Carter v Australian Securities & Investments Commission

2. THE STATUTE 6 Sections 206A of the Act relevantly provides: (1) A person who is disqualified from managing corporations under this Part commits an offence if: (a) they make, or participate in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or (b) they exercise the capacity to affect significantly the corporation's financial standing; or (c) they communicate instructions or wishes (other than advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation) to the directors of the corporation: (i) knowing that the directors are accustomed to act in accordance with the person's instructions or wishes; or (ii) intending that the directors will act in accordance with those instructions or wishes. (1A) For an offence based on subsection (1), strict liability applies to the circumstance, that the person is disqualified from managing corporations under this Part. … (2) A person ceases to be a director, alternate director or a secretary of a company if: (a) the person becomes disqualified from managing corporations under this Part; and (b) they are not given permission to manage the corporation under section 206F or 206G. 7 The penalty for contravention of s 206A(1) is 50 penalty units or imprisonment for one year, or both: Item 49 of Schedule 3 of the Act. 8 Section 206F relevantly provides: Power to disqualify (1) ASIC may disqualify a person from managing corporations for up to 5 years if: (a) within 7 years immediately before ASIC gives a notice under paragraph (b)(i): (i) the person has been an officer of 2 or more corporations; and (ii) while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) (including that subsection as applied by section 526‑35 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006) about the corporation's inability to pay its debts; and (b) ASIC has given the person: (i) a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and (ii) an opportunity to be heard on the question; and (c) ASIC is satisfied that the disqualification is justified. … Notice of disqualification (3) If ASIC disqualifies a person from managing corporations under this section, ASIC must serve a notice on the person advising them of the disqualification. The notice must be in prescribed form. Start of disqualification (4) The disqualification takes effect from the time when a notice referred to in subsection (3) is served on the person.

3. DECISION OF THE PRIMARY JUDGE 9 The learned primary judge found that service of the kind required by s 206F(3) had been effected, and that ASIC was entitled to proceed on the basis that Mr Carter had been disqualified from managing corporations under s 206F. His reasoning may be summarised as follows: (1) Section 206F(3) requires in mandatory terms that a Notice in the prescribed form be served 'on the person'. (2) Establishing the date from which the disqualification takes effect is a significant matter because s 206A(1) provides that a person who is disqualified from managing corporations commits an offence if, in effect, they act in substantial disregard of the disqualification. The offence is one of strict liability: s 206A(1A). The strict liability nature of the offence means that it is not open to a disqualified person to prove a lack of knowledge by way of defence. (3) The disqualification must be formally notified by ASIC in a manner that satisfies the legislative language. It is not enough that the person comes to know of the disqualification in an informal or indirect way. (4) Section 206F(3) uses the expression 'serve...on the person'. It is a requirement for personal service. Personal service requires the document in question to come to the actual attention of the person required to be served. The express requirement in s 206F(3) for a Notice "advising" the relevant person of the disqualification supports the conclusion that it must come to the actual attention of the person to be served. (5) The manifest purpose of the service requirement, in the context of s 206A, is that the disqualification does not commence unless and until there is no real doubt as to knowledge on the part of the person of the disqualification by ASIC. The provision as to service also provides clarity as to the operative date on which the person ceases to be a director. When the disqualification takes effect the person ceases to be a director by operation of s 206A(2). There should be no real doubt as to whether third parties are entitled to deal with a person on the basis that they are a director. (6) There may be reasons why ASIC determines that the disqualification should not occur with immediate effect. The terms of s 206F(3) mean that if a decision to disqualify is made, it will not take effect unless and until ASIC itself takes steps to serve the Notice. (7) Having regard to these matters, the primary judge concluded: [26] These are all considerations that distinguish service under s 206F(3) from