Visnic v Australian Securities and Investments Commission

Visnic v Australian Securities and Investments Commission - [2007] HCA 24 - HCA 2007 case summary — Zoe

[12]

GLEESON CJ, GUMMOW, HAYNE, CALLINAN, HEYDON AND CRENNAN JJ. Section 206F of the Corporations Act 2001 (Cth) ("the Corporations Act") is found in Pt 2D.6 (ss 206A‑206HA) of that statute. Part 2D.6 is headed "Disqualification from managing corporations". This may be brought about in three ways.
First, s 206B provides for what is identified as "[a]utomatic disqualification". This occurs by force of that section if a person is convicted of an offence of a certain description. Secondly, ss 206C, 206D and 206E confer powers of disqualification upon "the Court", which is defined[1] so as to include the Federal Court and the Supreme Court of a State or a Territory. The powers of the Court under these provisions for disqualification are exercised upon application by the Australian Securities and Investments Commission ("ASIC"). Section 206C is engaged by curial declaration under s 1317E of contravention of a civil penalty provision, s 206D by responsibility for mismanagement of failed corporations, and s 206E by repeated contraventions of the Corporations Act.
Thirdly, s 206F confers the power of disqualification not upon one of the designated courts but upon ASIC itself. Section 206F provides that ASIC may disqualify a person from managing corporations for up to five years if the conditions spelled out in s 206F(1) are satisfied. In determining whether disqualification is justified, ASIC is directed to the matters set out in s 206F(2). The text of these provisions is set out later in these reasons. A decision by ASIC under s 206F may be reviewed by the Administrative Appeals Tribunal (s 1317B).
A person who becomes disqualified from managing corporations by the operation of any of these provisions of Pt 2D.6 ceases to be a director, alternate director or a secretary of a company (s 206A(2)). It is an offence for a disqualified person to manage a corporation (s 206A(1)).
The litigation in this Court arises in the following manner. On 24 January 2006, a delegate of ASIC served upon the plaintiff a notice stating that he had been disqualified from the time of service of the notice for a period of five years from managing corporations without the leave of ASIC. On the same day, ASIC published a statement of facts, findings and reasons for decision.
The plaintiff had been a director of 14 companies which had been wound up with the appointment of liquidators. ASIC was satisfied, within the meaning of par (a) of s 206F(1), that the plaintiff had been an officer of two or more corporations within the immediately preceding seven years and that, whilst he was such an officer or within 12 months of his ceasing to be so, each corporation had been wound up and a liquidator had lodged a report under s 533(1) of the Corporations Act concerning the inability of the corporation to pay its debts. The statement by ASIC published on 24 January 2006 concluded that the plaintiff was:

[28]

A cause then pending in the Federal Court in which the plaintiff sought a declaration on the invalidity of s 206F was by order of this Court made on 30 October 2006 removed into this Court. It then was heard concurrently with the appeals in Albarran v Members of the Companies Auditors and Liquidators Disciplinary Board and Gould v Magarey[2]. These reasons should be read with those in the two appeals.
ASIC is the defendant in the present cause but entered a submitting appearance. The Attorney-General of the Commonwealth intervened and presented opposing submissions to those of the plaintiff.
The central issue is whether s 206F purports to confer upon ASIC a function or power pertaining exclusively to the judicial power of the Commonwealth. If, upon its proper construction, the legislation did so, then it would be invalid, ASIC not being one of the courts identified in Ch III of the Constitution.
The Attorney-General identifies s 206F as conferring upon ASIC a power to be exercised for the purpose of maintaining professional standards in the public interest and submits that there is nothing inherently judicial in such a power. These submissions should be accepted and the action should be dismissed. We turn to explain why this conclusion should be reached and the contrary submissions by the plaintiff rejected.
The plaintiff put several arguments in addition to those of the appellants in Albarran and Gould. The first submission fixed upon the presence in Pt 2D.6 of the Corporations Act of the curial powers of disqualification conferred by ss 206C, 206D and 206E, alongside the power conferred upon ASIC by s 206F. Then it was said that the Parliament could not vest judicial power at the same time in both a Ch III court and an administrative body.
This submission should be rejected. First, a proposition of that width cannot stand with the earlier authority of this Court provided by R v Quinn; Ex parte Consolidated Foods Corporation[3]. There, the Court upheld the validity of s 23(1) of the Trade Marks Act 1955 (Cth). That one provision was concurrently addressed to this Court and to the Registrar of Trade Marks and, upon application, conferred authority to remove for non‑use trade marks from the register. Secondly, in any event, the criteria stipulated for the exercise of power by ASIC and by the courts differ and do so to a significant degree. Earlier in these reasons reference has been made to the regard ASIC may have to the public interest in a disqualification (s 206F(2)(b)(ii)) and to the absence of any reference to the public interest in the other sections conferring curial power.
This Court held in Precision Data Holdings Ltd v Wills[4] that the Corporations and Securities Panel, in declaring an acquisition of shares or conduct relating thereto to have been unacceptable, was not exercising the judicial power of the Commonwealth. In its reasons, the Court drew a distinction which is presently material[5]:

[30]

The statement in the final sentence of that extract is sufficiently determinative of the present case. Section 206F empowers ASIC to determine that a person henceforth not manage corporations and to decide that question by reference to criteria including the public interest.
It is true that ASIC may look to the conduct of the person in question, in relation to the management of any corporation (s 206F(2)(b)(i)). But, as with the legislation considered in Albarran and Gould, there is no determination of guilt with respect to any offence provision. Consideration of such provisions would be but a step in concluding whether there should be a disqualification.
The plaintiff also fixed upon what were identified as grounds of contravention of the law which would attract both s 206C and s 206F. Were ASIC to apply under s 206C, the rules of evidence would apply (s 1317L). But, if ASIC itself moved under s 206F, as in the present case, the rules of evidence would not apply and impermissibly would be "circumvented". This argument assumes the proposition, already rejected in these reasons, that the power conferred upon ASIC is inherently or exclusively judicial in nature. If that proposition be rejected, there is no footing for an argument of "circumvention".
Likewise the proposition advanced by the plaintiff that s 206F was an ineffective attempt to oust the "original jurisdiction" of this Court under s 75(iii) of the Constitution in "matters ... in which the Commonwealth ... is a party". For the purposes of s 75(iii), ASIC has the identity of the Commonwealth[7]. But, in acting under s 206F, ASIC does not purport to exercise the judicial power of the Commonwealth. How then can there be a legislative attempt to oust the operation of s 75(iii)?
The action should be dismissed. The Attorney-General seeks no costs order.
KIRBY J. These proceedings, removed into this Court from the Federal Court of Australia, were heard at the same time as the Albarran and Gould appeals from that Court[8]. Like those appeals, the proceedings concern s 71 of the Constitution. That is the provision that requires "the judicial power of the Commonwealth" to be vested in a Ch III court and not exercised by a legislative or executive officer, body or tribunal.

[31]

