FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Daws [2006] FCA 723

CORPORATIONS – banning order – appeal from tribunal decision to substitute enforceable undertaking – motion to stay entry into enforceable undertaking pending appeal – undertaking by subject of order to withdraw undertaking on court direction if appeal succeeds – in circumstances no apparent reason to grant stay to secure the effectiveness of the hearing and determination of the appeal

Held:  motion for stay refused

Administrative Appeals Tribunal Act 1975 (Cth) ss 44, 44(1), 44A, 44A(2), 44(4), 45(4)

Australian Securities and Investments Commission Act 2001 (Cth) s 93A(1), 93AA

Corporations Act 2001 (Cth) ss 920D, 920E, 920E(1), 922A

Broadbent v Civil Aviation Safety Authority [1999] FCA 1871

Director-General of Social Services and Health v Hangan (1982) 70 FLR 212

Federal Commissioner of Taxation v Myer Emporium Ltd [No.1] (1986) 160 CLR 220

Gray v Minister for Immigration, Local Government and Ethnic Affairs (No 2) (1992) 39 FCR 526

Minister for Immigration and Ethnic Affairs v Gungor (1982) 42 ALR 209

Morales v Minister for Immigration and Multicultural Affairs (1998) 82 FCR 374

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v CHRISTOPHER JOHN DAWS

WAD 102 of 2006

NICHOLSON J

24 MAY 2006

PERTH (via video-link to Sydney)

THE COURT ORDERS THAT:

1.                  The applicant’s notice of motion for stay is refused. 

2.                  The applicant pay the respondent’s costs of and incidental to the motion, to be taxed if not agreed.

3.                  Counsel to advise the Court of unavailable dates from now to the end of the year and estimates of likely duration of the appeal. 

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

REASONS FOR JUDGMENT

1                     The applicant, the Australian Securities and Investments Commission, brings a notice of motion moving the Court for a stay order.  It seeks to stay the decision of Senior Member Penglis of the Administrative Appeals Tribunal (‘the Tribunal’), dated 15 March 2006 in application W2005/8, that the applicant enter into an enforceable undertaking with the respondent and that a banning order dated 2 May 2001 be revoked.  The stay is sought until judgment, or discontinuance, or dismissal, or until further order.  That motion is brought in reliance on s 44A of the Administrative Appeals Tribunal Act 1975 (Cth). 

2                     The decision of the Senior Member given on 15 March 2006 was in the following terms:

‘1.        The reviewable decision of the respondent dated 10 December 2004 is set aside.

2.         The Tribunal substitutes a decision that:

(a)     the respondent accept an enforceable undertaking from the applicant in the terms set forth in the Tribunal's Reasons for Decision;

(b)     upon the applicant's provision to the respondent of such an enforceable undertaking, the banning order made by the respondent in respect of the applicant dated 2 May 2001 shall be revoked pursuant to s 420D of the Corporations Act 2001.’

3                     The reasons of the Senior Member delivered on 15 March 2006 were followed by further reasons for decision delivered on 5 April 2006, being oral reasons for decision delivered by the Senior Member on 15 February 2006.  It has been submitted, and not contradicted, that on the occasion of the delivery of the oral reasons, provisional oral orders were made which were subsequently translated into the form of orders finally made on 15 March 2006.

4                     The application requires reference to certain statutory provisions.  The first of those are the provisions of ss 44 and 44A of the Administrative Appeals Tribunal Act, which read: 

‘44

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

…

(4)               The Federal Court of Australia shall hear and determine the appeal and may make such order as it thinks appropriate by reason of its decision.

            …’

‘44A

(1)       Subject to this section, the institution of an appeal to the Federal Court of Australia from a decision of the Tribunal does not affect the operation of the decision or prevent the taking of action to implement the decision.

(2)       Where an appeal is instituted in the Federal Court of Australia from a decision of the Tribunal, that Court or a Judge of that Court may make such order or orders staying or otherwise affecting the operation or implementation of either or both of the following:

(a)     the decision of the Tribunal or a part of that decision; and

(b)     the decision to which the proceeding before the Tribunal related or a part of that decision;

            as that Court or Judge considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the appeal.’

5                     It is appropriate also to refer to the Australian Securities and Investments Commission Act 2001 (Cth) (‘the ASIC Act’) and, in particular, to ss 93AA and 93A(1):

‘93AA

(1)       ASIC may accept a written undertaking given by a person in connection with a matter in relation to which ASIC has a function or power under this Act.

