Federal Court of Australia|1991-11-22|Before: Pincus J

Re Australian Securities Commission v Trevor John Bell [1991] FCA 565; 720 Corporations 6 ACSR 281/104 ALR 125; (1991) 32 FCR 517 (1991) 25 ALD 1 (22 November 1991)

Corporations - Investigation by Australian Securities Commission - decision by investigator declining to allow the presence of the examinee's lawyer - power of investigator to make that decision - circumstances in which that power may be used - exercise of power not justified on the evidence.

Counsel for the Appellant: Mr B. Toomey QC with Miss R.M. Henderson

Counsel for the Respondent: Mr R.N. Chesterman QC with Mr A.J. Morris

Solicitors for the Respondent: Messrs Feez Ruthning

The appellant pay the respondent's costs of the appeal. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

The question in this matter is whether an inspector, in the course of an investigation by the Australian Securities Commission ("the ASC") in connection with the affairs of a company under Division 2 of Part 3 of the Australian Securities Commission Act 1989 ("the Act"), is entitled to decline to allow a person who is to be examined representation by the lawyer of his choice.

2. The learned primary Judge (Pincus J.) answered the question in the negative, based upon his construction of the relevant statutory provisions; but his Honour also found on the facts that, even if the question should be answered in the affirmative, the exclusion by the inspector of the examinee's lawyer in this case was not justified.

3. I turn first to the primary question in the case (I shall consider later the findings of fact made by his Honour) which concerns the right of an examinee to be represented by the lawyer of his choice during his examination by an inspector under Division 2 of Part 3 of the Act and the power of the inspector to curtail the exercise of that right. The ASC does not contend that an examinee can be deprived of legal representation; but it does contend that in an appropriate case the particular lawyer selected by the examinee may be denied the right to represent him before the inspector.

4. Division 2 relates to the examination of a person before an inspector where the ASC, on reasonable grounds, suspects or believes that the person can give information relevant to a matter that it is investigating or is to investigate under Division 1 of Part 3 (s. 19(1)). The Commission is empowered to give written notice in the prescribed form to the person to be examined, requiring him to give to the Commission all reasonable assistance in connection with the investigation and to appear before a specified member or staff member for examination on oath and to answer questions (s. 19(2)). The inspector is empowered to examine the examinee on oath or affirmation and to require the examinee to answer a question put to him at the examination that is relevant to a matter that the Commission is investigating or is to investigate under Division 1 (s. 21).

5. Sections 22 and 23 are the crucial sections for present purposes and they provide as follows:

"22(1) The examination shall take place in private and the

inspector may give directions about who may be present during

it, or during a part of it.

22(2) A person shall not be present at the examination unless he

or she:

(a) is the inspector, the examinee or a member;

(b) is a staff member approved by the Commission; or

(c) is entitled to be present by virtue of:

(i) a direction under subsection (1); or

(ii) subsection 23(1).

Penalty: $1,000 or imprisonment for 3 months, or both.

23(1) The examinee's lawyer may be present at the examination

and may, at such times during it as the inspector determines:

(a) address the inspector; and

(b) examine the examinee;

about matters about which the inspector has examined the examinee.

23(2) If, in the inspector's opinion, a person is trying to

obstruct the examination by exercising rights under subsection

(1), the inspector may require the person to stop addressing the

inspector, or examining the examinee, as the case requires."

6. The inspector is required to cause a record to be made of statements at the examination if the examinee so requests (s. 24(1)). If a written record is made then the inspector may require the examinee to read it and may require him to sign it and the inspector shall, if requested in writing by the examinee, furnish a copy of the written record of the examination to the examinee without charge but subject to such conditions, if any, as the inspector imposes (s. 24(2)).

7. Section 23(1) is directed to an examinee's right of legal representation. It confers upon the examinee's lawyer the rights to be present at the examination, to address the inspector and to examine the examinee. The term "lawyer" is not defined in the Act, but it is defined in s. 9 of the Corporations Law as meaning "a duly qualified legal practitioner and, in relation to a person, means such a practitioner acting for the person". That definition is incorporated into the Act by s. 5(2) of the Act which provides that, subject to the Act, an expression has the same meaning in the Act as in the Corporations Law. I see nothing in the Act which requires a different meaning to be given to the term "lawyer" than the meaning which it bears in the Corporations Law.

8. There is a question as to whether the rights to which s. 23(1) is addressed are in truth the rights of the examinee or those of his lawyer; but I do not think anything turns on this, although it may have relevance with respect to the proper parties in litigation where the rights are in issue. In the present case the client, Mr Bell, not his solicitor, is the party and no point has been taken about this by the ASC. Also, a lawyer can exercise the rights conferred by sub-section (1) only when he is retained by his client, the examinee: cf: National Crime Authority v A, B and D (1988) 18 FCR 439 at 446 with respect to the National Crime Authority Act 1984 ("the NCA Act").

9. An interesting feature of s. 23 is that, whilst sub-section (1) confers three rights on the lawyer, sub-section (2) empowers the inspector to curtail the exercise of two only of those rights (the rights of address and of examination) if the lawyer tries to obstruct the examination by the exercise of any of the three rights. In other words, if the lawyer, by his presence or address or examination, seeks to interfere with or obstruct the examination, the inspector is not specifically empowered to bring to an end the lawyer's right to be present, but only his rights of address or examination. Indeed, nowhere in s. 23 or elsewhere in the Act is there to be found an express statement of the right of an inspector to deny the presence of the examinee's lawyer.

