Australian Securities & Investments Commission v Donald

Federal Court of Australia|2002-09-20|Before: Merkel J

REASONS FOR JUDGMENT 1 Towards the end of trading on 29 May 1998 the respondent, a dealer's representative with ABN AMRO Equities Australia Ltd, procured the price of Burswood shares on the Australian Stock Exchange Automated Trading System to increase to 95c, which was 6.7% above the price previously reached on that day. The trading that caused the price increase was not genuine and resulted in the applicant ("ASIC") imposing a banning order on the respondent on 20 July 1999 pursuant to ss 829 and 830 of the Corporations Law. The order prohibited the respondent from doing an act as a representative of a dealer or an investment adviser for a period of four years. 2 ASIC'S banning order was made in reliance upon s 829 which, relevantly, provides that ASIC may make a banning order against a natural person if: "… (d) he or she contravenes a securities law; … (f) the Commission has reason to believe that he or she has not performed efficiently, honestly and fairly the duties of; (i) a representative of a dealer; … (g) the Commission has reason to believe that he or she will not perform efficiently, honestly and fairly the duties of; (i) a representative of a dealer; …" 3 The contravention of "a securities law" relied upon by ASIC was the contravention of s 998(1) of the Corporations Law, which provides: "A person shall not create, or do anything that is intended or likely to create, a false or misleading appearance of active trading in any securities on a stock market or a false or misleading appearance with respect to the market for, or the price of, any securities." 4 Section 830(1) provides that where the Commission is empowered to make a banning order against a person the Commission may, by written order, prohibit the person, either permanently or for a specified period, from doing an act as a representative of a dealer. 5 The respondent applied to the Administrative Appeals Tribunal ("the AAT") to review the decision by ASIC to make the banning order and subsequently appealed to the Court against the decision of the AAT, which had substituted a banning order for two years for ASIC's banning order for four years. The Court set aside the decision of the AAT and ordered that the application of the respondent for the review of ASIC's decision be remitted to a differently constituted AAT for rehearing according to law: see Donald v Australian Securities and Investment Commission (2000) 104 FCR 126. The issues arising on the previous AAT review and appeal are not relevant to the issues arising in the present proceeding. 6 On 20 November 2000 the AAT granted a stay of ASIC's banning order pending the hearing and determination of the application for the review of ASIC's decision by the AAT. As a consequence of the stay order the respondent was able to obtain a position with BNP in marketing and research. 7 On 2 July 2001 the AAT set aside ASIC's banning order and substituted a decision that: "(1) a banning order be made prohibiting the applicant from doing any act as a dealer's representative from 20 July, 1999 until 22 November 2000; and (2) the Commission accept a written undertaking from the applicant to the effect that the applicant: (a) enrol in and complete the Business and Finance Practice Industry and/or the Financial Markets Law, Regulation and Compliance courses offered by the Securities Institute; (b) co-operate with Australian Securities Exchange and the respondent in the preparation and presentation of seminars which will consider issues of law, practice and procedure relevant to acting as a Designated Trading Representative; (c) undertake for a period of three and a half years from the date of the undertaking not to create, or do anything that is likely to create, a false or misleading appearance of active trading in any securities on a stock market or a false or misleading appearance with respect to the market for, or the price of, any securities; and (d) during the term of the undertaking, give a copy of the undertaking to all licensed dealers by whom he is employed." 8 ASIC has appealed to the Court, on a question of law, from the decision of the AAT. ASIC's appeal was limited to two issues. The first issue is whether the AAT lacked the power to decide that ASIC was to accept the written undertaking set out in cl 2 of the decision. The second issue is whether the decision to impose a banning order for approximately 16 months was so manifestly inadequate that no reasonable tribunal could have arrived at that decision without erring in law. 9 In order to understand ASIC's lack of power argument it is necessary to briefly outline the statutory scheme concerning the powers of the AAT on a review of a decision by ASIC made pursuant to ss 829 and 830(1) of the Corporations Law. Section 1317B of the Corporations Law provides that an application may be made to the AAT for a review of a decision made by ASIC under the Corporations Law. Section 1317C excludes certain decisions from review but is not relevant for present purposes. 10 Section 25(1) of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act") provides for the AAT to review decisions made in the exercise of powers conferred by an enactment. Section 25(4) provides that the AAT has power to review any decision in respect of which an application is made to it under any enactment. An enactment includes, inter alia, an Act: see s 3(1) of the AAT Act. 11 The review by the AAT is governed by s 43 of the AAT Act which, relevantly, provides: "(1) For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing: (a) affirming the decision under review; (b) varying the decision under review; or (c) setting aside the decision under review and: (i) making a decision in substitution for the decision so set aside; or (ii) remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal. … (6) A decision of a person as varied by the Tribunal or a decision made by the Tribunal in substitution for the decision of a person, shall, for all purposes (other than the purposes of applications to the Tribunal for a review or of appeals in accordance with section 44), be deemed to be a decision of that person and, upon the coming into operation of the decision of the Tribunal, unless the Tribunal otherwise orders, has effect, or shall be deemed to have had effect, on and from the day on which the decision under review has or had effect." 12 It is now well established that, when reviewing an administrative decision of ASIC under s 43(1) the AAT stands in its place, is empowered to exercise all of the relevant powers and discretions of ASIC for the purpose of reviewing the decision under review and hears the matter de novo in the light of the evidence and material placed before it: see Otter Gold Mines Ltd v Australian Securities Commission (1997) 26 AAR 99 at 106. 13 As was said by Bowen CJ and Deane J in Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 589: "The question for the determination of the Tribunal is not whether the decision which the decision-maker made was the correct or preferable one on the material before him. The question for the determination for the Tribunal is whether that decision was the correct or preferable one on the material before the Tribunal." 14 Plainly the AAT, in reviewing the decision of ASIC made pursuant to ss 829 and 830 of the Corporations Law, was empowered to exercise all of the powers and discretions of ASIC to make a banning order under s 830(1). It was also empowered to make an order under s 831(1) which provides: "An order made against a person under subsection 830(1) may include a provision that permits the person, subject to such conditions (if any) as are specified to do, or to do in specified circumstances, specified acts that the order would otherwise prohibit the person from doing".

