Australian Securities and Investments Commission v Provide Nominees Pty Ltd

Federal Court of Australia|2024-04-03|Before: Mr P, O'Bryan J, Lee J, Anderson J

A. In the event that the Defendant's application for special leave to appeal to the High Court of Australia (M26/2024) is refused, the Defendant undertakes to comply with order 1 of the Federal Court of Australia made on 25 September 2023 at Melbourne (O'Bryan J) by the close of business on the next business day subsequent to the day on which the High Court of Australia publishes that decision.

Pursuant to rule 41.03 of the Federal Court Rules 2011 (Cth), order 1 of the Federal Court of Australia made on 25 September 2023 at Melbourne (O'Bryan J) be stayed until the Defendant's application for special leave to appeal to the High Court of Australia (M26/2024) is determined.
The Plaintiff pay the Defendant's costs of and incidental to the interlocutory application filed on 2 April 2024. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

RELEVANT BACKGROUND 5 It is unnecessary to set out the general background to the proceeding in great detail as this has been addressed comprehensively by O'Bryan J in the primary judgment Australian Securities and Investments Commission v Provide Nominees Pty Ltd [2023] FCA 1137 (Primary Judgment) at [1]-[31], and by Lee J in the Full Court's decision Provide Nominees Pty Ltd v Australian Securities and Investments Commission [2024] FCAFC 25 (Appeal Judgment) at [8]-[21]. 6 For the purposes of this Stay Application, it suffices to summarise the background as follows: (a) on 28 September 2022, ASIC issued a notice to Provide under s 33 of the ASIC Act requiring Provide to produce certain documents falling within particular categories (the Notice); (b) although Provide produced documents pursuant to the Notice, ASIC contended that not all documents described in the Notice had been produced and on 2 December 2022, filed an originating process seeking, pursuant to s 70(3) of the ASIC Act, an inquiry into Provide's compliance with the Notice and orders requiring Provide to produce the documents described in the Notice; (c) on 25 September 2023, O'Bryan J handed down the Primary Judgment in which his Honour found that Provide had failed to produce certain categories of documents in accordance with the Notice (categories 1, 2, 3 and 12) without reasonable excuse and made the Production Order requiring Provide to produce relevant documents to ASIC within 28 days; (d) Provide filed an appeal to the Full Court of the Federal Court on 20 October 2023. On the same day, Provide filed an interlocutory application seeking a stay of the Production Order pending the hearing and determination of the appeal. ASIC ultimately consented to the dismissal of the interlocutory application and stated that it would not take steps to enforce compliance with the Production Order prior to the determination of Provide's appeal to the Full Court; (e) Provide's appeal to the Full Court was heard on 22 February 2024, with judgment pronounced ex tempore dismissing the appeal. The Full Court made the following orders on the same day: 1. The appeal be dismissed with costs. 2. Order 1 not be entered until the publication of the revised reasons of the Full Court. The Full Court published the Appeal Judgment on 6 March 2024; (f) on 26 February 2024, Provide informed ASIC that it was considering making an application for special leave to appeal the decision of the Full Court to the High Court, and noted that any such application was required to be made by 21 March 2024. Provide sought ASIC's consent to a stay of the Production Order until 21 March 2024, or if Provide made a special leave application, until the determination of the application; (g) on 6 March 2024, ASIC stated its refusal to consent to a further stay of the Production Order, but noted that it would not take steps to enforce the Production Order if Provide complied with the order within 28 days of the entry of the Full Court's decision (effectively, giving Provide until 3 April 2024 to produce the relevant documents); (h) on 21 March 2024, Provide made an application for special leave to appeal from the decision of the Full Court to the High Court; (i) on 25 March 2024, Provide's solicitors wrote to ASIC's solicitors seeking, in light of the special leave application, agreement to defer any enforcement action in relation to the Production Order until after the determination of the special leave application. Provide's solicitors requested a response by 4.00 pm on 26 March 2024, noting that in the absence of ASIC's agreement, Provide intended to file an application to stay the Production Order; (j) on 26 March 2024, Provide was notified by ASIC's solicitors that they were seeking instructions, but would be unable to respond by 4.00 pm as requested by Provide's solicitors; (k) Provide subsequently filed, on 28 March 2024, the Stay Application, seeking an order staying the Production Order until Provide's application for special leave to appeal had been determined.

