Share Plan

      equivalent dividends                       $25,595,000

                                               $202,924,000"

The Company's balance sheet showed that its current assets included "Receivables" of $1,923,056,000 and a note to the accounts showed that of this amount $1,827,673,000 represented "Amounts receivable from subsidiary companies".  According to the Submission paper (a) these should have been written down by $434,000,000, and (b) a loss of $103,000,000 was disguised in certain transactions between the Company and Buckley & Nunn Antiques Pty Ltd.  This meant that the Company's profit/loss position for the year was $537,000,000 worse than the financial statements indicated.  It also meant that there were
no profits to sustain payment of the dividend since the amount shown in the accounts as available for distribution ($460,599,000) was exceeded by the said amount of $537,000,000.

As at 5 October 1990, shares in the Company were trading at $3.53 per share.

5 November 1990

The directors declared and paid the final dividend of 25 cents per share ($97,027,000) making a total dividend declared and paid for the year ended 30 June 1990 of $228,519,000 (including the $4,000 mentioned on page 7 above) of which $25,595,000 was satisfied by the issue of bonus shares and the balance of $202,924,000 was paid in cash.

Mid November 1990

By this time the Company "was under a bank workout, that is, a de facto receivership controlled by a banking syndicate."

Late November 1990

By this time shares in the Company were trading at $0.35 per share.

December 1990

An "independent" external valuation placed a figure of between nil and $97,000,000 on the net worth of the Company.

29 September 1992

The ASC, pursuant to s 13 of the Act, approved of the making of an investigation into the affairs of the Company and its subsidiaries, and in particular, into whether certain specific loans by Adsteam to subsidiary companies had been, and should have been recognised as being, bad or doubtful and provided for accordingly, in default of which provision the Company had falsely appeared to have profits and retained earnings entitling it to pay the dividend.

10 March 1994

Following a meeting on 3 March 1994 between three directors of the Company and representatives of the ASC, the Company wrote to the ASC in connection with the ASC's contemplated commencement of proceedings in the Company's name against former directors.  The letter advised that the Company's directors believed that civil proceedings would cause considerable commercial inconvenience.  The letter set out "reasons".  It concluded as follows:

     "Adsteam's view is that the decision whether or not civil action should begin in the company's name is a decision for Adsteam in the first instance, and a decision to be taken in the light of the company's interests (not the wider public interest, as you seem to suggest; on our advice it is in the public interest that proceedings should be commenced once it has been determined that it is in the company's interest to commence them)."

15 March 1994

The ASC replied, inviting the directors by close of business
on Friday 18 March 1994, to elaborate on certain matters before their letter was considered by members of the ASC.

22 March 1994

The ASC wrote to the directors noting that no response had been received to its letter dated 15 March, advising that all matters raised by the directors would now be put to members of the ASC, and noting certain concerns which the writer had with certain matters which had been raised by the directors in their letter.

29 March 1994

The ASC considered the Submission paper.  This comprised 12 pages (divided into 73 paragraphs), a six page Schedule particularising breaches of duty alleged against the directors and the auditors, and annexures "A" (the Company's annual report and financial statements), "B" (the three letters dated 10 March, 15 March and 22 March referred to above) and "C" (a two-page spreadsheet purporting to show the variance between external and internal valuations of the Company). 

The Submission paper recommended that the ASC resolve that as a result of the investigation it appeared to the ASC to be in the public interest for the Company to commence civil proceedings pursuant to s 50 of the Act against the former directors and DRT for the recovery of damages for loss caused by negligence and breach of duty in relation to the payment of a dividend otherwise than from profits, and for ancillary
relief. 

The ASC did not resolve in those terms.  A copy of the minute of the ASC's dealing with the matter on 29 March 1994 headed "AGENDA ITEM 1" ("the Minute") is annexure "A" to these Reasons.  Para 52 of the Submission paper referred to in para 7 of the Minute is contained in annexure "B" to these Reasons (as to which see later).

20 April 1994

The Proceedings were commenced.

21 April 1994

The ASC made a press release in relation to the Proceedings.

19 May 1994

The application by DTT under the AD(JR) Act was filed in these proceedings.

LEGISLATION

Central to the case is s 50 of the Act which is as follows:

     "50  Where, as a result of an investigation or from a record of an examination (being an investigation or examination conducted under this Part or a corresponding law), it appears to the Commission to be in the public interest for a person to begin and carry on a proceeding for:

          (a)  the recovery of damages for fraud, negligence, default, breach of duty, or other misconduct,
committed in connection with a matter to which the investigation or examination related; or

          (b)  recovery of property of the person;

          the Commission:

          (c)  if the person is a company - may cause; or

          (d)  otherwise - may, with the person's written consent, cause;

          such a proceeding to be begun and carried on in the person's name."

The references in s 50 to "an investigation" and "a record of an examination" are references to provisions in Part 3 (ss 13-93) which is headed "INVESTIGATIONS AND INFORMATION-GATHERING".  Division 1 (ss 13-18) of Part 3 is headed "Investigations".  Sub-section 13 (1) empowers the ASC to make such investigation as it thinks expedient for the due administration of, relevantly, the Corporations Law, where it has reason to suspect that there may have been committed a contravention thereof.  Section 16 provides for the preparation, in the situations there described, of interim reports relating to investigations. Section 17 provides for the preparation of final reports about investigations. 

Division 5 (ss 49-50) of Part 3 is headed "Proceedings after an investigation".  Section 49 empowers the ASC to cause prosecutions for certain offences to be begun and carried on. Unlike s 50, s 49 contains no reference to the public interest.  The ASC submitted that the expression "the public interest" in s 50 was to be understood in the light of paras 1
(2) (a), (b), (d) and (g) and sub-s 1 (3) of the Act.  Those provisions are as follows:

     "1 (2)    In performing its functions and exercising its powers, the Commission must strive:

              (a)  to maintain, facilitate, and improve, the performance of companies, and of the securities markets and futures markets, in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy; and

              (b)  to maintain the confidence of investors in the securities markets and futures markets by ensuring adequate protection for such investors; and

              (c)  ..........................................

              (d)  to administer national scheme laws effectively but with a minimum of procedural requirements; and

              (e)  ..........................................

              (f)  ..........................................

              (g)  to take whatever action it can take, and is necessary, in order to enforce and give effect to national scheme laws.

        (3)    This Act has effect, and is to be interpreted, accordingly."

ASC'S OBJECTION TO COMPETENCY

The Decision is expressed as a decision "that it was in the public interest to cause proceedings to be begun and carried on ...".  Section 50 empowers the ASC to cause proceedings to be begun and carried on in a person's name.  This necessarily implies a power in the ASC to decide to do so.  That decision may be taken only where "it appears to the Commission to be in the public interest for [the] person to begin and carry on [the] proceeding".  The ultimate action for which the section
provides is that of causing proceedings to be begun and carried on in a wronged person's name and the ultimate decision for which the section provides is the decision to take that action.

In terms of the AD(JR) Act the ASC submitted that the "appearing" to the ASC as to the public interest is not a "decision", that if it is a decision it is not one "made ... under an enactment", and that if it is a decision made under an enactment, it is not a decision by which DTT is "aggrieved". 

Further, the ASC submitted that whether it appeared to the ASC to be in the public interest to begin and carry on the proceedings was a matter of opinion and policy rather than of fact (citing Liversidge v Anderson [1942] AC 206) and that an expression of an opinion or statement of a policy does not amount to a "decision" within the AD(JR) Act (citing Pegasus Leasing Ltd v Commissioner of Taxation (1991) 32 FCR 158 (FCA/O'Loughlin J)).  Finally, it made a general submission that a decision to commence proceedings is not a reviewable decision, citing Strictly Stainless Pty Ltd v Deputy Commissioner of Taxation, unreported, FCA/Davies J, 5 November 1993; Hutchins v Deputy Commissioner of Taxation (1994) 123 ALR 133 (FCA/Jenkinson J), and Murchison v Keating (No 2) (1984) 54 ALR 386 (FCA/Morling J) at 394, and that in any event since 23 June 1994 DTT had not sought review of the ASC's decision to commence the Proceedings.

It is convenient to deal with these last two submissions at once.  Where a decision-making power of a public body is made conditional upon the body's opinion as to where the "public interest" lies, it may well be difficult to establish that the condition has not been fulfilled.  But in my opinion linguistic formulae of this kind coupled with the good faith of the public body do not immunise its decision from attack.   Caution must be exercised nowadays before Liversidge v Anderson [1942] AC 206, cited by the ASC, is relied on as authority for a proposition to the contrary; see the powerful dissent of Lord Atkin in that case, and Nakkuda Ali v Jayaratne [1951] AC 66 (PC) at 76-77; Ridge v Baldwin [1964] AC 40 (HL) at 73 (Lord Reid); and Inland Revenue Commissioners v Rossminster Ltd [1980] AC 952 (HL) at 1011 (Lord Diplock), 1025 (Lord Scarman).

