FEDERAL COURT OF AUSTRALIA

Quintano v Minister for Finance and Deregulation [2014] FCA 531

THE COURT ORDERS THAT:

1.    The application for judicial review filed 26 June 2013 be dismissed.

2.    The applicant pay the respondent’s costs.

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

REASONS FOR JUDGMENT

BACKGROUND

1    On 15 December 2002 the applicant visited a nightclub. A fight broke out at the nightclub and the applicant was shot in the head. The injuries inflicted on the applicant were very serious. He is now wheelchair bound with a paralysed right side of his body. He also lost an eye and suffers from seizures.

2    The respondent commenced proceedings against the owner of the nightclub, a company called BW Rose Pty Ltd (the nightclub company). In June 2009, the Supreme Court of New South Wales awarded the applicant $4,063,802.50 in damages. The nightclub company went into liquidation during the course of the proceeding. The nightclub company was insured at the relevant time by International Unity Insurance (General) Limited (IUI General) through its agent International Unity Insurance Pty Limited (IUI Australia). IUI General was incorporated in the Solomon Islands and, until April 2002, licensed to provide insurance in that country.

3    IUI General and IUI Australia were wound up in 2004 pursuant to an application to the Federal Court of Australia by the Australian Securities & Investments Commission (ASIC). It is common ground that the applicant has not, and will not, recover any part of his damages awarded from the nightclub company or its insurer.

4    In early 2011 the applicant made an application for an act of grace payment under s 33 of the Financial Management and Accountability Act 1997 (Cth) (the Act) on the basis that both ASIC and the Australian Prudential Regulation Authority (APRA) had failed to act in any positive and meaningful sense against IUI General or IUI Australia despite being aware that they were unable to meet their commitments and liabilities and may also have engaged in criminal activity. That application was ultimately refused by letter dated 19 April 2013 from the relevant Minister to the applicant’s solicitors. At the request of the applicant the Minister later provided a statement of reasons dated 30 May 2013 (the Statement of Reasons) for the Minister’s decision to refuse to make any act of grace payment to the applicant.

5    In this proceeding the applicant seeks a declaration that the Minister’s decision was affected by an error of law together with an order setting the decision aside so that his application for an act of grace payment might be considered afresh and in accordance with law.

SECTION 33

6    Section 33 is in Pt 4, Div 4 of the Act. It relevantly provides:

33    Finance Minister may approve act of grace payments

    (1)    If the Finance Minister considers it appropriate to do so because of special circumstances, he or she may authorise the making of any of the following payments to a person (even though the payment or payments would not otherwise be authorised by law or required to meet a legal liability):

        (a)    one or more payments of an amount or amounts specified in the authorisation (or worked out in accordance with the authorisation);

        (b)    periodical payments of an amount specified in the authorisation (or worked out in accordance with the authorisation), during a period specified in the authorisation (or worked out in accordance with the authorisation).

    …

7    In Toomer v Slipper [2001] FCA 981, Weinberg J dismissed an application for review of the Minister’s decision to refuse to make an act of grace payment under s 33 of the Act. His Honour said of the expression “special circumstances” as used in s 33 (at [31]):

The statutory context in which the term “special circumstances” arises in the present case is one in which the Minister is given a discretion to authorise the making of act of grace payments where such payments “would not otherwise be authorised by law or required to meet a legal liability”. There are any number of circumstances which may give rise to a claim for a payment of this type. It is impossible to anticipate the situations in which such payments may be warranted. The discretion vested in the Minister is obviously broad.

8    It is apparent from the language of s 33, that the Minister may only authorise a payment under that provision if he or she considers it appropriate to do so because of “special circumstances”. However, what constitutes special circumstances justifying the making of such a payment is for the Minister to determine having regard to any matter that he or she considers relevant consistent with the subject, scope and purpose of the Act. In exercising the discretion under s 33 the Minister must not make a decision that is unreasonable in the legal sense, by which I mean that it must not be capricious, plainly unjust, or otherwise involve an abuse of power. However, it is not suggested by the applicant in the present case that the respondent’s decision was unreasonable in the legal sense.

