Culley v Australian Securities and Investments Commission

Culley v Australian Securities and Investments Commission - [2010] FCAFC 43 - FCAFC 2010 case summary — Zoe

[28]

4 His Honour answered each of questions 5 and 6 "yes". The point in question 5 had not been raised by Mr Culley before the Tribunal but was agitated for the first time before the primary Judge: see [39]-[60] of the earlier reasons. His Honour concluded that s 206F of the Corporations Act impliedly required that the power of disqualification be exercised by ASIC within a reasonable time; as much had been agreed between the parties: see [41]. Accordingly, his Honour answered question 6 by holding that ASIC's delay, in the circumstances before him, had been unreasonable; see, especially, at [57]-[60]. That finding, we emphasise, was arrived at in the light of various concessions made on behalf of ASIC. Moreover, as the wording of question 6 required, it was a finding which turned on the particular factual circumstances of the case. 5 Despite his Honour's answers to questions 5 and 6, he was not prepared to make the declarations sought by Mr Culley. As his Honour recorded in a second set of reasons published on 14 December 2009 (see [2009] FCA 1474) ("the later reasons"), the question of an implied requirement that the disqualification occur within a reasonable time had not been raised or decided in the Tribunal, but had been argued for the first time in this Court. That, in his Honour's view, attracted the application of the remark made by Gummow J in Federal Commissioner of Taxation v Raptis (1989) 19 ALD 726, at 728, which had been referred to by a Full Court of this Court in Secretary, Department of Social Security v Cooper (1990) 26 FCR 13, at 18, that is; There must be some difficulty… in finding as "error of law" in the failure in the Tribunal to make a finding first urged in this court. The issue, his Honour perceived, in the light of authorities such as Ferriday v Repatriation Commission (1996) 69 FCR 521, Federal Commissioner of Taxation v Glennan (1999) 90 FCR 538, and Hussain v Minister for Foreign Affairs (2008) 169 FCR 241, was not merely one of whether "prejudice" might flow to ASIC if an argument not advanced below were allowed to be relied on in this Court; it was whether, as a matter of law, the Tribunal had erred in law in failing itself toaddress the question. In his Honour's view, the existence of an implied requirement that the statutory power be exercised within a reasonable time and whether, in fact, that requirement had been satisfied; were not matters which the Tribunal was bound to take into account independently of the parties' submissions. It would have been necessary for the Tribunal to find the facts relating to the time taken by ASIC to investigate the matter and issue the show cause notice and the reasons for the delay. None of this occurred. 6 In the earlier reasons, having explained his conclusion that questions 5 and 6 should be answered in the affirmative, the learned primary Judge continued, at [62]; The period of Mr Culley's disqualification expired in February 2009. The disqualification decision was made by the delegate and affirmed by the Tribunal. As presently advised I can see no practical purpose to be served by an order setting aside the Tribunal's decision. Nor can I discern any useful purpose to be served by remitting the matter for further hearing and determination by the Tribunal. As is evident from these reasons it is my view that the Tribunal committed no reviewable legal error in the course of dealing with the appeal as presented to it. Mr Culley has had but limited success in his appeal to this Court and then only on a point which was not agitated before the Tribunal. This may also have implications for any costs order which may be sought. 7 Consequently, his Honour made orders for the filing of minutes of agreed orders to give effect to his reasons, or, if agreement were not able to be reached, for the filing of minutes of order which each party might contend should be made. 8 There was no agreement. ASIC submitted that his Honour ought to make only the order which he ultimately made, that the proceeding be dismissed. Mr Culley, as his Honour recorded at [8] of the later reasons, sought orders in these terms; (1) Declare that the respondent's show cause notice dated 13 October 2006 was not given by the respondent to the applicant pursuant to paragraph 206F(1)(b) of the Corporations Act 2001 within a reasonable time after the liquidator lodged his report with the respondent on 23 October 2002 about Construction Resources Pty Ltd.