other cases where the courts have held that proof of actual notice is sufficient to satisfy a requirement for service even if personal service has not been effected. Accordingly, I accept the submission that s 206F(3) requires that the service of the notice be effected by ASIC. It is not enough that the disqualification becomes known to the relevant person in some indirect way without the involvement of ASIC. [27] Therefore, if it is the case that ASIC by its act brought the Notice to the actual attention of Mr Carter then the statutory requirement for the commencement of the disqualification has been met. 10 The primary judge then turned to the facts of the present case. He noted that ASIC delivered to Mr Christensen the Letter, from ASIC addressed to Mr Carter personally and signed by the ASIC delegate who made the decision to disqualify, and the Notice. Mr Christensen then forwarded to Mr Carter a copy of the Letter and the Notice. The primary judge made the following findings: [29] ASIC delivered to Mr Christensen by means of an electronic communication, the Letter (from ASIC addressed to Mr Carter personally and signed by the ASIC delegate who made the decision to disqualify) and the Notice. [30] Mr Christensen then forwarded to Mr Carter a copy of the Letter and Notice. The covering email said that the Notice was 'to be served on Mr Carter'. Therefore, when Mr Carter received the forwarded Letter and Notice he knew from the terms of the email from ASIC to Mr Christensen and from the terms of the Letter that ASIC was taking steps to serve him with the Notice. [31] In those circumstances, when he read the Notice it was personally served. Completion of service by ASIC bringing the document to the actual attention of Mr Carter required it to know that fact. Put another way, service by ASIC could not be effected without ASIC knowing that the required steps had been taken. So, once ASIC knew that Mr Carter had read the Notice in the context of having received the Letter, notice of disqualification in the prescribed form was served on Mr Carter personally by ASIC for the purposes of s 206F(3). [32] This is not a case where the notice was simply provided by ASIC to Mr Christensen who then forwarded it to his client by way of communication between solicitor and client in a manner that might be said not to involve any act by ASIC in effecting service. Nor is it a case where Mr Carter became aware of the fact of the disqualification, but never received the notice. [33] Rather, the communication by Mr Christensen to Mr Carter of a copy of the Letter (being a signed letter addressed to him personally from ASIC and which stated that the Notice was enclosed by way of service) as well as a copy of the Notice followed by his communication with ASIC completed service by ASIC on Mr Carter. The attempt by Mr Carter in his affidavit to characterise the provision of the Letter to him by Mr Christensen as being for the information of Mr Carter does not alter its character as a communication by ASIC addressed to Mr Carter. The information in the forwarded email communicated to Mr Carter included both the Letter addressed to him and the Notice. [34] It is true that ASIC initially communicated with Mr Christensen in a manner that may have indicated that service on Mr Carter was to be arranged. The letter to Mr Christensen was to that effect. However, that did not mean that personal service could not be effected by the delivery of the Notice to Mr Carter personally in the manner that occurred. The way in which Mr Carter received the Letter and the Notice would not have left any real doubt that those communications were by ASIC to him personally. Contrary to the characterisation by Mr Carter in his affidavit that the Decision Related Documents had been sent to him for his information, there was no suggestion from Mr Christensen that he was forwarding the Letter and the Notice to Mr Carter by way of information only. The email from ASIC to Mr Christensen (forwarded to Mr Carter) said only that the Decision Related Documents 'are to be served on Mr Carter, for your reference'. That communication was not sufficient to denude the Letter (signed for ASIC and addressed to Mr Carter) of its character as a communication to him by ASIC when he received it. His contemporaneous communications with ASIC on 30 and 31 July 2017 show that was the manner in which he treated the Letter and the Notice. Therefore, upon receiving and reading the Letter and Notice and the communication of that fact to ASIC, Mr Carter had been served by ASIC with notice of the disqualification. [35] The above conclusion does not depend upon any particular authority on the part of Mr Christensen to receive communications. It depends upon the receipt of the Letter by Mr Carter and the communication to ASIC on 31 July 2017 in unequivocal terms that he had thoroughly read the documents (which included the Letter and the Notice).

