Consideration
27 The applicant relies upon s 126J(1)(b) of the SIS Act. That subsection gives to this Court a discretion to declare that an individual is not a disqualified person for the purposes of Pt 15 of the SIS Act notwithstanding that that individual has, prior to the making of the Court order, been caught by the definition of disqualified person in s 120 of the SIS Act. An order under s 126J(1) may be expressed to be subject to such exceptions and conditions as may be determined by the Court. Notice of the application for an order under s 126J(1) must be given by the disqualified person at least 21 days before the application is filed (s 126J(3)(a)). In the present case, that notice was given by the letter dated 17 August 2012 from the applicant's lawyers to APRA.
28 There are no criteria or guidelines expressed in the SIS Act or in the regulations made under that Act as to the matters which should, or could, be taken into account by the Court when considering and determining an application under s 126J(1). This state of affairs may be contrasted with the position under subdiv A of Div 3 of Pt 15 where the regulator (the Commissioner of Taxation) called upon to consider waiving an individual's status as a disqualified person is required to comply with detailed procedures and protocols (as to which see s 126B, s 126C, s 126D and s 126F). In particular, the regulator is obliged to satisfy himself or herself that the waiver applicant is highly unlikely to contravene the SIS Act (s 126D(1A)(f)) or do anything that would result in a self-managed superannuation fund not complying with the SIS Act (s 126D(1A)(g)). In determining whether he or she is satisfied of those matters, the regulator must have regard to the factors listed in s 126D(1A)(a) to (e).
29 The language of s 126J(1)(b) is curious. A disqualified person may (emphasis added) apply to the Court for an order that the person is not a disqualified person. Clearly, the provision is intended to authorise the making of the relevant application if the applicant decides to bring it forward. The subsection does not, however, speak in terms which ordinarily denote the grant of a discretionary power to the Court (eg "… upon application by a disqualified person, the Court may order …"). Nonetheless, I think that s 126J(1)(b) should be interpreted as conferring a broad discretion upon the Court to decide whether to make the order contemplated by the subsection and, if so, on what terms. In considering whether to exercise the discretion and, if so, how, the Court must take into account the purpose or object of the SIS Act and, in particular, the purpose or object of Pt 15 of that Act. The object of the SIS Act is set out in s 3. The object of Pt 15 is specified in s 119. Therefore, in any given case, when the Court's jurisdiction under s 126J(1)(b) is engaged, the Court is obliged to determine the application by paying due regard to the fact that:
(a) Part 15 of the SIS Act is intended to set out rules governing the eligibility of persons to take up positions of responsibility with superannuation entities; and
(b) The principal object of the SIS Act generally insofar as superannuation entities are concerned is to make provision for the prudent management and supervision of such entities.
30 Subdivision B of Div 3 of Pt 15 of the SIS Act was introduced, in its present form, into the SIS Act by the Financial Sector Legislation Amendment (Review of Prudential Decisions) Act 2008 (Cth) (the 2008 amendment). The 2008 amendment was intended to replace regulator-based disqualification in respect of those activities regulated by APRA with Court-based processes. The Explanatory Memorandum promulgated by the government at the time made clear that the intention of the government was to bring the disqualification regime broadly into line with the disqualification regime under the Corporations Act 2001 (Cth) (the Corporations Act). By approaching APRA regulated entities in this way, the legislature made a clear distinction between ATO regulated entities (essentially, SMSFs) and APRA regulated entities.
31 It seems to me, therefore, that the Court is entitled to have regard to the jurisprudence developed by the Court in relation to the disqualification and reinstatement of officers of corporations pursuant to the Corporations Act. In particular, for present purposes, the Court is entitled to have regard to the jurisprudence developed by the Court in respect of s 206G of the Corporations Act. Of course, the Court must keep in mind as the overarching consideration the purpose and object of the SIS Act and Pt 15 of the SIS Act reflected in s 3 and s 119 respectively.
32 In Duffy; Re Westgate Ports Ltd (2010) 79 ACSR 267 at [19], Gordon J summarised the relevant principles which have been developed by this Court in respect of its exercise of discretion pursuant to s 206G of the Corporations Act. After referring to a number of authorities, her Honour said:
… Those principles may be summarised as follows:
(1) the applicant bears the onus of establishing that the court should make an exception to the legislative policy underlying the prohibition;
(2) the legislative policy is one of protecting the public, not one of punishing the offender: Re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80; [2002] NSWSC 483 at [56]; cf Australian Securities and Investments Commission v Vizard (2005) 145 FCR 57 at [35] and Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; 209 ALR 271; 50 ACSR 242; [2004] HCA 42 at [41]-[43];
(3) another objective is to deter others from engaging in conduct of the particular kind in question;
(4) the prohibition itself contemplates that there will be hardship to the offender. Therefore, hardship to the offender alone is not a persuasive ground for the granting of leave;
(5) the court in exercising its discretion will have regard to the following factors (Re Magna at 205; cited in Re Zim Metal at 555):
(i) the nature of the offence;
(ii) the applicant's general character, including conduct prior to and in the period since the offence;
(iii) any risks to shareholders, creditors, employees or to the public should the applicant assume the management position proposed;
(iv) any acknowledgement of wrongdoing and co-operation by the applicant;
(v) whether the applicant's general character is such that he has never before offended, whether he is a valuable and contributing member of the community and whether re-offending is unlikely: see for example, Pace at [7];
(vi) the structure of the companies. (The applicant referred to Jansen v Australian Securities and Investments Commission [2003] FCA 1564, where Mansfield J found the shareholding structure to be of significance in granting leave, as the company had only three shareholders, including the applicant, and the other shareholders were aware of his background and were supportive of his application: in particular at [12] and [14]);
(vii) the degree of control which the applicant would be able to exercise (Marsden; cited in Pace at [23]) and the level of supervision (Pace at [29]); and
(viii) whether the applicant has before the court a specific proposal to take part in the management of a specified corporation or corporations, and whether what is proposed accords with proper commercial standards: see Re Shneider (1996) 71 FCR 69; 142 ALR 129; 22 ACSR 497 (Shneider) in which Drummond J stated that the legislative policy of public protection could not be met without a specific and commercially proper proposal before the court. Shneider concerned the predecessor of s 206G of the Act, s 229(3) of the Corporations Law, however the legislative policy and the approach to be adopted would be consistent, particularly as s 206G specifically refers to leave to manage a particular corporation.
