Applicant Y v Australian Prudential Regulation Authority

[2005] FCAFC 222

FEDERAL COURT OF AUSTRALIA

Applicant Y v Australian Prudential Regulation Authority [2005] FCAFC 222

PRACTICE AND PROCEDURE –whether identity of appellants should not be disclosed until appeals heard– whether publication of reasons for judgment of primary judge should be prevented, in so far as those reasons would disclose the identity of the appellants- whether possibility of prejudice to the administration of justice outweighs public interest in maintaining open justice

Federal Court of Australia Act 1976 (Cth), s50
Insurance Act 1973 (Cth) ss24, 25A

Australian Broadcasting Commission v Parish & Ors (1980) 49 FLR 129

APPLICANT Y & ANOR v AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY & ANOR

NSD 1793 OF 2005

APPLICANT X & ANOR v AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

NSD 1794 OF 2005

EMMETT, ALLSOP & EDMONDS JJ
28 OCTOBER 2005
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1793 OF 2005

BETWEEN:

APPLICANT Y

FIRST APPELLANT

APPLICANT Z
SECOND APPELLANT

AND:

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

FIRST RESPONDENT

MARK GODFREY
SECOND RESPONDENT

JUDGES:

EMMETT, ALLSOP & EDMONDS JJ

DATE OF ORDER:

28 OCTOBER 2005

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1. Up to and including the day on which the appeal is finally disposed of:

   (a)Publication of the reasons of Lindgren J of 16 September 2005 be restrained, other than in the redacted form approved by Lindgren J on 5 October 2005.

   (b)Access to the Court files relating to proceeding NSD727 of 2005 before Lindgren J and the appeal be restricted to the parties to those proceedings.

1. Notwithstanding Order 1(a), the respondents may provide a copy of the unredacted form of the reasons for judgment of Lindgren J of 16 September 2005 and this order to the Department of Prime Minister and Cabinet and the Commonwealth Attorney General's Department for reporting purposes.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1794 OF 2005

BETWEEN:

APPLICANT X

FIRST APPELLANT

APPLICANT Z
SECOND APPELLANT

AND:

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

FIRST RESPONDENT

MARK GODFREY
SECOND RESPONDENT

JUDGES:

EMMETT, ALLSOP & EDMONDS JJ

DATE OF ORDER:

28 OCTOBER 2005

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1. Up to and including the day on which the appeals are finally disposed of:

   (a)Publication of the reasons of Lindgren J of 16 September 2005 be restrained, other than in the redacted form approved by Lindgren J on 5 October 2005.

   (b)Access to the Court files relating to proceeding NSD726 of 2005 before Lindgren J and the appeal be restricted to the parties to those proceedings.

1. Notwithstanding Order 1(a), the respondents may provide a copy of the unredacted form of the reasons for judgment of Lindgren J of 16 September 2005 and this order to the Department of Prime Minister and Cabinet and the Commonwealth Attorney General's Department for reporting purposes.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1793 OF 2005

BETWEEN:

APPLICANT Y
FIRST APPELLANT

APPLICANT Z
SECOND APPELLANT

AND:

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY
FIRST RESPONDENT

MARK GODFREY
SECOND RESPONDENT

NSD 1794 OF 2005

BETWEEN:

APPLICANT X
FIRST APPELLANT

APPLICANT Z
SECOND APPELLANT

AND:

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY
FIRST RESPONDENT

MARK GODFREY
SECOND RESPONDENT

JUDGES:

EMMETT, ALLSOP & EDMONDS JJ

DATE:

28 OCTOBER 2005

PLACE:

SYDNEY

REASONS FOR JUDGMENT

1. The notices of motion before the Court raise the question of whether, pending the hearing of two appeals, the identity of the appellants should not be disclosed and whether publication of the reasons for judgment of the primary judge should be prevented, in so far as those reasons would disclose the identity of the appellants.  The applications are made in the context of litigation relating to the jurisdiction and power of a federal government authority to take steps that it is threatening to take.

2. Section 25A of the Insurance Act 1973 (Cth) (‘the Insurance Act’) provides that Australian Prudential Regulation Authority (‘APRA’) may disqualify a person if it is satisfied that the person is not a fit and proper person to be or to act as a person referred to in s 24(1)(a), (b) or (c) of the Insurance Act. Section 24(1) relevantly provides that a disqualified person must not be or act as:

   (a)a director or senior manager of a general insurer (other than a foreign general insurer); or

   (b)a senior manager, or agent in Australia, of a foreign general insurer; or

   (c)a director or senior manager of an authorised non operating holding company.