4.1 The submissions 11 On appeal, Mr Carter submits that the facts found by the primary judge in the present case establish that ASIC did no more than provide copies of documents to Mr Carter's solicitors for information, at the same time stating that they intended separately to serve him. This does not constitute an act of service falling within the proper construction of the words "ASIC must serve" in s 206F(3) of the Act. Whilst the primary judge correctly considered at [21] that the requirement for service under s 206F meant personal service, the appellant submits the primary judge incorrectly found that personal service is met if the document in question comes to the actual attention of the person required to be served, which is the wrong question. The statute casts a burden on ASIC to serve, and unless Mr Carter consents or waives or abandons that burden, he is entitled to have that burden discharged. This submission is supported by the statutory context, one aspect of which is that by s 206F(4), the period of disqualification does not commence until service takes place in accordance with s 206F(3). Another is that s 206F(1) stipulates that it is a strict liability offence for a person who is disqualified to continue to manage a corporation, which means a broad interpretation of s 206F could place people in jeopardy of not knowing whether they are disqualified or not. Mr Carter submits that the Letter did not purport to constitute "service" and did not suggest that the provision of information to the Mr Carter's solicitors was service. To the contrary, the letter included the statement that "The order will need to be served personally on your client and I have asked the case officer to contact you to make suitable arrangements. In the meantime, I enclose for your information a copy of my letter to your our client and the enclosures". 12 ASIC summarises the legal position of Mr Carter as involving the proposition that as a matter of law, s 206F(3) is not satisfied in circumstances where a director actually receives the Notice and ASIC knows that to be the case, unless the director receives the Notice directly from ASIC (or an agent of the director authorised to receive it on his or her behalf). ASIC contends that the primary judge correctly identified three conditions which are sufficient to satisfy the statutory requirement in s 206F(3): first, that ASIC must take steps, or do an act, to serve the notice; secondly, that the notice must come to the actual attention of the person to be disqualified; and thirdly, that ASIC must know that the person has received the Notice. It submits that these conditions meet the legislative requirements of s206F(3) in the context in which it appears.

4.2 Consideration 13 The primary judge found, and no party challenges, that "service" within s 206F(3) means "personal service". 14 In Capper v Thorpe [1998] HCA 24; 194 CLR 342, the High Court (Gaudron, McHugh, Kirby, Hayne and Callinan JJ) said at [21]: ...Where a statutory provision, such as s 6, requires a document to be "served", the statutory command is ordinarily perceived as requiring the contents of the document to be delivered to the person to be served. However, unless the statute says so, a document may be "served" although it is not personally served. Thus, it may be served by posting it to the person required to be served. In many statutory contexts, a document may also be "served" when it is brought to the notice of the person who has to be served. At all events, it will be "served" in such contexts if the efforts of the person who is required to serve the document have resulted in the person to be served becoming aware of the contents of the document. Thus, in Ex parte Portingell, the English Court of Appeal held that a notice of objection had been "served on" the applicant for renewal of a licence when it was handed to a boy of 14 on the licensed premises and the magistrates inferred that "the notice had in fact come to the hands of the applicant". 15 The reference in that passage, which is relied upon by ASIC, that in many statutory contexts a document may be 'served' when it is brought to the notice of the person to be served and in such contexts it will be 'served' 'if the efforts of the person who is required to serve the document have resulted in the person to be served becoming aware of the contents of the document' is only the starting point for analysis. In the present statutory context it is clear the Notice required to be served could not be served merely by it being brought to the notice of Mr Carter. As noted neither party disputes, nor did the primary judge reject, that personal service of the documents by ASIC was required. 16 However that Capper might apply only by analogy, rather than be binding on this Court, in itself is not fatal to ASIC's case. Proof of personal service ordinarily will be established if a party to be served expressly acknowledges that he or she has both received a document required to be served and has become aware of its terms. So too will a document be personally served if it is served on a solicitor who has authority to receive it on his or her behalf. In Howship Holdings Pty Ltd v Leslie (No 2) [1996] NSWSC 314; 41 NSWLR 542 at 544, Young J addressed the question of service in the context of s 459G of the Act: Section 459G itself does not deal with what is service. The ordinary meaning of 'service' is personal service, and personal service merely means that the document in question must come to the notice of the person for whom it is intended. The means by which that person obtains the document are usually immaterial. This is clear in cases that have been considered good law over the centuries, including Hope v Hope (1854) 4 De GM & G 328 at 341-345; 43 ER 534 at 539-540; R v Heron; Ex parte Mulder (1884) 10 VLR 314 at 315; Pino v Prosser [1967] VR 835 at 838. Some of those cases were complicated by the requirement in the former statutes that a person serving initiating process had to endorse the initiating process, but the principle is clear from them. If this were not so, one would get the absurd situation referred to by McInerney J in Pino v Prosser (at 837), that the conclusion would be one which is: "… remarkable to the point of seeming absurdity, in that the defendant who, on his own affidavit admits that he received the writ … should be held not to have been served." 