Byrnes and Australian Securities and Investments Commission
[2007] AATA 1073
•21 February 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1073
ADMINISTRATIVE APPEALS TRIBUNAL )
) N2006/1281
GENERAL ADMINISTRATIVE DIVISION ) Re JAMES WARREN BYRNES Applicant
And
AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION
Respondent
DECISION
Tribunal Ms G Ettinger, Senior Member Date 21 February 2007
Place Sydney
Decision The application for a stay is refused.
Ms G Ettinger
Senior Member
……[sgd]…….
CATCHWORDS
Corporations Law - disqualification order - public interest - debt - liquidation - director of a company - managing a corporation - stay application - decision affirmed.
Re Repatriation Commission and Delkou (1985) 8 ALD 454
Re Commonwealth Banking Corporation and Iannello (1988) 15 ALD 418
Re Griffith Grif-Air Helicopters Pty Ltd and Civil Aviation Authority (1993) 31 ALD 380
Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65
Re Dekanic and Tax Agents’ Board of New South Wales (1982) 6 ALD 240Corporations Act2001
Administrative Appeals Tribunal Act1975REASONS FOR DECISION
21 February 2007 Ms G Ettinger, Senior Member
1. Mr James Warren Byrnes applied to this Tribunal for a stay of the Disqualification Order of ASIC made against him on 29 August 2006 pursuant to section 206F of the Corporations Act 2001.
2. Mr Byrnes represented himself at the hearing. He informed me that his counsel could not attend, and made application for his counsel to supplement his oral submissions by written submissions at a later date. Dr M Allars, of counsel, who represented ASIC, the Respondent in these proceedings, opposed that course of action due to an increase in costs and time which that would incur. She drew to my attention that the Respondent’s Written Submissions opposing the Stay had been served on 8 December 2006, and that accordingly the Applicant had had ample time to prepare his case.
3. I told the parties I proposed to hear them and make a decision about the further submissions at the end of the hearing. At completion of submissions, I noted that Mr Byrnes had commenced his submissions by enunciating the principles surrounding the granting of a stay, and I found that Mr Byrnes was well prepared. He was able to give evidence and make quite extensive submissions regarding a stay. He had every opportunity to say all he wanted, and I did not require further material from either party in order to come to a decision.
LEGISLATIVE CONTEXT
4. The relevant legislation in this matter is section 41(2) of the Administrative Appeals Tribunal Act 1975 (“the AAT Act”), which provides as follows:
“The Tribunal or a presidential member may, on request being made, as prescribed, by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal or presidential member is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal or presidential member considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.”
5. Three volumes of documents lodged pursuant to section 37 of the AAT Act by the Respondent (“T-documents”), were referred to by Mr Byrnes in the course of his submissions.
PRINCIPLES TO BE CONSIDERED IN A STAY APPLICATION
6. The principles to be taken into account in connection with an application for a stay have been considered by this Tribunal on many occasions. They are enunciated in Re Repatriation Commission and Delkou (1985) 8 ALD 454, Re Commonwealth Banking Corporation and Iannello (1988) 15 ALD 418 and other cases.
7. The following matters are relevant to the exercise of the discretion to grant a stay under s 41(2):
· whether a stay is appropriate to secure the effectiveness of the hearing and determination of the application for review;
· the prospects of success of the application for review;
· whether refusal of a stay causes prejudice to the applicant; and
· the public interest.
Securing the Effectiveness of a Hearing
8. Section 41(2) of the AAT Act states the purposes for which a stay may be granted: in order that the Tribunal may do what “the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review”. Where it is appropriate to preserve the effectiveness of the hearing of the application for review, the Tribunal may make an order.
9. The Tribunal must consider whether the application for review, if successful, will be rendered nugatory if the request for a stay is not granted. (Delkou (supra)). The purpose of the power to grant a stay under s 41(2) is to preserve the subject matter of the application for review. The power
“… enables the Tribunal to preserve the status quo pending the hearing and determination of the application for review where the ‘effectiveness’ of the review may be jeopardized if the decision, in the meantime, is carried into operation. Thus the power may be exercised when it is appropriate to do so to ensure that the application for review, if successful, is not rendered nugatory …”
10. Dr Allars submitted that Mr Byrnes’ case was not one such as Re Griffith Grif-Air Helicopters Pty Ltd and Civil Aviation Authority (1993) 31 ALD 380 where a licence was required in order to operate commercial aircraft. She indicated that Mr Byrnes could continue to earn income even given his present restrictions. She submitted that even in Re Griffith Helicopters, a stay had been refused.