[51]

The nature of the appeal 15 At [12] et seq of the later reasons, the primary Judge considered whether it was open to Mr Culley to raise an argument for the first time in this Court. His Honour, as we have said, referred to what had been said by Gummow J in Raptis, and by Bowen CJ in Kuswardana v Minister for Immigration and Ethnic Affairs (1981) 54 FLR 334. We agree, for the reasons which the learned primary Judge gave at [14]-[18], that the Tribunal's failure to make a finding of fact it is required to make - sometimes called a "jurisdictional finding" - may ground an "appeal" on a question of law pursuant to s 44, irrespective of whether the fact has been put in issue before the Tribunal. 16 In a case like the present, however, where no submission on a factual issue has been made to the Tribunal, and where the fact to be found was not a precondition of jurisdiction, this Court's power to entertain such a question of law is discretionary: see, for example, Water Board v Moustakas (1988) 180 CLR 491. In that case, speaking of the general rule against an appeal based on a point not taken at first instance, Mason CJ, Wilson, Brennan and Dawson JJ said, at 497; Where all the facts have been established beyond controversy or where the point is one of construction or of law, then a court of appeal may find it expedient and in the interests of justice to entertain the point, but otherwise the rule is strictly applied. The factors going to the exercise of that discretion in the context of a s 44 "appeal" were discussed by a Full Court of this Court in Hussain v Minister for Foreign Affairs (2008) 169 FCR 241. There, their Honours, at 256, approved an observation by Lindgren and Bennett JJ in Repatriation Commission v Warren (2008) 167 FCR 511, that this Court will "more readily permit a matter to be raised for the first time on appeal from the Tribunal" where: (a) the matter is a pure question of law, such as a question as to the validity of a regulation: see Kuswardana 54 FLR at 343; 35 ALR at 195; Tefonu 44 FCR at 367; or a question as to whether the tribunal had applied the correct standard of proof on the true construction and application of legislation: Ferriday v Repatriation Commission (1996) 69 FCR 521 at 527-528 per Lee J;

[54]

17 Mr Styring of Counsel, who appeared with Mr Krischock of Counsel for the appellant, submitted that question 5 in the further amended notice of appeal before the primary Judge could be brought within any of categories (a), (b) and (c) identified in the passage from Warrenwhich we have just quoted. However, in our view, question 5 falls unequivocally only into category (a). The existence of an implied temporal limit on ASIC's power was clearly not a condition precedent to the availability of the power as required for it to come within category (c). We also very much doubt whether it was the subject of a shared misapprehension in the sense required for it to fit within category (b). In any case, Lindgren and Bennett JJ in Warrendid not purport to do more than outline categories of questions likely to lead to a favourable exercise of the discretion to allow them to be agitated for the first time before this Court. It does not follow that this Court will always decline to entertain a question which cannot be brought within one of their Honours' three categories. The form of question 5 and the considerations adverted to by the Full Court in Hussain make it impossible for us to conclude that the learned primary Judge's discretion miscarried when he decided to entertain that question. 18 The discretion to which we have referred is subject to the stringent requirement of s 44 of the AAT Act that the "appeal" to this Court be "on a question of law". The principal authorities on that requirement have been collected by Ryan J in MacDonald v Secretary, Department of Family, Health, Community Services and Indigenous Affairs (2009) 180 FCR 378, at 382. It is there emphasised, as well as in Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321, which is cited in MacDonald, that a s 44 question must be "stated with precision as a pure question of law": Birdseye, per Branson J, at 325. In our view, what was question 5 before the primary Judge comfortably satisfies that criterion. 19 However, what was question 6 before the primary Judge was not a pure question of law of that type. In substance, it was a subsidiary question of fact flowing from an affirmative answer to question 5. In form it is, at best, a question of mixed fact and law requiring the Court to apply its conclusion of a need for ASIC to act within a reasonable time to the circumstances of the case which had been before the Tribunal. It is no part of this Court's function under s 44 to resolve such a question. As the High Court said in another of the authorities collected in Macdonald, Repatriation Commission v Owens (1996) 70 ALJR 904, at 904, the allocation of merits review to the Tribunal (or, before it, the relevant delegate) and of judicial review to this Court is one which is "critical to the correct operation of the administrative review process". As we have indicated, we consider that even the most cursory reading of the terms of question 6 reveals that it is not a question of law on which s 44 is predicated. The Court should therefore decline to answer question 6. It is, accordingly, unnecessary to make further reference to it. We turn then to consider the proper construction of s 206F of the Corporations Act.