15 However, ASIC contends that the AAT is not empowered to exercise the power of the Commission under s 93AA of the Australian Securities and Investments Commission Act 1989 (Cth) ("the ASIC Act"), which provided:

"(1) The Commission may accept a written undertaking given by a person in connection with a matter in relation to which the Commission has a function or power under this Act. (2) The person may withdraw or vary the undertaking at any time, but only when the consent of the Commission. (3) If the Commission considers that the person who gave the undertaking has breached any of its terms, the Commission 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."

16 Section 244(2) of the ASIC Act provided that applications may be made to the AAT for a review of certain decisions made by ASIC under that Act but the reviewable decisions did not include a decision made under s 93AA. ASIC contended that the AAT was not empowered to exercise the powers of the Commission under s 93AA because it did not have the power to review a decision made by ASIC under that section. Put simply, the argument was that the AAT was not empowered to do indirectly that which it could not do directly.

17 The respondent disputes ASIC's contention and contends that s 43(1) of the AAT Act empowers the AAT to exercise all of the powers and discretions conferred by "any relevant enactment" on ASIC for the purpose of reviewing a reviewable decision. The respondent then contends that, as the power conferred under s 93AA is a power and discretion conferred on ASIC, the AAT is entitled to exercise that power pursuant to s 43(1) provided that it is doing so for the purpose of reviewing ASIC'S reviewable decision. The respondent claims that the AAT's exercise of ASIC's powers and discretions under s 93AA is for the purpose of reviewing ASIC's reviewable decision.

18 A substantial body of authority supports the respondent's submissions in relation to s 43(1) of the AAT Act. In Re Control Investment Pty Ltd and Australian Broadcasting Tribunal (No 2) (1981) 3 ALD 88 at 92 Davies J observed that s 43(1) confers upon the AAT

"…an amplitude of powers so that the Tribunal may exercise, if it is convenient and useful to do so, not only the decision-making power upon which the decision-maker relied, but all relevant powers and discretions which were conferred by the enactment upon the decision-maker. The provision extends the authority of the Tribunal so that it may more adequately exercise its function of reviewing on the merits the subject decision."

19 In Fletcher v Commissioner of Taxation (1998) 19 FCR 442 ("Fletcher") at 452 the Full Court stated:

"As a matter of principle, it must be correct, as submitted on behalf of applicants, that the powers and discretions referred to by s 43(1) are the powers and discretions vested in the original decision-maker for the purposes of making the decision under review. They do not include any powers and discretions which may be vested in the decision-maker for some other purpose."

20 The Full Court also observed (at 453) that the AAT's powers are not confined to those that were in fact exercised by the primary decision-maker but rather, the AAT is entitled to exercise any power and discretion which the decision-maker was entitled to exercise in relation to the decision under review.

21 In Secretary, Department of Social Security v Hodgson (1992) 37 FCR 32 at 39-40 Hill J observed:

"The language of s 43 is quite clear and unambiguous. It empowers the Tribunal to exercise all the powers and discretions conferred upon the original decision maker provided it does so for the purpose of reviewing a decision. Provided the necessary purpose is present, the power conferred upon the Tribunal is not otherwise limited. It is not necessary or permissible to put a gloss upon s 43 that would permit the Tribunal to exercise the decision-maker's powers and discretions only when those powers or discretions are necessarily interdependent with the decision under review or where the power or discretion to be exercised by the Tribunal is necessarily involved in the making of the decision under review. Of course there must be an association between the power to be exercised by the Tribunal and the decision under review, but that association is to be found in the restriction of the grant of power in s 43(1) to the purpose of the Tribunal's review. The test is one of relevance rather than dependence. Where the exercise of a power or discretion is relevant to the making of the decision under review then, if requested, the Tribunal may exercise the discretion."