THE REASONS FOR DECISION

9    The respondent’s Statement of Reasons contains two paras 4, two paras 5 and two paras 6. For ease of reference I have designated the second occurrence of each para as 4A, 5A and 6A respectively. The Statement of Reasons is made up of a number of sections which, most relevantly, include sections entitled:

    Legislation and Policy (paras 4-5);

    Findings on Material Questions of Fact (para 4A);

    Evidence or Material upon which the Findings were Based (para 5A);

    Reasons for the Decision (paras 6-12).

10    At para 4 of the Statement of Reasons the respondent refers to s 33(1) of the Act which he sets out. He also refers at para 5 to the Finance Circular 2009/09, Discretionary Compensation and Waiver of Debt Mechanism (Finance Circular 2009/09) issued by the Department of Finance and Deregulation (Finance) to provide guidance to agencies of the Australian Government. The respondent also states at para 5 that he considered the Finance Circular 2009/09 but did not regard himself as bound by it.

11    At para 5A of the Statement of Reasons the respondent refers to the submission with which he was apparently provided by Finance concerning the applicant’s application for an act of grace payment. This submission is said by the respondent in the Statement of Reasons to have included various attachments including a letter from the applicant’s solicitors to the then Special Minister for State dated 5 September 2011, an undated submission of ASIC and a letter from APRA dated 14 November 2011. Copies of these three documents are included in the evidence before me.

12    The section of the Statement of Reasons entitled “Findings on Material Questions of Fact” indicates that the respondent made the following 33 findings of fact:

Mr Quintano’s situation

(1)    The nightclub company owned a nightclub in Sydney.

(2)    There was no legislative or licensing requirement for the nightclub company to have a public liability insurance policy.

(3)    In February 2002, the nightclub company obtained public liability insurance for the period from 27 March 2002 to 20 February 2003.

(4)    The nightclub company engaged Prestige as brokers to assist in obtaining the insurance.

(5)    Prestige referred the matter to another broker, the Cameron Group, which specialised in “hard to place” risks.

(6)    Prestige warned the nightclub company that there would be significant risks in insuring with IUI General, because IUI General was not authorised to provide insurance in Australia.

(7)    The nightclub company obtained a public liability policy issued by IUI General through IUI Australia.

(8)    On 15 December 2002, Mr Quintano visited the nightclub. During the visit, Mr Quintano was shot in the head.

(9)    As a result of the shooting, Mr Quintano is now permanently incapacitated and has no capacity for remunerative employment.

(10)    Mr Quintano sued the nightclub company in the NSW Supreme Court. On 19 June 2009, the Court awarded $4,063,802.50 to Mr Quintano.

(11)    Mr Quintano was unable to recover damages from the nightclub company.

(12)    Mr Quintano was unable to obtain damages from the insurer.

The insurance companies

(13)    IUI General was authorised to provide insurance in the Solomon Islands. IUI Australia was incorporated in Australia and acted as IUI General’s agent in Australia.

(14)    APRA and ASIC are the Australian Government’s regulatory agencies for the insurance industry.

(15)    In 2001, ASIC received a report from AUSTRAC about a transaction involving IUI Australia. ASIC decided that there was no indication of breaches of the Corporations law.

(16)    In November 2001, members of the insurance industry advised APRA of concerns about IUI Australia’s presence in the Australian insurance market. APRA did not take any formal action.

(17)    In February 2002, the Controller of insurance of the Solomon Islands wrote to APRA about IUI Australia. APRA advised that IUI Australia did not have an insurance licence and that APRA could not comment further.

(18)    The Controller of Insurance of the Solomon Islands advised APRA that, in March 2002, IUI General had been given a notice of suspension, advised not to undertake new business and asked for documentation of the company’s stated capital.

(19)    APRA then informed IUI Australia that it was in possible breach of the Insurance Act 1973, as it was carrying on insurance in Australia while not authorised or licensed in the Solomon Island. IUI Australia gave an undertaking not to arrange or renew insurance in Australia until its Solomon Island insurance licence was renewed.

(20)    At about this time, APRA contacted ASIC about IUI General. ASIC undertook an investigation but concluded there were no matters for it to pursue.