17 This approach, which has been referred to as the "effective informal service rule" has been applied in many cases; see Woodgate v Garard Pty Ltd [2010] NSWSC 508; 78 ACSR 468 at [42] (Palmer J) (and the many cases cited there), TCL Airconditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd [2019] FCA 257; 369 ALR 192 at [41] (McKerracher J). 18 Given the terms of the primary judge's reasoning, it is not open to suggest that his Honour was unmindful of the specific requirement in 206F(3) that ASIC serve the Notice on Mr Carter. 19 To the contrary it is clear that the primary judge held, consistently with Capper, that ASIC's efforts as the person required to serve the Notice ultimately resulted (albeit via an intermediary) in Mr Carter becoming aware of its contents. It was by that means ASIC served both the Letter and the Notice. There is nothing in any point regarding what was served being only copies: each document so served was an electronically signed duplicate of the original. Mr Carter's acknowledgement of having received those documents and of having a full understanding of their import was communicated to ASIC by his e-mail of 31 July 2017. ASIC was entitled to rely on that acknowledgment as fixing the date of their service. 20 Although the language of [31] in which his Honour sought to "put [that proposition] another way" might perhaps have been unhelpfully expressed, we would discern nothing to the contrary in those observations. The dispositive question is not whether his Honour was correct to have concluded that personal service of the Notice had been established (which on the facts outlined must be accepted) but whether in this particular legislative context there is a further requirement inherent in the language of s 206F(3) as would have necessitated ASIC to have served that document directly (and not in reliance on any intermediary). If so that would exclude the principle stated by the High Court in Capper from applying. Counsel for Mr Carter submits that is the case. 21 The principles of statutory construction are not in dispute. As Kiefel CJ and Nettle and Gordon JJ said in SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; 262 CLR 362 at [14]: The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected. 22 The crux of the present case is the construction to be given to the words "ASIC must serve a notice on the person advising them of the disqualification" within s 206F(3). Section 206F(4) provides that disqualification takes effect from the time when a notice referred to in (3) is served on the person. Subsections 206A(1) and (1A) provide for criminal penalties in the event of a contravention of the disqualification. 23 The relevant context is accordingly that the act of service not only provides the means by which the disqualification is brought to the attention of a director, but also the time from which the director is exposed to criminal penalties for acting in contravention of the disqualification. It may be inferred that the statutory purpose underlying the words "ASIC must serve a notice on the person" is to provide a measure of certainty, both for the director and also ASIC, as to the date from when the disqualification takes effect. However we reject that that purpose is only capable of being met by giving a construction to the statute requiring that ASIC, by itself or its agents, must alone bring about service. That no doubt will be the usual practice but what the Act requires as a precondition for a person becoming liable to penal consequences is clarity as to when service has been effected by ASIC. We see no reason why the principles in SZTAL would require the statute to be construed so as to exclude the possibility adverted to in Capper or the application of what has been dubbed the effective informal service rule. 24 On the facts of this case, the decision was made by ASIC to disqualify Mr Carter on 20 July 2017. On the same day ASIC sent its email to Mr Christensen. By 23 July 2017 Mr Christensen sent the Decision Related Documents to Mr Carter. On 30 July 2017 Mr Carter acknowledged receipt of those documents and said that he had "accordingly resigned all Directorships in respect of the orders". From this it may be taken to be established that by that date the Decision Related Documents had come to the attention of Mr Carter. On 31 July 2017 he further communicated with ASIC by email confirming that he "had thoroughly read the documents sent". In objective terms, in our view service by ASIC had been established by 30 July 2017. There could be no unfairness in ASIC proving service as at 31 July 2017 and treating that date as the date from which Mr Carter was served. 25 Accordingly the primary judge did not err in holding that ASIC had personally served Mr Carter with the Notice on 31 July 2017. 26 Mr Carter's proposition that ASIC should be required to re-serve an identical Notice to that he had advised ASIC on 31 July 2017 that he had received, had understood and was acting upon is without merit. 27 In light of the foregoing, in our view the following orders and declaration should be made: (1) The appeal be dismissed; (2) The appellant pay the respondent's costs of the appeal; (3) The Court declares that service of the decision dated 20 July 2017 to disqualify Rodney Charles Carter from managing corporations under s 206F(1) of the Corporations Act 2001 (Cth), was effected on 31 July 2017. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Greenwood, Kerr and Burley.