22 In Comcare v Burton (1998) 50 ALD 846 ("Comcare v Burton") Finn J decided that the AAT, on a review of a decision of the primary decision-maker not to pay for taxi fares as part of the compensation payable for a work related injury under s 16 of the Safety, Rehabilitation and Compensation Act 1988 (Cth) ("SRC Act"), was not entitled to exercise the primary decision-maker's as yet unexercised power to determine the compensation payable for permanent disability under s 24 of the SRC Act. In explaining why the AAT erred in concluding that, because it had jurisdiction in respect of one aspect of the claim for compensation it could consider the whole question of compensation under the SRC Act, Finn J at 848 and 851-852 drew attention to the "purposive limitation" on the power conferred by s 43(1). His Honour held that the AAT was not entitled to exercise the primary decision maker's power under s 24 of the SRC Act for the purpose of reviewing a decision made under s 16 of the SRC Act because the exercise of the s 24 power is not for the purpose of reviewing the decision made in the exercise of the s 16 power.

23 In the present case it is common ground that the powers and discretions available to ASIC in relation to the respondent included:

· the power to make a banning order for such period as it determined to be appropriate under s 830;

· the power under s 831(1) to include provisions in the banning order that suspended or limited the operation of the order on certain conditions or in specified circumstances; and

· the power to accept a written undertaking under s 93AA of the ASIC Act.

24 It is also common ground between the parties that, although the banning order has the consequence of excluding an individual from acting as a representative of a dealer or investment adviser, the making of such an order is not designed to punish or impose a penalty on that person: see Australian Securities Commission v Kippe (1996) 67 FCR 499 ("Kippe") at 508. As the Full Court observed in Kippe at 508, the banning order is both preventive and protective by nature; it is preventive in that it removes a perceived threat to the public interest and to public confidence in the securities and futures industry by removing the banned person from participation therein and it is protective in that it protects the operation of that industry by moulding the remedy to the particular circumstances of the individual case under consideration.

25 The preventive and protective aspects of a banning order are plainly relevant to the exercise of power by ASIC, under ss 830 and 831 of the Corporations Law and the exercise of power by it under s 93AA of the ASIC Act. Indeed, in the present case ASIC determined to accept an undertaking under s 93AA from the trader with whom the respondent dealt in respect of the relevant trades in Burswood shares, in lieu of making a banning order against that person.

26 There is no reason for taking a narrow view of the powers conferred on the AAT under s 43(1) of the AAT Act. ASIC was not able to point to any public interest or statutory purpose that might be served by reading into s 43(1) a limitation that the AAT's powers on review exclude the exercise of any power of the original decision maker which cannot be reviewed by the AAT. I cannot conceive of any reason why the same range of powers and discretions available to ASIC should not be available to the AAT on a review, on the material before it, of a banning order made by ASIC, provided that the exercise of those powers and discretions was for the purpose of reviewing the decision to make the banning order. It is not to the point that ASIC may have elected not to exercise one or more of these powers: see Fletcher at 453.

27 ASIC has relied solely upon the absence of power in the AAT to review a decision by ASIC under s 93AA of the ASIC Act. It is, however, more accurate to state that it relies upon the absence of power in the AAT to review a decision by ASIC to refuse to accept a written undertaking under s 93AA. However, it does not follow that the absence of a power in the AAT to review a decision by ASIC to refuse to accept an undertaking under s 93AA deprives the AAT of the power to decide that ASIC accept an undertaking when it is proposing to exercise the power for the purpose of reviewing a decision of ASIC that is reviewable.

28 The only decision which offers some support to ASIC's contentions is the decision of the Administrative Appeals Tribunal in Re BHP Petroleum Pty Ltd v Minister for Resources (1993) 30 ALD 173 ("BHP Petroleum Pty Ltd"). In that case the Tribunal, with O'Connor J presiding, stated (at 178) that Fletcher is authority for the proposition that:

"The tribunal stands in the shoes of the decision-maker only in so far as the decision maker exercises powers which are themselves subject to review."

29 In my view Fletcher does not stand as authority for the proposition stated by the AAT. As explained above, the only limitation in s 43(1) is a purposive limitation. Consequently, as was held in Comcare v Burton, the AAT does not have power to exercise the powers of the decision-maker that are only exercisable in relation to another decision which is not under review. The reason, however, for the absence of power in such a case is that the exercise of power by the AAT in relation to the other decision is not an exercise of power for the purpose of reviewing the decision that is under review.

