Murdaca and Australian Securities and Investments Commission [2010] AATA 792 (11 October 2010)

DECISION AND REASONS FOR DECISION [2010] AATA 792

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

The Tribunal directs, pursuant to s 25(4A) of the Administrative Appeals Tribunal Act 1975 (Cth), that the scope of the hearing be limited by precluding the applicant from relying upon the matters set out in paragraphs 2.1 to 2.4 and paragraph 4.1 of the Statement of Facts and Contentions dated 22 August 2010.

SECURITIES & INVESTMENTS - disqualification from managing corporations for period of two years - allegations of prejudgment against delegate of the Australian Securities & Investments Commission - allegations of prejudgment irrelevant - applicant ought not be permitted to rely upon allegations of defect in original decision making processes

PRACTICE & PROCEDURE - Tribunal may determine scope of review - scope of hearing limited by precluding applicant from relying upon irrelevant matters

Administrative Appeals Tribunal Act 1975 (Cth), ss 25(1), 25(4A), 42D, 43(1)

Corporations Act 2001 (Cth), ss 206F, 1317B

Civil Aviation Safety Authority v Allan [2001] FCA 1064; (2001) 114 FCR 14

Commonwealth of Australia v Beale [1993] FCA 294; (1993) 30 ALD 68

Minister for Immigration & Multicultural Affairs v Perth City Mission [2000] FCA 397

Re Lavery & Registrar, Supreme Court of Queensland (No 2) (1996) 23 AAR 52

Secretary, Department of Social Security v Alvaro [1994] FCA 1124; (1994) 50 FCR 213

1. On 29 September 2006 a delegate of the respondent, the Australian Securities and Investments Commission, decided to disqualify the applicant, Mr Antonio Murdaca, from managing corporations for a period of two years. The decision was made in reliance on s 206F of the Corporations Act 2001 (Cth). Mr Murdaca made application to the Tribunal to review that decision and was successful[1]. The Tribunal, as then constituted, set aside the Commission's decision.
2. Mr Murdaca's success was short-lived. The Commission appealed to the Federal Court. On 16 September 2008 the Court set aside the Tribunal's decision and remitted the matter for a re-hearing[2]. There was a further appeal[3] by Mr Murdaca but it was, in substance, dismissed.
3. A preliminary issue has arisen and has been argued in advance of the hearing of the substantive issues. Mr Murdaca wishes to contend at the hearing (and to lead evidence in support of the contention[4]) that the original decision maker, the delegate of the Commission,

"did not comply with the legislative prerequisites for making [the] decision insomuch as he did not provide the applicant with a genuine 'opportunity to be heard' before purporting to disqualify him from managing corporations".[5]

Mr Murdaca wishes to give and call evidence that, if accepted, is capable of establishing that the Commission's delegate had determined, prior to any hearing, that Mr Murdaca was to be disqualified. The consequence, it is said, is that the original decision is invalid and ought, for that reason alone, be set aside by the Tribunal and remitted to the Commission for reconsideration by an "unbiased" decision maker.

1. The Commission contends[6] that such allegations are irrelevant and serve no useful purpose in the conduct of the Tribunal's review. For the reasons that I will now seek to explain I consider that the Commission is correct and that Mr Murdaca ought not be permitted to rely upon allegations of defect in the original decision making processes.
2. To understand why that is so it is necessary to start with the power that was exercised by the delegate. Section 206F of the Corporations Law is, relevantly, in these terms:

"(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) ... about the corporation's inability to pay its debts; and

(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.

(2) In determining whether disqualification is justified, ASIC:

(a) must have regard to whether any of the corporations mentioned in subsection (1) were related to one another; and

(i) the person's conduct in relation to the management, business or property of any corporation; and

(ii) whether the disqualification would be in the public interest; and

(iii) any other matters that ASIC considers appropriate."

The "report under subsection 533(1)" is that required by that subsection to be lodged by a liquidator if it appears, in the course of a winding up, that a company may be unable to pay its unsecured creditors more than 50 cents in the dollar.