Nor do I think that there is a general principle which has the effect of excluding from the purview of the AD(JR) Act a decision of the ASC to exercise the power vested in it by s 50 to cause proceedings to be begun and carried on in a person's name.  It does not seem necessary for me to discuss the question whether the cases referred to by the ASC are authority for a general principle of relevance to decisions by public bodies to commence proceedings and if so what that general principle is.  It suffices to say that in my opinion the principle has no application to the exercise of such an extraordinary power as is conferred by s 50 of the Act, that is to say, a power to cause proceedings to be begun and carried on, not in the name of the ASC, but in the name of another person in respect of a cause of action of that other person.  The section gives the ASC a power not available to it under the general law and renders lawful an act by it which would otherwise be unlawful (cf Southern Farmers Group Ltd v Deputy Commissioner of Taxation (SA) (1989) 92 ALR 317 (FCA/O'Loughlin J) at 328; General Newspapers Pty Ltd v Telstra Corporation (1993) 117 ALR 629 (FCA/FC) at 633 (Davies and Einfeld JJ).

Central to the argument on competency was the distinction between the Decision and the decision to cause the Proceedings to be begun and carried on.  The evidence of the Decision can be seen in annexure "A" to these Reasons.  Under the heading "Resolution" it is recorded that "The Commission, ... RESOLVED that the Commission cause ... proceedings to be begun and carried on in the name of Adsteam".  The words which occur between the expression "The Commission" and the word "RESOLVED" are in the nature of an explanatory recital.  The recital that "the Commission has formed the opinion that it appears to the Commission to be in the public interest for Adsteam to commence civil proceedings, pursuant to section 50 of the ASC Law" is clearly intended to describe and record in a formal way that on 29 March 1994 contemporaneously with or immediately prior to the passing of the resolution, as required by s 50 it "appear[ed] to the Commission to be in the public interest for a person to begin and carry on a proceeding".

The AD(JR) Act does not define "decision".  Sub-section 3 (1) provides that a decision to which the Act applied means:

     "a decision of an administrative character made, proposed to be made, or required to be made, as the case may be (whether in the exercise of a discretion or not) under an enactment, ..."

Some light is thrown on the notion of the making of a decision for the purposes of s 5 by sub-s 3 (2) which is as follows:

     "In this Act, a reference to the making of a decision includes a reference to:

     (a)  making, suspending, revoking or refusing to make an order, award or determination;

     (b)  giving, suspending, revoking or refusing to give a certificate, direction, approval, consent or permission;

     (c)  issuing, suspending, revoking or refusing to issue a licence, authority or other instrument;

     (d)  imposing a condition or restriction;

     (e)  making a declaration, demand or requirement;

     (f)  retaining, or refusing to deliver up, an article; or

     (g)  doing or refusing to do any other act or thing,

     and a reference to a failure to make a decision shall be construed accordingly."

These provisions were drawn upon by Mason CJ in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 ("Bond's case") in his discussion of the meaning of "decision" as used in the AD(JR) Act.  His Honour said (at 337-338):

     " ... a reviewable 'decision' is one for which provision is made by or under a statute.  That will generally, but not always, entail a decision which is final or operative and determinative, at least in a practical sense, of the issue of fact falling for consideration.  A conclusion reached as a step along the way in a course of reasoning leading to an ultimate decision would not ordinarily amount to a reviewable decision, unless the statute provided for the making of a finding or ruling on that point so that the decision, though an intermediate decision, might accurately be described as a decision under an enactment.

     Another essential quality of a reviewable decision is that it be a substantive determination.  With the exception of s. 3(2)(g), the instances of decision mentioned in s. 3(2) are all substantive in character.  Moreover, the provisions in sub-ss. (1), (2), (3) and (5) of s. 3 point to a substantive determination.  In this context the reference in s. 3(2)(g) to 'doing or refusing to do any other act or thing' (emphasis added) should be read as referring to the exercise or refusal to exercise a substantive power. 

     .......................................................

     The interpretation of 'decision' which I favour is not as broad as that preferred by the Federal Court in Lamb v Moss [(1983) 76 FLR 296; 49 ALR 533].  There the Full Court of the Federal Court (Bowen C.J., Sheppard and Fitzgerald JJ.), after reviewing the authorities, which the Court said revealed 'some inconsistency', stated [(1983) 76 FLR, at p 318; 49 ALR at p 556]:

          'In our opinion, there is no limitation, implied or otherwise, which restricts the class of decision which may be reviewed to decisions which finally determine rights or obligations or which may be said to have an ultimate and operative effect.'

     My view is more in accord with the tentative opinion expressed earlier by Ellicott J. in Ross v Costigan [(1982) 59 FLR 184, at p 197; 41 ALR 319, at p 331] when he said that 'it may well be that the word 'decision' means an ultimate or operative determination not a mere expression of opinion or a statement which can of itself have no effect on a person'.  However, I would not wish for myself to place emphasis on the words 'of itself' in this statement.  To say that a reviewable decision is an ultimate or operative determination does not mean that antecedent conclusions or findings which contribute to the ultimate or operative decision are beyond reach.  Review of an ultimate or operative decision on permissible grounds will expose for consideration the reasons which are given for the making of the decision and the processes by which it is made.

     Lest it should be thought otherwise, I should say that, to the extent in Lamb v Moss that the magistrate decided that a prima facie case had been established and that he would proceed with the committal proceedings, a reviewable decision had been made.  That decision was one for which s. 41(2) of the Justices Act 1902 (N.S.W.) specifically provided.  The decision resolved an important substantive issue to be determined before the ultimate decision could be made under s. 41(6) of that Act whether to commit the defendant for trial or discharge him from custody."

Brennan and Deane JJ agreed with the Chief Justice. 

The joint judgment of Toohey and Gaudron JJ contains the following:

     "The question raised by s.3(2) of the A.D.(J.R.) Act is not whether an act (whether positive or negative) should have 'ultimate and operative effect' to be characterized as a decision but, rather, whether the terms of par. (g) extend to encompass acts which do not involve the exercise of or refusal to exercise a substantive power." (at 376)

     "If an enactment requires that a particular finding be made as a condition precedent to the exercise of or refusal to exercise a substantive power, a finding to that effect is readily characterized as a decision 'under an enactment'.  However, it is otherwise with respect to findings which are not themselves required by an enactment but merely bear upon some issue for determination or some issue relevant to the exercise of a discretion.  Findings of that nature are not themselves 'decisions under an enactment', they are merely findings on the way to a decision under an enactment.

     The finding by the Tribunal that the sixth to ninth respondents were no longer fit and proper persons within the terms of s. 88(2)(b)(i) of the Broadcasting Act is, as conceded on behalf of the Tribunal, a decision under an enactment.  It was, in the circumstance with which the Tribunal was concerned, a finding which was required before the Tribunal could exercise its power under that section to suspend or revoke the licences." (at 377)

In so far as there may be any relevant difference in the judgment of Mason CJ and that of Toohey and Gaudron JJ, I am bound by the former which, having the support of Brennan and Deane JJ, represents the view of the majority of the judges who sat in Bond's case.

Both the DTT and the ASC drew upon the judgment of Mason CJ in Bond's case in support of their respective submissions.  It is necessary to read his Honour's words in the context of the facts of the case and his reference to Lamb v Moss in the context of s 41 of the Justices Act 1902 (NSW).

Commercial licences under the Broadcasting Act 1942 (Cth) were held by a number of companies which were subsidiaries of Bond Media Ltd ("Bond Media").  By reason of Alan Bond's shareholding in Dallhold Investments Pty Ltd, he was able to determine the composition of the boards of directors of Bond Media and of the licensees.  In 1988 the Australian Broadcasting Tribunal held an inquiry under s 17C(1) of the Broadcasting Act into the question whether it was advisable in the public interest to suspend or revoke any of the licences.  The Tribunal found that Mr Bond had been guilty of improper conduct in certain respects and concluded that he would not be found to be a fit and proper person to hold a licence.  The Tribunal proceeded to decide that by reason of his control of the licensees, they were no longer fit and proper persons to hold the licences.  At this stage, and prior to any suspension or revocation of any of the licences, application was made under the AD(JR) Act for review of various decisions, findings and rulings of the Tribunal, including the finding and decision referred to.  

Sub-section 88 (2) of the Broadcasting Act was as follows:

     "The Tribunal may suspend or revoke a commercial licence if it appears to the Tribunal that it is advisable in the public interest to do so, having regard only to the following matters or circumstances:

     (a)  the Tribunal is satisfied that the licensee has failed to comply with the undertaking given under subsection 83(1) or 86(4), as the case may be, in relation to the licence;

     (b)  the Tribunal is satisfied that the licensee

          (i)  is no longer a fit and proper person to hold the licence; or

          (ii)no longer has the financial, technical and management capabilities necessary to provide an adequate and comprehensive service pursuant to the licence; or

     (c)  the Tribunal is satisfied that a condition of the licence has not been complied with."