(2)       The person may withdraw or vary the undertaking at any time, but only with ASIC’s consent.

(3)       If ASIC considers that the person who gave the undertaking has breached any of its terms, ASIC may apply to the Court for an order under subsection (4).

(4)       If the Court is satisfied that the person has breached a term of the undertaking, the Court may make all or any of the following orders:

(a)     an order directing the person to comply with that term of the undertaking;

(b)     an order directing the person to pay to the Commonwealth an amount up to the amount of any financial benefit that the person has obtained directly or indirectly and that is reasonably attributable to the breach;

(c)     any order that the Court considers appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach;

(d)     any other order that the Court considers appropriate.’

‘93A

(1)        ASIC may accept a written undertaking given by the responsible entity of a registered scheme in connection with a matter:

(a)     concerning the registered scheme; and

(b)     in relation to which ASIC has a power or function under the corporations legislation (other than the excluded provisions).’

6                     Additionally, reference should be made to the Corporations Act 2001 (Cth), and to Pt 7.6, in which appears Div 8, addressing banning or disqualification of persons from providing financial services.  I refer particularly to ss 920D, 920E and 922A (Div 9), each of which reads as follows:

‘920D

(1)       ASIC may vary or cancel a banning order, by giving written notice to the person against whom the order was made, if ASIC is satisfied that it is appropriate to do so because of a change in any of the circumstances based on which ASIC made the order.

(2)       ASIC may do so:

(a)     on its own initiative; or

(b)     if the person against whom the order was made lodges with ASIC an application for ASIC to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph.

(3)       If ASIC proposes not to vary or cancel a banning order in accordance with an application lodged by a person under paragraph (2)(b), ASIC must give the person an opportunity:

(a)     to appear, or be represented, at a hearing before ASIC that takes place in private; and

(b)     to make submissions to ASIC on the matter.’

‘920E

(1)       A banning order, or variation or cancellation of a banning order, takes effect when it is given to the person against whom the order is or was made.

(2)       ASIC must publish a notice in the Gazette as soon as practicable after making, varying or cancelling a banning order.  The notice must state when the action took effect and:

(a)     in the case of the making of a banning order - set out a copy of the banning order; or

(b)     in the case of the variation of a banning order - set out a copy of the banning order as varied.

…’

922A

(1)              ASIC must establish and maintain one or more registers relating to financial services.

(2)              The regulations may prescribe the way in which the register or registers must be established or maintained, including the details that ASIC must enter in the register or registers in respect of the following person or bodies:

(a)          financial services licensees;

(b)          authorised representatives of financial services licensees;

(c)          persons against whom a banning order or disqualification order under Division 8 is made;

(d)          any other persons or bodies that are prescribed by regulations made for the purposes of this paragraph.’

7                     The factual circumstances which provide the background to the issues now arising may be apprehended from the chronology attached to the respondent's submission in connection with this motion:

8                     It will have been observed from the reference which I have made to s 44A(2) of the Administrative Appeals Tribunal Act, that in order to grant a stay, the Court has to be satisfied that it considers such as appropriate:

‘for the purpose of securing the effectiveness of the hearing and determination of the appeal.’

Although there has been some reference in the course of the written and oral submissions to what was said by Dawson J in particular at 222 in Federal Commissioner of Taxation v Myer Emporium Ltd [No.1] (1986) 160 CLR 220, where reference is made to the need for special circumstances to exist, I propose to apply the words in s 44A(2), as I have just referred to them, and not seek to understand those words with any gloss in the way that might be suggested by reference to Myer Emporium.

9                     The applicant brings three main arguments to support its case why the motion for stay should be granted.  The first is that there is apparent uncertainty as to the operation of the Tribunal's orders.  For example, reference is made to what is apparently an erroneous reference in those orders to s 420D rather than s 920D of the Corporations Act.  Additionally, it is contended there is uncertainty as to the date when order 2(b) becomes effective.  Additionally, it is said that order 2(b) appears to be inconsistent with s 920E(1) of the Corporations Act.  Further, the reference to ‘revoke’ in the orders is said to not pick up and track the language of s 920D.  Therefore it is said there is uncertainty as to the effect to be given to the orders. 

10                  I am unable to see how that contributes to the applicant’s case meeting the test set out in s 44A(2) of the Administrative Tribunals Appeals Act of securing the effectiveness of the hearing and determination of the appeal.  It is not necessary, therefore, for me to rule on any of those matters at this time on this motion.  If those problems exist, their link to the effectiveness of the appeal is not made out. 