3. On 18 February 2005, Mr Mark Godfrey, the second respondent in each of these proceedings, who is a senior manager of APRA, wrote to the first appellant in each of the proceedings, who will be referred to respectively as ‘X’ and ‘Y’. Each letter stated that Mr Godfrey had come to the preliminary view that the addressee was not a fit and proper person to be or to act as a person referred to in s 24(1)(a), (b) or (c). Each letter informed the addressee that Mr Godfrey proposed to recommend to the appropriate delegate of APRA that the addressee be disqualified, but invited the addressee to make submissions as to why APRA should not disqualify him.

4. Each of X and Y is a long-term senior manager of the second appellant in each proceeding, which will be referred to as ‘Z Co’.  Z Co is a foreign general insurer.  However, neither X nor Y has ever resided, or worked for Z Co, in Australia.  Neither of them is a citizen of Australia. 

5. The appellants commenced proceedings seeking, inter alia, declarations that APRA does not have power to disqualify X and Y.  Lindgren J ordered, pursuant to Order 29 rule 2, that two questions raised in the proceedings be decided separately from, and before, any other question in the proceedings.  The questions are:

   • Whether APRA has jurisdiction or power under s 25A of the Insurance Act to disqualify X or Y, as the case may be, from holding any of the positions referred to in s 24(1) of the Insurance Act.
   • Whether the use by APRA or Mr Godfrey of certain evidence before a Royal Commission contravenes s 6DD or 6M of the Royal Commissions Act 1903 (Cth).

6. On 13 May 2005, Lindgren J ordered that no person publish the name of X, Y or Z Co, or any information that may identify X, Y or Z Co until the hearing and final determination of those questions. That order (‘the s 50 Order’) was made pursuant to s 50 of the Federal Court of Australia Act 1976 (Cth). Section 50 relevantly provides that the Court may, at any time during or after the hearing of a proceeding in the Court, make such order forbidding or restricting the publication of particular evidence, or the name of a party or witness, as appears to the Court to be necessary in order to prevent prejudice to the administration of justice. 

7. Lindgren J heard argument on the preliminary questions and, on 16 September 2005, made orders answering the preliminary questions respectively ‘Yes’ and ‘No’000000. His Honour published reasons for those orders (‘the Reasons’), but also ordered that the s 50 Order be continued until 5 pm on 21 September 2005. On 21 September 2005, Lindgren J extended the operation of the s 50 Order until 5 pm on 23 September 2005 and ordered that the Reasons not be published on the internet until 5 pm on that day (‘the Suppression Order’).

8. On 23 September 2005, Lindgren J granted leave to the appellants to appeal from the substantive orders made on 16 September 2005. His Honour also granted leave for the appellants to file notices of motion seeking orders from the Full Court in terms similar to the s 50 Order, and extended the orders then in force until the hearing and determination of those motions.

9. The appellants filed notices of appeal on 23 September 2005.  By notices of motion filed on the same day, the appellants moved the Full Court for orders that no person publish the names of the appellants, or any information that may identify them, until the hearing and determination of the appeals or further order.  The motions came on for hearing before the Full Court on 26 September 2005.  That hearing continued until 27 September 2005. 

10. In the course of the hearing of the motions, the applicants applied for an adjournment to enable them to adduce further, more cogent, evidence as to the prejudice that they would suffer if their identities were disclosed pending the hearing of the appeals.  Following that application, the hearing of the notices of motion was adjourned and orders were made on 29 September 2005, having effect as follows:

    • Publication of the Reasons be restrained up to 5 pm on Friday, 30 September 2005.
    • If a redacted form of the Reasons is approved by Lindgren J prior to 5 pm on Friday, 30 September 2005, publication of the Reasons, other than in that redacted form, be restrained until the determination of the notices of motion filed on 23 September 2005.
    • Until the determination of the notice of motion of 23 September 2005, access to the Court files in the proceedings before Lindgren J and the appeals be restricted to the parties to the proceedings.
    • The appellants file and serve any further evidence upon which they intend to rely on or before Friday, 7 October 2005.
    • The motions stand over for directions to Monday, 10 October 2005.

