Questions of Law 1-3; Grounds 4 -6
12 These grounds can be dealt with together.
13 Section 126A of the SIS Act provides:
126A The Regulator may disqualify individuals
(1) The Regulator may disqualify an individual if satisfied that:
(a) the person has contravened this Act or the Financial Sector (Collection of Data) Act 2001 on one or more occasions; and
(b) the nature or seriousness of the contravention or contraventions, or the number of contraventions, provides grounds for disqualifying the individual.
…
(3) The Regulator may disqualify an individual if satisfied that the individual is otherwise not a fit and proper person to be a trustee, investment manager or custodian, or a responsible officer of a body corporate that is a trustee, investment manager or custodian.
…
14 It was submitted for the Commissioner that the Tribunal's reasons disclosed that the Tribunal:
(a) failed to consider the statutory question posed by s 126A(1)(b) - namely, whether the Tribunal was satisfied that the nature, number and/or seriousness of the contraventions provided grounds for disqualifying Mr Coronica;
(b) failed to consider the statutory question posed by s 126A(3) - namely, whether the Tribunal was satisfied that Mr Coronica was a fit and proper person to be a trustee; and
(c) failed to ask the right question in the exercise of its discretion.
15 The statutory questions (whether the nature, number and/or seriousness of the contraventions provides grounds for disqualifying the individual (s 126A(1)); and whether the person is otherwise not was a fit and proper person to be a trustee (s 126A(3))) arise from the express terms of the provisions themselves, which make the formation of the state of satisfaction of those matters a precondition to the exercise of the statutory power to disqualify a person from acting as trustee of a superannuation fund. As the exercise of the power under either provision turns on satisfaction of the matters prescribed, it is a mandatory step for the regulator (here the Tribunal standing in the shoes of the Commissioner) to consider whether to form the required states of satisfaction as a statutory condition for the exercise of discretion. As the decision whether to reach the requisite state of satisfaction is a mandatory step, the formation of that state of satisfaction is not only a jurisdictional fact, but it is also a matter that affects the exercise of the discretion having regard to the subject matter, scope and purpose of the power. In the absence of the formation of the requisite states of satisfaction, or if there are errors in the process by which those states of satisfaction were reached, the exercise of the discretion under s 126A will have miscarried: Plaintiff M70/2011 v Minister for Immigration and Citizenship [2011] HCA 32; 244 CLR 144, [57] (French CJ); Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21; 197 CLR 611, [130]-[137] (Gummow J); Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 [2003] HCA 30; 73 ALD 1, [59] (McHugh and Gummow JJ).
16 The Tribunal's reasons did not refer to whether the Tribunal had formed the requisite states of satisfaction under ss 126A(1) and (3). It was submitted for Mr Coronica that it was implicit from the reasons nonetheless that the Tribunal did form the requisite states of satisfaction under both ss 126A(1) and (3). It is well established that the decision of the Tribunal must not be read with an "eye keenly attuned to error" and that a "commonsense and realistic approach should be taken to understanding the reasons as a whole to see what it was that the [decision-maker] was saying": Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; 185 CLR 259, 272; Fang Wang v Minister For Immigration & Multicultural & Indigenous Affairs [2003] FCA 1044, [14]. However, as the cases demonstrate, it is not appropriate to draw the inference that the Tribunal had formed the requisite states of satisfaction where there is a lack of basis for such an inference having regard to the reasoning: Acting Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v CWY20 [2021] FCAFC 195; 395 ALR 57 (Besanko J with Allsop CJ, Kenny, Kerr and Charlesworth JJ agreeing), [130]. In my view, the Tribunal's reasons, read fairly, do not disclose that it did proceed to consider whether or not s 126A was enlivened and it did not, in my view, perform the statutory task required of it. If I am wrong and it is implicit that the Tribunal did form the requisite states of satisfaction, I am of the view that it erred in its approach to the exercise of its discretion by failing to take those factors into account in deciding not to disqualify Mr Coronica.
17 The reasons of the Tribunal on the disqualification decision began with noting that disqualification is one of the "range of actions" that the regulator can take against a trustee who contravenes the provisions of the SIS Act (at [330]). The Tribunal then noted that the Commissioner decided to disqualify Mr Coronica on the grounds that he was satisfied both that the nature, number and seriousness of the contraventions provided grounds for disqualifying Mr Coronica from acting as trustee and that Mr Coronica was not a fit and proper person to be a trustee of a superannuation fund.
