Australian Prudential Regulation Authority v Siminton (No 6)

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FEDERAL COURT OF AUSTRALIA

Australian Prudential Regulation Authority v Siminton (No 6) [2007] FCA 1608

BANKING – Provisions relating to the carrying on of banking business – Where respondent establishes a “country” known as Principality of Camside – Where that country hosted a “bank” referred to as the Terra Nova Cache – Where members of public deposit money in the Terra Nova Cache – Where unlawful for a person other than a body Corporate to carry on banking business unless exemption granted by APRA – Where no such exemption granted to Respondent – Whether the Respondent’s conduct constitutes the carrying on of banking business in contravention of s 7 of the Banking Act 1959 (Cth)

CONSTITUTIONAL LAW – Preliminary objections to application on Constitutional grounds – Where s 65A of the Banking Act relates to breaches of ss 7 and 66 which are “criminal offences” – Whether alleged breaches of such provisions can be conducted as civil proceedings rather than criminal proceedings

CONSTITUTIONAL LAW – Where interlocutory injunction imposed preventing Respondent from dealing with his funds and property – Whether freezing order constitutes an acquisition of property by the Commonwealth other than on just terms

PRACTICE AND PROCEDURE – Abuse of process – Whether evidence of collateral purpose – Argument ruled on in earlier judgment

REMEDIES – Injunctions – Whether appointment of receiver appropriate – Parties to file submissions on appropriate terms of orders consistent with reasons for judgment

WORDS AND PHRASES – “banking business”

Australian Prudential Regulation Authority Act 1998 (Cth) s 8
Australian Securities and Investment Commission Act 1989 (Cth) s 12GD
Banking Act 1959 (Cth) ss 7, 11, 65A, 66, 69E
Constitution ss 51, 80
Corporations Act 2001 (Cth) s 1324
Customs Act 1901 (Cth) s 243E
Federal Court of Australia Act 1976 (Cth) ss 23, 57
Financial Sector Legislation Amendment Act (No 1) 2000 s 20
Judiciary Act 1903 (Cth) s 78B
Trade Practices Act s 80

Australian Prudential Regulation Authority v Siminton (No 2) [2006] FCA 336 cited
Australian Prudential Regulation Authority v Siminton (No 5) [2006] FCA 1340 cited
Australian Securities and Investments Commission v Mauer-Swisse Securities Limited (2002) 42 ACSR 605 discussed
Australian Independent Distributors Ltd v Winter (1964) 112 CLR 443 referred to
Australian Securities and Investment Commission v Burke [2000] NSWSC 694 cited
Australian Federal Police v Cox (1986) 78 ALR 509 referred to
Commissioner of State Savings Bank of Victoria v Permewan, Wright & Company Limited (1914) 19 CLR 457 referred to
Medibank Private Limited v Cassidy (2002) 124 FCR 40 referred to
Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 referred to
Mikasa (NSW) Pty Ltd v Festival Stores (1972) 127 CLR 617 referred to
R v Smithers; Ex parte McMillan (1982) 152 CLR 477 discussed
Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270 discussed
R v Kirby; Ex parte Boilermakers Society of Australia (1956) 94 CLR 254 cited
Sterling v Trade Practices Commission (1981) 51 FLR 1 referred to
The University of Western…

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Details
Case
[2007] FCA 1608
Decision Date

CaseChat Overview and Summary

The Australian Prudential Regulation Authority (APRA) brought proceedings against Mr Siminton in the Federal Court of Australia, alleging breaches of financial sector legislation by Mr Siminton in connection with an entity known as the Terra Nova Cache. The primary legal issues before the court were whether APRA's statement of claim contained sufficient particulars to support its claims and whether Section 65A of the relevant Act, which grants the court wide-ranging powers, was constitutionally valid. The court addressed these issues by reviewing the affidavits and submissions filed by APRA, which largely went unchallenged, and by examining the constitutionality of Section 65A in light of the principles established in R v Kirby; Ex parte Boilermakers Society of Australia.

The court found that APRA's statement of claim was sufficiently detailed, particularly given the extensive affidavits and outline of submissions provided. The court rejected Mr Siminton's preliminary objections, noting that he had not sought further particulars during the trial preparation. The court also concluded that Section 65A was constitutionally valid, drawing parallels with similar provisions in other Commonwealth legislation that had been upheld by higher courts. The court reasoned that Section 65A's power to award damages was a judicial act in support of legislative objectives and did not violate the separation of powers.

The court ultimately found in favour of APRA, confirming the sufficiency of its statement of claim and the constitutionality of Section 65A. As a result, the court ordered the proceeding to be listed for mention on a specified date and directed APRA to file draft minutes of any proposed order for the appointment of a receiver by a certain deadline.

