Boucher, Alleyn James v Australian Securities Commission

[1996] FCA 424

CATCHWORDS

Administrative Law - judicial review - decision and conduct of the Australian Securities Commission - whether Australian Securities Commission may re-open evidence after hearing and reservation of decision - whether Australian Securities Commission bound by procedural rules applicable to a court.

Administrative Decisions (Judicial Review) Act 1977 ss 5, 6

Australian Securities Commission Act, Part 3, Division 1

Corporations Law, Part 7.3, Division 5

McDonald v Director-General of Social Security (1984)
1 F.C.R. 354

Nation v Repatriation Commission (Federal Court of Australia, 22 September 1993, unreported)

Bushell v Repatriation Commission (1992) 175 CLR 408

Gerrard v Mayne Nickless Ltd (Industrial Relations Court of Australia, 8 February 1995, unreported)

Murphy v Tigge (1974) 4 ALR 612

ALLEYN JAMES BOUCHER v AUSTRALIAN SECURITIES COMMISSION
No. VG 898 of 1995

NORTHROP J
MELBOURNE
31 MAY 1996

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY           No VG 898 of 1995

GENERAL DIVISION

B E T W E E N :

ALLEYN JAMES BOUCHER
  Applicant

and

AUSTRALIAN SECURITIES COMMISSION
  Respondent

COURT:    NORTHROP J

PLACE:    MELBOURNE

DATE:     31 MAY 1996

MINUTES  OF  ORDER

The Court orders that the application be dismissed with costs.

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

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY           No VG 898 of 1995

GENERAL DIVISION

B E T W E E N :

ALLEYN JAMES BOUCHER
  Applicant

and

AUSTRALIAN SECURITIES COMMISSION
  Respondent

COURT:    NORTHROP J

PLACE:    MELBOURNE

DATE:     31 MAY 1996

REASONS FOR JUDGMENT

The issues raised by this application involve the nature of a hearing before the Australian Securities Commission ("the Commission"). In particular the issue is whether limitations restricting the right of a party to legal proceedings in a court to have the proceedings re-opened after judgment has been reserved in those proceedings but before judgment has been delivered apply with respect to a proceeding before the Commission exercising powers conferred upon it by section 829 of the Corporations Law

The facts are not in dispute.  At all material times the applicant was employed by Vinton Smith and Dougall ("Vintons").  Vintons carries on a securities business, namely that of a stockbroker, and thus is a dealer under the Corporations Law.  The applicant was employed as a
representative, and was a securities representative, under Chapter 7 of the Corporations Law.  As a representative of Vintons he acted as an investment adviser to clients of Vintons.

By a notice of hearing dated 12 July 1995, the Commission gave notice to the applicant that it, or a person duly authorised by it, would hold a hearing commencing on 1 August 1995 for the purpose of determining whether or not the Commission should make a banning order pursuant to section 829 of the Corporations Law against the applicant. The notice made reference to a number of procedural matters including those referred to in sub-section 837(1) of the Corporations Law and the various courses open to the applicant in relation to the matters alleged against the applicant.  The allegations against the applicant were set out in an annexure to the notice.

Two allegations were made against the applicant.  The first was:-

"AThe ASC (the Commission) alleges that, in relation to sub-paragraph 829(f)(i) of the Law (the Corporations Law), you have not performed efficiently, honestly and fairly the duties of a representative of a dealer in your dealings with James (Vivienne Lynn James), a client of Vintons) during the Period (29 November 1991 to 7 July 1993)."

Particulars of this allegation were given.

The second allegation was:-

"BThe ASC alleges that, in relation to paragraph 829(d) of the Law, you have contravened section 851 of the Law by making securities recommendations to James during the Period, a person who may reasonably be expected to rely on the recommendations, without having a reasonable basis for making the recommendations."

Particulars of this allegation were given.

