Betalli and Australian Securities and Investments Commission
[2023] AATA 3073
•25 September 2023
Betalli and Australian Securities and Investments Commission [2023] AATA 3073 (25 September 2023)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2021/2774
Re:Christopher Nadir Betalli
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal:Deputy President Bernard J McCabe
Date:25 September 2023
Place:Adelaide
WHEREAS the Tribunal intends to make a direction in the terms set out in paragraph [5] of the reasons for this decision (the Direction);
The Tribunal DIRECTS:
1. no more than three business days following the publication of these reasons, both parties must confer with each other and confirm in writing an agreed date by which the applicant will comply with the Direction; or
2. in the absence of agreement, no more than five business days following the publication of these reasons both parties must file with the Tribunal brief written submissions on an appropriate date for the applicant’s compliance with the Direction.
..................................SGD......................................
Deputy President Bernard J McCabe
Catchwords
Adjectival relevance – de novo review – procedural fairness
Legislation
Administrative Appeals Tribunal Act 1975
Corporations Act 2001 (Cth)
Cases
Frugtniet v Australian Securities and Investments Commission [2019] HCA 16
Schroeder and Australian Securities and Investments Commission [2020] AATA 2453Shi v Migration Agents Registration Authority [2008] HCA 31
REASONS FOR DECISION
Deputy President Bernard J McCabe
25 September 2023
Mr Chrisopher Betalli worked as a financial advisor. He has asked the Tribunal to review a decision made by a delegate of the Australian Securities and Investments Commission (ASIC) to impose a banning under s 920A of the Corporations Act 2001 (Cth). The reviewable decision was communicated on 22 April 2021. It prohibits the applicant from providing any financial services for a period of two years. The delegate found the applicant had failed to comply with financial services laws, although there were other findings as well.
The decision was the subject of a stay so the applicant has been able to continue working in the meantime: see Betalli and Australian Securities and Investments Commission [2021] AATA 1953.
ASIC’s case against the applicant appears to have evolved somewhat on review. ASIC now says:
(a)there is reason to believe the applicant is not adequately trained, or is not competent, to provide financial services (a ground mentioned in s 920A(1)(da));
(b)the applicant has not complied with a financial services law (a ground mentioned in s 920A(1)(e)); and
(c)there is reason to believe the applicant is likely to contravene a financial services law (the ground mentioned in s 920A(1)(f)).
The applicant, for his part, does not contest he contravened a financial services law (or laws) in the period considered by the delegate. But the applicant says the grounds mentioned in ss 920A(1)(da) and 920A(1)(f) are not made out given he has changed the way he has conducted his business more recently. He points out he has managed to practice successfully for some time without incident. ASIC notes the applicant has made assertions to that effect in his statement of facts, issues and contentions.
ASIC says Mr Betalli should produce a number of documents that will shed light on his positive assertion that he has practised without incident in more recent times. Specifically, ASIC has asked for a direction in the following terms:
By [DATE], the Applicant is to file with the Tribunal and serve on the Respondent any of the following documents relating to the AFSL holder’s monitoring and supervision of the Applicant, in the period 1 January 2019 to 31 December 2022, including any audit or review process in relation to the Applicant’s provision of financial services:
a. Questionnaires, checklists or working papers that an auditor has used to record their review and findings;
b. Reports of any audits including audit rating;
c. Any documents making any recommendations in relation to remediation.
At the directions hearing, Mr Knowles SC (who appeared for ASIC) argued Mr Betalli had effectively opened the door to ASIC’s request for the documents when he ran what amounted to a positive case claiming he had a good track record in more recent times.
Mr Knowles said it is expected that the holder of an Australian Financial Services Licence (an AFSL) will conduct reviews of the affairs of authorised representatives like Mr Betalli, so it is likely the documents sought will contain information that either proves or disproves Mr Betalli’s claim. That evidence would be directly relevant to the Tribunal’s assessment relating to the grounds referred to in ss 920A(1)(da) and 920A(1)(f).
ASIC has asked the Tribunal to either make a direction under s 33(2A)(a) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) or agree to issue a summons under s 40A of the AAT Act. Mr Knowles argued it would be preferable to do that now, well in advance of the hearing. The alternative was to wait until the hearing when Mr Betalli was cross-examined. Mr Knowles foreshadowed it was likely Mr Betalli would be asked questions about reviews and reports made by or to the AFSL holder, and that ASIC would potentially call for the production of any documents Mr Betalli mentioned in the course of his answer. That would be inefficient.
As it happens, there was no dispute between the parties about the test of relevance which applies in cases like these. The party seeking the documents must establish the documents have adjectival relevance to the dispute in the sense those documents might be expected to shed light on the questions the Tribunal is required to answer. ASIC says that threshold is clearly established given it relies on the grounds referred to in ss 920A(1)(da) and 920A(1)(f) of the Corporations Act, and given Mr Betalli appears to rely on his track record since the period when the contraventions were said to occur.