(21)    In April 2002, APRA was in touch with the UK Financial Services Authority about a London underwriting agency that appeared questionable and appeared to have links with IUI Australia.

(22)    At about this time, APRA considered the situation of unauthorised companies carrying on insurance business in Australia. APRA concluded that such actions involved criminal offences but that APRA would be unlikely to obtain an injunction in these cases.

(23)    On 15 April 2002, APRA issued a general warning in respect of unauthorised foreign insurers issuing insurance products in Australia.

(24)    On or shortly after 16 April 2002 the Solomons Controller advised APRA that IUI General could not sell insurance in the Solomon Islands. On 18 April 2002, APRA issued a media release, noting that IUI General’s registration had been cancelled and noting the risks in taking out insurance with unauthorised foreign insurers.

(25)    Later in April 2002, the United Kingdom Financial Services Authority advised APRA of concerns about reinsurance contracts of the IUI companies.

(26)    In June 2002, APRA received information that IUI General was continuing business activities in Australia and was using United Kingdom underwriters. APRA had correspondence with IUI General about this matter.

(27)    In September 2002, ASIC wrote to APRA, noting that IUI General may be conducting insurance business in Australia. APRA decided that its resources were required elsewhere at the time.

(28)    In November 2002 and January 2003, APRA received advice of problems being experienced with the IUI companies. APRA staff unsuccessfully attempted to contact IUI Australia. APRA then passed the complaint to ASIC.

(29)    In January 2003, IUI Australia’s chartered accountant advised ASIC of concerns about IUI Australia and IUI General. ASIC undertook an investigation.

(30)    The investigation showed that IUI Australia had not met claims and had siphoned off its assets to put them beyond the reach of its creditors.

(31)    In June 2003, a third party provided APRA with documents about IUI General and IUI Australia, indicating false statements and securities fraud. APRA considered it had no jurisdiction.

(32)    ASIC applied to the Federal Court to have IUI General and IUI Australia wound up. The IUI Australia application was filed on 25 September 2003 and the IUI General application was filed on 27 February 2004.

(33)    In June 2004, the Federal Court issued orders winding up IUI General and IUI Australia.

13    The section of the Statement of Reasons entitled “Reasons for the Decision” includes the following:

6.    It was submitted on Mr Quintano’s behalf that the Australian Government should reimburse Mr Quintano because there had been a failure in the Government's regulatory regime in relation to IUI General and that this had led to Mr Quintano not receiving damages. I did not accept this submission as I do not consider that the Australian Government has assumed responsibility for every situation arising because a person or organisation evades a regulatory regime.

[6A].    In this respect I noted that the Australian Government has established a wide range of regulatory regimes. I considered it would not be feasible for it to accept responsibility for every situation involving the evasion of a regulatory regime. I also considered that this view was confirmed by the legislative immunity given to APRA and ASIC where they have acted in good faith, under section 58 of the Australian Prudential Regulation Authority Act 1998 and section 346 of the Australian Securities and Investments Commission Act 2001.

7.    It was also submitted on Mr Quintano’s behalf that it would be desirable to apply the benefits of present legislation retrospectively to Mr Quintano's case. It was submitted that, if the present legislation had been in force at the relevant time, APRA and ASIC would have had enhanced powers and the problems with the nightclub company's insurance cover would have been revealed.

8.    This submission referred to Finance Circular 2009/09, Attachment B, clause 5, third dot point. This states that “special circumstances” in terms of section 33(1) of the FMA Act are generally considered to apply where it is considered that, “the matter is not covered by legislation or specific policy, but the Australian Government intends to introduce such legislation or policy, and it is considered desirable in a particular case to apply the benefits of the relevant policy prospectively”.

9.    It appears that the submission was based on the subsequent introduction of the Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Act 2007, which took effect on 1 July 2008, and strengthened the Australian Government’s regulatory powers in relation to overseas insurers.

10.    I did not accept this submission. The submission proposed a retrospective application and was not consistent with the policy approach in the Finance Circular, which refers to prospective policy or legislative changes. I did not see any basis for modifying this policy approach as proposed on behalf of Mr Quintano.