Sections 829 and 851 are within Chapter 7 of the Corporations Law.  The parts of those sections relevant to this application are set out:-

1. Subject to section 837, the Commission may make a banning order against a natural person (other than a licensee) if;

(a)  ...

(d)  he or she contravenes a securities law;

(e)  ...

(f)the Commission has reason to believe that he or she has not performed efficiently, honestly and fairly the duties of:

(i)  a representative of a dealer; or

(ii) ... "

The applicant is not a licensee under Chapter 7 of the Corporations Law.  It was not suggested that the provisions of section 837 had not been followed.  In the Corporations Law, a securities law is defined to mean a provision of Chapter 7.

"851.(1)A securities adviser who:

(a)makes a securities recommendation to a person who may reasonably be expected to rely on it; and

(b)does not have a reasonable basis for making the recommendation to the person:

contravenes this section.

(2)For the purposes of subsection (1), a securities adviser does not have a reasonable basis for making a securities recommendation to a person unless;

(a)In order to ascertain that the recommendation is appropriate having regard to the information the securities adviser has about the person's investment objectives, financial situation and particular needs, the securities adviser has given such consideration to, and conducted such investigation of, the subject matter of the recommendation as is reasonable in all the circumstances; and

(b)the recommendation is based on that consideration and investigation.

(3)A person who contravenes subsection (1) is not guilty of an offence."

The notice of hearing was served on the applicant in July 1995.  This followed investigations by officers of the Commission following complaints made by Ms James which complaints had been referred to the Commission for investigation some time in 1993.

At the hearing of the allegations by the Commission, constituted by its delegate, Mr M H Broder, on 1 August 1995, the applicant had legal representation and an officer of the Commission, who was a lawyer, appear to assist the Commission.  Procedural directions were given and eventually the hearing was conducted on 27, 28, 29 September 1995 and 2 and 6 October 1995.  At that stage the Commission gave leave to provide written submissions and reserved its decision.  The written submissions were to be provided by 6 November 1995.

Before the decision of the Commission could be announced, officers of the Commission conducted further investigations into the allegations which had been made against the applicant.  By letter dated 26 October, the legal officer of the Commission who had been assisting Mr Broder at the hearing of the allegations, Mr Dooley, informed the solicitor for the applicant that fresh evidence had come to the attention of the Commission and that on 3 November 1995 he would make application to Mr Broder to receive the fresh evidence, the nature of which was stated in the letter.  This application came on for hearing before Mr Broder on 17 November 1995.  The applicant had legal representation and Mr Dooley appeared for the purpose of assisting the Commission.  After hearing submissions, Mr Broder announced, in substance, that he proposed to hear the further evidence.  Following a short adjournment, the legal adviser of the applicant sought an extended adjournment to enable the applicant to seek to review the decision to admit further evidence.

On 23 November 1995, the applicant caused this application to be issued. It named the Commission as respondent and stated that it was an application for an order of review, an application for orders pursuant to section 39B of the Judiciary Act 1903 and an application pursuant to section 51(1) of the Corporations Act 1989.  At the hearing, the applicant limited his claim for relief to an order of review under the Administrative Decisions (Judicial Review) Act 1977. The applicant seeks a review of the decision of the Commission to re-open the hearing into the allegations made against him for the purpose of hearing further evidence and a review of the conduct of the Commission in proposing to hear that further evidence. The grounds relied upon are those contained in paragraphs 5(1)(a), (e) and (j) of the Judicial Review Act. In so far as paragraph 5(1)(e) is relevant, the applicant relies upon paragraph 5(2)(b) and (g). Similar provisions are contained in section 6 of the Judicial Review Act insofar as conduct is sought to be reviewed. For ease of reference the relevant provisions of section 5 are summarised:-

"5(1)(a)- a breach of the rules of natural justice.

(e)- an improper exercise of the power, and in particular (5)(2)(b) - failing to take a relevant consideration into account and (g) an exercise of power so unreasonable that no reasonable person would have so exercised the power.

