"The policy to which s122 gives effect is that a person convicted of an offence of any of the types specified in that section is not to be permitted to act as a director or to take part in the management of a company. The section is not punitive. It is designed to protect the public and to prevent the corporate structure from being used to the financial detriment of investors, shareholders, creditors and persons dealing with the company. In its operation it is calculated to act as a safeguard against the corporate structure being used ... in a manner which is contrary to proper commercial standards." (Emphasis added)
It is also important to note that by subs1(2) of the ASC Act, the ASC is enjoined to strive:
" .....
(b) to maintain the confidence of investors in the securities markets and futures markets by ensuring adequate protection for such investors; ...." (Emphasis added)
Subsection 1(3) provides that the ASC Act has effect and is to be interpreted according to its objects and to the duties of the Commission.
The distinction between "punitive" and "protective" statutory provisions is well settled and has been applied in a number of cases. See for example Friend v Corporate Affairs Commission (1989) 7 ACLC 106 at 115; Story v NCSC (1988) 6 ACLC 560 at 581; Nicholas v Commissioner for Corporate Affairs (1987) 5 ACLC 258 at 265 affirmed on appeal (1987) 5 ACLC 673 at 679-681; Flavel v Borrett and Haig (1991) SASR 452 at 458-9, Quinn v Australian Securities Commission (1994) 12 ACLC 412 at 417-419 (AAT).
Of course, in one sense it might be said that many statutory provisions which have the purpose of protecting the public, will seek to achieve the protection by imposing a disability or disqualification so that it might be suggested that the provision has a dual purpose. However, the authorities support the view that even where this is so the Court will look to the predominant purpose of the provision under consideration. See Nicholas (supra) at 265; Re Network Agencies International Ltd (in liq); Johnston v Edwards (1991) 5 NZCLC 67,535 at 67,538. In the present case we do not think that the provision has a dual purpose.
There is also a line of authority in relation to professional disciplinary matters which draws a clear distinction between disciplinary orders, designed to protect public confidence and the public interest and orders which might be characterised as punitive. See for example, New South Wales Bar Association v Evatt (1968) 117 CLR 177 at 183-184; Clyne v New South Wales Bar Association (1960) 104 CLR 186 at 201-202 and Ziems v The Prothonotary of The Supreme Court of New South Wales (1957) 97 CLR 279 at 285-287. Underlying these cases is the principle that public confidence and the protection of the public are the primary considerations in characterising the orders.
Reasoning
A proceeding which has as its object the imposition of a penalty and which may result in the imposition of such a penalty is penal in nature (Naismith v McGovern (1953) 90 CLR 336 at 341; R v Associated Northern Collieries (1910) 11 CLR 738 at 742-743; Derby Corporation v Derbyshire County Council [1897] AC 550 at 552). Proceedings to recover or enforce such a penalty may be either civil or criminal proceedings depending upon the nature of the procedure used to initiate them (see generally Sir Frederick Jordon, Selected Legal Papers, Legal books (1983) Pt 3, "General Principles of the Administration of Justice" at pp 28-29). When the proceeding to recover a penalty is a civil proceeding it remains a civil proceeding notwithstanding that it is penal in nature (R v Associated Northern Collieries at 742; Naismith v McGovern at 340). Accordingly, subject to any statutory enactment, the common law privilege against self-incrimination has a relevant operation in civil proceedings which are penal in nature (eg civil proceedings to recover a penalty of which R v Associated Northern Collieries and Naismith v McGovern are examples).
Against this common law background s68(3)(a) and s68(3)(b) of the ASC Act prima facie do no more than recognise that "a proceeding for the imposition of a penalty" includes a civil proceeding the object of which is the imposition of a penalty (s68(3)(b)) in contradistinction to a criminal proceeding which of its nature is penal and has as its object the imposition of a penalty (s68(3)(a)).
At the outset, it is important to note that s68(1) is a general abrogation of the privilege for certain purposes and that the relevant exception to this general statutory abrogation is formulated in very specific language, namely that the proceeding must be properly characterised as being for the imposition of a penalty.
Section 68(3)(b) uses the language of purpose. The question posed is whether the proceeding for a banning order is, "a proceeding for the imposition of a penalty".
Another important but not controlling consideration is that if an unduly wide interpretation is given to the expression then the efficacy of the Act will be diminished. In many cases the only cogent evidence may be that elicited under claim of privilege. However, in the final analysis it is necessary to closely examine the language of the section.
If the question is asked as to whether the purpose of a proceeding which may result in a banning order is for the imposition of a penalty, the short answer is that it is not for such a purpose. Although a 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 for an offence or contravention of any norm of conduct. Moreover, the existence of conduct which may justify a banning order does not itself give rise to an offence. An offence is constituted by s835 and only arises where there is contravention of an order.
That the section is not intended to be punitive is made apparent by having regard to the range of specified grounds which must be established before such an order is made. These include standard non-blameworthy grounds, for example, becoming "an insolvent under administration" and becoming "incapable, through mental or physical incapacity, of managing his or her affairs". As the question under consideration is one of interpretation, it cannot be said that the character of the subsection changes depending on the particular ground upon which the order is sought. Nor, can it be said in such cases that the purpose of a banning order is to punish or penalise a person who becomes insolvent or incapable. Consideration of the grounds on which a banning order is made do not support the suggestion that the banning order is of a penal nature and certainly is not one for the imposition of a penalty. Rather, the grounds set out in s829 clearly point to the conclusion that it is properly characterised as protective.
In cases of ambiguity or uncertainty, it is permissible to consider the stated functions of the ASC. The functions of the ASC include the maintenance of investor confidence in the securities and futures markets by ensuring adequate protection
for such investors. This clearly indicates that one of the underlying purposes of the Act is protective in nature. As indicated earlier, in cases of ambiguity, the Act should be interpreted having regard to this function. See subsection 1(3). If there is ambiguity in the present case, such an approach supports the view that s68 is protective and preventive in nature.
The immediate and direct legal effect intended by a banning order is not to impose a penalty or punishment on the person concerned, but to be preventive in that it removes a perceived threat to the public interest and to public confidence in the securities and futures industry by removing that person from participation therein.
Chapter 7.3 of the Law, the legislative context in which s829 is found, is concerned with persons engaged in the securities industry. Division 5 is concerned with the exclusion of persons from participation in the industry and to preserve the effective operation of the industry. The broad range of discretionary remedies supports the view that the purpose of the provision is to protect the operation of the industry by moulding the remedy to the particular circumstances of the individual case under consideration.
A proceeding which may result in a banning order under s829, in our view, is to be characterised, consistently with the decisions referred to above, as "protective" in purpose and not as one for the imposition of a penalty. It unduly strains the language enacted by parliament, to suggest that proceedings directed to the making of a banning order for the reasons specified in s68(1) of the ASC Act, should be described as being for the imposition of a penalty.
In the light of the above considerations, our conclusion is that a proceeding for the making of a banning order under s829 of the Law, is not a proceeding for the imposition of a penalty within s68(3)(b) of the ASC Law.
The appropriate orders are:
- That the application be granted.
- That the decision of the Deputy President of the AAT be set aside.
3 That it is declared that the proceeding for a banning order under s829 of the Law is not a proceeding for the imposition of a penalty within s68(3)(b) of the ASC Law.
- That the matter be remitted to the AAT for determination in accordance with law.