Callychurn and Australian Securities and Investments Commission
[2019] AATA 4600
•25 October 2019
Callychurn and Australian Securities and Investments Commission [2019] AATA 4600 (25 October 2019)
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL )
)No: 2015/1419; 2015/1420
TAXATION AND COMMERCIAL DIVISION )
Re: Meenakshi Callychurn
Applicant
And: Australian Securities & Investments Commission
RespondentRe: Unique Mortgage Services Pty Ltd
ApplicantAnd: Australian Securities & Investments Commission
RespondentTRIBUNAL: Deputy President J Redfern
DATE OF CORRIGENDUM: 5 November 2019
PLACE: Melbourne
IT IS DIRECTED, in accordance with subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975, that the text of the decision in AAT Case No.2015/1419 and 2015/1420 is altered such that the reference to “Meenakishi” at paragraph [1] reads as “Meenakshi”.
................[sgd]............................................
Deputy President
DIVISION: TAXATION AND COMMERCIAL DIVISION
File Number: 2015/1419
Re:Meenakshi Callychurn
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
File Number: 2015/1420
Re:Unique Mortgage Services Pty Ltd
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal:Deputy President J Redfern
Date:25 October 2019
Place:Melbourne
The decisions under review are affirmed.
....................[sgd]....................................................
Deputy President J Redfern
CATCHWORDS
CORPORATIONS – consumer credit – application for review of decision prohibiting applicant from engaging in any credit activities for a specified period under s 80(1) of the National Consumer Credit Protection Act 2009 (Cth) – whether applicant contravened s 225 of the National Consumer Credit Protection Act 2009 (Cth) – whether applicant is a fit and proper person to engage in credit activities – whether the applicant is likely to contravene or be involved in the contravention of any credit legislation – disqualification period – decision under review affirmed
CORPORATIONS – consumer credit – application for review of decision to cancel an Australian Credit Licence under s 55(1) of the National Consumer Credit Protection Act 2009 (Cth) – whether credit licensee is a fit and proper person – whether likely to contravene credit legislation in the future – decision under review affirmed
JURISDICTION – scope of review on remittal – order that the matter be remitted to the Tribunal for further consideration in accordance with law – no express or implied limitation – matter remitted is the whole matter – matter remitted is not confined to the question of law considered – new grounds and evidence raised before this Tribunal on review following remittal
LEGISLATION
Acts Interpretation Act 1901 (Cth), s 2C(1)
Administrative Appeals Tribunal Act 1975 (Cth), ss 43, 43(1)
Australian Securities and Investments Commission Act 2001 (Cth), s 12DA, 13
Broadcasting Act 1942 (Cth)
Conveyancers Act 2006 (Vic)Corporations Act 2001 (Cth)
Crimes Act 1958 (Vic), ss 82, 83, 83ACrimes Act 1914 (Cth), Part VIIC
Legal Profession Act 2004 (Vic), Part 2.2 - Div 3
Migration Act 1958 (Cth), ss 290(2), 303, 303(1), 303(1)(f), 303(1)(h), 314
Migration Agents Regulations 1998 (Cth), Schedule 2National Consumer Credit Protection Act 2009 (Cth), ss 29, 37, 37(2), 37(2)(h), 37(2)(h)(i), 37(3), 45, 47, 47(1), 53, 55, 55(1), 55(1)(a), 55(1)(b), 55(2), 55(2)(b)(ii), 55(3), 55(4), 80, 80(1)(d), 80(1)(e), 80(1)(f), 80(2), 80(3), 80(4), 117, 123, 160D, 225, 225(2), 225(5), 247, 266, 267, 290, 327; Schedule 1
CASES
Allesch v Maunz (2000) 203 CLR 172
Australian Broadcasting Tribunal v Bond [1990] HCA 33
Callychurn and Australian Securities and Investments Commission [2016] AATA 114
Callychurn v Australian Securities and Investments Commission [2017] FCA 29Callychurn v Australian Securities and Investments Commission [2017] FCAFC 137
Callychurn v Australia and New Zealand Banking GroupT/A ANZ [2016] FWCFB 1944Callychurn vAustralia and New Zealand Banking Group [2016] FWC 526
Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577Frugtniet v Australian Securities and Investments Commission [2019] HCA 16
Frugtniet v Law Institute of Victoria Ltd [2012] VSCA 178
HIH Insurance Limited and HIH Casualty And General Insurance Ltd; Australian Securities and Investments Commission v Adler [2002] NSWSC 483
Horwarth v Australian Securities and Investments Commission [2008] AATA 278
Jebb v Repatriation Commission (1988) 80 ALR 329
Kim v Minister for Immigration and Citizenship [2008] FCAFC 73
Law Institute of Victoria Limited v Frugtniet (Legal Practice) [2011] VCAT 596
Liedig v Commissioner of Taxation (1994) 50 FCR 461
Minister for Immigration and Ethnic Affairs v Pochi (1980) 31 ALR 666
Mobil Oil Australia Ltd v Federal Commissioner of Taxation (1963) 113 CLR 475
Nation v Repatriation Commission (No 2) (1994) 37 ALD 63
Peacock v Repatriation Commission [2007] FCAFC 156
Perpetual Trustee Co (Canberra) Ltd v Commissioner for ACT Revenue (1994) 123 ACTR 17
Power v Hammond [2006] VSCA 25
Re Brian Lawlor Automotive Pty Ltd and Collector of Customs (New South Wales) (1978) 1 ALD 167
Re Control Investment Pty Ltd and Australian Broadcasting Tribunal (No 2) (1981) 3 ALD 88
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) [1979] 2 ALD 634
Repatriation Commission v Yates (1997) 46 ALD 487
Shi v Migration Agents Registration Authority [2008] HCA 31
Story v National Companies and Securities Commission (1988) 13 NSWLR 661