11                  The argument in the applicant's case is that public interest considerations require the grant of a stay.  In this regard it is important to understand that the banning order which the Tribunal decision seeks to replace with an enforceable undertaking is not an order directed to keeping the person the subject of the order (Mr Daws) from holding any position as a director.  Rather, it seeks to impose on him a permanent prohibition from acting as a representative or proper authority holder of a securities dealer or investment adviser.  Certain conditions are set out in the order which, if they had been met, would have led to the non-applicability or limited applicability of the order.  It is common ground that none of those conditions was met within the relevant time frames expressed in the order. 

12                  The enforceable undertakings are those which have been agreed as between the applicant and the respondent and which provide protections, arguably all in the public interest, akin to the protections in the banning order, but updating them to the circumstances as they now are.  They relate to such things as undertakings received from Mr Daws and requirements placed on him in relation to education and supervision and so on.

13                  I mentioned those background circumstances in order to state that the public interest considerations are not ones which are absent from the context where the enforceable undertaking which is sought to be put in place of the banning order would put in issue.  The terms of the enforceable undertaking are directed against any danger of Mr Daws inappropriately engaging in the industry.  In addition, Mr Daws has informed the Court, and it is common ground, that he has no intention of re-entering the industry and is not presently engaged in the industry to which the banning order relates in respect of his activities.

14                  Rather, the public interest considerations on which the applicant now relies relate to the maintenance of the register that the applicant is required to keep and to which reference is made in the abovementioned provisions of the Corporations Act, in particular s 922A and reg 7.6.06 which specifies the details which must appear in the register.

15                  At the conclusion of the reasons of the Tribunal of 5 April 2006, the Senior Member found and stated that he was satisfied that in taking the actions which he proposed and which are reflected in the decision and orders of the Tribunal, he was doing so because the public interest was not compromised as the paramount consideration.  The respondent submits, and it is not contested, that such finding is not the subject of the appeal.  There are, therefore, no public interest considerations arising which can be related to the issue of the effectiveness of the hearing and determination of the appeal.  Concerns relating to register are not in this character.

16                  I come to the second and main argument of the applicant's case.  The essence of it is that the effectiveness of the appeal will be affected because unless the stay motion is granted, the appellate Court will not be able to make orders which will undo the acceptance by the applicant of the enforceable undertaking which the orders direct the applicant to accept.  It is not apparent why the Tribunal, standing in the shoes of the applicant, did not make orders accepting the enforceable undertaking.  There may have been reasons for that; the fact is, it did not occur.  Had that occurred and been appropriate in terms of the Tribunal’s power, such orders would appear to be likely to have been able to be set aside on appeal without difficulty.  Here, however, the problem which the applicant sees is that it will have embarked on another act at the direction of the Tribunal, namely the act of acceptance of the enforceable undertaking.  It contends that if the appeal succeeds, the Court will be unable to undo that act and restore the position to what it was and what it should be.

17                  What the applicant is contending is that following a successful appeal there would nevertheless remain on the record the banning order and the accepted undertaking.  Therefore the applicant submits that the hearing and determination of the appeal would be rendered nugatory (to the extent that the Court could not make appropriate orders to undo the acceptance of the enforceable undertaking).  See Broadbent v Civil Aviation Safety Authority [1999] FCA 1871 per Cooper J at [6]. 

18                  For the respondent three submissions are made on this issue.  The first is that the power of the Court to make orders on the appeal is such that it would allow the Court to make orders directed to the respondent to withdraw the undertaking, thus opening to the applicant the possibility of consenting to the withdrawal given to it in that respect under 93AA(2) of the ASIC Act.  It is said this would avoid the undertaking remaining in effect in accordance with the power.

19                  Secondly, the respondent submits that on the hearing of the appeal the Court could vary the undertaking so that it ceased to be effective before and upon the making of further orders allowing the appeal, subject to management of temporal considerations and any remaining arguments of power.  These submissions are supported by reference to ss 44(4) and 44A(2) of the Administrative Appeals Tribunal Act.  Reference is made by the respondent to the decision of Cooper J in Gray v Minister for Immigration, Local Government and Ethnic Affairs (No 2) (1992) 39 FCR 526 where his Honour was of the view that an issue there arising, namely of detention, was ‘so bound up with the determination of the original appeal’ that the Court had power to make an order in relation to it.  Likewise, reliance is placed on what was said by the Full Court (Black CJ, Burchett and Tamberlin JJ) in Morales v Minister for Immigration and Multicultural Affairs (1998) 82 FCR 374 at 386-387 where the Court said: 