Relevant principles 7 The relevant principles concerning the grant of a stay in circumstances where a party has filed an application for special leave to appeal in the High Court were recently summarised by Kirk JA in 123 259 932 Pty Ltd v Cessnock City Council (No 2) [2023] NSWCA 89 as follows (emphasis added): 2. [T]his Court, when considering whether to stay its own orders pending the determination of an application for special leave to the High Court, should apply the principles applied by the High Court itself in resolving such applications. The most commonly quoted statement of principle in that regard is by Brennan J in Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1) (1986) 161 CLR 681 at 684-685; [1986] HCA 84: A stay to preserve the subject matter of litigation pending an application for special leave to appeal is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted. If an order for a stay is made, the respondent is kept out of the benefit of the order of the court in which the matter is pending until the hearing of the application for special leave to appeal. … In exercising the extraordinary jurisdiction to stay, the following factors are material to the exercise of this Court's discretion. In each case when the Court is satisfied that a stay is required to preserve the subject-matter of the litigation, it is relevant to consider: first, whether there is a substantial prospect that special leave to appeal will be granted; secondly, whether the applicant has failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; thirdly, whether the grant of a stay will cause loss to the respondent; and fourthly, where the balance of convenience lies. 3. Of the four factors, the second is a factor peculiar to consideration by the High Court and is not relevant in this Court. The third factor can be seen as an element of the fourth. The relevant factors identified by Brennan J, thus, are whether there is a substantial prospect that special leave to appeal will be granted and where the balance of convenience lies. The prospects question relates to obtaining special leave, not the prospects of an appeal succeeding if special leave was to be granted: note Gerah Imports Pty Ltd v Duke Group Ltd (1994) 68 ALJR 196 at 197; [1994] HCA 3 per Dawson J. 4. These factors are not to be applied in a mechanical way: note Rinehart v Welker at [49]. Nor are they exhaustive: Obeid v R (2016) 90 ALJR 447; [2016] HCA 9 at [14] per Gageler J. As explained below, the overall issue is whether the grant of a stay (perhaps on terms) is warranted taking account of all the circumstances. A particularly important matter in that regard is whether the absence of a stay may render the special leave application, and any subsequent appeal, nugatory because of the loss of the subject matter of the appeal: see eg in Gerah at 197-198 per Dawson J. 5. In this case there was some dispute about whether the notion of "exceptional circumstances" was an additional factor. That notion is better understood as an overall characterisation of the burden the applicant must meet. The applicant must persuade the court that, taking account of all the relevant facts and factors, there are exceptional circumstances warranting the granting of a stay; it will not be ordered as a matter of course. … 10. In summary, then, exceptional circumstances must be shown to warrant the grant of a stay pending the determination of a special leave application; significant factors in that regard are whether the applicant has substantial prospects of obtaining special leave, where the balance of convenience lies and whether the application for special leave may be rendered nugatory unless a stay is granted; those factors are not exhaustive; "substantial prospects" does not require that the court conclude that a grant of special leave is likely; the overall question is whether, taking account of all the circumstances, there are sufficiently significant prospects of special leave being obtained to warrant a grant of a stay, perhaps on terms designed to protect the interests of the respondent. (Emphasis added.) Although his Honour was considering the application of those principles by the New South Wales Court of Appeal, the same principles are relevant in this Court. 8 In Obeid v R (2016) 329 ALR 372; [2016] HCA 9, Gageler J (as his Honour then was) stated, at [12]-[13]: The purpose [of the court's power to order a stay of proceedings] is not to enable the parties, or either of them, merely to maintain the status quo pending the justiciable controversy between them being brought to practical finality by a decision of this Court whether or not to give further consideration to that controversy. The purpose is, rather, to safeguard against the exercise of this Court's appellate jurisdiction being rendered in some degree inutile or a source of adverse collateral consequences in the event of special leave to appeal being granted. … The limited purpose of a stay and the limited rights protected by the grant of a stay were stressed in Beljajev v Director of Public Prosecutions, where, in the course of refusing an application for a stay of an order that the applicant be committed to prison to await his trial, Brennan J referred to: "the necessity to identify the subject matter of the litigation in order to determine whether a refusal of a stay order will render futile the proceedings in this Court and will prevent a successful appellant from being restored substantially to his former position". His Honour continued: "It is imperative that the jurisdiction to grant a stay be recognized as extraordinary and that applications seeking to invoke that jurisdiction are not made simply in order to secure the intervention of this Court in the preservation of a status quo." 9 Dawson J in Gerah Imports Pty Ltd v Duke Group Ltd (In Liq) (1994) 119 ALR 401 at 403 said: The inherent jurisdiction of this court to order a stay of proceedings pending the determination of an application for special leave is well established. It is an extraordinary jurisdiction which will only be exercised in exceptional circumstances. Exceptional circumstances may arise where the subject matter of the proposed appeal will be lost without a stay, with the result that the application for special leave and any subsequent appeal will be nugatory. Clearly, in the present case, the subject matter of the litigation - the immunity of the applicants from examination and from the production of documents concerning the matters in contention - will have disappeared before the application for special leave is heard if the application for a stay is refused. Having regard to the date of the proposed examinations, in the absence of a stay the questions will have been asked and answered and the documents produced before the application for special leave is heard.