10. Section 22(1) prescribes the nature of the examination by providing that it shall take place in private. It also empowers the inspector to give directions "about who may be present during (the examination), or during a part of it". This gives the inspector a wide power to determine who may be present at an examination under Division 2. Ordinarily the persons present would be expected to include the inspector, the examinee, the examinee's lawyer if the examinee seeks his attendance, and an officer or officers of the Commission including a transcript reporter or monitor. But the inspector may decide to allow others to be present.

11. Counsel for Mr Bell argued that sub-section (2) of s. 22 conferred an entitlement or right vested in the class of persons there described to be present at the examination. But this cannot be so. The sub-section rises no further than its terms and they are to prohibit persons being present at the examination unless they fall within at least one of the specified categories. For a prohibited person to be present constitutes an offence attracting a pecuniary penalty or imprisonment or both.

12. The ASC relied upon s. 22(1) as the source of a power of the inspector, when giving directions about who may be present during the examination or during part of it, to decline to allow the examinee's lawyer to be present if the inspector forms a view, on reasonable grounds and in good faith, that to allow that particular lawyer to appear would or might prejudice the investigation which the inspector is obliged to carry out under the Act. Sub-section (1) was said to be an overriding provision in the sense that it overrides the right conferred by s. 23(1) of the lawyer to be present. Reliance was placed in support of this argument on the decision of a Full Court of this Court in the A, B and D Case.

13. Generally the examinee's right to have the lawyer of his choice could not be abrogated; but there may be cases where lawyers seeking to represent examinees have real conflicts of interest or conflicts between duty and interest or where it would otherwise be improper for them to represent their clients at such examinations. The possible examples are numerous; but if, for example, a lawyer has been personally involved in the affairs of a company being investigated under Division 2 and there is a real risk of his having committed offences, it would plainly be inappropriate and improper for him to seek to represent a witness himself, thereby enabling him to gain insight into the substratum of the investigation which he could use for his own advantage. I do not suggest that the present case answers this description. This is a matter on which the evidence is silent. But it is in the best interests of the community, the legal profession and the attainment of justice that lawyers do not represent clients in administrative enquiries where there could be a reasonably held perception that they are compromising the integrity of their profession for the pursuit of personal advantage arising from their representation, whatever may be the ultimate truth of the facts which underlie that perception.

14. To a degree this problem is solved by the professional bodies which exercise disciplinary authority over their members. Also, appropriate relief can be obtained from the courts exercising special jurisdiction over barristers and solicitors: Rakusen v Ellis Munday and Clarke (1912) 1 Ch D 831 at 835; Australian Commercial Research and Development Limited v Hampson (1991) 1 QdR 508.

15. In addition, if it is desired to ensure that the lawyer attending an examination under Division 2 keeps confidential to himself and his client what occurred and what was said during the examination, appropriate undertakings may be called for by the inspector and given by the lawyer, as indeed happened in this case. See National Companies and Securities Commission v The News Corporation Limited [1984] HCA 29; (1984) 156 CLR 296.

16. These solutions do not go to the heart of the present problem because the inspector must have the power effectively to regulate and control the investigation which he is conducting.

17. Section 23(1) states that the examinee's lawyer may be present at the examination and may, at such times during it as the inspector determines, address the inspector and examine the examinee about relevant matters. The rights conferred by sub-section (1) are not absolute, they must be qualified to some extent. Section 23(2) qualifies the rights by empowering the inspector to stop the lawyer addressing him or examining the examinee if in his opinion the lawyer is trying to obstruct the examination by exercising the rights under sub-section (1). But in the example postulated by me earlier, it could frustrate the object of the inquiry if a lawyer, having a personal vested interest in the outcome of the inquiry, could appear for one or more than one witness. An abuse of power of this kind is not one to which the inspector's powers under s. 23(2) is directed.

18. What can the inspector do about this? In my opinion, he may decline to allow the lawyer to appear before him if there are reasonable grounds for a bona fide belief on his part that to allow the representation will or is likely to prejudice the investigation which he is obliged to carry out pursuant to the requirements of the Act. The examinee may still be represented by any lawyer of his choice except the lawyer or lawyers excluded by the inspector for reasons which satisfy the tests to which reference has been made. The right of legal representation conferred by s. 23(1) still remains; it is the choice of a particular lawyer that has been denied. An examinee is entitled to have legal representation of his own choice, but that right cannot be abused so as to thwart the investigation; it must be qualified to the extent mentioned earlier.

19. If the inspector declines to allow the lawyer of the examinee's choice to represent him at an examination under Division 2, the correctness of that decision may be tested in the courts, as may alleged abuses of other statutory powers, for example, the issue and execution of search warrants under the Crimes Act 1914 (Cth). The courts would then determine whether these are in fact reasonable grounds for the decision of the inspector to disallow representation. This may in some cases call for the taking of evidence in camera if the public disclosure of it would be inimical to the public interest; and courts are able to mould their procedures to accommodate such cases.