1. By virtue of s 1317B of the Corporations Act, application may be made to the Tribunal for review of a decision made by the Commission to disqualify a person from managing corporations. Section 1317B is thus an enactment of the type specified in s 25(1) of the Administrative Appeals Tribunal Act 1975 (Cth) and accordingly, by virtue of s 25(4) of the same Act, the Tribunal has power to review the decision.
2. Mr Murdaca made such an application (and an application to extend the time for making the application) on 22 February 2007. Given one of the arguments put forward by the Commission it is relevant to note that the "Grounds of appeal" set out in the application included, relevantly,
   • ground 14, which alleged that he had been "denied natural justice and not provided with a sufficient opportunity to be heard because there was insufficient supporting documentation to enable the Applicant to contest the allegations made by the Respondent"; and
   • ground 18, which alleged that there "was a reasonable apprehension that the Respondent was biased because of the reliance placed by the Respondent upon the liquidator, who was funded by AMI, a party that AAMIC and the Applicant were in conflict and who made allegations of fraud against the Applicant."
3. The allegation that is now sought to be advanced is that the delegate had prejudged the outcome of the hearing. Were it to matter, (and I do not think that it does), this allegation is a different way of alleging a denial of procedural fairness. The complaint in ground 14 was not explicitly dealt with in the reasons for decision of the Tribunal although those in ground 18 were touched upon in paragraphs [11] and [12].

"ASIC decision vitiated by jurisdictional error

[34] Murdaca submitted that the manner in which ASIC (not the AAT) conducted the hearing (see [4] above) denied Murdaca natural justice. Murdaca's principal complaint appeared to be that because ASIC did not afford him an opportunity to cross-examine the liquidators who compiled the s 533 reports referred to in the notice served on Murdaca (see [3] above) the hearing before ASIC was 'vitiated by jurisdictional error' and that there was, therefore, nothing for the AAT to review. There is a complete answer to this contention.

[35] Consistent with the authorities (see [16]) to the effect that an oral hearing is not required, there was nothing to suggest that ASIC failed to comply with its statutory obligations in the manner in which it conducted that oral hearing. Moreover, even if there was an error of the kind complained of by Murdaca (and there was not), such an error would not deprive the AAT of the statutory authority to deal with the application on the merits. That is not to say that the provisions in s 206F(1)(b) for notice and opportunity to be heard have no teeth at all. Suppose that ASIC decided to disqualify a person the day after issuing a notice and without providing any opportunity to be heard, whether by written submission or otherwise. Upon an application for review under s 43, the AAT could set aside the disqualification decision on that basis alone. The AAT would not, however, be deprived of the power to decide de novo whether, with the benefit of proper notice and opportunity, disqualification might still be justified.

[36] To understand why, it is necessary to return to the basic structural provisions of the AAT Act and the authorities explaining those provisions. Section 43(1) of the AAT Act gives to the AAT 'all the powers and discretions that are conferred by any relevant enactment on the person who made the decision'. Important consequences flow from that provision. It is all the 'powers and discretions' which ASIC had when making the disqualification order, not the procedures which bind ASIC, to which the AAT accedes: compare, Minister for Immigration and Multicultural and Indigenous Affairs v Ahmed (2005) 143 FCR 314; [2005] FCAFC 58 at [41] and [44]. The AAT's procedures are prescribed by s 39 of the AAT Act: see also Sullivan v Secretary, Department of Transport (1978) 20 ALR 323 at 342-3; 1 ALD 383 at 402-3. As a result, any failure on the part of ASIC to comply with its statutory procedures will not deprive the AAT of statutory authority to deal with an application for review of the decision of ASIC. Any such defect is 'cured' by the AAT when an applicant is made aware of the substance of the allegation made against them and the AAT provides them with an opportunity to respond to the allegations: for example, Zubair v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 139 FCR 344; 211 ALR 261; 80 ALD 534; at .

[37] Counsel for Murdaca attempted to distinguish the foregoing authorities on the basis that, in contrast to the relevant provisions in the migration legislation, the requirements of s 206F(1)(b) are substantive preconditions to the enlivening of the administrative disqualification jurisdiction rather than procedural due process requirements, such that a defect could not be cured on review by the AAT. In effect, counsel took the view that the AAT's review of a s 206F disqualification decision by ASIC was not and could not be a hearing de novo. That view is entirely inconsistent with the basic structure of ss 39 and 43 of the AAT Act as explained by the case law. In the absence of any explicit legislative statement to that effect in s 206F(1), the submission must be rejected.