There is an obvious similarity between the words "if it appears to the Tribunal that it is advisable in the public interest to [suspend or revoke a commercial licence]" in sub-s 88 (2) of the Broadcasting Act, and the words "Where, ... , it appears to the Commission to be in the public interest for a person to begin and carry on a proceeding ... " in s 50 of the Act.  In each case, the words quoted conditioned or qualified the power to take a certain action ("suspend or revoke a commercial licence" or "cause ...  a proceeding to be begun
and carried on in [a] person's name").  In each case the appearance as to the public interest is so closely bound up with the power to act that it is difficult to conceive of a situation in which it could appear to be in the public interest for the power to be exercised, yet for it (properly) not to be exercised, or in which a decision might be taken as to where the public interest lay without, at the same time, the ultimate decision provided for in the legislation also being taken.  Again, the "appearance" as to the public interest requires that the Broadcasting Tribunal and the ASC respectively "consider" and "assess" the situation, and in this respect differs from an objective factual state of affairs the existence of which is a condition of the availability of a statutory power: cf Dhillon v Minister for Immigration, Local government and Ethnic Affairs (1994) 48 FCR 107 (FCA/French J).

However, sub-s 88 (2) of the Broadcasting Act separately refers to an antecedent condition which has no counterpart in s 50 of the Act, namely the Tribunal's being "satisfied" of one or other of four particular matters specified.  They meet the description of Toohey and Gaudron JJ of a "particular finding [which an enactment requires] be made as a condition precedent to the exercise of ... a substantive power" (Bond's case, supra, at 377).  A finding that the Tribunal was satisfied of one of the four matters specified would not necessarily lead to suspension or revocation: there would remain the question whether it appeared to the Tribunal in the public interest that this should occur.

Mason CJ summarised (at 333-334) the eleven decisions of which review was sought in Bond's case, the first two as follows:

     "1.  The decision made on 26 June 1989 that Mr Bond would not be found to be a fit and proper person to hold a licence.

      2.  The decision made on 26 June 1989 that the licensee companies were no longer fit and proper persons to hold their licences."

The Tribunal conceded that its decision that the respective licensees were no longer fit and proper persons to hold their licences was a decision of an administrative character made under an enactment, namely, s 88 (2) (b) (i) of the Broadcasting Act.  The Chief Justice said that this followed from his interpretation of the word "decision" in the AD(JR) Act. 

Of the Tribunal's finding that the licensees were no longer fit and proper persons to hold their broadcasting licences, Mason CJ said that:

     "Although that decision was an intermediate determination made on the way to deciding whether to revoke or suspend the licences or to impose conditions on them, it was a decision on a matter of substance for which the statute provided as an essential preliminary to the making of the ultimate decision." (at 339)

DTT relies on this passage.  His Honour held that the Tribunal's conclusion that Mr Bond would not be found to be a fit and proper person to hold a licence was not a decision for which the Act provided and was no more than a step in the Tribunal's reasoning on the way to deciding that the licensees themselves were no longer fit and proper persons to hold their licences.

Toohey and Gaudron JJ expressed the view that a "decision" for the purposes of the AD(JR) Act was not limited to an exercise of or refusal to exercise, a substantive power, but that reviewable decisions were not at large in that they must be decisions made "under an enactment."  Their Honours considered that this meant that a decision must be expressly or impliedly required or authorised by an enactment (Bond's case, supra, at 377).

In Bond's case, the question whether a reviewable decision was involved in its appearing to the Tribunal that it was advisable in the public interest that a commercial licence be suspended or revoked did not arise, because the final stage of decision-making had not been reached when the application under the AD(JR) Act was brought.  The references in sub-s 88 (2) of the Broadcasting Act to the Tribunal's being "satisfied" in relation to one or other of four specific matters is more easily seen as involving a "decision" required or authorised by a statute than the "appearance" as to the public interest.  The latter, unlike the former, is part and parcel of the decision to exercise the power in question.  The former, unlike the latter, is a decision provided for as a stage distinct from, and antecedent to, the stage when the decision whether or not to exercise the ultimate power in question is taken.

In Lamb v Moss (1983) 76 FLR 296 (FCA/FC), an application was made under the AD(JR) Act for an order of review in respect of certain decisions of a magistrate during committal proceedings for a federal offence.  The magistrate determined that there was a prima facie case for another offence and proposed that the proceeding continue under sub-s 41 (4).  Section 41 of the Justices Act 1902 (NSW) provided for the procedure to be followed by a justice on the hearing of committal proceedings in respect of any treason or other indictable offence.  Sub-section 41 (2) required that the justice, after all the evidence for the prosecution had been taken, should proceed in one of two ways according to whether he was of the opinion that the evidence was not, or was, sufficient to warrant the defendant's being put upon his trial.  If he was of the opinion that the evidence was not sufficient, he was required to order forthwith that the defendant, if in custody, be discharged.  If he was of the opinion that a prima facie case had been made out he was required to proceed in accordance with the subsequent sub-sections of s 41.  The defendant applied for a direction that certain witnesses be re-called for cross-examination and for a stay of the committal proceedings as an abuse of process.  The stipendiary magistrate refused both applications.

Application was then made under the AD(JR) Act for an order of review of the "decisions or conduct" of the magistrate in not discharging the applicant, deciding that a prima facie case had been made out, proceeding to deal with the applicant under sub-s 41 (4), and rejecting his two applications referred to above.  An objection to competency was dismissed at first instance and appeal from that dismissal was itself dismissed.

Sub-section 41 (6) of the Justices Act addressed the ultimate stage in the committal proceedings when all the evidence for both the prosecution and the defence had been taken.  It required the justice to proceed in one of two ways according to whether he was of the opinion that the defendant ought not to be put upon his trial or that the evidence was sufficient to warrant his being put on his trial or raised a strong or probable presumption of guilt.  In the former case the justice was required to make forthwith an order discharging the defendant if he was in custody and in the latter case he was required to commit the defendant for trial.

Accordingly, the Act provided for an opinion to be made by the justice at two stages, and depending on the opinion formed the Act required a certain course to be followed which would affect directly the interests of the person charged.  With respect, it is easy to see that the decision at the earlier stage (after all the evidence for the prosecution was taken) that a prima facie case had been made out and that the committal proceedings should continue was a decision which was specifically provided for by statute and which resolved an important substantive issue, notwithstanding the fact that a decision under sub-s 41 (6), if it eventuated, would also have those qualities.

In my opinion, the appearance to the ASC as to the public interest to which s 50 refers is not a decision under an enactment for the purposes of the AD(JR) Act because it is not "final or operative and determinative" (see Mason CJ in Bond's case at 337).  In the present case the decision which has that character is the decision to begin and carry on the Proceedings.  Whatever the position may have been previously, once that decision was taken, the Decision was not "final or operative and determinative".  Since "review of an ultimate or operative decision on permissible grounds will expose for consideration the reasons which are given for the making of the decision and the processes by which it is made" (Mason CJ in Bond's case at 338), review of the decision to begin and carry on the Proceedings would have exposed for consideration the ASC's reasons for its conclusion that it was in the public interest to do so.

DTT submitted that the passage quoted (at p 18 above) from the Chief Justice's judgment signified that it was entitled to attack what it described as the "essential preliminary" and as the "antecedent conclusion or finding" as to the public interest, and in this way bring down the "ultimate decision the subject of challenge [namely] the decision to cause the proceedings to be begun and carried on" (para 1.4 of DTT's written submissions).  This misconceives the position:  what must be attacked in the present situation is the ultimate and operative determination, because the Decision is, in the light of the taking of that ultimate and operative decision, a spent force.

Similarly, DTT is not "aggrieved by" the Decision but by the ASC's decision to begin and carry on the Proceedings.  The appearance to the ASC as to the public interest has not affected DTT's interests because it was immediately overtaken by the ASC's decision to litigate.  All affectation of DTT's interests is attributable to the latter decision.

The present case differs from such cases as Bond's case and Lamb v Moss, supra, in which an application was made under the AD(JR) Act for review of an "intermediate decision" at a time before the final decision-making stage had been reached.

Support for the view which I have expressed is found in several authorities.  In Perry v Director of Public Prosecutions (1985) 6 FCR 578 ("Perry's case") Mrs Perry sought review under the AD(JR) Act of (a) a decision of a stipendiary magistrate in South Australia ordering her extradition to Victoria, and (b) a subsequent decision of Bollen J in the Supreme Court of South Australia ordering her extradition to Victoria.  Bollen J had made that order upon a review pursuant to s 19 of the Service and Execution of Process Act 1901 (Cth) of the magistrate's order.  Both applications for orders of review came before Fisher J in this Court.  Relevantly, his Honour said (at 583):

     "I would, however, accept and adopt his contention that Mrs Perry is not a person aggrieved by the decision of the magistrate.  She is without doubt aggrieved and her interests are adversely affected by the fact that she is directed to return to Victoria.  She was aggrieved by the decision of the magistrate at least up to the time that Bollen J pronounced, after a re-hearing, upon her application to him.  In my opinion, however, she is at present aggrieved not by the decision which she seeks to have reviewed under the Judicial Review Act but by the decision of Bollen J confirming and varying in part the decision of the magistrate.  The operative decision now is the decision of Bollen J, which  has at least, for practical purposes, superseded that of the magistrate.  Section 19(6), to the effect that the decision of Bollen J 'shall be executed according to its tenor as if it had been made by the magistrate', confirms that the presently operative decision is that of the Supreme Court judge.  However, notwithstanding this fact, it is to be executed as if it had, contrary to the true position, been made by the magistrate.  The fact that the magistrate's decision is no longer for practical purposes an operative decision would suggest that it is not a 'decision' for the purposes of the Judicial Review Act.  However, in Lamb v Moss (supra) the Full Court of this Court, after referring at 551 to the difficulties which have been encountered in determining what is a 'decision', said at 556:

          'in our opinion, there is no limitation, implied or otherwise, which restricts the class of decisions which may be reviewed to decisions which finally determine rights or obligations or which may be said to have an ultimate and operative effect.  Such a conclusion is, in our opinion, in accordance with the plain legislative intention revealed by the words of the Act.'