20. The power of the inspector to exclude a particular lawyer is derived from s. 22(1) which in terms authorises the inspector to give directions about who may be present during the examination. But sub-section (1) of section 22 is not a transcendent power in the sense contended for by counsel for the ASC; it does not override sub-section (1) of s. 23 because the right of legal representation which is the essence of that sub-section remains unimpaired. The inspector cannot deny an examinee legal representation, save where sub-section (2) of s. 23 is invoked; but he can exclude a particular lawyer for good reasons of the kind already mentioned based on an actual or likely abuse of the power conferred by s. 23(1). An exercise of the power under s. 23(1) that is an actual or likely abuse of that power is not a true exercise of the power. The power however still remains ready to be properly exercised. Further, while s. 23(2) does not entitle the inspector to deny the examinee's lawyer the right to be present if he tries to obstruct the examination, this does not derogate from the conclusion that a particular lawyer may be excluded by the inspector for good reasons because the right of the examinee to have his lawyer present during his examination remains; it is the identity of the lawyer that must change if he is excluded by the inspector.

21. The power created by s. 22(1) is expressed in positive terms, namely, the giving of directions about who may be present, and not in negative terms about who may not be present; section 22(2) achieves this to a degree. It seems to me, however, that to sensibly construe s. 22(1) requires that the inspector be authorised to direct who may and who may not be present. The express power to give directions about who may be present implies a like power about who may not be present.

22. It may be that the inspector's power to exclude a particular lawyer would exist as being reasonably incidental or ancillary to the proper conduct of the examination even if the specific power conferred by s. 22(1) was absent; but it is not necessary to consider this because of the power conferred by s. 22(1).

23. The A B and D Case in some respects is close to the present case, but there are differences. The Acts are different. This case is concerned with the ASC, its powers and rights under the Act; the A, B and D Case involved the National Crime Authority under the National Crime Authority Act. Although there is a degree of correspondence between some of the legislative provisions, there are differences between them. There is, for example, no equivalent in the National Crime Authority Act of s. 23(2). Section 25(4) of the National Crime Authority Act differs in some respects from s. 23(1) of the Act. Nor, as the primary Judge pointed out, is there to be found a section in the Act which gives to an inspector powers of the kind mentioned in s. 19 of the National Crime Authority Act. Section 11(4) of the Act confers incidental powers upon the ASC, but they are not the powers of an inspector conducting an investigation under Division 2 of Part 3 of the Act. The Full Court concluded in the A, B and D Case that the National Crime Authority had the power to regulate its own proceedings by excluding a legal practitioner "if it concludes on reasonable grounds and in good faith that to allow the representation either will, or may, prejudice the investigation which it is obliged to carry out pursuant to the terms of its statute". I have reached a similar conclusion with respect to sections 22 and 23 of the Act though, in this case, my preferred test of "will or is likely to" presents a slightly higher barrier than "will, or may"; but the difference in practical application will depend on judicial approach to the facts of the particular case. In my view, the differences between the two Acts and the basis of the power being s. 22(1) coupled with an abuse of power under s. 23(1), as opposed to the broader policy considerations relied on in the A, B and D Case, lead to this result.

24. It remains to deal with an argument advanced by counsel for the ASC that the primary function of the examination under Division 2 is to give effect to the powers and functions of the Commission and the object of the Act. In particular it was said that the inspector was required to explore suspected contraventions of the laws which the Commission administered. Reliance was placed upon s. 1(2) of the Act which requires the Commission to "strive" to achieve various objects and take particular action. We were referred to s. 11 of the Act including s. 11(4) which empowers the Commission to do whatever is necessary for or in connection with or reasonably incidental to the performance of its functions. We were also referred to ss. 13, 16, 17 and s. 19(2). Reference was also made to s. 102(1) of the Act which empowers the Commission by writing to delegate any of its functions and powers to persons.

25. In my opinion none of these matters addresses the question which is before us and which turns essentially upon the power of inspectors conducting Division 2 examinations and upon ss. 22 and 23 of the Act read in the statutory context in which they appear.

26. I turn now to the findings of the primary Judge that on the evidence the exclusion by the inspector of the examinee's lawyer was not justified.

27. An investigation is being conducted by the ASC under Division 2 of Part 3 of the Act into the affairs of a company, Aust-Home Investments Limited ("the company"). On 10 May 1991 Mr J.F. MacKenney, a solicitor and a member of the firm of Messrs Gilshenan and Luton, Solicitors, of Brisbane, lodged with the ASC a prospectus for the issue of shares in the company. The prospectus was considered by the ASC and discussions were held among its officers. Mr B.C. Behan, an officer of the ASC, was consulted about its contents. On 23 May 1991 the ASC wrote to the company informing it that the prospectus would not be registered as it did not comply with the law and, in addition, because it contained false and misleading statements and "there are omissions from the prospectus". Examples of the alleged deficiencies were given. In July and August there were examinations of a number of people relating to the affairs of the company. On 30 and 31 July 1991 inspectors other than Mr Behan examined six people all represented by Mr MacKenney. At various times during August six other people were examined by Mr Behan. Again Mr MacKenney appeared for two of those examinees. One of the examinees examined by Mr Behan is the respondent, Trevor John Bell, who is the secretary of the company. Mr Bell appeared before Mr Behan on 6, 12 and 20 August 1991 with his solicitor, Mr MacKenney.

28. On 19 August 1991, when Mr MacKenney appeared as the solicitor representing another examinee before Mr Behan, Mr Behan said, amongst other things:

"This is an on-going examination and you can see from my line of

questions that it is highly likely that criminal and civil

proceedings may arise as a result of the investigation. Further,

as a result of certain information I have in my possession, it may

be that the role of yourself or your firm in relation to the

preparation of the prospectus may be the subject of this

examination. I hasten to add that I have not formed any views at

this stage, nor am I suggesting any impropriety, but I am just

drawing to your attention the fact that I have certain information

in my possession."