[38] The contention that ASIC's decision (and, therefore, the AAT's) was vitiated by jurisdictional error based on a denial of natural justice is thus both without foundation and irrelevant."

1. The reasons for decision of the Full Court do not raise doubt about the correctness of any of her Honour's observations.
2. But Mr Murdaca advances an ingenious argument that seeks to accommodate the conclusions reached in the appeal about the nature of the review in the Tribunal. His argument accepts that the Tribunal has power to "cure" defects in the original procedure by conducting its own de novo hearing in an appropriate manner but that, he says, is not determinative of whether it ought to do so. In appropriate circumstances, Mr Murdaca contends, the Tribunal, when considering the exercise of its power under s 43(1)(c) of the Administrative Appeals Tribunal Act, is empowered to determine that the original decision should be set aside, and to remit it for reconsideration rather than proceeding to re-determine the issue itself. In the course of the hearing he relied, as well, on the power to remit for reconsideration in s 42D of Administrative Appeals Tribunal Act.
3. Section 43(1) of the Administrative Appeals Tribunal Act is in these terms:

(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:

(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."

1. Mr Murdaca contends that, if the evidence of prejudgment were to be accepted, the following legal consequences flow:

(a) the decision would be rendered inefficacious and invalid by reason of the denial of natural justice and by reason of a failure to comply with the requirement of s 206F to provide "an opportunity to be heard" before the decision was made;

(b) the finding would not deprive the Tribunal of authority to conduct merits review and to decide, de novo, whether or not the disqualification was justified;

(c) the fact that the Tribunal retains power to conduct a merits review does not mean that it is obliged to do so; in an appropriate case it can decide to set aside the decision and remit the matter for reconsideration rather than re-determine the issue itself;

(d) the present case is one where the Tribunal ought remit rather than re-determine because,

(i) the case now presented by the Commission ranges far wider than that originally decided and that enlarged case has not yet been considered on the merits;

(ii) it would be unfair to confine Mr Murdaca to, effectively, a single merits consideration of the enlarged case;

(iii) Mr Murdaca's case involves "important and serious allegations" against liquidators whose conduct is supervised by the Commission. The Commission, and not the Tribunal, ought investigate those allegations.

1. Whilst Mr Murdaca's submissions appear to accept the point it is as well to start from the proposition that a decision, otherwise reviewable, is reviewable even if the decision is legally ineffective or void[7]. The matter was expressed in this way by von Doussa J (with whom Spender & French JJ. agreed) in Secretary, Department of Social Security v Alvaro[8]:

"In the hierarchy of reviews from original decision-maker to the AAT it was not necessary that there be at the outset an original decision that was in all respects validly made, and at each level of review thereafter another decision that was in all respects validly made. The person or tribunal to whom application for each of the reviews was made had jurisdiction to undertake that review so long as the preceding decision-maker had made what purported to be a decision in exercise of powers conferred by the Act affecting the interests of the person seeking review. It mattered not whether the ground of complaint made about the preceding decision was merely that it is wrong on the merits, or that in law it was not an effective decision because it was made by someone without authority, or in excess of authority, or for improper purposes, or was vitiated through procedural irregularity such as a failure to accord natural justice."

1. The argument for Mr Murdaca thus appears to accept that the prejudgment complained of (if found) does not deprive the Tribunal of jurisdiction; the argument is that the Tribunal ought not, as a matter of discretion, exercise that jurisdiction, and that the matter ought be remitted to the Commission for a further exercise of its decision-making power were the complaints about the hearing process made out or, in the alternative, that the Tribunal, if satisfied of the substance of the allegations, ought remit the matter for reconsideration under s 42D of the Administrative Appeals Tribunal Act.
2. Mr Knowles, counsel for the Commission, contended that s 43(1)(c) of the Administrative Appeals Tribunal Act did not admit of a discretion of the type contended for by Mr Murdaca. Where all the material necessary for a decision was before the Tribunal the Tribunal was bound to make a decision; the power in s 43(1)(c) to remit was reserved for cases where there was inadequate material for the Tribunal to make a decision. Reference was made to cases in support of that contention.
3. In Commonwealth of Australia v Beale[9] Neaves J said of s 43(1)(c):