ASIC'S Submissions 10 ASIC submits that irrespective of the outcome of Provide's special leave application to the High Court of Australia, the validity of the Notice is not in dispute. Moreover, ASIC submits that the validity of the Notice was not in contest before the primary judge or before the Full Court and is not now in issue on this application. 11 ASIC submits that the Production Order made by the primary judge contemplated only those documents encompassed by the Notice. Therefore, in ASIC's submissions, pursuant to the validity of the Notice which effected a valid statutory requirement for Provide to produce the relevant documents, ASIC is, and remains, entitled to all such documents by reason of the statutory requirement effected by the Notice quite apart from, and not contingent upon, the making of the Production Order. 12 On the basis of the above, ASIC submits that the precise subject matter of the litigation is whether the Federal Court had the power to make the Production Order in the particular circumstances as distinct from ASIC's entitlement to the documents that are the subject of the Notice. 13 ASIC submits that Provide's special leave application would therefore not be rendered nugatory if it produced documents the subject of the Production Order for the following reasons. First, if Provide's application for special leave and the subsequent appeal were successful, Provide would be in a position where it had produced documents pursuant to the existing statutory requirement under the Notice rather than a court order, and ameliorated the risk of other consequences, such as those in s 73 of the ASIC Act. Second, Provide may obtain orders setting aside its liability for costs ordered against it at first instance and on appeal to the Full Court. 14 ASIC submits that even if Provide's appeal was rendered nugatory, the prejudice to ASIC's efficient investigation in the event of ongoing non-production and the balance of convenience, as well as Provide's prospects of success on its special leave application, weigh heavily in favour of rejecting the stay.