(j)  - the decision was otherwise contrary to law."

The substance of the submissions made on behalf of the applicant was that in exercising the power conferred upon it by section 829 of the Corporations Law the Commission was exercising a quasi judicial power.  As a result, once it had heard a matter under that sub-section and had reserved its decision, before re-opening the hearing to hear further
evidence it was required to adopt and apply the principles of law applied with respect to a court of law.  Counsel submitted that the principles were stated clearly by Muirhead J in Murphy v Tigge (1974) 4 ALR 612 at 612-613:-

"In Watson v Metropolitan (Perth) Passenger Transport Trust [1965] WAR at 89 the Chief Justice appears to have applied three tests, namely that fresh evidence should be admitted only when:-

(a)it is so material that the interests of justice require it;

(b)the evidence if believed would most probably affect the result;

(c)the evidence could not by reasonable diligence have been discovered before.

In that case the introduction of fresh evidence not tendered by reason of counsel's inadvertence was not in issue as is here the case.  I would, speaking for myself, add to that category the circumstances where such inadvertence was established, provided the evidence was clearly admissible, could be admitted on conditions which ensured no prejudice to the other party by reason of its introduction at a late point of time and provided always that interests of justice so require."

Having regard to later authorities, there is doubt whether this is a correct statement of the law:  see Smith v New South Wales Bar Association (1992) 176 CLR 256 and Londish v Gulf Pacific Pty Ltd (1993) 45 FCR 128 especially in the judgment of the Court, Neaves, Burchett & Ryan JJ, commencing at 138.

Counsel for the Commission contended that no matter what the principles were in relation to procedures before a court, they have no application to procedures to be applied by the Commission in the exercise of its powers under section 829 of the Corporations Law.  In these circumstances the Court does not attempt to resolve the apparent conflict in the authorities but is prepared to assume that Mr Broder, as delegate of the Commission, did not apply the principles whatsoever they may have been.  Accordingly, it becomes necessary to consider the contentions made on behalf of the Commission.

Before doing this, it is desirable to describe the effect a banning order may have on the applicant. Section 829 of the Corporations Law empowers the Commission to make a banning order against the applicant, in the circumstances, of this case, if the matters described in paragraphs 829(d) and (f)(i) are established. In section 9, the words "banning order" in the Corporations Law are defined to mean (among other meanings):-

"(a)in section 835 or 836 - an order by the Commission in force under Division 5 of Part .3; and

(b)in any other provision of Part 7.3 of the Corporations Law of this jurisdiction;"

All sections of the Corporations Law relevant for present purposes are with Division 5 of Part 7.3 of the Corporations Law.  Section 830 empowers the Commission, where it has power to make a banning order, to prohibit the person from doing an act as a representative of a dealer.  Section 835 provides that the person the subject of a banning order, must not contravene that order.  Thus, if the Commission makes a banning order against the applicant, the applicant would not, subject to any conditions imposed by the Commission, be able to continue to act as a representative of a securities dealer.  This could constitute a severe penalty on the applicant.

The applicant has not sought to challenge the validity of the hearings before the Commission between 1 August and 6 October 1995 based on the facts that officers of the Commission received and investigated the complaints against the applicants, that the Commission, by a delegate, gave the notice of hearing to the applicant, that the Commission, by a delegate, conducted the hearing and that an officer of the Commission appeared before the Commission to present "the case" against the applicant.  The Court expresses no opinion on the effect of these matters.  The only issue before the Court is whether the principles referred to in Murphy v Digger have application with respect to the re-opening of the hearing before the Commission to receive further evidence.