Mr MacKenney asked Mr Behan what information he possessed and he replied that he could not reveal it to him.

29. On 20 August 1991 Mr Bell again appeared before Mr Behan accompanied by Mr MacKenney and another partner of Messrs Gilshenan and Luton, M.P. Quinn. Mr Behan expressed concern at the continuing presence of Mr MacKenney and any partners or employees of the firm Gilshenan and Luton. He said he was concerned that Mr MacKenney has appeared as "legal counsel" for some eight persons who have appeared for examination arising out of the investigation into the company and associated companies. He said:

"From information in my possession I have formed the view that the

continued representation of examinees in this investigation will or

may prejudice the investigation if those examinees are represented

by Mr MacKenney and/or partners or employees of Gilshenan and Luton.

I have given considerable thought to this matter but it is my

intention to examine a substantial number of further examinees and

the answers being provided by examinees to date is such that I feel

that there is an obvious and apparent conflict of interest.

... I am concerned that in fact the investigation into (the company)

and associate companies and offices may involve Mr MacKenney himself

and other members of the firm of Gilshenan and Luton who were

responsible for preparing a prospectus lodged with the commission

for (the company). I take it no further than to say that it causes

me concern and I believe on reasonable grounds that it would be

unsafe and prejudicial to the investigation to allow Mr MacKenney

and/or the partners and employees of Gilshenan and Luton to continue

to represent examinees.

I do not wish my words at this stage to be misconstrued with respect

to my concerns as to the involvement of either Mr MacKenney and/or

the firm. I offered to Mr MacKenney yesterday, and I repeat that

offer today, that I am prepared to listen to any submissions that he

may have, or alternatively Mr Quinn may have, on his behalf, that

would or may persuade me to not make a direction. I would emphasise

that I am concerned to ensure the security of this examination and

all examinations conducted in this investigation.

Each of the parties is examined in private and Mr MacKenney has

given me his personal undertaking that he would not discuss any of

the matters raised in an examination or any of the issues or

questions asked and answers given with any other party other than

the examinee in question.

I accept that this is the intent of Mr MacKenney and that that

undertaking is given in good faith; however from the information

available to me I have reasonable grounds to believe that to permit

Mr MacKenney and/or partners or employees of Gilshenan and Luton to

continue to act for examinees, will prejudice or may prejudice the

investigation that is currently being conducted. ..."

30. During the discussion that took place on 20 August Mr Behan said to Mr Quinn that he had spoken to Mr MacKenney following the completion of proceedings on 19 August involving another witness and told him that there was some concern on his part and that he (Mr MacKenney) should consider his position

"aside from the matters raised on the ethical basis. It is for that

reason, and to ensure that there was no misunderstanding or

misapprehension that when Mr Bell appeared this afternoon, my

opening remarks were intended to ensure that there was no

misunderstanding or misapprehension with regard to the view that I

hold as to what should be the proper directions made to ensure the

security of this investigation and its privacy."

... "In endeavouring to appraise Mr MacKenney of matters that I

believed relevant in assisting him to make such a determination, or

to report back to his partners or others, I also indicated to him

that there was additional information in my possession that caused

me concern, and that a perusal of the transcripts to date was such

that there was, in my view, a clear need to consider his position,

and it was for that purpose, yesterday, that I agreed to adjourn the

matter, clearly so that he could obtain advice, and that was in

relation to a different examination. I only refer to it to ensure

that the matter is quite precise ..."

31. The examination of Mr Bell was adjourned to Tuesday, 27 August 1991. By letter dated 22 August 1991 from Mr Bell to the ASC, Mr Bell requested that a copy of the transcript of his examination held on Tuesday, 20 August 1991 be given to him and asked that the examination be adjourned on 27 August to allow him time to appoint a new solicitor and for that person to read and comprehend the already lengthy transcripts. By letter dated 23 August 1991 from Mr Behan to Mr Bell, the latter was informed that a copy of the transcript of his examination would be provided to him in accordance with s. 24(2)(b) "of the ASC law" at the completion of his examination "subject to such conditions, if any, as the inspector imposes". He was informed that his adjourned examination would continue on Tuesday, 27 August 1991 and that:

"Neither Mr MacKenney nor any member of the firm

Gilshenan and Luton will be permitted to be

present during your examination. You have been

given adequate opportunity to appoint

alternative legal representation."

32. By letter dated 25 August 1991 the solicitors presently acting in this matter for Mr Bell wrote to Mr Behan informing him that proceedings would be commenced in this Court unless he agreed "to stay the operation of the relevant decisions or adjourn Mr Bell's continued examination, pending the hearing of the application". Subsequently these proceedings were commenced and were heard on an interlocutory footing by Pincus J. on 26 August 1991. The final hearing took place before his Honour on 30 August 1991.

33. On 26 August 1991 Pincus J. granted an interlocutory injunction restraining the ASC from conducting the adjourned examination of the applicant on 27 August. On 30 August his Honour made a final order setting aside the decision of the respondent that neither Mr MacKenney nor any other member of the firm of Gilshenan and Luton be permitted to be present at the continued examination of Mr Bell by the ASC and ordered that the ASC pay Mr Bell's costs of and incidental to the application. The ASC appeals from that judgment.