The facts: The basic facts are set out in the reasons of Gleeson CJ, Gummow, Hayne, Callinan, Heydon and Crennan JJ ("the joint reasons")[9]. Before action was taken to disqualify him, Mr Milan Visnic ("the plaintiff") was an officer (director) of fourteen companies that had been wound up. Pursuant to the Corporations Act 2001 (Cth) ("the Corporations Act")[10], a liquidator reported that the corporations, of which the plaintiff was an officer, might have been unable to pay their unsecured creditors more than $0.50 in the dollar.
In the result, the Australian Securities and Investments Commission ("ASIC")[11], by service of a notice in November 2005, afforded the plaintiff an opportunity to be heard as to why he should not be disqualified from managing corporations for a period of up to five years. The notice was issued pursuant to s 206F(1)(b)(i) of the Corporations Act. The plaintiff responded by challenging the constitutional validity of s 206F.
These proceedings have afforded the plaintiff the opportunity to argue his challenge. Some, but not all, of the plaintiff's arguments overlapped those advanced by the appellants in Albarran and Gould.
The legislation: The joint reasons set out the terms of sub‑ss (1) and (2) of s 206F[12]. It is unnecessary for me to repeat them. As the joint reasons explain[13], the scheme of the Corporations Act envisages that officers of corporations may be disqualified from holding such office in three ways: (1) by automatic disqualification upon conviction of certain offences[14]; (2) by order of "the Court" (including the Federal Court or the Supreme Court of a State or Territory)[15]; or (3) by order of ASIC itself under s 206F.
ASIC proceeded against the plaintiff not by making application to "the Court" but under its own power expressed in s 206F. This is described in the heading to that section as "ASIC's power of disqualification". It is this asserted "power" which the plaintiff argues constitutes an invasion by ASIC - a body within the executive government of the Commonwealth - of the federal judicial power reserved by the Constitution to Ch III courts.
Albarran and Gould: overlap and difference: The overlap with the Albarran and Gould appeals is plain. Each of the proceedings concerns an aspect of the regulation of corporations under federal law. That regulation is of large and still growing importance for the economy and the nation. The protection of shareholders, creditors, employees and the community depends on the integrity of officers of corporations and, where such corporations fail, of their liquidators. One obvious mode of securing the protection of such interests is by disqualification (in the case of officers) and deregistration (in the case of liquidators) of persons who hold such positions in order to prevent them, for a time, from exercising the powers of those positions.
Orders that deprive those who have held such positions of the entitlement to exercise their powers are public determinations having potentially serious consequences for the property (earning) rights and the reputation of the persons concerned.
Nevertheless, for the reasons explained in the Albarran and Gould appeals[16], the form of discipline provided for in the Corporations Act, in the case of officers of corporations that are wound up, is permissibly administrative in character. It does not involve the exercise of powers which, of their nature, must be vested only in a Ch III court because they involve the exercise of "the judicial power of the Commonwealth"[17].
It is not necessary, in these proceedings, to repeat the analysis of the issues and the explanation of the conclusions stated in Albarran and Gould. The similarity of the disciplinary features of the powers provided to the executive body (ASIC) by the Corporations Act is sufficiently plain to render repetition superfluous.
Nevertheless, there is one particular feature of the challenged legislation in the present proceedings upon which the plaintiff fastened. In order to understand the essence of the plaintiff's argument, different from and additional to the arguments in Albarran and Gould, it is necessary to explain the distinctive statutory provisions on which the present plaintiff relied.

[42]

The similarity between the language of the provisions empowering "the Court" to disqualify a person from managing corporations and the language of s 206F by which ASIC is empowered to so determine is clear. In the case of "the Court", the period of disqualification may be longer (up to 20 years in s 206D and not specifically limited in s 206C or s 206E). Some of the criteria for reaching the satisfaction are different[19]. However, the plaintiff submitted with some cogency that these were simply differences of degree and not of kind. They did not alter the essential identity of the functions being discharged respectively by the executive government body (ASIC) and by a Ch III court.
Parallel legislation: The plaintiff therefore argued that the effective identity of the "power" of decision-making afforded to "the Court" and to ASIC, demonstrated an attempted conferral by federal law upon each of the bodies named of a power to decide substantially the same type of issue according to the same type of considerations. That "power" is, in essence, to adjudicate a controversy between the regulatory body (ASIC) and the officer of the corporation concerned (the plaintiff). It is to do so by reference to like criteria spelt out in the Corporations Act. It is to do so in a manner apt to deciding, ultimately, whether that officer should be "disqualified". Indeed, the touchstone for the decision in each case is the same. It is whether "the Court" or ASIC, as the case might be, is satisfied that "disqualification is justified"[20].
There are further similarities in the respective legislative provisions. In each case, whether in "the Court" or in ASIC, the decision to disqualify is expressed as a facultative power by the use of the verb "may". In this way, an evaluative decision must be made by each decision-maker by reference to the criteria nominated. So far as those criteria were concerned, in "determining whether disqualification is justified" a very close similarity exists between the factors to which "the Court" and ASIC "may have regard". Thus, in each case, attention is called to "the person's conduct in relation to the management, business or property of any corporation" and "any other matters" that the decision-maker "considers appropriate". The identified considerations are cast in very broad language. The only difference, in the case of ASIC, is the addition of reference to "whether the disqualification would be in the public interest"[21].
The plaintiff submitted, also with a certain cogency, that the addition of this last-mentioned consideration was ineffective, if it was designed to deprive the ultimate decision of a "judicial" character. It is true that some functions are committed to judges, by statute and the general law, that ask them to consider the public interest whilst acting judicially[22]. The use of such expressions in legislation may direct the attention of the court to a "discretionary value judgment to be made by reference to undefined factual matters" but with boundaries that can be fixed by reference to the objects that the legislature is taken to have had in view[23].
The plaintiff's complaints: Once the very high similarity of the powers afforded to "the Court" and to ASIC is appreciated, together with the near identity of many of the criteria for reaching the identical conclusion (disqualification) and the similarity of the considerations called to notice by the Parliament in each case, the force of the plaintiff's constitutional complaint is easier to appreciate.
If, by the application of virtually identical criteria, directed to the same outcome, a "power" has purportedly been given by federal law both to a Ch III court and to an executive government agency, the plaintiff asked, in effect, how the exercise of such "power" could not, in each case, equally, be an exercise of "the judicial power of the Commonwealth". If the existence of such a "power" was required for the valid vesting of jurisdiction in a Ch III court, how, why and when did it cease to be a "power" of the same character merely because it was vested in an executive body? The "power" was effectively the same. To allow it to take on a different constitutional quality, simply because it was assigned by the Parliament to ASIC, and not to a court, would amount to permitting the Parliament, in effect, to dictate the constitutional character of the "power" by its own choice, that is, simply by nominating the identity of the repository to which the "power" was assigned[24].
The plaintiff argued that, consistently with the rule of law, this could not be so. He pointed to a number of considerations which, he suggested, rendered such a conclusion offensive to basic constitutional principle:

[47]

Reliance on the chameleon principle: I have endeavoured to explain the plaintiff's submissions because I regard them as presenting a serious question for decision. It is not one to be dismissed by an appeal to "formularies"[27].
Once again, the Attorney-General of the Commonwealth, who assumed the defence of the legislative scheme, founded his argument on the "double aspect" or "chameleon" principle. I have myself, to some degree, accepted that principle in the past[28]. In the right context[29], it can serve a useful function. However, it requires considerable care in its application lest it becomes a self-fulfilling means by which the executive and the legislature, by ingenious legislation, may sideline the independent courts. If that were to happen, serious decision-making of large importance might be transferred from independent and impartial decision-makers (such as judges) protected from external influences, to committed agencies within the other branches of government, lacking the same features of institutional neutrality and impartiality.
There has been a clear tendency on the part of the Commonwealth of late to meet virtually every appeal to the separation of powers doctrine in the Constitution by an invocation of the "chameleon" principle. The Commonwealth then says that it can solve virtually all supposed infractions of the doctrine by the decision that it makes to assign the functions in question to courts or to executive bodies at its own pleasure. We need to be careful lest this "doctrine", taken too far, destroys the important objectives which the constitutional separation of powers serves. It is of the nature of executive government (and sometimes parliaments) to be impatient with the requirements of such separation. However, the separation can sometimes protect the interests of the people and serve important constitutional ends that this Court should be vigilant to safeguard.
The investigator as adjudicator: The danger of which the plaintiff complained is illustrated by contrasting the exercise of the power illustrated in the Albarran and Gould appeals and that deployed in the plaintiff's proceedings. At least in Albarran and Gould, the decision resulting in the public sanction, exacted in those matters, was committed to an independent panel, namely the Companies Auditors and Liquidators Disciplinary Board ("the Board"). The Chairperson of the Board is required to have legal qualifications similar to those required for judicial appointment[30]. A feature of public administration in Australia in recent years, including in federal administration, has been the growth of important tribunals with members who enjoy substantial tenure and exhibit independence and impartiality similar to the courts[31]. However, as the corporate "watchdog", with an expected and proper commitment to policing corporations and to corporate law enforcement, ASIC cannot exhibit the appearance of similar institutional independence and impartiality. It is this element in the present case that causes me a degree of unease about the legislative design. The question is whether this unease betokens constitutional invalidity. Obviously, the joint reasons conclude that it does not.
It is true that, in the past, parallel institutional arrangements have existed under federal law for the exercise of substantially similar powers by a court and by an administrator[32]. However, the absence of a facility of a full "appeal" to a court, or of a privilege to elect to proceed in a court, presents a different picture in the plaintiff's case[33].
The arguments of the plaintiff are by no means meritless. They make a number of effective points. If this field of law were free from legal authority, it might be possible to examine the validity of the legislative model presented in the present case. The "chameleon" principle does not appear to have been adopted in the United States of America where, otherwise, there are similarities in the constitutional provisions requiring separation of the judicial power from the other powers of government. Thus, in the United States Supreme Court it has been held repeatedly that "the nature of a proceeding 'depends not upon the character of the body but upon the character of the proceedings'"[34]. The chameleon principle still has a place in our constitutional doctrine[35]. Yet, as Deane J explained in Polyukhovich v The Commonwealth[36]:

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