‘This Court on an appeal from the AAT may make such order as it thinks appropriate by reason of its decision:  s 44.  The expression “by reason of its decision” delimits the general power to make such determination as it thinks appropriate.  That is, orders can only be made if they are appropriate by reason of the decision on the point of law:  Minister for Immigration and Ethnic Affairs v Gungor (1982) 63 FLR 441 at 454-455; Director-General of Social Services and Health v Hangan (1982) 70 FLR 212 at 223.  The extent of this power of remittal is further spelt out by s 44(5) [of the Administrative Appeals Tribunal Act]  …’

20                  The applicant relies on Minister for Immigration and Ethnic Affairs v Gungor (1982) 42 ALR 209, particularly at 220-221 to support the possibility that the reach of the power of the Court on the making of orders on appeal may be restricted and delimited.  These are issues which, if it were necessary to decide, I would embark upon in greater detail.  However, given the possibility that they could arise again in the forming of orders were the appeal to succeed on these issues to then face the Court, I will not decide them unless it is necessary for me to do so.  In my view, it is not so necessary.

21                  The reason that I formed that view was because in a further affidavit sworn on 19 May 2006 Mr Daws states:

‘If the stay is not granted, but ASIC's appeal is successful and the decision of the Tribunal is set aside, I undertake to withdraw my undertaking provided to ASIC on 29 March 2006, if the court directs me to do so.’

He will be a party to the litigation and he has given that undertaking in the course of this hearing on the motion.  No reason has been submitted as to why the Court should not place reliance upon that undertaking.

22                  The consequence of this is that if Mr Daws were to withdraw the undertaking in accordance with the undertaking so given to the Court, the applicant would have the option of consenting to such withdrawal.  Again, see s 93AA(2) of the ASIC Act.  True it is, that the fulfilment of this undertaking to the Court would not determine the exercise of the applicant’s discretion as to whether to grant its consent.  However, it would give to the applicant the opportunity of itself deciding should the appeal succeed whether or not to prevent the continuation of the enforceable undertaking.

23                  In those circumstances, I cannot see how the Court can be satisfied that the effectiveness of the appeal requires the granting of the notice of the motion.  The effect of the grant of the undertaking to the Court by Mr Daws would be to place the applicant in the situation where it had the option to determine the effectiveness of the appeal.  In other words, I consider that the making of the undertaking to the Court is of such effect that I cannot be satisfied that the appeal would be rendered nugatory so that its effectiveness needs to be secured by a stay order.

24                  There was reference in the submissions to the prima facie position which is reflected in s 44(1) of the Administrative Appeals Tribunal Act, namely, that subject to the section, the normal rule is that the institution of an appeal to the Federal Court from a decision of the Tribunal does not affect the operation of the decision or prevent the taking of action to implement the decision.  As has been said, s 44A(2) to which the first subsection is subject, provides the possibility of amelioration of that prima facie position.

25                  The application of the normal rule gave rise to submissions on behalf of the respondent based on whether he should be entitled to enjoy ‘the fruits of victory’, unless the applicant can satisfy the Court that it has met the test in the second subsection.  ‘The fruits of victory’ are not easy to identify in the present circumstances.  The respondent has ceased to engage in the industry the subject of the banning order and the enforceable undertaking, and advises the Court in evidence that he does not seek to do so in the future.  At one time in the preparation and delivery of affidavits for this hearing, he claimed some prejudice on not being appointed to the board of a company named Niagara Mining Limited, of which he is manager, and of which he wishes to be a managing director.  In an affidavit sworn on 23 May 2006 by the respondent that company has stated (by way of a letter annexed to the affidavit) that it will not appoint him as a director ‘whilst the ASIC banning order is in place and their appeal is still to be determined’.  That is, it has ceased to be a consideration that the grant of this motion may have affected his so-called ‘fruits of victory’ in that respect.  This is because no action will be taken by that company in respect of the respondent until the appeal itself has been determined.  Therefore I do not consider that anything arises to be weighed from the so-called ‘fruits of victory’ submissions. 

26                  For those reasons I am of the view that the applicant has not met the test of establishing that to secure the effectiveness of the hearing and determination of the appeal the motion for stay should be granted.  Accordingly, the motion should be refused.

Associate:

Dated:              9 June 2006