On 5 October 2005, the Reasons were published in redacted form, as contemplated by those orders. 

1. On 7 October 2005, the appellants were granted an extension of time within which to file their further evidence.  On 13 October 2005, further evidence, consisting of three affidavits, was filed in each of the proceedings.  APRA and Mr Godfrey have informed the Court that they do not wish to cross-examine any of the deponents of those affidavits.  Accordingly, the Full Court will proceed on the basis that the assertions made in the affidavits are to be accepted without qualification.

2. Z Co has an excellent reputation and standing in the insurance industry, both in Australia and in other parts of the world.  Z Co’s reputation could be damaged if serious adverse conclusions by Mr Godfrey, and the recommendation for disqualification of X and Y, became known by participants in the insurance industry.  Specifically, Z Co’s credit rating could be affected by such disclosure.  One of the most important factors determining credit ratings of companies in the insurance industry is the reputation and performance of the company’s management team.  Ratings can be downgraded by perceptions that an adverse change within the senior management of an insurance company may occur, such as removal, or demotion, or questions about fitness to continue in the industry.

3. The primary contention of the appellants is that APRA lacks power under the Insurance Act to disqualify X and Y. Lindgren J accepted that the questions of construction involved in the preliminary questions are not free from difficulty. If APRA purported to disqualify X and Y in circumstances where it has no power to do so, irreparable damage could be suffered by X, Y and Z Co that could not be remedied by the quashing, on appeal, of the decision to do so. For that reason, X, Y and Z Co made applications at the commencement of each of the proceedings to suppress their identities. If the s 50 Order had not been made, Z Co would not have authorised the continuation of the proceedings because of the potential damage from publication of the findings made by Mr Godfrey.

4. The public interest, that the Court should effectively endeavour to achieve in considering the exercise of power under s 50, is the object of doing justice between the parties. That is the function that the Court is appointed to discharge. Where refusal to make an order might well undermine or defeat the purpose of achieving justice between the parties, and disappoint the public interest in having the Court deal responsibly with the affairs of citizens, it may be appropriate to make an order pursuant to s 50 – see Australian Broadcasting Commission v Parish & Ors (1980) 49 FLR 129 at 133.

5. The Court must, however, take into account what s 50 does not explicitly state, but is the underlying assumption upon which it is based, namely, the principle of open justice. The importance of the principle of open justice is not in doubt. On the other hand, the possibility of prejudice to the administration of justice must be weighed against the public interest in maintaining open justice. Although the principle of open justice is of great importance in exercising the discretion under s 50, it is not necessarily the whole weight of that principle that must be placed on the scales. The derogation from the principle that might be involved in making an order under s 50 may be very great, or it might be very small. The degree of derogation from the principle involved in the proposed order is an important matter to be considered in balancing the principle against possible prejudice to the administration of justice – see Australian Broadcasting Commission v Parish & Ors at 136.

6. Certainly, it was within the power of X, Y and Z Co to refrain from commencing the proceedings. However, they would not have commenced the proceedings or continued them, if the s 50 Order had not been made. In circumstances where Lindgren J accepted that the questions of construction involved in the preliminary questions were not free from difficulty, and his Honour granted leave to appeal from the orders that he made, there would be a real prejudice to the administration of justice if the appellants succeeded in their appeals and established that APRA has no power to disqualify X or Y, but suffered irreparable damage from the publication of the Reasons and the disclosure of the adverse findings made by Mr Godfrey.

7. As indicated above, the Reasons have now been published in redacted form.  The fact of the proceedings is now public, although the identity of X, Y and Z Co is not of itself disclosed by the redacted form of the Reasons.  The derogation from the principle of open justice in the circumstances would, therefore, not be great. On the other hand, the possible prejudice to the administration of justice, by depriving the appellants of the possible fruits of their victory if they succeed, outweighs the public interest in maintaining the principle of open justice. 

I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Emmett, Allsop and Edmonds.

Associate:

Dated:             28 October 2005

Counsel for the Appellants:	Mr P.H. Greenwood SC
Solicitor for the Appellants:	Minter Ellison
Counsel for the Respondent:	Mr J. Stevenson SC
Solicitor for the Respondent:	Sparke Helmore
Date of Hearing:	26 and 27 September 2005
Date of Judgment:	28 October 2005