In order to determine the matter before the Court, it is necessary to make a brief reference to the nature of the power being exercised by the Commission. The Commission is established by section 7 of the Australian Securities Commission Act 1989 ("the ASC Act"). By section 1, the objects of the ASC Act include the object to establish the Commission "to administer such laws of the Capital Territory, the States and the other Territories as confer functions and powers under those laws on the Commission". The Corporations Law is such a law. Another object is "to provide for the functions, powers and business of the Commission". Sub-section 1(2) provides that in performing its functions and exercising its powers, the Commission must strive to achieve, maintain and administer the specific objects set out in the sub-section some of which are:-

"(a)....

(b)to maintain the confidence of investors in the securities markets and futures markets by ensuring adequate protection for such investors; and

(c)to achieve uniformity throughout Australia in how the Commission and its delegates perform those functions and exercise those powers;

(d)To administer national scheme laws effectively but with a minimum of procedural requirements; and

(e)  .... ; and

(f)to take whatever acting it can take, and is necessary, in order to enforce and give effect to national scheme laws."

Section 11 of the ASC Act provides that the Commission has such functions and powers as are conferred upon it by, among others, the Corporations Law. The power conferred on the Commission by section 829 of the Corporations Law is such a power. That power forms part of the supervisory function of the Commission.

Part 3 of the ASC Act is headed "Investigations and Information-Gathering". Divisions 1, 2, 3 and 4 are headed "Investigations", "Examination of Persons", "Inspection of Books" and "Requirements to disclose information about securities and futures contracts" respectively. Division 5 is headed "Proceedings after an investigation" and contains provisions empowering the Commission to prosecute criminal or civil proceedings.

Division 6 is headed "Hearings" and comprises sections 51 to 62. Section 51 empowers the Commission to hold hearings for the purposes of the performance or exercise of any of its functions and powers under, among others, the Corporations Law. Under section 52 the hearings may be in public or in private. Under section 58 the Commission has power to require a person to attend a hearing to give evidence and has power to take evidence on oath or affirmation. This power can be enforced by criminal proceedings under sub-section 63(3). Section 59 is of importance. It provides that a hearing should be conducted with as little formality and technicality and with as much expedition as the requirements of among others the Corporations Law and a proper consideration of the matters before the Commission permit. The Commission is not bound by the rules of evidence and shall observe the rules of natural justice. At a hearing, a person may be represented by a barrister or solicitor. Section 60 requires the Commission to take into account evidence and submissions relating to the matter before it. Under section 102 the Commission may delegate to a person all or any of its functions and powers.

It is necessary to consider the nature of the functions and powers of the Commission, acting by its delegate, Mr Broder, in conducting the hearing referred to in the notice of hearing given to the applicant. The hearing was to determine whether the Commission should make a banning order against the applicant on one or other or both of two grounds namely those stated in paragraph 829(d) and 829(f)(i) of the Corporations Law. The Commission had conducted an investigation into complaints made against the applicant. It was considering
whether to make a banning order. The Commission complied with the procedures and requirements prescribed by the Securities Commission Act. The Commission completed the hearing and reserved its decision.

The fact that a lawyer appeared at the hearing to assist the Commission may give the impression that the Commission was hearing a dispute between two parties - the Commission and the applicant. This impression is false. The mere statement of the impression illustrates that it is a wrong impression. The Commission cannot be a party and judge in its own behalf. When conducting the hearing, the Commission was not acting as an arbitrator hearing a dispute between two parties. There were no parties. No question of res judicata or issue of estoppel would arise. The functions of the Commission were to hear the evidence and submissions put to it and give proper consideration to all matters put to it before making a decision. The Commission was in truth exercising a true administrative function, not a quasi-judicial function. It is true that procedural requirements and compliance with the rules of natural justice apply but this does not make the functions quasi-judicial.
     This is not a novel concept. Many statutes confer rights on a person under which a claimant makes application for the grant of an entitlement and the relevant authority considers the material and makes a decision to refuse or grant the application. In some cases, the legislation permits a review of the decision to intermediatory groups and eventually the Administrative Appeals Tribunal. Many authorities show that the Administrative Appeals Tribunal in making the review, is exercising the powers of the original decision-maker and in fact is acting as if it were the original decision-maker. The fact that before the Tribunal the applicant and the original decision-maker are represented does not change the position. Terminology used in relation to court procedures can only obscure the true nature of the hearing before the Tribunal. This can be illustrated by reference to two authorities.