"There is, thus, an express power in the tribunal to set aside a decision under review and to remit the matter for reconsideration. However, it may only do so where, in order to give effect to the conclusions to which the tribunal has come, it is appropriate to set aside the decision under review but the tribunal is not in a position to formulate a decision in substitution for the decision set aside. That was not the situation in the present case. The tribunal had reached a firm conclusion that each of the documents which the tribunal had to consider was an exempt document so that the appropriate order for the tribunal to have made was to affirm the decision under review subject, of course to the variation of that decision effected by the decision of the tribunal made on 9 June 1992."

His Honour's reasoning was adopted by Lee J in Minister for Immigration & Multicultural Affairs v Perth City Mission[10] where his Honour observed:

"[23] ...The power of the Tribunal to set aside a decision and remit the matter for reconsideration only arises where the Tribunal is unable to make, and has not made, a decision in substitution for the decision set aside. (See: Commonwealth of Australia v Beale [1993] FCA 294; (1993) 30 ALD 68 per Neaves J at 70.) Section 43(1)(c)(ii) is directed to a circumstance where the decision under the enactment has not been made where the Tribunal is of the view that it is unable to make the decision required by the enactment, for example, where a requirement or condition must be satisfied before a decision can be made. (See: Re SLE Medical Pty Ltd and Industry Research and Development Board (1988) 10 AAR 13.)"

1. Finally reference was made to the decision of Moore J in Civil Aviation Safety Authority v Allan[11] where his Honour said of s 43(1)(c):

"[16] ...Section 43 of the AAT Act confers various powers on the Tribunal when reviewing a decision. Paragraph (c) of s 43(1) empowers the Tribunal to set aside the decision under review and do one of two things. The first is to make a decision in substitution for the decision which is set aside. This involves the Tribunal exercising and exhausting the powers of the primary decision-maker. Alternatively the Tribunal can remit the matter for reconsideration to the primary decision-maker and, in so doing, may give the primary decision-maker a direction or make a recommendation to reflect conclusions the Tribunal had reached about the matter falling for decision. However the Tribunal may only follow this latter course when it is 'remitting the matter for reconsideration' which plainly contemplates that the primary decision-maker will again exercise the power authorising the making of the decision. While a direction or recommendation may tend to circumscribe the way the primary decision-maker is to exercise that power and decide the matter, subpar (ii) contemplates that there will be some residual function to be performed by the primary decision-maker involving the exercise of the relevant statutory power. That is, the Tribunal would not itself have exercised and exhausted the decision making power."

1. Here, says the Commission, all the material necessary to formulate a decision would be before the Tribunal and there would be nothing preventing the Tribunal from making a decision. There would be no residual function to be performed by the Commission were the matter to be remitted.
2. Mr Swanwick, the solicitor for Mr Murdaca, submitted that the observations made were not intended to create a rule of inflexible application and that such a rule would be inconsistent with the Tribunal's statutory objective of providing a mechanism of review that is fair, just, economical, informal and quick. There is some force in that submission however I prefer to assume, rather than decide, that there is a discretion to be exercised because, in the circumstances of this case, I would not exercise such a discretion favourably to Mr Murdaca were he to establish the matters of prejudgment on which he relies.
3. The matter has been on foot for a number of years and considerable public and private expense has been devoted to it. A further hearing before another delegate, followed by the possibility of another hearing before the Tribunal is not warranted where the matters of complaint (if true) are cured by the fact of the hearing before the Tribunal when the merits of the disqualification can be fully considered. The allegations of prejudgment are serious but they are, like the allegations of a denial of natural justice already considered, irrelevant. It may be accepted that Mr Murdaca has not had the case now advanced by the Commission considered by a first instance decision maker. But that will often be true. It is the nature of merits review, and the Tribunal's role as part of the administrative decision making continuum[12], that an applicant can rely upon material not before the primary decision maker and an agency may seek to support its decision on different grounds than those earlier relied upon. The task of the Tribunal, as the High Court recently affirmed[13], is to make a decision on the material before it, including new, fresh, additional or different material. That new, fresh, additional or different material will frequently not have been considered by the original decision maker but that is not to the point.
4. It is true that the volume of "new" material here is considerable, far greater than might be regarded as normal but it does not raise issues that require separate consideration by an original decision maker.