Orders

Orders of the court

1. The proceeding be listed for mention on 7 November 2007.

2. On or before 5 November 2007 the applicant file and serve draft minutes of any order for the appointment of a receiver which it contends should be made by the Court.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

I refused Mr Siminton’s application. Similar strike-out applications had been made to Merkel J on 30 March 2006 and to me on 18 October 2006. Those applications had been supported by substantially the same arguments and, in both cases had been rejected: see Australian Prudential Regulation Authority v Siminton (No 2) [2006] FCA 336; Australian Prudential Regulation Authority v Siminton (No 5) [2006] FCA 1340. There was no substance to the argument advanced in support of the permanent stay applications when they were first made. It was not improved by repetition. THE EVIDENCE APRA filed a large number of affidavits in support of its application. Most of the deponents were private citizens who had had dealings with Mr Siminton, associates of Mr Siminton and/or the Terra Nova Cache. There were also detailed affidavits from a Senior Analyst employed by APRA and the Managing Director of a company, Technocash Pty Ltd, which provides an internet based service to facilitate money transfers both within Australia and internationally. None of the deponents was required to attend for cross-examination. The evidence is, therefore, largely uncontroversial. It will not be necessary to recount the experiences of each of the persons who was induced to make contributions to the Terra Nova Cache. The stories which they recount have much in common. Examples will suffice. Before embarking on a summary of the evidence I should note that, on the eve of the trial, on 4 June 2007, Mr Siminton’s solicitor filed a document containing what were described as “preliminary objections” to APRA’s application. That document contained, amongst other things, various complaints about the adequacy of the statement of claim filed by APRA. The principal deficiency alleged related to an absence of particulars of allegations made by APRA. I refused to postpone the commencement of the trial while APRA made good the alleged deficiencies in its statement of claim. I did so for a number of reasons. In accordance with pre-trial directions the bulk of the affidavit material on which APRA proposed to rely at trial had been filed and served on 28 February 2007. On 21 May 2007 APRA filed and served its outline of submissions. The outline restated the various elements of its claim and, in a series of detailed footnotes, it referred to the paragraphs in the various affidavits on which it relied to make good those claims. Mr Siminton could have been in no doubt as to how the case was being put. At no stage did he seek further and better particulars of any of the allegations contained in the statement of claim. The deponents of the affidavits were not subsequently required to attend for cross-examination. Two further affidavits were filed late in May 2007. These were affidavits from two more depositors which did no more than provide additional evidence to support claims already made and supported by evidence given by the depositors whose affidavits had been earlier filed and served. In addition, there were some pleading points which amounted to a contention that the statement of claim had failed to plead certain essential elements which were necessary for APRA to succeed. I deferred ruling on these points until I had heard final addresses. Having done so I have concluded that APRAs statement of claim pleads all elements necessary to support the case it advances against Mr Siminton.

Decision

Reasons for decision

TRACEY J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: TRACEY J

The Separation of Powers Point. It will be convenient to deal with the final two arguments advanced by Mr Siminton together. They allege that s 65A of the Act confers legislative and executive power on the Court contrary to the implied limitation recognised in R v Kirby; Ex parte Boilermakers Society of Australia (1956) 94 CLR 254. As I understood the argument advanced by Mr Siminton it was that s 65A of the Act confers very wide powers on the Court. It is said that these powers are wide enough to enable the Court to act as a Royal Commission or Board of Inquiry, to award damages without the assistance of guiding criteria and to act as a surrogate or “collection service” for third persons who may wish to obtain damages from Mr Siminton. Section 65A of the Act was inserted in 2000, see Financial Sector Legislation Amendment Act (No 1) 2000, s 20. Under the former legislation, ss 7 and 66 of the Act contained penalty provisions only. The inclusion of s 65A was designed to allow APRA, subject to Court approval, to act pre-emptively to stop undesirable activities rather than simply acting to impose punishment after the damage had occurred: see Explanatory Memorandum, Financial Sector Legislation Amendment Act (No 1) 2000. Many of its sub-sections are drafted in the same or substantially the same terms as provisions to be found in other Commonwealth legislation. Comparisons can be drawn with s 80 of the Trade Practices Act 1974 (Cth), s 12GD of the Australian Securities and Investment Commission Act 1989 (Cth), and s 1324 of the Corporations Law 1989 (Cth). The constitutional validity of these equivalent provisions has been upheld by Court decisions spanning many years. Section 80(1) of the Trade Practices Act, which corresponds with s 65A(1) was held by Lockhart J to be a valid law of the Commonwealth Parliament in Trade Practices Commission v Sterling (1980) 28 ALR 497 at 517-9. An appeal from his Honour’s decision was dealt with by a Full Court. The appellant did not, on appeal, seek to argue that his Honour’s decision as to the validity of s 80(1) was wrong. It was, however, argued that sub-ss (4) and (5) of s 80 which contained provisions equivalent to those to be found in s 65A(3) were invalid, being beyond constitutional power. These submissions were rejected by the Full Court: see Sterling v Trade Practices Commission (1981) 51 FLR 1 at 7-9. Save for its first word s 65A(11) is in the same terms as s 1324 of the Corporations Law 1989 (Cth) (now s 1324 of the Corporations Act 2001 (Cth)). As the Full Court noted in Medibank Private Limited v Cassidy (2002) 124 FCR 40 at 50-51, provisions of this kind can be traced back to the Chancery Amendment Act 1858 (UK) ( Lord Cairns Act). The purpose of such provisions is expressly to empower a Court to award damages to persons who have suffered as a result of conduct which contravenes legislative requirements whether or not a curial power to grant a mandatory injunction might also support such an order. The exercise of the power is conditioned on the existence of a power to grant an injunction. That power is conferred by s 65A(1) which is a valid provision. In my opinion there is no reason, in principle, to distinguish between the power to grant injunctions and the power to require a respondent to pay damages occasioned by the same conduct which might justify the granting of an injunction. The granting of such relief does not cast the Court in the role of a “collection service” acting on behalf of third parties. It involves a judicial act in aid of a legislative purpose. Sections 65A(11) is valid law of the Commonwealth.ABUSE OF PROCESS