Application for special leave being rendered nugatory 15 I do not accept ASIC's submission that in this case, Provide's production of the relevant documents to ASIC would not render its special leave application to the High Court nugatory. 16 The Notice was issued pursuant to s 33(1) of the ASIC Act which provides: (1) ASIC may give to a person a written notice requiring the production to a specified member or staff member, at a specified place and time, of specified books that are in the first-mentioned person's possession and relate to: (a) affairs of a body corporate; or (ab) affairs of a registered scheme; or (b) a matter referred to in any of the paragraphs 31(1)(g) to (m), inclusive; or (c) a matter referred to in paragraph 32A(c) or (d). Note: Failure to comply with a requirement made under this section is an offence (see section 63). 17 Section 63 of the ASIC Act in turn provides: (1) A person must not intentionally or recklessly fail to comply with a requirement made under: (a) section 19; or (b) subsection 21(3); or (c) section 30, 30A, 30B, 31, 32A, 33 or 34; or (d) subsection 37(9); or (e) section 38; or (f) section 39. Penalty: 2 years imprisonment. … (5) Subsections (1), (1A), (2) and (3) do not apply to the extent that the person has a reasonable excuse. 18 Section 70 of the ASIC Act also provides: (1) This section applies where ASIC is satisfied that a person has, without reasonable excuse, failed to comply with a requirement made under this Part (other than Division 8). (2) ASIC may by writing certify the failure to the Court. (3) If ASIC does so, the Court may inquire into the case and may order the person to comply with the requirement as specified in the order. 19 As can be seen from the text of s 33(1), a notice issued under the section specifies a place and time that specified books must be produced. This requirement was equivalently reflected in the Notice itself which required Provide to produce the relevant books to ASIC at 4pm on 11 October 2022. The Notice has a limited temporal operation. Section 33(1) does not provide for an ongoing obligation on Provide to produce the documents specified in the Notice. 20 An intentional or reckless failure to comply with a notice issued under s 33(1) without a reasonable excuse constitutes an offence pursuant to s 63 of the ASIC Act. ASIC has the option of pursuing the prosecution of the offence upon such non-compliance. Alternatively, pursuant to s 70, ASIC also has the option of seeking to have the Court inquire into such non-compliance, as ASIC has sought to do in this case in relation to Provide's non-compliance. In the context of the avenues available to ASIC to address non-compliance with the Notice and the express language of s 33(1) and the Notice, there is no indication that the obligation to produce documents pursuant to the Notice creates an ongoing obligation on Provide to produce the relevant documents to ASIC. 21 It therefore follows that ASIC does not have a continuing entitlement, pursuant to the Notice, for the production of the documents specified in the Notice. Rather, following ASIC's application to this Court under s 70 of the ASIC Act, ASIC's entitlement to receive production of the relevant documents from Provide arises purely pursuant to the Production Order itself. 22 For these reasons, I reject ASIC's submissions that the question arising in the special leave application is separate and distinct to the obligation on Provide to produce the relevant documents. The obligation on Provide to produce the relevant documents to ASIC arises pursuant to the Production Order itself. The central question arising in the special leave application is whether the Federal Court had the power to make the Production Order. I accept Provide's submission that if the Production Order must be complied with before the special leave application is determined, Provide's right to seek special leave and, if granted, to appeal, risks being rendered nugatory, as the subject matter of the litigation will have disappeared before the application for special leave is determined. 23 It is also worth noting that in the context of the special leave application being rendered nugatory, ASIC made submissions highlighting that in the trial before O'Bryan J, Provide did not contest the validity of the Notice, and did not make submissions regarding its compliance with the Notice. Provide instead narrowed its case to the interpretation of s 70 of the ASIC Act. While this may be the case, in the context of the application before me, whether Provide was, at the time of the Notice, under a valid obligation to produce documents to ASIC, and whether Provide failed to comply with the Notice, was not in contest nor was it particularly relevant. As noted above, ASIC's current entitlement to production of the documents arises out of the Production Order itself; it is this obligation to produce documents which is the subject of the special leave application and which risks being rendered nugatory in the absence of a stay.