     In the circumstances I prefer to base my conclusion on the fact that in my opinion Mrs Perry is not presently aggrieved by the decision of the magistrate.  She is not entitled therefore to have that decision reviewed by this Court" (at 583-584).

Perry's case was decided prior to Bond's case in which Mason CJ passed upon the quoted passage from the judgment of the Full Court in Lamb v Moss.  In the light of what the Chief Justice said (Bond's case at 338 quoted at p 19 above), Fisher J would, it seems, have based his decision on the ground that the magistrate's decision had ceased to be the relevant operative decision because it had been superseded by that of Bollen J.

In Akers v Minister for Immigration, Local Government and Ethnic Affairs (1988) 98 ALR 261 (FCA/Lee J) the Court was concerned with an application for an entry permit under the Migration Act 1958.  Sub-section 6A (1) of that Act provided that an entry permit should not be granted to a non-citizen after his entry into Australia unless one or more of certain conditions were fulfilled in respect of him.  The relevant one was that he was the holder of a temporary entry permit which was in force and that there were strong compassionate or humanitarian grounds for the grant of an entry permit.  The applicant was a non-citizen who did not hold a temporary entry permit.  It had been the practice of the Minister or his authorised officer to consider the merits of any application relying upon the said provision notwithstanding that the applicant might not at the time have been the holder of a temporary entry permit.  Lee J said this:

     "If the Minister or his authorised officer has conditioned the exercise of his discretion to refuse or grant a temporary entry permit upon his assessment of the merits of the application for the grant of a 'permanent' entry permit, the former decision necessarily may be
subject to the review of the latter decision because the decision to refuse a temporary entry permit may be seen to be entirely subsumed in the decision to refuse a 'permanent' entry permit" (at 270 emphasis supplied).

Similarly, in Eskaya v Minister for Immigration, Local Government and Ethnic Affairs (1989) 18 ALD 217 (FCA/Lee J), a later decision not to grant an entry permit was treated as rendering an earlier decision not to do so "inoperative" and as being the only decision relevant for the purposes of review under the AD(JR) Act.

Of relevance in the present context is the principle that a person is not entitled to challenge an administrative decision on natural justice or other grounds where there has been a comprehensive appeal or review which has "cured" any defect touching the earlier decision see: Twist v Randwick Municipal Council (1976) 136 CLR 106 at 116 (Mason J); Calvin v Carr [1980] AC 574 (PC); Preston v Carmody (1993) 44 FCR 1 (FCA/Wilcox J); Wu v Minister for Immigration and Ethnic Affairs (1994) 48 FCR 294 (FCA/Wilcox J).

For the foregoing reasons in my opinion the ASC's objection to competency should be upheld.

Because the remaining issues in the case were extensively argued, I think it appropriate that I note the grounds relied on by DTT and express views on some of them.  As will be seen I have reached a firm view that I would have granted DTT
relief on the first ground dealt with below.  Otherwise any views expressed are only tentative ones.

GROUNDS ON WHICH ORDER OF REVIEW IS SOUGHT

Sub-section 5 (1) of the AD(JR) Act sets out in paras (a) to (i) the grounds on which an order of review may be applied for.  Sub-section 5 (2) provides that the ground provided for in para 5(1)(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") is to be construed as including references to the matters referred to in paragraphs (a) to (j) of that sub-section.

DTT pressed three grounds provided for in sub-s 5 (1): improper exercise of power (para 5 (1) (e)); error of law (para 5 (1) (f)); and lack of jurisdiction (para 5 (1) (c)).  The three grounds were particularised.  I will deal with the grounds as particularised according to the groupings in which DTT's written submissions addressed them.

Ground 1 (a) (iii) - ss 5(1)(e), 5(2)(b) of AD(JR) Act

Improper exercise of power - failure to take into account relevant considerations - Company, solvent company under control of directors independent of wrongdoers.

 

"1.  The making of the Decision was an improper exercise by the Respondent of the power conferred by section 50 of the Act in that:

 

     (a)  There was a failure to take into account relevant considerations.

 

           Particulars of relevant considerations

 

          (i)  ................(ii)........................

          (iii)     The Company is a publicly listed company which is able to pay its debts as and when they fall due and is actively engaged in the pursuit of its businesses under the control and direction of its board of directors who were opposed to the commencement of the Proceedings against inter alia the Applicant."

The submissions as to "relevant considerations" and "irrelevant considerations" must be appraised in the context of the Act and the Decision.  But there are some general principles.  In Minister for Aboriginal Affairs v Peko- Wallsend Ltd (1986) 162 CLR 24 ("Peko-Wallsend"), Mason J discussed these grounds of relief in respect of administrative decision-making.  His Honour set out certain propositions established by a number of decided cases.  In summary, those relating to the failure to take into account relevant considerations are (omitting references to authorities) as follows:

(a)  "The ground of failure to take into account a relevant consideration can only be made out if a decision-maker fails to take into account a consideration which he is bound to take into account in making that decision" (at 39);

(b)  "What factors a decision-maker is bound to consider in making the decision is determined by construction of the statute conferring the discretion. ...  If the relevant factors - ... - are not expressly stated, they must be determined by implication from the subject-matter, scope and purpose of the Act. ... where the ground of review is
that a relevant consideration has not been taken into account and the discretion is unconfined by the terms of the statute, the court will not find that the decision-maker is bound to take a particular matter into account unless an implication that he is bound to do so is to be found in the subject-matter, scope and purpose of the Act" (39-40);

(c)  "Not every consideration that a decision-maker is bound to take into account but fails to take into account will justify the court setting aside the impugned decision and ordering that the discretion be re-exercised according to law.  A factor might be so insignificant that the failure to take it into account could not have materially affected the decision" (at 40);

(d)  "The limited role of a court reviewing the exercise of an administrative discretion must constantly be borne in mind.  It is not the function of the court to substitute its own decision for that of the administrator by exercising a discretion which the legislature has vested in the administrator.  Its role is to set limits on the exercise of that discretion, and a decision made within those boundaries cannot be impugned: ...

     It follows that, in the absence of any statutory indication of the weight to be given to various considerations, it is generally for the decision-maker and not the court to determine the appropriate weight to be given to the matters which are required to be taken into account in exercising the statutory power: ... " (at 40-41);

This passage makes it clear, as Deane J said in Sean Investments Pty Ltd v Mackellar (1981) 38 ALR 363 at 374-375, that ss 5 (1) (e) and 5 (2) (b) of the AD(JR) Act do not entitle a party affected by a decision to make an exhaustive list of the matters which the decision-maker might conceivably have regarded as relevant and then attack the decision on the ground that one or some of them were not specifically taken into account.  And see Li Shi Ping v Minister for Immigration, Local Government and Ethnic Affairs, unreported, FCA/FC, 28 November 1994 at 19 (Carr J with whom Sheppard and Gummow JJ
agreed).

Clearly, the expression "the public interest" is one of wide import.  It is an expression particularly apt to vest in a decision-maker a wide power to determine what considerations are to be taken into account and what weight is to be given to those which are taken into account.  In O'Sullivan v Farrer (1989) 168 CLR 210, Mason CJ, Brennan Dawson and Gaudron JJ said that the expression "in the public interest" when used in a statute, classically imports a discretionary value judgment to be made by reference to undefined factual matters, confined only "in so far as the subject matter and the scope and purpose of the statutory enactments may enable ... given reasons to be [pronounced] definitely extraneous to any objects the legislature had in view" (citing Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505 (Dixon J)).  And in Bond's case Toohey and Gaudron JJ said of the expression "if it appears to the Tribunal that it is advisable in the public interest", that it indicates that "the considerations which may be taken into account in determining whether a licensee is not or is no longer fit and proper are not closely confined"  (Bond's case, supra, at 381-382).

The breadth of meaning which the expression is intended to have is perhaps reinforced by the consideration that the ASC "has a collective wealth of knowledge and experience in commercial practice and capital markets to draw upon" which makes it appropriate to invest it with a wide discretion in the present context (ASC's written submissions, para 7).