[77]

Consideration 30 For the reasons which follow, we have concluded that the language and structure of s 206F exclude any implied requirement for ASIC to exercise its power of disqualification within any shorter period than the seven years immediately before the giving of a "show cause" notice under s 206F(1)(b). 31 Section 206F was part of the Corporations Act as originally enacted. The corresponding provision, identically numbered, had been present in the Corporations Law, which was the immediate predecessor of the Corporations Act having been inserted in the Corporations Law by the Corporate Law Economic Reform Project Act 1999 (Cth). In light of that legislative history, it is unnecessary to call in aid, in construing s 206F, any extrinsic material as we can discern in s 206F no ambiguity to warrant recourse to s 15AB of the Acts Interpretation Act 1901 (Cth). It is clear enough from its terms and its location in Pt 2D.6 of the Corporations Act that the legislature, in framing s 206F, has been concerned to strike a balance between two competing interests. 32 The section reflects on the one hand, the interest of the public in the existence of a facility for removing from the pool of managers those who are, or have been, officers of two or more corporations which have been wound up for inability to pay their debts. As a result, the public and the market are afforded a measure of protection from those who, as was said in Murdaca (supra), at 143; either through incompetence or dishonesty or a combination of the two, bring about the failure of corporations and thus cause loss to others (Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at [47]-[50]). In the same passage, their Honours discerned in s 206F a concern with "the maintenance of professional management standards in the public interest (Visnic v Australian Securities and Investments Commission (2007) 231 CLR 381 at [11] and [26])." 33 On the other hand, the legislature has recognised the need for corporate officers not to be exposed to disqualification as a result of corporate failures separated by an inordinate length of time. In our view, the concern, which we have imputed to Parliament, to strike a balance between these competing interests has been accommodated by fixing in s 206F(1)(a) a "window" of seven years within which two or more corporate collapses must occur in order for an officer involved in them to be at risk of disqualification from managing any other corporation. 34 The intention which we have divined from the language and structure of s 206F is inconsistent with an interpretation of the section which would confine ASIC's power of disqualification within a narrower retrospective "window" than the seven years expressly stipulated in s 206F(1)(a). 35 As we have already noted, Counsel for ASIC accepted that the exercise of the power to disqualify may be attended by a requirement to act within a reasonable time in various respects. For example, the lapse of time between the lodging of the two or more triggering liquidator's reports could properly bear on the attainment by ASIC's delegate or the Tribunal of the satisfaction required by s 206F(1)(c) that "the disqualification is justified." The weight, if any, to be given to the lapse of time up to the presumptive disqualification is a matter for the decision maker in light of the circumstances of each particular case. Similar considerations apply to other potentially relevant factors such as the level of indebtedness of a particular corporation, the number of corporate failures in which the same officer has been involved and the extent to which the relevant insolvency has inflicted losses on creditors or shareholders. A guide to the identification of factors relevant to the exercise of an administrative discretion which is conferred in unconfined terms has been given by Mason J in Minister for Aboriginal Affairs v Peko-Wallsend (1986) 162 CLR 24, at 40. 36 To acknowledge that lapse of time is one of a number of factors available to be weighed in the exercise of a discretion falls far short of imposing, as a condition for its exercise, a requirement that some action be taken within a reasonable time. In our view, the observations of Heerey J in Kardas (supra), do not support the implied imposition of such a condition. There, it will be remembered, his Honour was dealing with s 600 of the Corporations Law, a legislative predecessor of s 206F but, as appears from the extract set out at [22] above, one in different terms. We regard his Honour as saying no more, in that case, than that a decision maker acting under such a provision ought to discharge his or her functions with reasonable promptness, and so much was to be inferred from the terms in which the power was conferred. His Honour was not, it appears to us, elevating that requirement to a free-standing condition precedent to the exercise of the power, or erecting a legal constraint on ASIC's "power to decide" of the type identified by Hayne J in Aala (supra). The authority to which Heerey J referred in Kardas, and upon which extensive submissions were made before us, Halliday v Commissioner of Corporate Affairs (14 May 1990, Supreme Court of Victoria, O'Bryan J, unreported), illustrates the point. 37 In Halliday, O'Bryan J was hearing an appeal de novo from a delegate of the respondent Commissioner who had prohibited the appellant from being a director, a promoter, or being in any way involved in the management, of a corporation without the Court's leave. In allowing the appeal, his Honour said, at page 8 of the transcript of his ex tempore reasons, that; …delay between 1981 and 1989 was a relevant circumstance. One aspect of delay important in this appeal is the time taken to bring this proceeding to a conclusion. This proceeding commenced by service of a notice to show cause, dated 1 July 1987. The hearing between Mr Perry [the respondent's delegate] did not commence until 24 March 1988 and concluded on 21 April 1989. A decision was not announced until 15 June, almost two years after the show cause notice issued. During this period the applicant has faced uncertainty as to his future with Spectra Systems and possibly financial detriment. One would hope it is exceptional for a proceeding of this nature to be so protracted. The interests of the community and commercial persons are not served by long delays in this area of the law.

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