11.    I also did not accept this submission as I considered it was speculative whether an earlier implementation would in fact have affected Mr Quintano’s situation. I noted that there would be questions as to whether an approved insurance provider would have been prepared to offer a public risk policy to the nightclub company, and whether the company would have been prepared to pay the applicable premium, presumably at a significantly higher rate than the rate paid to IUI General.

12.    Mr Quintano was seeking to recover damages from the nightclub company and, as the company had chosen to take out insurance, he hoped to obtain payment from the insurer but this proved not to be possible. I considered that his situation is therefore essentially the same as that of any other person who has been injured but cannot recover damages because the other person or organisation does not have sufficient assets and has no insurance or insufficient insurance. I therefore considered that it was not appropriate to approve an act of grace payment to Mr Quintano.

THE GROUNDS FOR REVIEW

14    The applicant’s originating application for judicial review is discursive and it would not be helpful to reproduce or even attempt to summarise the grounds set out in that document some of which were not developed at the hearing. The principal argument advanced by the applicant at the hearing, as discussed below, was that the respondent did not turn his mind to the question whether special circumstances existed as might justify a payment pursuant to s 33 of the Act essentially because the respondent did not recognise that there may be a moral (as opposed to a purely legal) dimension to the matters that are to be considered in deciding whether or not to make an act of grace payment pursuant to s 33 of the Act. So understood, the application for judicial review is founded upon s 5(1)(e) when read with s 5(2)(b) (failing to take a relevant consideration into account) and s 5(1)(f) (error of law) of the Administrative Decision (Judicial Review) Act 1977 (Cth) (the ADJR Act).

THE LETTER OF 5 SEPTEMBER 2011

15    The material before the Minister (apparently attached to a submission provided to the Minister on 10 April 2013) included a letter dated 5 September 2011 (the 5 September letter) from the applicant’s solicitors. The 5 September letter is particularly significant because it is in this letter that the applicant’s solicitors most clearly describe the regulatory failure upon which the applicant relied in support of his application for an act of grace payment. Relevantly, the 5 September letter stated:

Dear Minister,

RE: LUKE QUINTANO

Thank you for meeting with us at your office in Canberra in regard to this unfortunate matter.

At the meeting you requested us to provide you with further details of the awareness and knowledge of APRA and ASIC of the existence of International Unity Insurance (General) Limited (“IUI General”) and International Unity [Insurance] Pty Limited (“IUI [Australia]”) and their unlawful insurance activities in Australia prior to the shooting of Mr. Quintano.

On 15 April 2002 APRA received notice from the Office of The Controller of Insurance in the Solomon Islands that the registration of IUI General had been cancelled with effect from 4:30pm that day.

A warning to this effect from APRA No. 02.08 dated 18 April 2002 accompanies this letter.

In March 2002 APRA advised IUI General not to accept or renew contracts of insurance in Australia. APRA instructed IUI General not to write any new insurance business in Australia. APRA was fully cognisant at that time IUI General and IUI [Australia] had written insurance business in Australia.

APRA did not investigate the activities of IUI General and IUI [Australia] further and most importantly failed to appoint a Trustee or a Receiver to the insurance business of IUI General in Australia. APRA did not notify existing policyholders individually that their insurance cover was questionable and in jeopardy. Consequently existing holders of insurance policies with IUI General were unaware that their policies were ineffective and valueless.

Nor did APRA investigate or appoint a Trustee or Receiver to the insurance business of IUI [Australia] which had been carrying on business as an insurer in Australia in concert with IUI General.

The Federal Court of Australia later found that IUI General and IUI [Australia] carried on their businesses in such a manner that IUI General could attempt to avoid the need to be authorised by APRA as an insurer and to avoid its obligation to obtain a licence under the Corporations Act 2001.

The Court, however, found that only one business existed which was conducted jointly by IUI General and IUI [Australia]. That one business was conducted through two entities to attempt to avoid their legal obligations to be authorised and/or licenced [sic].

IUI General was not entitled to conduct the business of an insurer in Australia without being registered as a foreign company and obtaining the necessary authorities under the Insurance Act 1993 and the Corporations Act 2001. IUI [Australia] was not entitled to underwrite insurance in Australia because it also did not have the necessary authorities under those two Acts.