11. Mr Byrnes did not make submissions in regard to securing the effectiveness of the hearing, and I accept the submission of the Respondent that the granting of a stay in this matter will not serve any purpose of preserving the subject matter of the decision, or otherwise ensuring that the review is not rendered nugatory. I accept that Mr Byrnes will still be able to pursue his application in this Tribunal and conduct certain business interests as he does, without a stay. A stay is not indicated from the point of view of securing the effectiveness of the hearing.
12. I next moved to consider the prospects of success of the application for review.
Prospects of Success of the Application for Review
13. Dr Allars pointed out in her written submissions that Mr Byrnes had not contested the findings made against him, had not contested the legal principles applied in the Decision, and had not provided any particulars of the basis on which the Tribunal should vary or set aside the Decision. Dr Allars indicated that Mr Byrnes would find it difficult to challenge the findings of a liquidator. She submitted that given his history of a previous banning Order in 1998, which was affirmed on appeal to this Tribunal, it was highly likely he did not have good prospects of success for the substantive hearing.
14. Mr Byrnes, on the other hand, submitted at length before me that he has further documentation available, and very good prospects of success. He also referred to some of the evidence he would give at the hearing, particularly in regard to the four companies mentioned at paragraph 17 of the Decision. I noted that ASIC found that all four companies were wound up, and a liquidator lodged a report under subsection 533(1) of the Corporations Law about the corporation’s inability to pay its debts while Mr Byrnes was an officer, or within 12 months after he ceased to be an officer of the company.
15. Mr Byrnes told me that ACN 072 951 823 Pty Ltd, was the parent company of several property development companies, and that several companies went into liquidation as a result of problems which have arisen due to the restriction on his activities as a result of the banning Order. Mr Byrnes did not agree with ASIC’s finding that he was managing a corporation when he should not have been, and said he was doing his job as a guarantor. He disagreed with the ASIC report on many counts, including its reliance on what he referred to as the “Marsden” report.
16. Mr Byrnes gave an explanation regarding Bauhaus Pyrmont Pty Ltd, implicating Multiplex, and stating that the debt was incurred before he became a director, and that none was incurred while he was a director.
17. As to Curlew Apartments Pty Ltd, Mr Byrnes explained this company was formed in connection with a development on Hamilton Island which had had problems due to a co-director and builder.
18. As to Cromwells Auctioneers & Valuers Rozelle Pty Ltd; Mr Byrnes explained he was overseas and did not know what was occurring there.
19. The decision of ASIC is of course a decision which may be affirmed, varied or set aside by the Tribunal at a substantive hearing. It is not my place here to try all the issues, but I cannot say that Mr Byrne’s case is entirely without merit, or that he may not have some chance of success at the Tribunal. However, from the evidence and submissions I have heard, that chance of success may not be slight. From the point of view of the prospect of success at the hearing, a stay is not indicated.
20. I moved then to consider any prejudice to Mr Byrnes.
Prejudice to the Applicant
21. Mr Byrnes said that he had endured 18 months of investigations and enormous scrutiny and ridicule. He said that he had suffered prejudice to himself and his family over the banning Order. Mr Byrnes said that he had tried to completely step aside, and had, in the last three months, overseen 50 of his staff leaving, and the reduction of his portfolio from 43 to six companies. Mr Byrnes emphasised that those companies have no external debt and no external liabilities, but that the restriction on his participation at the relevant level has caused problems, and continues to do so. He submitted that as a shareholder in various companies he could not vote on issues affecting the company.
22. Dr Allars submitted that Mr Byrnes had no further role in the four companies named in the reviewable decision as they are all in liquidation, and accordingly he could not be disadvantaged in regard to those. She submitted that the evidence Mr Byrnes gave about difficulties in managing because he could not hold the role of director was not persuasive. Dr Allars correctly pointed out that Mr Byrnes could not hold office, but that as a shareholder he could vote on issues involving companies in which he held shares. She indicated that the Respondent did not accept what Mr Byrnes said regarding the prejudice to him if a stay were not to be granted.