I am entitled to draw the inferences that the ASC did not take a particular consideration into account from the absence of any reference to it in the Submission paper and the fact that the ASC led no evidence that it did take it into account notwithstanding the fact that its omission to do so was raised in the Application: cf Arm Constructions Pty Ltd v Deputy Commissioner of Taxation (1986) 65 ALR 343 (FCA/Burchett J) (which related to a failure to refer to matters in a statement provided under s 13 of the AD(JR) Act) and cases there cited.

Does the Act expressly oblige the ASC to take any particular considerations into account when deciding whether it appears to the ASC to be in the public interest for a person to begin and carry on proceedings of the kind referred to in s 50?  As noted earlier, sub-s 1 (2) of the Act obliges the ASC to strive to do certain things "in performing its functions and exercising its powers."  In deciding whether it appears to the Commission to be in the public interest for a person to begin and carry on a proceeding of the kind referred to in s 50, the ASC is performing a function and/or exercising a power.  The considerations referred to by DTT do not, however, fall within sub-s 1 (2). 

Are the factors referred to in sub-s 1 (2) exhaustive or merely inclusive?  I see no reason to think that they were intended to be exhaustive.  This leaves the question whether the subject matter, scope and purpose of the Act show that the Act bound the ASC to take into account the considerations referred to by DTT.

The thrust of DTT's submission relating to Ground 1 (a) (iii) was that where the wronged person is a company, s 50 contemplates that it is only in a case where the directors can not be expected, by reason of their not being independent of the wrongdoers, to commence proceedings for the recoveries referred to in the section, that it can properly appear to the ASC to be in the public interest for the company to begin and carry on the proceedings.  More accurately in the context of the present ground, the submission was that the ASC was bound to take into account, when deciding whether it appeared to the ASC to be in the public interest for the Company to begin and carry on the Proceedings, the fact that the Company's directors, being independent of the wrongdoers, were, except in most exceptional circumstances, the appropriate persons to decide whether to begin and carry on the Proceedings.

DTT's submissions referred to the fact that Clause 50 of the Bill for the Act had stipulated for the written consent of the wronged person, whether a company or a natural person, and to the reasons why this requirement was abandoned in the case of a wronged company.  Paras 4.45 - 4.51 of the Report of the Joint Select Committee on Corporations Legislation (April, 1989) ("the Report") made it clear that the requirement of written consent was abandoned in the case of a wronged company as a result of a submission by the National Corporations and Securities Commission ("the NCSC") which the Report summarised as follows:

     " ... the effect of the Clause is that the ASC will be unable to bring proceedings to recover misappropriated money or property when the persons controlling the company are amongst the persons from whom recovery would be sought or are associates of such persons or otherwise under their influence" (para 4.46).

The Report quoted from the NCSC's submission as follows:

     "Where, on the other hand, the controllers of the company are truly independent of the persons against whom civil proceedings would be brought, it would normally be a decision for them as to whether proceedings were worthwhile in the interest of the members of the company and the ASC would not, except in the most exceptional circumstances, have any reason to believe bringing such proceedings was in the public interest." (emphasis supplied)

The Report noted that the Attorney General's Department had responded that the NCSC's concern was misconceived because of the established exceptions to the rule in Foss v Harbottle (1843) 2 Hare 461.  The Report concluded  (para 4.50) that "an additional provision in the Clause allowing the ASC to proceed against directors without written consent, if necessary, is required." (emphasis supplied)

It seems to be a fair summary to say that the NCSC persuaded the Committee, contrary to the submission of the Attorney-General's Department, to accede to its request that consent to the commencement of proceedings not be required in the case of a wronged company, by reason of its assurance that proceedings would be commenced in a company's name without the Company's consent only where the directors were not independent of the wrongdoers or there existed other "most exceptional circumstances".

DTT also pointed out that in the ASC's "Policy Statement Release 4" dealing with intervention by the ASC under s 1330 of the Corporations Law in court proceedings relating to a matter arising under that Law, the ASC had referred to the "protection of minorities under s 50 of the ASC Act" as a situation in which the ASC would intervene.  In the Policy Statement Release 4, the ASC elaborated upon this "Protection of minorities" in the following terms:

     "(d)Protection of minorities

          Under section 50 of the ASC Act, the ASC may cause proceedings to be carried on in the name of a company, or any other person with that person's consent, where it appears to the Commission to be in the public interest for those proceedings to be brought as a result of an investigation or examination under that Act. 

          ...................................................

          The ASC believes that the private plaintiff is best able to assess the costs and benefits of litigation.  The ASC is reluctant to undertake civil proceedings, where there is a potential plaintiff with sufficient funds to bring those proceedings, but is not prepared to do so.  However, where the ASC is satisfied that civil proceedings which may be justified by reason of a contravention of the Corporations Law cannot be brought, because of the financial circumstances of a potential plaintiff, the ASC will consider an application for assistance.
The ASC may be prepared to undertake a greater role in ensuring the prosecution of those proceedings if it appears to be in the public interest for the proceedings to be brought.

          For example:  If the ASC was satisfied that the affairs of a corporation were being conducted in a manner oppressive to minority shareholders, and those minority shareholders had insufficient resources to bring appropriate proceedings, the ASC may consider a request for intervention under section 1330 of the Corporations Law."

DTT submitted, and I accept, that the mere existence of a cause of action for the recovery of damages or of property of a kind referred to in s 50 does not satisfy the section's requirement that it appear to the ASC to be in the public interest for a person to begin and carry on a proceeding for such recovery. 

In my opinion the ASC was bound to take into account the consideration referred to above and reformulated below.  The obligation arises from the terms of s 50 itself.  Section 50 predicates the existence of a cause of action in a person.  The stipulation that in general the ASC may cause proceedings to be begun and carried on in the person's name only if the person consents in writing is consistent with the general proposition that the cause of action "belongs" to the person and may be dealt with as the person desires.  Thus, in the case of a wronged natural person the ASC may not, absent that person's written consent, cause proceedings to be begun and carried on in the person's name even though the ASC may be troubled by the circumstances in which consent is declined. 
For example, the proposed defendants/respondents may be in a position to exercise commercial or other power against the wronged person.  Indeed the wronged person may have agreed with them as part of a contract, arrangement or undertaking which is opposed to the public interest, not to give his or her consent.  Nonetheless, the section accepts that the private interests and wishes of the person having the cause of action are to be determinative of the question whether proceedings shall be brought.

The terms of the section raise the question, why should the position be different where the wronged person is a company?  Why should the public interest prevail over the private interests and wishes of the wronged person where that wronged person is a company?  Subject to the exception noted earlier and again below, there is no reason why this should be.  In other words, subject to that exception, there is no reason why the "public interest" which the section contemplates should have a different potential according to whether the wronged person is a natural person or a company.   The exception made in the case of a wronged company suggests that there is some special feature of corporate existence which may cause consent to be withheld but which the draftsperson did not regard as appropriate to stand in the way of the commencement of proceedings.  The special feature which suggests itself is one which is revealed by cases decided under the general law, namely, the possibility that the Company's controlling mind might be expected not to decide in its interests because that controlling mind is not independent of the wrongdoers. 

That this is the special feature in question is, of course, made clear by the Report.  Consideration may properly be given to the Report to determine the meaning of the expression "the public interest" because its meaning is ambiguous or obscure and the Report is capable of assisting in the ascertainment of the meaning of that expression:  see Acts Interpretation Act 1901 (Cth), s 15AB (1) and (2)(c).

In my opinion the ASC was bound to take into account the policy of the general law that it is a matter for the directors of a wronged company to determine whether proceedings shall be commenced in its name for the enforcement of its rights, and whether, consistently with the policy underlying and reasons for the exception allowed for in the section, it was in the public interest for proceedings to be begun and carried on in the name of the Company.  (I will refer to this consideration as "the Foss v Harbottle consideration").

As can be seen from paragraphs 53 and 58-61 of the Submission paper which appear in annexure "B" to these Reasons, the ASC did not take into account the Foss v Harbottle consideration.

Annexure "B" to the Submission paper and referred to in paragraph 59 of it comprised the three letters dated 10, 15 and 22 March 1994 referred to at pp 9-10 of these Reasons.  It will be recalled that the concluding paragraph in the letter dated 10 March 1994 from the Company's current directors to the ASC asserted that it was a matter for the Company's directors to determine whether proceedings should be commenced in the Company's name.  Having regard to the absence of wrongdoer control, prima facie so it was; or if not, the strength of the case in favour of the view that it was certainly makes the factor one that ought to have been taken anxiously into account by the ASC.

There is no question at all of the Foss v Harbottle consideration being "so insignificant that the failure to take it into account could not have materially affected the decision": see Peko-Wallsend at 40.

Ground 1 (a) (i) and (ii) - ss 5(1)(e), 5(2)(b) of AD(JR) Act

Improper exercise of power - failure to take into account relevant considerations - double benefit to shareholders and lack of benefit to creditors (except possibly bankers).

"1.  The making of the Decision was an improper exercise by the Respondent of the power conferred by section 50 of the Act in that:

    

     (a)  There was a failure to take into account relevant considerations.