The two companies pretended that they were operating independently of each other whereas, in fact, the two companies were jointly running one business.

The Court found that IUI General and IUI [Australia] operated as one entity. The two businesses were run as one. In those circumstances, both companies were in breach of the legislative provisions to which the Court referred.

ASIC had also received complaints from Australian holders of IUI General insurance policies that more than $1 million of insurance claims and policies refunds had not been paid. These claims related to insurance policies accepted by IUI General before March 2002.

Neither ASIC nor APRA made any announcement to the effect that the holders of IUI General insurance policies were not being paid at the time and those persons who had entered into insurance policies with IUI General had no reason not to believe that their insurance policies were valid and of full force and effect

Both APRA and ASIC were well aware at an early stage that there were severe problems with the insurance activities of IUI General and IUI [Australia] and that they were unable to meet their obligations and pay their insurance liabilities and in particular well before Mr. Quintano was shot.

APRA was aware in late March 2002 that IUI General was experiencing financial and other problems and ASIC had received complaints regarding these companies not paying their insurance liabilities.

Notwithstanding the extent of awareness of IUI General’s problems and the complaints received about IUI General’s non-payments both APRA and ASIC did not act in any positive or meaningful sense until June 2004 when these companies were liquidated at the instance of ASIC.

Mr. Quintano’s accident occurred on 15 December 2002 approximately 8 months after APRA and ASIC were aware that these insurance companies were unable to meet their commitments and liabilities.

If insurance policy holders had been notified by either APRA or ASIC at that time when APRA became aware of the problem or a Receiver or Trustee had been appointed by them then existing policyholders would have had ample opportunity to obtain alternative insurance which would have the effect of indemnifying the nightclub proprietor against whom Mr. Quintano obtained judgment.

Also the scheme in relation to the carrying on of insurance business in Australia without the appropriate licences by IUI General and IUI [Australia] as found by the Court should have been prevented and detected by APRA and ASIC at a much earlier stage. This would have had the effect of preventing insurance policies of this nature being sold in this country from March 2002 onwards.

IUI [Australia]’s [i]nsurance operations in Australia constituted the carrying on of insurance business in Australia which was a flagrant breach of the Insurance Act 1993. This should have been apparent to both APRA and ASIC, if only because of the use of the word insurance in their respective names.

None of the breaches of a number of legislative provisions appeared to have been pursued either civilly or criminally by either APRA or ASIC.

[emphasis added]

16    It is apparent from the 5 September letter that central to the applicant’s application under s 33 of the Act was what he characterised as inaction by both ASIC and APRA from around March 2002 by which time they (or at least APRA) were said by the applicant to have been well aware that IUI General was experiencing financial difficulties and that IUI General and IUI Australia were not paying their insurance liabilities. In particular, the applicant asserted that APRA and ASIC were aware about 8 months before the applicant was shot that both IUI General and IUI Australia were unable to meet their liabilities. In spite of this knowledge, according to the applicant, neither APRA nor ASIC took any positive or meaningful action until June 2004.

SUBMISSIONS

17    At the hearing, the applicant’s case was put in a variety of ways but essentially it may be summarised as follows. It was submitted that the principal justification the applicant advanced for an act of grace payment was that there had been a failure in the Commonwealth Government’s regulatory regime which led to him not receiving any damages. This is consistent with the first sentence of para 6 of the Statement of Reasons where the Minister records that it was submitted on the applicant’s behalf “… that the Australian Government should reimburse Mr Quintano because there had been a failure in the Government’s regulatory regime in relation to IUI General and that this had led to Mr Quintano not receiving damages.”

18    However, the applicant contended that the submission which he made to the respondent, as noted in para 6 of the Statement of Reasons, was not actually considered. In particular, the applicant submitted that what appears after the first sentence of para 6 reveals that the respondent dealt with the applicant’s application not by considering whether there had been any failure in the regulatory regime, but by considering whether the Commonwealth has accepted or assumed responsibility for every situation in which an applicant has suffered a loss as a result of another person or organisation having evaded a Commonwealth regulatory regime. This led the applicant to submit that the respondent did not turn his mind to the question whether special circumstances existed as might justify a payment pursuant to s 33 of the Act on account of what the applicant submitted was the Commonwealth’s moral responsibility for what had happened to him at least in so far as the nightclub owner’s insurance position was concerned.