23. I considered any prejudice to Mr Byrnes if a stay were not to be granted, noting he can still be a shareholder and vote on issues affecting companies in which he holds shares. He told me that he is involved in funding litigation, and providing seed capital for mezzanine debt finance. He can also seek other employment. Mr Byrnes also said that 50% of his involvement in business is presently overseas, and said that he is pursuing that business. My conclusion is that notwithstanding some inconvenience to him as a result of the banning Order, Mr Byrnes is still able to continue to earn a living so that on balance that outweighs any prejudice. A stay is not indicated.
24. I next considered the public interest.
The Public Interest
25. Mr Byrnes said that he understood the public could be adversely affected by “rogue” directors, adding that in his thirty years of business life he had been bankrupt only once, but some 15 years ago. He said however, that as far as the public went, he had served as a director on hundreds of boards, had employed thousands of people, and only had two major setbacks, where it was he who had suffered the main losses. Mr Byrnes told me that he had not purposely deceived anyone or traded insolvent. He acknowledged the ATO had lost money through his actions, but said that no-one had suffered more than he himself. He said that the way he operated now had changed, and the public would not suffer if he were permitted to operate as a director of a company. He said that he provided seed capital for mezzanine debt finance and provided funding for litigation. He said that 50% of his investments were now off shore. Mr Byrnes said that he had not purposely deceived anyone, and had not traded insolvent.
26. Dr Allars submitted that the risk to the public was strong, and Mr Byrnes’ history mitigated against the granting of a stay. She submitted that given past actions, there was a high risk of failure of companies run by Mr Byrnes, with losses to the public.
27. I accepted the submissions of the Respondent in regard to the public interest, noting that Mr Byrnes was bankrupted approximately 15 years ago, and although I do not have details of that incident, it is likely to have caused losses. He had a previous banning Order in 1998 with an appeal to this Tribunal which resulted in the decision of ASIC being affirmed. He has a right to appeal the current banning Order, which he is pursuing. The substantive decision is likely to be heard this year. In considering the public interest, I consider that a stay is not indicated.
CONCLUSIONS
28. In finally coming to a decision, I need to take into account the principles for considering a stay which have been enunciated in quite a number of cases. A priori the decision that was made should remain until a full review can be conducted, unless there are good reasons for doing otherwise. I am mindful also that there is case law (Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65), where it was held that special or exceptional circumstances do not have to be made out for a stay to be granted.
29. I am mindful that Mr Byrnes indicated he was prepared to accept a conditional stay such as that he would not be able to enter into new enterprises, or take on substantial amounts of employees. He submitted there would therefore be no risks that anyone could suffer loss as a result of his actions.
30. Noting the main indicia I have canvassed in the paragraphs above, I find there is no issue as to securing the effectiveness of the hearing, and that accordingly in that regard, a stay is not indicated. I find that Mr Byrnes can still earn a living, and continues to, and that prejudice to him is therefore not a strong indicator for a stay to be granted. As to the prospects of success at hearing, I cannot try the case when considering a stay, but from the material I have before me, I find that Mr Byrnes’ case is not entirely without merit. However on balance, a minor prospect of success at the substantive hearing does not persuade me to grant a stay.
31. I am mindful that in Re Decanic, Davies J stated that there is no particular formula in cases like this:
“…in every particular case the circumstances of the case must be considered and in not every case will it be appropriate that a stay should be granted. Particularly a stay should not be granted if it is clear that, in the public interest, the decision under review should be effective until the Tribunal has considered the matter fully.”
32. I find on balance that the interests of the public outweigh those of Mr Byrnes, and that from that point of view, a stay is not indicated.
33. I do not accept Mr Byrnes’ offer of a conditional stay.
34. Ultimately on balance, and taking the above discussed indicia into account, I find that the discretion to grant Mr Byrnes a stay should not be exercised.
DECISION
35. The application for a stay is refused.
I certify that the 35 preceding paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger, Senior Member
Signed: [sgd] .....................................................................................
AssociateDate of Hearing 14 February 2007
Date of Decision 21 February 2007
Applicant Self Represented
Counsel for the Respondent Dr M Allars
Solicitor for the Respondent ASIC
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