Mr Beaumont SC, who appeared for Mr Betalli, argued ASIC was trying to shore up a key weakness in its own case. Mr Beaumont said the delegate’s reviewable decision made findings on the various grounds having regard to the events which took place in the period then under review. He noted ASIC’s statement of facts, issues and contentions expressly states (at para [37]) that the questions which effectively arise under ss 920A(1)(da) and 920A(1)(f) “will largely be determined on what inferences can be drawn from the applicant’s past conduct”. ASIC went on (at [38]) to signal the past conduct in question was the
non-compliance with financial services laws that was the subject of the findings. Those findings focused a on eight client files that were considered by the delegate. The applicant’s conduct had been the subject of an expert report which took some time to produce. Given that frame of reference in the reviewable decision and the statement of facts, issues and contentions, Mr Beaumont argued it would be inappropriate and unfair for ASIC to now seek additional evidence of other conduct.
Mr Knowles noted the decision of the High Court in Shi v Migration Agents Registration Authority [2008] HCA 31 confirmed the Tribunal would ordinarily make its decision with reference to the material which was before it at the hearing. Subject to the relevant enactment which governed the review, the Tribunal would determine the correct or preferable outcome at the time of its decision having regard to the most up-to-date material, rather than determining the correct or preferable decision at some earlier point: such is the nature of a de novo review on the merits.
While Mr Beaumont did not expressly refer to the High Court’s decision in Frugtniet v Australian Securities and Investments Commission [2019] HCA 16, his submissions call the case to mind. That case dealt with limits to the matters that might properly be considered by the Tribunal on review given it was part of an administrative decision-making continuum. Kiefel CJ, Keane and Nettle JJ explained in Frugtniet (at [15]) that, subject to the statutory provisions in question, the Tribunal will not be permitted to take account of matters where to do so “would change the nature of the decision” or “the question before the original decision-maker”. The reasoning in Frugtniet was the subject of an extensive discussion in Schroeder and Australian Securities and Investments Commission [2020] AATA 2453. In that case, the Tribunal observed (at [34]):
Where new evidence comes to light in the course of the review, or where additional or alternative grounds or criteria become apparent, the Tribunal must assess how it should proceed. Where the Tribunal is satisfied the question on review is the same as that before the original decision-maker, albeit that additional or different grounds or material have come to light, the review can proceed. Of course, a tailored procedural response may be required where the new material creates concerns about procedural fairness. The Tribunal might allow a party extra time to prepare its case, for example. It might also consider remitting the matter to the original decision-maker for reconsideration under s 42D of the AAT Act. A remittal under s 42D might be appropriate where the decision-making process can be more efficiently or conveniently advanced by the original decision-maker rather than continuing the process before the Tribunal with its more court-like procedures. Once that reconsideration has concluded, the Tribunal’s review can resume if necessary.
That reasoning suggests there is no difficulty in considering fresh evidence that relates to a period beyond that considered in the reviewable decision provided that evidence meets the test of adjectival relevance – and provided it can be introduced in a way that is not procedurally unfair.
There is no doubt the evidence being sought has adjectival relevance. The grounds referred to in ss 920A(1)(da) and 920A(1)(f) of the Corporations Act that are central to ASIC’s case invite consideration of the most up-to-date evidence. ASIC is not inevitably confined to material mentioned in the reviewable decision made two years ago, or to the matters which took place in 2018. Evidence of more recent reviews and interactions with the AFSL holder that deal with the applicant’s record of compliance might well shed light on the questions I must address on review.
Mr Beaumont argued there is no reason to suppose the evidence would be probative and therefore unlikely to assist. While I accept the Tribunal does not know what is in the documents, ASIC is right to pointy out the documents in question may assist in one of two ways: either they will not show any recent concerns, which helps the applicant make his point about competence and provide assurance about future conduct, or they will raise concerns that may well be relevant to the assessment the Tribunal must make.
I do not accept the request amounts to fishing. ASIC is not seeking to cast a net in the hope that something might turn up. There is reason to believe the applicant has had interactions with the AFSL holder in relation to the quality of his compliance because the AFSL holder has an obligation to monitor and review those issues.
The only real question is whether that evidence can be obtained and introduced in a way that is procedurally fair at this stage of the proceedings. Subject to one consideration, I am satisfied there is no unfairness in allowing ASIC to access material at this juncture. Indeed, it would be fairer to everyone – and almost certainly more efficient – for the evidence to be obtained now rather than waiting to the hearing. While I note Mr Beaumont’s argument that ASIC’s request for the documents appears to suggest a changed focus of the case it outlined in [37] of the statement of facts, issues and contentions, the applicant is on notice of that change (to the extent it is, in fact, a change) and can prepare accordingly.
The consideration I mentioned in the preceding paragraph relates to the scope of the request for documents. Mr Beaumont argued the request for documents was poorly formulated. I disagree. I am satisfied it is sufficiently precise to enable the applicant to identify the documents sought.
Conclusion
I am satisfied a direction should be made in the terms sought by ASIC. The parties should confer and indicate within three (3) business days of these reasons an agreed date by which the applicant will comply with the direction. In the absence of agreement, the parties will make brief written submissions on an appropriate date for compliance within
five (5) business days of these reasons.
19. I certify that the preceding 17 (seventeen) paragraphs are a true copy of the reasons for the decision herein of Deputy President McCabe
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Associate
Dated: 25 September 2023
Date(s) of hearing: 22 September 2023 Counsel for the Applicant: Nicholas Beaumont SC Solicitors for the Applicant: Cristean Yazbeck Counsel for the Respondent: Patrick Knowles SC Solicitors for the Respondent: Robert Chiarella
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