34. Mr Behan did not give evidence before the primary Judge and his Honour remarked that there was no explanation given to him as to the reasons for Mr Behan's not giving evidence; and referred to the fact that failure to give evidence was in all the circumstances puzzling. Counsel for the ASC argued before his Honour that the inspector would have reasonable grounds to suspect that the confidentiality of the investigation may be compromised if a legal practitioner appears for several witnesses. Counsel also argued that the inspector would have reasonable grounds to suspect that the integrity of the investigation may be compromised if an examinee is represented by a firm of solicitors where a member of that firm is himself subject to investigation. His Honour said it would have been simple enough for Mr Behan to say in an affidavit that the reasons advanced by counsel for the ASC were the true reasons if that was the case; but counsel for the ASC asked his Honour to infer from the transcript before Mr Behan and from the evidence of persons other than Mr Behan that the reasons for exclusion were as she submitted.

. in the circumstances and in the absence of any evidence of Mr Behan, it was difficult to make a finding with any confidence as to what Mr Behan's concern truly was;

. if Mr Behan's concern was an objection to the appearance of Mr MacKenney or his firm due to their having lodged the prospectus:

"one might have expected the point to be taken

at the outset, rather than after Mr MacKenney

had appeared for a number of people ... over

some weeks".

. it was not submitted, nor could he reasonably infer, that any additional matter came to Mr Behan's knowledge to cause him to change his mind;

. he could not follow why he was asked to infer that Mr Behan was moved by the possibility of information obtained from one examinee being transmitted by the solicitor to another (undertakings had been given by Mr MacKenney to Mr Behan that he would not discuss any of the matters raised in an examination or any of the issues or any of the questions asked and answers given with any other party than the examinee in question);

. in discussing the problem with Mr Quinn on 20 August, Mr Behan made much of the point that he was not obliged to say what course the investigation might take or what illegalities might be expected;

. in his view if an inspector wishes to attempt to insist upon an examinee's dismissing his or her solicitor or barrister there should be a clear statement of the ground upon which the demand for dismissal of the lawyer is being made and that this was not made;

. even during the proceedings before him the stance was still maintained by the ASC that it was not necessary clearly to disclose what was the problem about Messrs Gilshenan and Luton appearing.

36. His Honour found that in the state of the evidence before him it did not seem to him possible to hold that the total exclusion of the firm of Messrs. Gilshenan and Luton could be justified. His Honour held that, on the assumption that there was a discretion to exclude Mr Bell's solicitor, he would not have decided the matter in favour of the ASC because the basis upon which Mr Behan purported to act had been left unclear by the evidence, especially as he himself had not seen fit to give evidence.

37. The transcript of Mr Bell's examination before Mr Behan was before his Honour; and it suggests that Mr Behan was concerned about the involvement, if any, of Messrs. Gilshenan and Luton in the prospectus and about that firm's representation in those circumstances of examinees before him. However, no evidence was led before his Honour from Mr Behan about that concern, if any, or the reasons for it. It would have been open to the Commission to give evidence before Pincus J. about these matters; and, if necessary, it or part of it could have been given in camera if his Honour regarded that course as being necessary to ensure, in the public interest, the proper conduct of the examination.

38. In my opinion his Honour's findings have not been shown to be in error. It was open to him to make the findings which he did.

The first aspect of this appeal raises a question of construction of ss.22 and 23 of the Australian Securities Commission Act 1989 ("the Act"). The sections are as follows:-

"22(1) The examination shall take place in private and the

inspector may give directions about who may be present

during it, or during a part of it.

(2) A person shall not be present at the examination

unless he or she:

(a) is the inspector, the examinee or a member;

(b) is a staff member approved by the Commission;

or

(c) is entitled to be present by virtue of:-

(i) a direction under subsection (1); or

(ii) subsection 23(1).

Penalty: $1,000 or imprisonment for 3 months, or both.

23(1) The examinee's lawyer may be present at the

examination and may, at such times during it as the

inspector determines:-

(a) address the inspector; and

(b) examine the examinee;

about matters about which the inspector has examined the examinee.

(2) If, in the inspector's opinion, a person is trying to

obstruct the examination by exercising rights under

subsection (1), the inspector may require the person to stop

addressing the inspector, or examining the examinee, as the

case requires."

2. The examination referred to is provided for in Division 2 of Part 3 of the Act which is entitled, "Investigation and Information-Gathering." Subsection 19(1) provides that where the Australian Securities Commission ("the Commission") on reasonable grounds suspects or believes that a person can give information relevant to a matter which it is investigating or is to investigate, the Commission may give written notice to the person requiring him to give to the Commission all reasonable assistance in connection with the investigation and to appear before a specified member or staff member for examination on oath and to answer questions.

3. The question of construction is whether an inspector conducting an examination may give a direction excluding from the examination a lawyer retained by the person being examined to represent him during the examination. If such a direction may be given, there is then the question whether, in the circumstances of this case, the inspector was justified in giving a direction to exclude the lawyer retained by the respondent to the appeal to represent him at the examination. The second question requires some analysis of the facts of the matter. I shall refer to the evidence after I have dealt with the question of construction.

4. The starting point is subpara. 22(2)(c)(ii) which provides that a person shall not be present at the examination unless he or she is entitled to be present by virtue of subsec. 23(1). That subsection provides that the examinee's lawyer may be present at the examination and may, at such times during it as the inspector determines, address the inspector and examine the examinee about matters about which the inspector has examined him or her. Subsection 23(2) provides that if, in the inspector's opinion a person is trying to obstruct the examination by exercising rights under subsec. (1), the inspector may require the person to stop addressing the inspector, or examining the examinee, as the case requires.