33 Principles (1) to (4) have direct application in the present case. Principle (5) contains a number of important factors in the corporate context which, when adapted and applied to the present context, provide most useful guidance as to the way in which the discretion given to the Court by s 126J(1) of the SIS Act should be exercised.
34 In making the order which I did on 7 December last, I considered the following factors:
(1) The applicant bears the onus of establishing that the Court should make an exception to the legislative policy underlying the prohibition reflected in s 120 of the SIS Act.
(2) The legislative policy is designed to protect the public, not to punish the offender. The legislature is concerned to ensure that those who are entrusted with positions of responsibility in respect of the retirement savings of others should be beyond reproach.
(3) General deterrence may be a factor, depending upon the importance of other considerations.
(4) The prohibition itself contemplates that there will be hardship to the offender. Therefore, hardship to the offender alone is not a persuasive ground for making an order under s 126J(1) of the SIS Act.
(5) The following particular matters were significant:
(a) The offences were very serious. They took place over a lengthy period of time. They demonstrated a systematic and calculated disregard for the position of trust held by the applicant. The nature, number and calculated way in which the offences were committed were the most significant factors weighing against the grant of the relief sought by the applicant.
(b) At the time of the offences, the applicant was a relatively young man (25 or 26 years of age). He had not reached a level of maturity which would necessarily result in the offences being regarded as having been committed by a person of sufficient experience and understanding of life with the consequence that the wrongful conduct should be regarded as demonstrative of his true character.
(c) The applicant has not been charged with any offence since his convictions in 1989. Prior to those convictions, he had an unblemished record.
(d) The applicant repaid to his employer all of the funds which he had stolen from it.
(e) The applicant demonstrated both in 1988 and in 1989, and, indeed, before me, genuine remorse for his conduct. In addition, he co-operated fully with the police in their investigation at the time. Furthermore, he pleaded guilty thereby accepting the wrongfulness of his conduct and saving the court system and the police a great deal of time and trouble.
(f) It is now almost 23 years since the 1989 convictions and a little longer since the offences were committed. In that period, the applicant has had a number of responsible jobs and demonstrated honesty in both those jobs and generally. He has had a successful career by any assessment.
(g) The applicant is now in a responsible position earning a significant salary. He is in a stable marriage with no apparent financial pressures beyond the norm.
(h) The applicant offered an explanation for his wrongdoing viz his desire to assist his sister. I had some considerable reservations about this explanation, given that it was raised for the first time only very recently and was not supported by any documentary or other evidence. I gave very little weight to this explanation in my consideration of the matter given my reservations about the truthfulness of it.
(i) The 1989 convictions are spent convictions (see s 7 of the Criminal Records Act 1991 (NSW)). This means that the existence of those convictions is ordinarily protected from disclosure. The idea behind the spent convictions schemes is to give offenders a second chance recognising that they may be rehabilitated. The legislature has considered that an older criminal record should not limit the opportunities in life for those who have been rehabilitated and that persons should not be stigmatised by their criminal record.
These are all matters which are directed to the position of the individual who has been disqualified under the SIS Act. As is the case in the Corporations Act context, the position of that individual should not be given much weight because the primary notion underpinning the disqualification regime is the protection of the public as reflected in s 3 and s 119 of the SIS Act. However, I gave this consideration some weight in the exercise of my discretion.
(j) The applicant has the support of his current CEO and apparently the support of the Chairman of the Board of the trustee. APRA is aware of the application and, having undertaken initial enquiries, has not seen fit to attend before the Court to oppose the application or to place any information whatsoever before the Court. Given that APRA is the appointed regulator for superannuation entities, I assumed, when exercising my discretion, that APRA had no objection to the applicant being granted the relief which he sought and did not wish to place any matter before the Court other than the District Court criminal file.
35 As is apparent from the considerations which I took into account, most of them weighed in favour of the applicant being granted the order which he sought. The most significant considerations weighing against the grant of that relief are those summarised at [34(5)(a)] above. On balance however, I came to the view that I should make the order sought and did so.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.