19    Ancillary to the applicant’s principal submission were two related but dependent propositions. The first was what was referred to by Senior Counsel for the applicant as the timing point. The submission was developed in this way (T 7–8):

One of the matters which, not surprisingly, is relevant to the consideration of special circumstances is whether the particular applicant missed out ... where other people didn’t miss out because of timing. Now, where one sees that – the most obvious expression of that is where direct compensation schemes are provided for – that would be a classic example of that. People who suffer harm of type X shall, from 1 January 2003, or whatever the date be, be compensated accordingly. And the person who had the misfortune to otherwise qualify for that compensation but for the timing to just miss out would be a natural candidate, all other things being equal, for an ex gratia payment ...

The timing point that arises in this case is of a slightly different kind … Where one has legislative intervention directed not to compensation, as in the example that’s just been given, but directed to prevention of the harm, then one can miss out in the same sense. That is, one suffers the harm which would not befall people later in time because the harm prevention mechanisms had not been put into place …

20    This submission refers, as I understand it, to the introduction of the Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Act 2007 (Cth) (the 2007 Act) the relevant provisions of which took effect on 1 July 2008. According to the Statement of Reasons at para 9, the Australian Government’s regulatory powers in relation to overseas insurers were strengthened by the 2007 Act.

21    The second of the related propositions concerns a factual finding made by the respondent (finding numbered (6)). While this finding was described by Senior Counsel for the applicant as “unsupported factual matter” or “insufficiently supported factual matter”, it was not submitted that this itself was relied on as an independent ground for review. Rather, it was submitted that it may explain why the respondent may have been distracted from engaging in a proper consideration of the “moral dimension” to the concept of “special circumstances” as the latter expression is used in s 33 of the Act.

22    The respondent submitted that when the Statement of Reasons is read as a whole, it is apparent that the respondent did consider the applicant’s submission recorded in the first sentence of para 6. In particular, it was submitted by the respondent that para 11 reveals that the respondent considered the question whether, if APRA and ASIC had been given enhanced powers earlier than they were, the problems with the nightclub owner’s insurance would also have emerged earlier than they did. As counsel for the respondent put it, para 11 in the Statement of Reasons is directly responsive to the contention that, but for APRA and ASIC’s inaction, the applicant would not have been left to enforce his judgment against an insolvent company that had no insurance policy to which the company or the applicant could have recourse.

23    In further support of the submission that the respondent did consider the applicant’s submission as recorded in para 6 of the Statement of Reasons, counsel for the respondent also referred to para 5A of the Statement of Reasons which includes, as I have already mentioned, a statement to the effect that the respondent had considered the submission provided by Finance concerning the application which included a copy of the 5 September 2011 letter and its various enclosures.

CONSIDERATION

24    The applicant’s principal submission suffers from the difficulty that the respondent’s Statement of Reasons makes direct and specific reference to the applicant’s contention that he should receive an act of grace payment because his inability to recover damages was the result of a failure of the Australian Government’s regulatory regime. The reference to this contention in the first sentence of para 6 of the Statement of Reasons provides a strong basis for inferring that it was indeed considered.

25    However, the reference to “a failure in the Government’s regulatory regime” is open to a number of different interpretations. It might suggest that there was a “regulatory failure” in the sense that through no fault of the regulator responsible for the administration and enforcement of the laws that make up the relevant legal environment, a person or organisation was able to lawfully carry on business outside the limits of such laws and therefore outside the reach of the regulator. For example, if there was no legal obligation for a charity to be registered, but the government agency appointed to regulate charities was given powers in relation to registered charities only, one can see how it might be said that there was a regulatory failure in respect of unregistered charities. On the other hand, the failure of a regulator to take steps to prevent contraventions of the law which it had the power to take might also be considered to constitute “regulatory failure”. This could include a failure to take action to enforce laws which the regulator had power to enforce and which the regulator knew or had good reason to believe were being contravened. A person who suffered loss as a result of either kind of regulatory failure may or may not have good grounds for seeking and obtaining an act of grace payment under s 33 of the Act. However, the second type of regulatory failure is one that might reasonably be expected to be more likely to attract a favourable exercise of the statutory discretion if all other things are equal.