5. The submissions made on behalf of the respondent involved the proposition that the inspector had no power to exclude a lawyer representing a person being examined from the examination because that person had a right (conferred by subsec. 23(1)) to be present at the examination. Nothing in either s.22 or s.23 provided for any circumstances in which the lawyer might be deprived of that right. The right was specifically preserved by subpara. 22(2)(c)(ii). Furthermore, subsec. 23(1) conferred three rights, namely, the right to be present, the right to address and the right to examine. Subsection 23(2) affected only two of these, namely, the right to address and the right to examine. The two sections provided exhaustively for the circumstances in which a lawyer might attend an examination, for his right to remain present at such an examination and for his rights to address and examine. It followed that there were no circumstances in which an inspector was empowered to exclude from an examination a lawyer who had been retained by the person being examined to represent him or her during the course thereof.

6. I should, perhaps, mention in passing that this is, I think, a case where rights are conferred upon the lawyer. The statutory framework is different from that which applied in National Crime Authority v A, B and D (1988) 18 FCR 439. There it was said by the Court (p 446) that s.25 of the National Crime Authority Act 1984 conferred no rights upon legal practitioners; the rights conferred by it were conferred upon witnesses.

7. Unless there is a clear legislative intention otherwise, tribunals of all kinds will have the power to regulate and control their own proceedings. That power is implied into the statutory provisions pursuant to which a given tribunal is created. The power is implied because it is necessary that the tribunal have it in order to be able properly to discharge its functions; see D.C. Pearce, Statutory Interpretation in Australia, 2nd ed., (para 33), p 37. I refer also to the decisions of Lockhart J. in Re Sterling; ex parte Esanda Limited [1980] FCA 61; (1980) 30 ALR 77 at p 82 and Toohey J. (when a judge of this Court) in Re Briggs; ex parte Briggs v Deputy Commissioner of Taxation (1986) 75 ALR 554 at pp 555-6 that, although no express power to set bankruptcy notices aside is conferred by the Bankruptcy Act 1966, such a power is to be implied into that Act. I refer also to my own decision in Dunkel v Commissioner of Taxation (1990) 27 FCR 524 which concerned the question whether an officer authorised to conduct an examination under s.264 of the Income Tax Assessment Act 1936 was entitled to have present during the examination counsel to advise him in relation to action he should take in relation to objections to be made by counsel for the person being examined based on a claim for legal professional privilege. In the course of my reasons I referred to a number of authorities (p 528). Amongst these was Re Gaumont-British Picture Corporation Limited (1940) 1 Ch 506 where Crossman J. said (p 512):-

"What I have to consider is whether the presence of the

shorthand writer is something which is reasonably necessary

to enable the inspector properly to carry out his duty under

the statute. I come to the conclusion that it is so

necessary. The taking of a shorthand note is not for the

purpose of publishing the proceedings or doing anything of

that kind. It is for the purpose of enabling the inspector

to prepare his report. When he comes to prepare his report

he wants a record of what has occurred and the shorthand

note is for that purpose. The presence of a shorthand

writer for that purpose is, in my view, reasonably necessary

to enable the inspector properly to carry out his duty under

the statute. In these circumstances it seems to me that

there is no more to be said in the matter."

Reference should also be made to s.15AA of the Acts Interpretation Act 1901 which requires a construction of an Act that would promote the purpose or object underlying the Act to be preferred to a construction that would not promote that purpose or object.

8. If it were not for the matters provided for in subsec. 23(2), it would be clear, in my opinion, that the inspector would have power, if there were grounds for doing so, to exclude a particular lawyer from the examination and thus deprive the examinee of his or her services. This would be so notwithstanding the fact that subsecs. 22(2) and 23(1) confer upon the lawyer a right to be present. The power would be implied because it would be necessary for the proper discharge by the inspector of his powers and functions.

9. I have reached the conclusion that the words of subsec. 23(2) do not affect the position which would have prevailed had they not been present. Three rights are provided for by subsec. 23(1), namely, the right to be present, the right to address and the right to examine. But I do not think it is correct to conclude that the legislature intended to exclude from the power of the inspector to control the proceedings before him the right of a lawyer to be present in cases where there are grounds for terminating that right. The rights to address and to examine, unlike the right to be present, are conferred by subsec. 23(1) in lettered paragraphs. In my opinion it is those rights, and those rights only, which are addressed by subsec. 23(2). The fact that it is silent about the right to be present is not indicative one way or the other of the legislature's intention.

10. The question arises as to why it is that it is the right of address and examination with which s.23 is dealing and not others. I think that there is a clear answer to this question. If rights to address and to examine were not specifically conferred by the section, it would be open to an inspector conducting an examination to take the view that he would not permit a lawyer to address him or to examine his client. He would be bound to allow the lawyer to be present to represent the examinee, but how the examination then proceeded and what part the lawyer would be entitled to play in it would be a matter for the inspector. In those circumstances it might have been argued that the right of a lawyer to be present carried with it an implied right to address and an implied right to examine but the position would not have been clear. The legislature put the matter beyond question by expressly conferring rights of address and of examination. In doing so, it recognised that these rights might be abused so it provided that if the lawyer tried to obstruct the examination by exercising either of the rights, they might be lost. It follows that, in my opinion, the legislature was not intending to deal in s.23 with the broad question of the overall control which the inspector was to have over the proceedings before him.