 

           Particulars of relevant considerations

 

          (i)  Judgment in the Proceedings against the Applicant would involve an award of damages against the Applicant and the ultimate beneficiaries of such award would be or would
be likely to be:

 

                   (a)  shareholders in the Company who have already benefited from sharing in the payment of the dividends complained of;

 

                   (b)  shareholders in the Company who acquire shareholdings subsequent to payment of the dividends complained of.

 

          (ii)No creditors of the Company at the time of payment of the dividends complained of would benefit from an award of damages in the Proceedings against the Applicant, except possibly the Bankers to the Company to the extent of what sums may remain unpaid in relation to their respective debts existing at the times of such payments."

 

It is appropriate to refer to the "double benefit to shareholders/no benefit to creditors" consideration the subject of Ground 1 (a) (i) and (ii) in some detail, as much was made of it by DTT.  The evidence identified particular shareholders who participated in the impugned dividend and who were still shareholders in July 1994.  For example, David Jones Finance & Investments Pty Ltd received a dividend of $18,475,848.50 in respect of its 73,903,394 shares in the Company and still held the same number of shares in July 1994; Anfrank Nominees Pty Ltd received a dividend of $15,257,807.00 in respect of its 61,031,228 shares, all of which it still held in July 1994; Adelaide Outdoor Centre Pty Ltd received a dividend of $5,840,833.75 in respect of its 23,363,335 shares all of which it still held in July 1994.

In relation to persons who became shareholders after payment of the dividend, there was evidence of progressive acquisition of shares in the Company by Guinness Peat Group plc of London and its subsidiaries ("Peat").  The evidence showed that on 11 April 1994 Peat became a substantial shareholder in the Company, having acquired shares on the market over a period from 4 November 1993 to 11 April 1994 at prices ranging from 11 cents to 18 cents per share, Peat's shareholding as at 11 April 1994 having reached 5.26% of the voting share capital of the Company.  The evidence showed further on-market acquisition by Peat of shares in the Company at prices ranging from 15 cents to 18 cents per share from 12 April to 8 September 1994 by which time it held 7.56% of the voting shares in the Company.   This evidence was said by DTT to be relevant to the consideration of the alleged "windfall" which would accrue from a recovery of damages in the Proceedings to those who became shareholders after payment of the dividend.

The evidence in relation to creditors was not so clear.  It showed that from late November 1990 to date the Company has been the subject of a "bank workout", and that the shares in the company have continued to be traded on the ASX.  It was not in issue that none of the directors at the time when the dividend was paid are directors now, but the evidence does not establish when and by whom the current directors were appointed.  I was asked to infer from the fact that some four years have passed since the dividend was paid during which time the Company's shares have continued to be traded, that "trade creditors" of the Company have been and are being paid, and that either the unsecured creditors of the Company when the dividend was paid have also been paid or satisfactory arrangements have been made with them by the banks.

The ASC referred me to the decision of Giles J in the Supreme Court of New South Wales in Segenhoe Ltd v Akins (1990) 1 ACSR 691 ("Segenhoe").  In that case there was an overstatement of retained profits in reliance on which a company paid an additional dividend.  A substantial part of this was required to be paid out of capital.  The company sought to recover that amount from its auditors as the measure of the loss and damage suffered by the company because of their negligence.  The auditors submitted that this was not the correct measure because the company was solvent and so the shareholders would stand to gain a windfall from a recovery.  Rejecting this submission, Giles J held that the measure of the company's loss was the amount of the dividend paid out of capital. 

However, DTT submitted that the fact that the measure of a solvent company's loss may be the amount of dividend paid out of capital does not answer the submission that a failure to take into account the "double benefit to shareholders" point is a failure to take into account a relevant consideration.  I agree that it does not answer the submission.  But much that Giles J said in Segenhoe is relevant to the present case.  Neither Segenhoe nor the present case is adequately described as a case in which all those persons who received dividend otherwise than out of profits would, upon recovery of damages from the auditors, be benefited to precisely the same monetary extent as the amount of the dividend.  The following words of Giles J, although directed to a different issue, are pertinent:

     "Further, recovery of the money paid away does not necessarily mean that shareholders will be paid twice over.  Even if the shareholders remain the same, the company may or may not distribute the amount recovered by way of further dividend; it may or may not make profits from the use of that amount; it may have suffered in its trading between payment out and recovery such that the recovery only restores its position.  Inquiry into these matters would be akin to the never-ending process to which I previously referred.  Changes in shareholding may mean that there is a real loss to shareholders occasioned by the company being out of pocket which is not matched by receipt of the dividend wrongly paid.  An incoming shareholder will not necessarily pay a price for his shares discounted so as to reflect the company being out of pocket, and thus will not necessarily receive a benefit, or the equivalent of a benefit, twice over if the company recovers the money paid away.  If the submission for DHS were to be accepted incoming shareholders may be disadvantaged, and it can not be that the result should differ according to when in relation to changes in shareholding the proceedings were brought to a successful conclusion, or according to an investigation of the position of each of the shareholders." (at 702)

DTT would emphasise that it is not essential to its present submission that there be a total correspondence between the benefit to a shareholder from receipt of the dividend and the benefit to the shareholder from a recovery of damages by the Company.  DTT has emphasised that its submission is merely that the consideration is one which the ASC was bound to take into account. 

However, the matters referred to by Giles J highlight the
importance of precise definition of the factor which it is said that the ASC was bound, but omitted, to take into account.  I infer from the evidence that some shareholders who received payment of dividend will probably benefit again to some unidentified extent if the Company succeeds in the Proceedings, and that the ASC did not take this probability into account.  It may also be the case that some persons who became shareholders after payment of the dividend paid less for their shares by reason of the fact that the dividend had been paid than they would have if it had not been paid, and so may secure a double benefit to an unidentified extent if the Company recovers damages in the Proceedings.  I infer that the ASC did not take this possibility into account.

But if I consider Ground 1 (a) (i) and (ii) in isolation, that is to say, on the assumption that it was the only ground on which DTT relied, my tentative view is that the Act does not, at peril of the invalidity of the decision-making process, oblige the ASC to take this particular consideration of imprecise and limited significance into account in deciding whether it was in the public interest that the Company begin and carry on the Proceedings (but see p 50 below).

Ground 1 (a) (iv) - ss 5(1)(e), 5(2)(b) of AD(JR) Act

Improper exercise of power - failure to take into account relevant considerations - the "Deloittes factor".

"1.  The making of the Decision was an improper exercise by the Respondent of the power conferred by section 50 of the Act in that:

 

     (a)  There was a failure to take into account relevant considerations.

    

           Particulars of relevant considerations

 

          (i)  (ii) (iii)...........................

          (iv)The applicant comprises a substantial body of partners resident and engaged in professional practice throughout Australia whereof only two participated in the conduct of the audit complained of, yet all such partners would be adversely affected professionally to a substantial extent in their individual capacities by the conduct and outcome of the Proceedings, irrespective of what the outcome might be, and any clarification of accounting standards in relation to the auditing of consolidated accounts and of any other accounting and audit issues of principle and practice arising in the Proceedings are capable of being effected at the instance of the Respondent by proceedings, processes and procedures which would not visit the Applicant and its general body of members with circumstances of such adversity as are inherently involved in the pursuit and outcome of the Proceedings."

This consideration was referred to on the hearing as "the Deloittes factor". It must have been obvious to the ASC that the Proceedings would have some adverse effect professionally on all the partners of DTT.  I do not infer from the absence of any reference to the Deloittes factor in the Submission paper that the ASC was totally unmindful of it.  I do infer, from that absence, that the ASC did not give it any weight.

On the assumption that Ground 1 (a) (iv) is the only ground relied on by DTT (but see below), my tentative view is that the Act does not reveal an intention that the ASC was bound, at the peril of the invalidity of the decision-making process, to take the Deloittes factor into account in its assessment of the public interest. 

I have considered the various grounds propounded in the Particulars in sub-para 1 (a) of the Application individually and on the assumption that each was the only ground relied on by DTT.  The possibility remains that grounds which would not, in isolation, have supported the granting of relief may, taken together, show such a wholesale disregard of relevant considerations that a case for relief is made out.  This possibility is related to Ground 2 (b) (ii) referred to at pp 61-62 below.

Ground 1 (b) (i) and (ii) - ss 5(1)(e), 5(2)(a) of AD(JR) Act

Improper exercise of power - taking into account irrelevant considerations - setting legal precedents, clarifying legal and accounting principles.

"1.  The making of the Decision was an improper exercise by the Respondent of the power conferred by section 50 of the Act in that:

 

     (a)  ..................................................

 

     (b)  Irrelevant considerations were taken into account.

 

          Particulars of Irrelevant Considerations

          (i)  The Respondent's desire to bring the Proceedings for the purpose of setting legal precedents and/or the desire to seek clarity on various matters.

 

          (ii)Any perceived need or cause for the Respondent:

 

                (a)  to expose for clarification or development principles of the common law relating to companies in the context of proceedings having the consequences to the Applicant and to its general body of members thereby actually and potentially involved;

 

                (b)  to demonstrate to the Applicant its duty of care under the common law in relation to the adoption of accounts in the context of such proceedings;

 

                (c)  to resolve issues and clarify principles relating to group consolidated accounts in the context of such proceedings where the matters complained of are confined to the parent company's accounts."