"42D Power to remit matters to decision-maker for further consideration

(1) At any stage of a proceeding for review of a decision, the Tribunal may remit the decision to the person who made it for reconsideration of the decision by the person."

1. The argument advanced is that the evidence of prejudgment ought be allowed to be given and if the Tribunal were satisfied that it was made out the matter ought be remitted for reconsideration. The ambit of the section was considered by Deputy President Forgie in Re Lavery & Registrar, Supreme Court of Queensland (No 2)[14] in which the Deputy President concluded:

"It would follow from the framework of the AAT Act and the nature of administrative merits review that the power given by section 42D to remit a decision to a decision maker should not be exercised simply because inadequate findings of fact, references to evidence or reasons have been given. Nor should it be exercised simply because a decision-maker supports his, her or its decision on a basis different from that originally put forward. The AAT Act provides other means to remedy those situations."

I entirely agree. The present case is one, and an extreme one, where then decision maker seeks to support the decision on a basis that is considerably wider that the original decision. But that would not, without more, warrant the making of an order under s 42D.

1. Whether the matter were to be viewed as a request for the Tribunal to act under s 42 D or s 43(1)(c) of the Adminsitrative Appeals Tribunal Act the position remains the same. Mr Murdaca seeks to give and call evidence which, if accepted, would demonstrate that the original decision was not a proper exercise of the power under s 206F of the Corporations Act. But that demonstration is irrelevant where any defect in the decision making process will be cured by giving Mr Murdaca the opportunity to present afresh his case and to respond to that propounded by the Commission. It is unnecessary, in those circumstances, to decide whether the decision making process was flawed in the manner alleged by Mr Murdaca. To do so would be to raise (and require the Commission to answer) false issues and incur needless public and private expense. It would, as well, be likely to delay the final determination of the matter..
2. There is power, granted by s 25(4A) of the Administrative Appeals Tribunal Act, for the Tribunal to determine then scope of the review of a decision by limiting the questions of fact, the evidence and the issues that it considers. The present case is one where it is appropriate to rely upon that power to prevent the litigation of irrelevant and unnecessary issues. There will then be a direction that the scope of the hearing be limited by precluding Mr Murdaca from relying upon the matters set out in paragraphs 2.1 to 2.4 and paragraph 4.1 of the Statement of Facts and Contentions dated 22 August 2010. It follows that I would regard evidence going to that issue as being irrelevant however appropriate rulings can be made in due course.

I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC

Signed: ..........Signed............................................................

Solicitor for the Respondent Australian Securities & Investments Commission

[1] See Murdaca & ASIC [2008] AATA 209.

[2] See Australian Securities and Investments Commission v Murdaca [2008] FCA 1399; (2008) 105 ALD 461 (Gordon J).

[3] Murdaca v Australian Securities and Investments Commission [2009] FCAFC 92; (2009) 178 FCR 119 (North, Kenny & Foster JJ).

[4] The applicant's written submissions identify paragraphs 194-206 of the applicant's affidavit sworn on 7 July 2010, the affidavit of Ian Hone sworn on 9 June 2010 and the affidavit of John Sitkiewicz sworn on 17 July 2010 as the evidence in support of the contention.

[5] Applicant's outline of submission, paragraph 1.

[6] Respondent's submissions, paragraph 3.2.

[7] See Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd [1979] FCA 21; (1979) 41 FLR 338.

[8] [1994] FCA 1124; (1994) 50 FCR 213 at 219-220.

[9] [1993] FCA 294; (1993) 30 ALD 68 at 70.

[10] [2000] FCA 397 at [23].

[11] [2001] FCA 1064; (2001) 114 FCR 14 at [16].

[12] See Jebb v Repatriation Commission [1988] FCA 105; (1988) 8 AAR 285, 289.

[13] See Shi v Migration Agents' Registration Authority [2008] HCA 31; (2008) 235 CLR 286 at [37].

[14] (1996) 23 AAR 52.