11. The provisions of ss.22 and 23 have to be read against the background of the Act itself. The Commission has important public functions to perform in relation to the detection of offences and other misconduct which may have occurred in relation to corporations. Those considerations are important matters to take into account in construing the power which the inspector has to carry out an examination. It is important that a situation not be permitted to arise in which his ability to do so may be prejudiced. One can imagine extreme, although unlikely, cases where it emerges quite clearly that the lawyer is acting in a grossly disruptive manner or in a patently dishonest manner. In either case reason dictates that the inspector, in order to safeguard the integrity of the examination, should have power to exclude the lawyer whose conduct is disruptive or dishonest. It would not be enough, concentrating upon the word "obstruct" in subsec. 23(2), for the inspector to curtail the lawyer's right of address or examination. Disruptive conduct could take many forms not involving addressing the inspector or examining the person who has been called for examination. Dishonest conduct could also take many forms. I instance the prompting of the witness in answers given by him to the inspector. Unless an implication is read into the statute whereby the inspector has power to regulate the proceeding before him, the inspector will be exposed to a situation which may become quite farcical. He will not have any overall power to control the proceedings before him with the consequence that they may well become a charade.

12. Counsel for the respondent saw the strength of this consideration and was prepared to concede that disruptive conduct might be conduct which would entitle an inspector to exclude a lawyer guilty of it from attendance. This concession was in my view rightly made. It leads immediately to the consequence that the rights conferred upon the lawyer by ss. 22 and 23 are not absolute and must be qualified. That was the approach adopted by this Court in National Crime Authority v A, B and D (supra). It was there decided that the Authority had the power to regulate its own proceedings by excluding the legal practitioner if it concluded on reasonable grounds and in good faith that to allow the representation either would, or might, prejudice the investigation which it was obliged to carry out pursuant to the terms of its statute. I think the same sort of qualification should be read into the provisions of ss. 22 and 23 of the Act here. Whether an inspector in a particular case is justified in excluding a lawyer from the examination will depend upon the particular facts and circumstances of a given case.

13. The facts and circumstances of the present case are recounted in the judgment of Lockhart J. which I have had the opportunity of reading.

(a) In July and August 1991 there were examinations of a number

of people relating to the affairs of a company, Aust-Home

Investments Limited. On 30 and 31 July 1991 inspectors

other than Mr Behan, who conducted the examination in

question here, examined six people all represented by a Mr

MacKenney, who is the respondent's solicitor. Mr MacKenney

is a member of the firm of Gilshenan and Luton.

(b) During August six other people were examined by Mr Behan.

Mr MacKenney appeared for two of those persons. One was

the respondent who was the Secretary of the company.

(d) On 19 August 1991 Mr MacKenney appeared for anotherperson

being examined by Mr Behan in connection with the affairs

of the company. Mr Behan said that the examination was

ongoing and that it was "highly likely" that criminal and

civil proceedings might arise as a result of the

investigation. He also said that, as a result of certain

information in his possession, it might be that Mr MacKenney's or

Mr MacKenney's firm's role in relation to the prospectus might

be the subject of the examination. Mr MacKenney asked Mr Behan

what information he had. Mr Behan said that he could not reveal it.

(e) When the respondent appeared before Mr Behan on 20 August

1991 he was accompanied by Mr MacKenney and Mr Quinn who

was one of Mr MacKenney's partners. Mr Behan expressed

concern at the continued presence of Mr MacKenney and

partners or employees of Gilshenan and Luton. He said that he

was concerned that Mr MacKenney had appeared for eight

persons in relation to the investigaton into the company and

then made the statement which is set out in the judgment of

Lockhart J. Mr Behan concluded his remarks by saying that,

from the information available to him, he had reasonable

grounds to believe that to permit Mr MacKenney and/or

partners or employees of Gilshenan and Luton to continue to

act for examinees, would prejudice or might prejudice the

investigation that was being conducted.

(f) Again on 20 August 1991 Mr Behan addressed some remarks to

Mr Quinn saying that Mr MacKenney should consider his

position. What Mr Behan said to Mr Quinn is set out in

Lockhart J.'s judgment.

14. The relief that was sought at first instance in this case was relief pursuant to the Administrative Decisions (Judicial Review) Act 1977. The grounds of the application which are relevant to the question now to be decided were that the appellant (really the inspector) took into account irrelevant considerations, failed to take relevant considerations into account and made the decision in breach of the rules of natural justice.

15. The respondent brought the case and it was for him to establish the necessary facts which would lead the Court to conclude that he had made out his case. He relied upon what Mr Behan himself had said. This was understandable because he had no material otherwise to go on. His case is that nothing Mr Behan said justified the exclusion of his solicitor, Mr MacKenney, or, for that matter, Mr Quinn, from the examination. Mr Behan refused to tell Mr MacKenney what the nature of the material that he had was. In his reasons for making the decision in question he referred to possible conflicts of interest and ethical problems but did not spell out what these were. It was the respondent's case that, when properly analysed, nothing said by Mr Behan could justify the course of action he decided to take.