In Nation v Repatriation Commission, Federal Court of Australia, 22 September 1993 (unreported) I considered the nature of the function of the Administrative Appeals Tribunal when reviewing a decision of the Repatriation Commission and a question relating to evidence and onus of proof. At pages 5-6 I said:-

"In considering this, it is helpful to keep in mind the nature of the proceedings before the Tribunal when exercising powers of review of decisions of administrators. A very helpful opinion on this matter is contained in the judgment of Brennan J in Bushell v Repatriation Commission (1992) 175 CLR 408. After setting out s120 of the Act, at pp424-5 his Honour said:

`The section is not concerned with an onus of proof. Sub-section (6) says so expressly. It is concerned
with a standard of satisfaction to which the administrative decision-maker must attain in finding the relevant facts and it directs the decision-maker to act on the material before the Commission, the Board or the AAT, as the case may be. Proceedings before the AAT may sometimes appear to be adversarial when the Commission chooses to appear to defend its decision or to test a claimant's case but in substance the review is inquisitorial. Each of the Commission, the Board and the AAT is an administrative decision-maker, under a duty to arrive at the correct or preferable decision in the case before it according to the material before it. If the material is inadequate, the Commission, the Board or the AAT may request or itself compel the production of further material. The notion of onus of proof, which plays so important a part in fact-finding in adversarial proceedings before judicial tribunals. has no part to play in these administrative proceedings. Nor does s120 create any presumption which has to be dispelled by the material before the decision-maker.'

The nature of the function of the AAT as so described puts clearly what was said in McDonald v Director General of Social Security (1984) 1 FCR 354 per Woodward J at pp356-8 and per Northrop J at pp365-366 in relation to the function of the AAT."

Any decision by the Commission following the hearing the subject of this application in issue in the case before the Court may be reviewed by the Administrative Appeals Tribunal. At that review it would be expected that the applicant and the Commission would be represented. Nevertheless in conformity with the principles discussed in Bushell and in McDonald they would not be parties in the sense of opposing litigants in court proceedings.

This analysis does not deny that in other types of hearing the Commission may be acting in a quasi-judicial capacity with parties appearing before it.  In Gerrard v Mayne Nickless Ltd, Industrial Relations Court of Australia, 8 February 1995 (unreported) I considered the nature of these two types of functions. There the issue was whether section 8 of the Acts Interpretation Act 1901 applied to accrued rights. In a long passage commencing at page 13 I discussed the types of functions and powers and referred to a number of authorities. I adhere to the views expressed. An appeal from that decision was heard by a Full Court and dismissed. At the same time the Full Court heard other matters. Generally see Gerrard v Mayne Nickless Ltd Full Court Industrial Relations Court of Australia 5 March 1996 (unreported).

The present case is clear. The Commission was acting in an administrative capacity. Subject to compliance with the provisions of the Securities Commission Act it was free to conduct the hearing as it sought proper. Rules of procedure and function applied in courts of law have no application. In particular, the principles relating to the re-opening of a hearing before a Court can have no application. Accordingly, the application must be dismissed with costs.

I certify that this and the preceding fourteen (14) pages are a true copy of the Reasons for Judgment of The Honourable Justice R.M. Northrop.

Associate:
Date:

ATTACHMENT

Counsel for the Applicant:       Mr P. Rose

Solicitors for the Applicant:        Phillips Fox

Counsel for the Respondent:      Mr P. Cranswick QC
  with Mr P. Hiland

Solicitors for the Respondent:    Regional General Counsel
  Australian Securities
  Commission

Date of Hearing:                 30 April 1996