Guidance as to the "Irrelevant Considerations" ground of judicial review of administrative decisions is found in Peko-Wallsend at 39-42 (Mason J).

DTT pointed to paras 5 and 6 of the Minute and paras 28-38 and 52.1, 52.6 and 62 of the ASC's Submission paper.  Paras 5 and 6 of the Minute can be seen from annexure "A" to these Reasons.  Paras 28-38 of the Submission paper were headed "Important Questions of Accounting and Legal Principles" and dealt with the payment of dividends otherwise than out of profits and the accounting principles involved.  Paras 28-38, 52.1, 52.6 and 62 of the ASC's Submission paper appear within annexure "B" (comprising paras 28-38 and 51-62 of the Submission paper) to these Reasons.

I see no reason why the notion of "the public interest" as used in s 50 does not entitle the ASC to take into account the considerations referred to. The "public interest" suggests interests of the public as distinct from the interests of the person wronged and of the wrongdoer.  It seems to me appropriate that the ASC should take into account as one consideration relevant to the public interest, the fact, if it be the fact, that the Proceedings would serve to clarify legal and accounting issues and principles.  But questions arise as to what precisely are the areas calling for clarification in the public interest and whether the ASC wrongly identified as areas calling for clarification areas which are in fact well settled.

Ground 1 (c) - ss 5(1)(e), 5(2)(c) of AD(JR) Act

Improper exercise of power - exercise of power for improper purpose.

 

"1.  The making of the Decision was an improper exercise by the Respondent of the power conferred by section 50 of the Act in that:

 

     (a)   .....................(b)...........................

     (c)   The powers conferred by section 50 of the Act were used for a purpose other than a purpose for which the powers were conferred.

 

               Particulars of Improper Purpose

 

           The Applicant relies on the particulars to paragraph 1 (b) above."

 

I make no independent observations on Ground 1 (c).

Ground 1 (d) (i) - ss 5(1)(e), 5(2)(g) of AD(JR) Act

Improper exercise of power - manifest unreasonableness - failure to take into account relevant considerations.

 

"1.  The making of the Decision was an improper exercise by the Respondent of the power conferred by section 50 of the Act in that:

 

     (a)   ...............(b)................(c)............

     (d)   In making the Decision the Respondent effected an exercise of power that was so unreasonable that no reasonable person could have so exercised the power in that way.

 

                         Particulars

 

           (i)   The Applicant repeats each of the particulars in paragraph 1 (a) above."

I expressed the tentative view earlier that each of Particulars 1 (a) (i), (ii) and (iv), considered in isolation, is not established and the firm view that Particular 1 (a) (iii) is established.  I refrain from considering the overall effect of Grounds 1 (a) (i) (ii) and (iv) taken together.

In relation to Ground 1 (a) (iii) considered in isolation, the question now posed is whether, properly taking that consideration into account, no reasonable person would have made the Decision.  It would seem to be, as the NCSC said in its submission to the Joint Select Committee on Corporations Legislation quoted at p 37 of these Reasons, only in "most exceptional circumstances" that the ASC, acting reasonably, could properly have made the Decision.  The Submission paper and the evidence before me do not reveal such those "most exceptional circumstances".  But this issue was not addressed by the ASC.  For all I know, most exceptional circumstances may exist.  I do not find it necessary or appropriate to categorise the failure to take into account the Foss v Harbottle consideration as also constituting "manifest unreasonableness".

 

Ground 1 (d) (ii) (a) ... (b) ... (c) (i) ...

                     (ii) - ss 5(1)(e), 5(2)(g) of AD(JR) Act

Improper exercise of power - manifest unreasonableness - disproportionality to regulatory objectives - the Deloittes factor, adverse effect on Deloittes of the litigation itself, likely adverse implications and consequences for auditors in Australia and their clients.

 

"1.  The making of the Decision was an improper exercise by the Respondent of the power conferred by section 50 of the Act in that:

 

     (a)  ...........(b).............(c).................

     (d)  In making the Decision the Respondent effected an exercise of power that was so unreasonable that no reasonable person could have so exercised the power in that way.

 

                         Particulars

 

          (i)    .............................................

 

          (ii)   The Decision was disproportionate to the regulatory objectives sought to be achieved by the commencement and prosecution of the Proceedings, by reason of:

 

                (a)  The matters stated in paragraph 1 (a) (iv);

 

                (b)  the likely adverse implications and consequences for the professional reputation and image of the Applicant and each of its many members and partners of being sued in the Proceedings, being Proceedings which on the Respondent's estimate would take three to nine months to be heard and which would require and involve the input of massive resources of time and money for the preparation and hearing thereof, and substantial disruption to the professional affairs of the Applicant;

 

                (c)  the likely adverse implications and consequences for:

 

                     (i)   auditors in the conduct of their profession in Australia; and

 

                     (ii)  existing and potential clients of auditors engaged professionally in Australia

 

                     which would flow from an award of damages against the Applicant of the dimension sought in the Proceedings, in terms of the cost and in particular the insurance cost of continuing so to conduct their profession and engage professionally in Australia."

Manifest unreasonableness was discussed by Mason J in Peko-Wallsend Mason J (at 41-42), and by Gummow J in Fares Rural Meat and Livestock Co Pty Ltd v Australian Meat and Live-stock Corporation (1990) 96 ALR 153. Gummow J referred to the three paradigm cases of unreasonableness identified by Dr Allars in Introduction to Australian Administrative Law, 1990, paras 5.54-5.57.  Dr Allars described the third paradigm as involving "a principle of proportionality" (para 5.57).  DTT raised the question whether disproportionality is an independent ground of review or an aspect of Wednesbury unreasonableness (cf Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 (CA)), and concluded that it sufficed for DTT to confine its reliance on "the doctrine of disproportionality" as an aspect or illustration of Wednesbury unreasonableness.

DTT referred to the fact that the Proceedings were for the recovery of a dividend amounting to $228,000,000.00 plus interest (referred to as giving an aggregate of some $340,000,000.00) following a hearing estimated to take 6-9 months at great cost and disruption of DTT's practice.  DTT quoted Lord Diplock in Regina v Goldstein [1983] 1 WLR 151 at 155 where his Lordship described the disproportionality principle as involving the use of a steam hammer to crack a nut where a nutcracker would do.  In the present context, DTT says that the Proceedings are the steam hammer and that the nut identified in the Submission paper is the fulfilment of the ASC's role in the regulation of directors' duties, accounting obligations and auditors' duties (para 4 of the Minute), the alleged need for "clarification of accounting standards in relation to the presentation of consolidated accounts of public company groups" (para 5 of the Minute) and the need to demonstrate to auditors "the duty of care imposed upon [auditors] in relation to the adoption of accounts" (para 6 of the Minute).  In the "Executive Summary" in the Submission paper, the "nut" was identified as the promotion of "credibility in the Australian securities market".

DTT submitted that these objectives, assuming them to be valid and justified in terms of the public interest, would be satisfied by proceedings initiated and pursued by the ASC against the particular DTT auditor (or auditors) directly involved under Division 3 of Part 9.2 of the Corporations Law: see sub-s 1292 (1) of the Corporations Law. 

It would be necessary in dealing with this submission, to make a more detailed analysis than it has been necessary for me to carry out of the public interest considerations identified by the ASC in the Submission paper.  There may be difficulty in a challenge to the weight given by the ASC to a particular valid public interest consideration.

Ground 1 (d) (ii) (c) (iii) - ss 5(1)(e), 5(2)(g) of AD(JR) Act

Improper exercise of power - manifest unreasonableness - inadequate evidentiary materials before the ASC.

"1.  The making of the Decision was an improper exercise by the Respondent of the power conferred by section 50 of the Act in that:

 

     (a)  ..........(b).............(c)...............

     (d)  In making the decision the Respondent effected an exercise of power that was so unreasonable that no reasonable person could have so exercised the power in that way. 

 

                         Particulars

 

          (i)    ...(ii)(a) ...(b) ... (c)(i) ... (ii)

          (iii)  When the Respondent made the Decision in the exercise of its powers under section 50 of the Act, it did not have before it adequate evidentiary materials or information to enable it properly to decide for itself whether or not to exercise its powers under Section 50 of the Act in the circumstances of this case.

 

[There followed in the Application lengthy "sub-particulars"].

DTT referred to Jeffs v New Zealand Dairy Production and Marketing Board [1967] 1 AC 551 (PC) at 563-4 in which the Privy Council relied on the "failure to observe the requirements of natural justice" ground of review in setting aside a decision of a Board.  The Board had relied on and adopted a committee report which did not contain any, or any adequate, summary of relevant evidence and submissions. There was no power of delegation by the Board to the Committee.  DTT submitted that "the Jeffs principle" can also be expressed as an aspect of Wednesbury unreasonableness.

DTT referred to the fact that the Submission paper was not supported by any expert report of a qualified auditor, any reasoning as to why the investigating officer's contentions and conclusions were soundly based, or any documentary or other material which would have enabled the ASC objectively and critically to assess the validity and reasonableness of the investigating officer's contentions and conclusions on auditing/accounting issues.