18 After setting out s 126A(1), the Tribunal then dealt with the "appropriateness" of the decision of the Commissioner to disqualify Mr Coronica from acting as a trustee, having regard to the increased tax consequences for him as a result of the change in status of the Fund from a complying fund to a non-complying fund, which the Tribunal considered to be "in the nature of imposing a monetary penalty" on him (see [332]-[333]). The Tribunal went on to hold that the financial consequences to Mr Coronica was an appropriate penalty for the contraventions. The Tribunal stated at [343]:
The contraventions of the [SIS Act] that underpin the non-compliance decision above have, in their circumstances, been held to be serious and, considering their financial consequences, justify being upheld. Those financial consequences meet the sentencing objectives discussed above. The penalty satisfies 'the need to protect society, deter the offender and others, to extract retribution and promote reform.' In the Tribunal's opinion, the noncompliance decision is an appropriate 'penalty' for the 'offence/offender'.
That paragraph is telling against the contention that the Tribunal formed the requisite state of satisfaction under 126A(1). Whilst the Tribunal did consider the nature, number and seriousness of the contraventions in its consideration of the non-compliance decision, the Tribunal failed to give any active consideration as to whether those matters also provided grounds to disqualify Mr Coronica from acting as a trustee, which was a separate and discrete inquiry which was not addressed at all.
19 The Tribunal then went on to consider s 126A(3), noting at [344] that: "[n]otwithstanding the adequacy of the financial penalty, an upholding of the disqualification [decision was] still supportable if the financial penalty could not satisfy one of the purposes of disqualification, namely protecting society against future contraventions". At [347]-[348], the Tribunal set out the Commissioner's submissions "as to the issue of future compliance risk", namely that Mr Coronica's evidence "demonstrated a failure to comprehend the character of the obligations of a trustee", and that "the inaccuracies in his workings and evidence demonstrated a lack of competence and that the seriousness of the errors was 'magnified by the fact that Mr Coronica not only has more than 50 years' experience as a [Certified Practising Accountant] but also continues to provide advice to clients in relation to superannuation matters'". The Tribunal stated that it did not take issue with those submissions which it considered were consistent with its findings that the contraventions were serious in the non-compliance decision (at [348]). Crucially however, the Tribunal did not separately and independently consider for itself whether it was satisfied that Mr Coronica was not a fit and proper person to act as trustee. Rather, the Tribunal proceeded straight into a consideration of whether in the exercise of its discretion it should disqualify Mr Coronica and concluded for the reasons given at [360]-[365] (extracted above at [9]) that it was appropriate to accept undertakings from Mr Coronica in lieu of disqualifying him.
20 An analysis of the reasons shows that no consideration was given by the Tribunal as to whether it should form the states of mind which were preconditions for the exercise of power under s 126A. Rather, it is apparent that the Tribunal approached the question as to whether or not to affirm the disqualification decision by reference to a consideration of the various countervailing matters, which were considered by the Tribunal to weigh upon whether disqualification was "appropriate".
21 It was submitted for Mr Coronica that if the Court found that the Tribunal did not form the requisite states of mind, the failure to reach those states of satisfaction before exercising the discretion not to disqualify Mr Coronica was immaterial, because compliance could not realistically have resulted in a different decision, as regardless of the Tribunal's state of satisfaction, the Tribunal would have exercised the discretion not to disqualify Mr Coronica. Thus, it was submitted, the failure did not amount to jurisdictional error. There is no substance in that submission. First, the criteria of which the Tribunal had to be satisfied to enliven the exercise of its discretion under s 126A (standing in the shoes of the Commissioner) were patently relevant to the discretion. Those matters were factors that bore in favour of disqualification and thus bore upon the exercise of discretion. The Tribunal could not exercise that discretion without evaluating those matters, which could be decisive, against the other matters which the Tribunal took into account; and by disregarding the matters which the Tribunal was statutorily obliged to consider, the Tribunal did not address the correct statutory questions in the exercise of its discretion. Secondly, in view of the failure of the Tribunal to perform its statutory task, there is at least the realistic possibility that the Tribunal would have reached a different conclusion on whether a disqualification order should be made against Mr Coronica, if the preconditions to the exercise of power were met and those matters had been taken into account in the exercise of discretion.
22 The Tribunal also fell into error by characterising the financial consequences for the Fund becoming a non-complying fund as a monetary impost in the nature of a penalty on Mr Coronica. That characterisation is wrong. The financial consequences followed from the consequence of the decision to make the Fund non-compliant, which resulted in the Fund being ineligible for concessional tax treatment. That consequence is a separate and independent sanction under the SIS Act. The scheme of the SIS Act contemplates that multiple sanctions may be both appropriate, and the sanction of a disqualification order is different from the sanction of giving a fund a notice of non-compliance. The sanction of a disqualification order causes the person against whom it is made to forfeit the office of trustee and forbids that person from acting as a trustee of a superannuation fund. That consequence is inflicted on the person because that person is not a fit and proper person to act as trustee: Rich v ASIC, [37]. The Tribunal, by focussing on the resultant financial consequences from the change of status of the Fund, did not give appropriate consideration to the question of whether Mr Coronica is a fit and proper person to continue to act as a trustee and thereby misdirected itself about the factors relevant to, and bearing upon, whether to impose the sanction of disqualification on Mr Coronica.