16. Having considered Mr Behan's various statements I have reached the conclusion that this submission is correct. The primary Judge remarked on the absence of evidence from Mr Behan himself. It seems to me that the material upon which the respondent relied called for an evidentiary response. The information which Mr Behan said he had was peculiarly within the knowledge of the Commission. Unless it were disclosed, Mr MacKenney could not deal with it. If it could not be disclosed to him, there was a strong reason why it should have been disclosed, if necessary upon a confidential basis, to the Court. One understands the difficulty that inspectors carrying out examinations under the Act may have. They are investigators, not judges. They may have acquired pieces of information from a variety of sources that may ultimately be relevant to the question whether any breach of the law has occurred or whether any action in respect of a supposed breach should be taken. It is in the public interest that their investigations not be made public; to make them public might alert people who have broken the law to their predicament with the consequence that they may leave the country or may take other action which will make it difficult for the Commission properly to discharge its functions. But the fact that this may be so does not, in my opinion, entitle an inspector simply to announce that he is in possession of unspecified information which may involve the solicitor appearing for a person being examined in misconduct himself. There is no reason why the person being examined or the solicitor should be required to accept the statement at its face value. The statutory right of representation which is conferred is an important right and it is not lightly to be cast aside.

17. How then are the interests of persons being represented and the public interest in that representation not being inimical to the investigative process which is being carried out to be reconciled? In my opinion the reconciliation must come at the stage where the matter is tested by an application under the Judicial Review Act or, perhaps, s.39B of the Judiciary Act 1903. The person being examined can then be represented by solicitors other than those retained to appear at the examination and the Commission can seek to lead evidence in confidence of the particular matters which give rise to its concern. This is not to cast any onus other than an evidentiary one upon the Commission. The applicant establishes his case by reference to what has been said in the course of the examination by the inspector. The absence of anything concrete and the failure to specify the matters relied upon provide the occasion for the leading by the Commission of evidence which will disclose the basis of its objection to the particular representation. The Court can then make a judgment on the matter without the person being examined or the solicitor appearing for him at the examination needing to know the basis of the Commission's objections. That evidence may come from the inspector himself or from other witnesses depending upon the circumstances of the case. In those circumstances I am of opinion that the application for judicial review was correctly granted with the consequence that the appeal should be dismissed.

18. In considering this matter I have wondered whether the application has specified the correct grounds upon which relief may be claimed. I would have thought that the provisions of paras. 5(2)(h) and (3)(a) of the Judicial Review Act may have been more appropriate than those relied upon. Those paragraphs in effect provide that there will be found to be an improper exercise of a power if the exercise of the power has resulted in uncertainty. It will result in uncertainty, inter alia, if the person who made the decision was required by law to reach that decision only if a particular matter were established and there was no evidence or other material from which he could reasonably be satisfied that the matter was established. Here I have concluded that the inspector's power to exclude a lawyer from the examination was an implied power which could be exercised in cases where the continued presence of the lawyer would or might prejudice the investigation. It may be that the Commission or the inspector did have the evidence which is referred to in para. 5(3)(a) of the Judicial Review Act but, if either did, the Court was not informed of it. To me that approach provides a more satisfactory foundation for the relief given in this case than any of the grounds relied upon in the application for judicial review. But I suppose the case, at bottom, does involve a denial of natural justice so that at least that ground was made out.

19. In the result I would dismiss the appeal with costs.

I agree that the express language of s. 23(1) of the Australian Securities Commission Act 1989 must be subject to an implicit qualification. The lawyer's right, and his client's right that it be observed, are conferred for the purposes of a statutory examination. They must be exercised for those purposes, not for extraneous purposes. If it can be shown that the lawyer's presence is inconsistent with the statutory function being performed, I agree that, despite the express language of the Act, it is implicit in the scheme for which the Act provides that he may be excluded. However, such a qualification upon the express entitlement conferred by the Act cannot be stretched beyond what the Court can say is necessarily required for the carrying out of the examination for which the statute provides. Otherwise, the Court would be reframing the statutory scheme and, in doing so, restricting the exercise of a common law right expressly preserved by Parliament.

2. It follows that, in my opinion, an onus lay upon the appellant to justify the action of the inspector in this case. That was not a light burden. It could not be discharged simply by showing that the solicitor had acted for other examinees in the same examination, nor by showing that he had been involved, as solicitor, in legal work for the company relevant to the subject matter of the enquiry. In a particular case, of course, the circumstances of such an involvement might be relevant to show that the solicitor's presence at a particular examination was inconsistent with the performance of the statutory function. But the circumstances would have to be exposed for consideration by the Court. In any consideration of such a case, the Court should not lose sight of the implications of a solicitor's task, which were eloquently set forth, in a not unrelated context, by Sir Phillip Street, speaking for the Full Court of the Supreme Court of New South Wales, in R v Tighe and Maher [1926] NSWStRp 3; (1926) 26 SR (NSW) 94 at 108-109.

3. In the present case, there was really no attempt to justify the exclusion of the lawyer, which was in the teeth of parliament's provision for his presence. The appeal should accordingly be dismissed with costs.

Crime Authority Act 1984

Interpretation Act 1901

Decisions (Judicial Review) Act 1977

Tax Assessment Act 1936

Securities Commission Act 1989

Re Australian Securities Commission v Trevor John Bell [1991] FCA 565; 720 Corporations 6 ACSR 281/104 ALR 125;

At a glance

Court

Decision date

Before

Source

Judgment (98 paragraphs)

Re Australian Securities Commission v Trevor John Bell [1991] FCA 565; 720 Corporations 6 ACSR 281/104 ALR 125; (1991) 32 FCR 517 (1991) 25 ALD 1 (22 November 1991)

Parties

Legislation Cited (5)

Cases Cited (7)