Balance of convenience 24 ASIC submitted that Provide has a history of delay and obfuscation, through which it has treated, and continues to treat, the requirements of a statutory notice as contingent upon confirmation or the further order by the Court. ASIC submits that this stay application is another attempt by Provide to further delay its compliance, and evinces an intention to delay the exercise of ASIC's investigative power. ASIC also noted Provide's attempt, after its unsuccessful appeal to the Full Court, to seek a permanent injunction restraining ASIC's ongoing investigation of its conduct which was summarily dismissed for a lack of reasonable prospects of success: Provide Nominees Pty Ltd v Australian Securities and Investments Commission [2024] FCA 303 (Rofe J). 25 While I accept ASIC has suffered prejudice as a result of the delay caused to its investigations into Provide's conduct, I do not accept ASIC's submission that Provide's history of delay and obfuscation disentitles Provide to the relief which it seeks in this application. 26 I accept Provide's submission that any stay is most likely to operate from 3 April 2024 until the determination of the special leave application on 6 June 2024, a matter of some two months. In accordance with the High Court Rules 2004 (Cth), the High Court (2024 Sittings) Rules 2023 (Cth) and the High Court's Revised Special Leave Process published on 17 November 2023, it can be expected that: (a) ASIC's response will be required to be filed and served by 16 April 2024, being 21 days after the service of Provide's special leave application; (b) any reply from Provide would need to be filed and served by 23 April 2024, being seven days after ASIC's response would be due; (c) Provide's special leave application would be referred to the Justices of the High Court at the commencement of the sitting period commencing on 6 May 2024, being the sitting period immediately after any reply from Provide would be filed and served; (d) the Justices of the High Court would meet on the first Monday of the following sitting period to consider the application, being 3 June 2024; and (e) the High Court would publish its decision with respect to Provide's special leave application on the afternoon of the first Thursday of that sitting period, being 6 June 2024. 27 It is not apparent what additional prejudice ASIC will suffer by a further two month delay in getting the documents the subject of the Production Order, should special leave be refused by the High Court. 28 Additionally, in light of ASIC's concerns regarding what it characterises as another attempt by Provide to forestall its compliance with the Notice, Provide has, through its counsel, provided an undertaking to the Court that if its application for special leave to appeal to the High Court is refused, it will comply with the Production Order by the close of business on the business day subsequent to the day on which the High Court publishes its decision. In the context of the relatively short period until when the High Court can be expected to publish its decision regarding Provide's special leave application, I consider that Provide's undertaking goes some way in addressing ASIC's concerns regarding Provide's ongoing efforts to further forestall its compliance. 29 For the reasons outlined above, in my view, the balance of convenience is weighted heavily in favour of Provide, including because the failure to grant the stay may result in rendering Provide's application for special leave and, if successful, an appeal, inutile. The balance of convenience favours the granting of a stay so as to avoid adverse collateral consequences in the event of special leave to appeal being granted: Obeid at [12].

Prospects of success 30 In my view, there is not an insubstantial prospect that special leave will be granted in the circumstances of this case. The ultimate purpose, which must be kept in mind, is to serve the interests of justice including by protecting the potential for the exercise of appellant jurisdiction: Cessnock at [8]. The special leave application raises questions of law about the power of the Court to enquire into a case under s 70 of the ASIC Act which are nuanced and not free from difficulty. I do not propose to discuss these nuances in detail, as they are outlined sufficiently in the Primary Judgement and Appeal Judgment. In these circumstances, it suffices to say that it cannot be said that Provide's prospects of obtaining special leave are insubstantial. 31 I also accept Provide's submission that the special leave application raises a question of law of public importance in that: (a) s 70 of the ASIC Act is a significant provision which can give rise to serious consequences in its application. In particular, if s 70 applies, ASIC can seek an order from the Court requiring a person to comply with a requirement made by ASIC under Part 3 of the ASIC Act. If an order made under s 70(3) is not complied with, the person may be liable for contempt; (b) the resolution of the construction issue raised by the special leave application has broader implications than the immediate statutory context of s 70, given that the provisions in s 70 are substantially replicated in a number of other statutory contexts including s 289 of the Superannuation Industry (Supervision) Act 1993 (Cth), s 62AB of the Banking Act 1959 (Cth), s 73A of the Taxation Administration Act 1997 (Vic) and s 27 of the Casino Control Act 1991 (Vic). 32 For the above reasons I am satisfied that special or exceptional circumstances exist, and the balance of convenience favours the granting of the stay order sought by Provide.

Disposition 33 On 3 April 2024, I granted the orders sought by Provide in its interlocutory application dated 28 March 2024. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anderson.

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