Paragraphs 13-17 of the Submission paper were as follows:

     "13.A schedule extracted from the working papers of Deloittes analysed the debts due by subsidiary
companies to Adsteam and indicated that $207 million comprised a debt due by the subsidiary Gourlay Cabinets SA Pty Ltd ("Gourlay"), $251 million comprised a debt due by the subsidiary Jomet Pty Ltd ("Jomet") and $21 million comprised a debt due by the subsidiary Camberley Pty Ltd ("Camberley").

      14.It is the contention of the investigating officer, supported by legal advice, that the loans from Adsteam to Gourlay, Jomet and Camberley ("the Gourlay, Jomet and Camberley loans") should have been written down in the final accounts by a total of $343 million, that is:

          14.1   Gourlay by $186.4 million;

          14.2   Camberley by $12.6 million.

      15.During the course of the investigation certain transactions between Adsteam and related off balance sheet company Buckley & Nunn Antiques Pty Ltd which had the effect of disguising losses of $103 million came to light.  These transactions were instituted with the knowledge of the board of Adsteam and Deloittes.

      16.It is alleged that all members of the board, and Deloittes, were aware of the acts and omissions giving rise to the overstatement of Adsteam's profit by at least $539 million (being the total of the amounts referred to in paragraphs 14 and 15 hereof).  It is alleged that these losses should have been recognised in the calculation of the profit and loss an retained earnings of Adsteam as at 30 June 1990.  Consequently, Adsteam did not have profits available for the payment of either the interim or final dividend for the 1990 year.

      17.By failing to recognise the losses and write downs, the assets of Adsteam were grossly overvalued.  This is evidenced by an internal Adsteam valuation prepared in about August 1990 which asserted the net value of Adsteam as $1.815 billion which contrasts with the external valuation of Lonergan as at December 1990 which valued the net worth of Adsteam between nil and $97 million."

Whether the loans "should have" been written down as paragraph 14 may or may not raise technical accounting questions.  For all I know, there may have been clear evidence in the papers seen by the investigating officers that the loans were not recoverable to the extents mentioned.  The "effect of disguising losses" referred to in paragraph 15 may also have been obvious to an intelligent layperson who had access to the papers which were seen by the ASC's investigating officers.  I do not know the qualifications, expertise or experience of the ASC's "investigating officer."  I do not know the content of the "legal advice" referred to in paragraph 14 of that paper.

In view of my conclusion on Ground 1 (a) (iii), in order for the Decision not to be manifestly unreasonable there would have had to be evidence before the ASC clearly placing the case in the "most extraordinary circumstances" category.  Material, including expert evidence, of the kind referred by DTT may have been necessary for that purpose.

Ground 2 - s 5(1)(f) of AD(JR) Act

Error of law.

 

"2.  The making of the Decision involved an error of law in that:

 

     (a)  The Respondent erred in deciding that section 50 of the Act enabled it to cause the Proceedings to be begun and carried on against DHS and DRT at all.

 

     (b)  The Respondent failed to have any proper regard as to whether the Proceedings were in the public interest or alternatively misconceived what was involved in forming the opinion required by section 50 of the Act.

 

                         Particulars

          (i)    The Applicant relies on the particulars to paragraphs 1(a), (b), (c) and (d) above.

 

          (ii)   Instead of identifying and weighing up competing aspects of the public interest in determining whether to cause the Proceedings to be begun and carried on, the Respondent merely considered those aspects of the public interest which favoured the taking of that course of action and did not have regard to any aspects of the public interest which did not favour the taking of that course of action."

Particular (a) seems to assume that the decision attacked in the Application is the decision to begin and carry on the Proceedings.  It is not. 

I have dealt with Particulars to sub-paras 1 (a)-(d) earlier.

DTT submitted that the ASC had fundamentally misconceived what was involved in forming its opinion as to public interest for the purposes of s 50.  It submitted that this necessarily involved "the weighing up or balancing of competing elements falling within that rubric":

     " ... The ASC approached its task under s 50 as one simply requiring the identification of one or more public interest considerations in support of the decision to initiate the particular proceedings, without having to engage in any weighing or balancing exercise.  In the absence of evidence from the ASC inconsistent or at variance with that documentary material, the court concluded the foregoing fairly describes the way in which the ASC approached its task." (DTT's written submissions para 7.3, p 44)

I agree that determination of where the public interest lies involves a weighing exercise.  In failing to accord any weight to the Foss v Harbottle consideration, the ASC erred in law.  My tentative view is that there is also substance in DTT's more general submission quoted above.

Ground 3 (i) and (ii) - s 5(1)(c) of AD(JR) Act

Lack of jurisdiction - not in public interest and improper exercise of power particularised in paras 1(a),(b),(c) and (d).

"3.  The Respondent did not have jurisdiction to make the Decision.

 

                         Particulars

     (i)  The Respondent only had jurisdiction to cause the Proceedings to be begun and carried on if it appeared to the Respondent that it was in the public interest to do so, and there was no evidence or other material to warrant such a jurisdictional finding.

 

     (ii)The applicant repeats the particulars in paragraphs 1 (a), (b), (c) and (d) above."

Particular (i) assumes that the decision attacked in the Application is the decision to litigate.  It is not.

In relation to Particular (ii) I make no observations beyond those previously made in the discussion of the grounds arising from sub-paragraphs 1 (a)-(d). 

Ground 3 (iii) - s 5(1)(c) of AD(JR) Act

Lack of jurisdiction - investigation not completed.

 

"3.  The Respondent did not have jurisdiction to make the Decision.

 

                         Particulars

 

     (i)    ...............(ii).........................

     (iii)  The Respondent only had jurisdiction to cause the Proceedings to be begun and carried on if it had completed its investigation pursuant to section 13 of the Act and, as at 29 March 1994 when the Decision was made, the Respondent had not completed its investigation into the affairs of the Company, which investigation had been formally approved on or about 29 September 1992."

DTT submitted that the words "as a result of an investigation" in s 50 signified "as a result of and after an investigation".  DTT pointed to the heading to Division 5, "Proceedings after an investigation" (emphasis supplied), and to sub-s 13 (1) of the Acts Interpretation Act 1901 which provides that "The headings of the Parts, Divisions and Sub-divisions into which any Act is divided shall be deemed to be part of the Act."  The ASC conceded that its investigation into the Company's affairs was continuing as at 29 March 1994. 

DTT invited me to view this submission as not merely technical.  It submitted that s 50's reference to "the public interest", particularly in the context of complex factual situations, is an indication that the section requires that the ASC reach its conclusion as to where the balance of public interest lies only after it has completed its investigation.

The construction submitted by DTT would or could have unfortunate consequences which Parliament should not lightly be taken to have intended.  For example, it could be that an investigation could not be completed within the statutory limitation period for the commencement of proceedings of the kinds referred to in s 50.  DTT responded to this argument by submitting that ss 1323 and 1324 of the Corporations Law provide adequate remedies to cover that situation.  DTT drew attention to the opening words of sub-s 1323 (1), "Where: (a) an investigation is being carried out ... " (emphasis supplied).  But these sections do not, in my view, overcome the problem that a limitation period in respect of the institution of proceedings for recovery of damages or recovery of property on the causes of action referred to in s 50 may be about to expire.

Notwithstanding DTT's submissions, I think that the words "as a result of" are satisfied by the existence of a causal link between the appearance as to the public interest and the activity of investigation.  An activity or process of investigation is appropriately referred to as "an investigation" although the activity or process has not yet come to an end.

It might, however, be open to an alleged wrongdoer, in the circumstances of a particular case, to point to particular factors which an investigation will yet reveal.  In such a case the ASC may be disabled from deciding where the public interest lies before its investigation has proceeded further. DTT did not attempt to point to such factors in the present case.

DISCRETION

I have upheld the ASC's objection to competency.   In the ordinary course this would lead to a dismissal of the Application and an order that DTT pay the ASC's costs.

If I had not upheld the ASC's objection to competency or if the "Decision" had been the decision to cause the Proceedings to be begun and carried on I would have granted the relief sought in the Application on Ground 1 (a) (iii), that is, the ASC's failure to take into account the Foss v Harbottle consideration.

It seems appropriate to make no order at this stage but to stand the proceedings over to Monday 23 January 1995 at 10.15 am for the purpose of the making of orders after the parties have had an opportunity to consider these Reasons.  There will be a direction that the parties deliver to my Associate by 4.00 pm on Friday 20 January the forms of orders (including any order as to costs) for which they will contend and any

submissions in support.

            I certify that this and the preceding 65 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.

            Associate:

            Dated:                16 January 1995

Heard:          27, 28 October 1994

Place:          Sydney

Decision:       16 January 1995

Appearances:    Mr R A Conti QC with Dr J A G Griffith of counsel instructed by Mallesons Stephen Jaques appeared for the applicant.

                Mr T A Gray QC with Mr R J Whitington and Ms A Moroney of counsel instructed by  Australian Securities Commission appeared for the respondent.