30 Further, the statutory provisions relevant to the review in BHP Petroleum Pty Ltd are quite different to those under consideration in the present case. BHP Petroleum Pty Ltd concerned s 20 of the Petroleum Resource Rent Tax Assessment Act 1987 (Cth) ("Petroleum Act") which enables the Minister to grant a certificate combining two or more projects as a single petroleum project. A certificate under s 20(1) of the Petroleum Act, enabling the combination of two or more projects, may be applied for, in which case certain statutory requirements must be met, or it may be issued by the Minister of his own motion in which case those statutory requirements need not be met. The AAT decided (at 177-178) that it was not open to the AAT to exercise the Minister's alternative power to act of his own motion in a review of the decision by the Minister in respect of an application for a combination certificate pursuant to s 20(1) of the Petroleum Act. A decision on an application was subject to review but a decision made by the Minister of his own motion was not subject to review. It may well have been that the exercise of the Minister's power to act of his own motion was not available to the AAT if it was not an exercise of power for the purpose of reviewing a decision of the Minister on an application for a certificate under s 20(1), which was subject to different statutory requirements.

31 The AAT's decision went on appeal to a Full Court in BHP Petroleum (Timor Sea) Pty Ltd v Minister for Resources (1994) 32 ALD 17 but it was unnecessary for the Full Court to decide the power point. However, Jenkinson J (at 21) observed:

"It was submitted for the applicants that, on review by the tribunal of the minister's decision refusing the four companies' application, the minister's power to issue a certificate of his mere motion (said to be conferred by the words 'or otherwise' in s 20(1)) was available for exercise by the tribunal. Because s 20(12) affords no right to apply for a review of a decision made by the minister in exercise of that power, it is perhaps difficult to accept that submission. Like Beaumont J, I prefer to express no conclusion about it."

32 In BHP Petroleum Pty Ltd and in Comcare v Burton, there were two separate decisions that were able to be made under the same Act by the same decision-maker with different statutory constraints operating in respect of each decision. The present situation is quite different as ASIC's power to accept an undertaking under s 93AA is one of the powers and discretions it has in relation to any matter where it is required to determine whether it will impose a banning order under s 830. The only pre-condition to the operation of ASIC's power under s 93AA is that the undertaking is to be "in connection with a matter in relation to which the Commission has a function or power" under the ASIC Act. It is not in dispute that the exercise of power under s 830 falls within that description. Accordingly, there is no basis for concluding that s 93AA falls into a separate statutory stream or is subject to different statutory constraints or purposes to the exercise of power under ss 830-831 of the Corporations Law. The relevant powers under the ASIC Act and the Corporations Law are interrelated and are to be exercised in a matter such as the present for the purposes identified by the Full Court in Kippe. Thus, ASIC's reliance on BHP Petroleum Pty Ltd and Comcare v Burton is misplaced.

33 For the above reasons, I have concluded that the AAT did have power to make its order that an undertaking be accepted under s 93AA as that power was exercised by it, standing in the shoes of ASIC, for the purpose of the review of ASIC's decision to make a banning order, which was a reviewable decision.

34 ASIC relied on two grounds of review in relation to penalty. The first was that the AAT failed to take into account a relevant consideration, namely, the need to protect the community against conduct inimical to the integrity of the share market. The submission is unsustainable as the AAT took into account the consideration referred to by ASIC. Indeed, it was that consideration that led it to determine that it was appropriate that an undertaking under s 93AA be accepted because it would be protective of the community.

35 The other ground relied upon by ASIC in relation to penalty was that the decision was so unreasonable that no reasonable Tribunal could have so decided. In my view that submission is also unsustainable. ASIC accepted that a two year ban without an undertaking could not warrant the Court's intervention but sought to argue that a sixteen month ban with an undertaking was so unreasonable that it would warrant the Court's intervention on the ground of Wednesbury unreasonableness. In my view ASIC's complaints in relation to penalty relate to the weight the Tribunal may have given certain matters and do not attract Wednesbury unreasonableness. Although ASIC was critical of the AAT for not imposing a more substantial banning order, I am satisfied that it was open to the AAT to reduce the period of the ban, as it did, because of its view that the respondent's employment record since the stay of the banning order and compliance by him with his written undertaking were sufficient protection of the public, notwithstanding the respondent's apparent failure to appreciate the nature of his contravening conduct. The AAT's decision was one that was reasonably open to it on the basis of the findings of fact it made.

36 For the above reasons ASIC's application is to be dismissed with costs.

I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel.

Associate: Dated: 19 September 2002 Counsel for the Applicant: Mr C Maxwell QC

Solicitor for the Applicant: Australian Securities and Investments Commission

Counsel for the Respondent: Mr N Moshinsky and Mr P Murley

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