26    The first question which arises is whether the respondent has confined his consideration of the special circumstances relied upon by the applicant to the first type of regulatory failure. My initial reaction to this was that the respondent may well have done so, however, on closer reflection, I am not persuaded that he has.

27    The respondent’s Statement of Reasons must be read as a whole. Further, it must not be read with an “eye keenly attuned to error”. Bearing these principles in mind, there are a number of matters that lead me to conclude that the respondent has considered the matter of regulatory failure in the broad sense, so as to encompass what was described by the applicant as regulatory failure, whether it be characterised as a failure on the part of the legislature or a failure on the part of the relevant agencies.

28    First, there is the reference to the Government’s regulatory regime in the first sentence of para 6. The language used comprehends both types of regulatory failure though, as previously explained, the language used is open to more than one interpretation.

29    Secondly, the reference in para 6A to the statutory immunities conferred on APRA and ASIC under s 58 of the Australian Prudential Regulation Authority Act 1998 (Cth) and s 346 of the Australian Securities and Investments Commission Act 2001 (Cth), suggests that the respondent considered whether the Commonwealth should accept responsibility for the regulatory failures which the applicant sought to attribute to APRA and ASIC. The respondent evidently considered that the existence of these immunities suggested that the Commonwealth should not accept such responsibility. Whether this consideration was confined to the Commonwealth’s legal responsibility as opposed to its moral responsibility (if any) is a matter to which I will return.

30    Thirdly, the respondent’s findings of fact are in large part directed to the role played by APRA and ASIC between 2001 and 2004 in relation to IUI General and IUI Australia. The factual findings of this character are those numbered (15) to (32) inclusive. Many of these findings focus on what APRA or ASIC did (or did not) know or do at particular times. This also indicates that the respondent gave consideration to the role that APRA and ASIC may have played in allowing a state of affairs to develop in which the nightclub owner was left with no effective insurance cover.

31    Fourthly, the Statement of Reasons indicates that the respondent turned his mind to the question of what might have happened had the 2007 Act amendments, effective from 1 July 2008, come into effect any earlier. The respondent characterised the applicant’s submission that the nightclub owner would or may have then obtained adequate insurance as “speculative”. This tends to confirm that the respondent considered whether the applicant’s inability to recover his damages from the nightclub owner’s insurer might have been avoided had ASIC and APRA acted earlier.

32    For the above reasons I am not persuaded that the respondent failed to have regard to what the applicant described as regulatory failure, whether it be one which might be attributed to either the legislature, the relevant government agencies, or some combination thereof.

33    The next matter to consider is the applicant’s submission that the respondent failed to consider the “moral dimension” of the applicant’s application for an act of grace payment.

34    It would necessarily involve an error of law for the respondent to consider the applicant’s application on the footing that s 33 of the Act did not permit him to authorise an act of grace payment in circumstances where the Commonwealth (or one of its agencies) had no legal liability in relation to the loss to which the act of grace payment sought related. However, I am not satisfied that the respondent interpreted s 33 of the Act in this manner. Rather, the respondent seems to have proceeded on the basis that in the absence of legal liability, there was no reason for the Commonwealth to accept any moral responsibility for what occurred such as to justify the making of an act of grace payment to the applicant.

35    In the present case the respondent refused the applicant’s application for an act of grace payment because he considered that the applicant was essentially in no different position to any other innocent person who has been injured but cannot enforce a damages award due to the guilty party’s lack of assets or insurance cover. One may agree or disagree with that characterisation of the applicant’s plight, but it was one which the respondent was entitled to adopt and act upon when exercising the very broad discretion conferred by s 33 of the Act.

36    It follows that the application will be dismissed with costs.

Associate:

Dated:    23 May 2014