Tarrant v Australian Securities and Investment Commission [2013] AATA 926SECONDARY MATERIALS
Australian Securities and Investments Commission, Regulatory Guide 204 - Applying for and varying a credit licence, February 2013
Australian Securities and Investments Commission, Regulatory Guide 218 - Licensing: Administrative action against persons engaging in credit activities, November 2010
Dennis Pearce, Administrative Appeals Tribunal (LexisNexis Butterworths, 4th ed, 2015)
Explanatory Memorandum, National Consumer Credit Protection Bill 2009 (Introduced 25 June 2009)REASONS FOR DECISION
Deputy President J Redfern
25 October 2019
These proceedings concern two applications for review. The first matter relates to an application by Ms Meenakshi Callychurn, who was a director of Unique Mortgage Services Pty Ltd (‘UMS’), the applicant in the second matter. The reviews concern two decisions by a delegate of the Australian Securities and Investments Commission (‘ASIC’) made on 27 February 2015, first, to ban Ms Callychurn from engaging in credit activities for a period of five years and, secondly, to cancel the Australian Credit Licence of UMS. The applicants sought review of the delegate’s decisions and the Tribunal, differently constituted, affirmed the cancellation decision in respect of UMS but set aside the decision to ban Ms Callychurn and substituted a decision that she be banned for a period of four years: Callychurn and Australian Securities and Investments Commission [2016] AATA 114.
The applicants sought judicial review of the Tribunal’s decisions by the Federal Court. The Federal Court dismissed the appeals: Callychurn v Australian Securities and Investments Commission [2017] FCA 29. The applicants appealed to the Full Court of Federal Court, which set aside the decisions and remitted the matters to the Tribunal to be determined according to law: Callychurn v Australian Securities and Investments Commission [2017] FCAFC 137.
The matters are now before the Tribunal pursuant to the order of the Full Court. The parties advanced contentions and evidence similar to that previously submitted. However, ASIC has raised new grounds and has sought to rely on additional evidence in support of its contentions. The applicants have raised issues regarding the scope of the review on remittal and dispute ASIC’s ability to raise new grounds and evidence.
For the reasons that follow, the decisions under review are affirmed.
BACKGROUND
UMS was granted an Australian Credit Licence on 24 December 2010, which gave it authority to engage in certain credit activities. UMS carried on business as a finance and mortgage broker and intermediary between credit providers or lessors and consumers, dealing with home, vehicle and other personal loans, car and consumer leases and credit cards. Ms Callychurn has been a director of UMS since 16 June 2011. She was nominated as a fit and proper person on the Australian Credit Licence of UMS from 24 December 2011. Mr Rudy Frugtniet was a director of UMS until 14 October 2011 and ceased as a fit and proper person on 12 January 2013. He was disqualified by the Victorian Civil and Administrative Appeals Tribunal (‘VCAT’) on 8 April 2011 from practising as a lay associate of a legal practice in Victoria for three years.[1] Mr Frugtniet unsuccessfully appealed this decision and the circumstances that lead to his disqualification are set out in the judgement of the Court of Appeal in Frugtniet v Law Institute of Victoria Ltd [2012] VSCA 178. Mr Frugtniet was permanently prohibited from engaging in any credit activities by ASIC on 26 June 2014. Mr Frugtniet and Ms Callychurn were domestic partners and have two children. Ms Callychurn says that she separated from Mr Frugtniet in 2012. She has been the sole director of UMS since 14 October 2011 and its sole fit and proper person since 12 January 2013.
[1] Law Institute of Victoria Limited v Frugtniet (Legal Practice) [2011] VCAT 596 (8 April 2011).
By notice dated 13 October 2014 addressed to Ms Callychurn, ASIC expressed concern that she had answered questions in the 2011 and 2012 annual compliance certificates for UMS in a manner that was false or misleading. The questions in the compliance certificates sought warranties about certain matters and an affirmative response certified that there was “no reason to believe” the existence of the matters that were identified as being adverse. Ms Callychurn had answered in the affirmative in respect of four questions in each of the annual compliance certificates and ASIC expressed concern that she may have thereby contravened the credit legislation. ASIC also expressed concern that there was reason to believe Ms Callychurn was not a fit and proper person to engage in credit activities. There were two grounds particularised in the notice. First, Ms Callychurn was said to lack the requisite knowledge and ability to manage UMS because she purportedly allowed Mr Frugtniet to continue to exercise control over UMS in circumstances where she ought not to have allowed him to do so. Secondly, it was alleged that Ms Callychurn had not appropriately responded to requests by ASIC in relation to its investigations. Those concerns were based on a variety of matters, which are outlined later in these reasons. Finally, ASIC expressed its concern that there may be reason to believe Ms Callychurn was likely to contravene the credit legislation by reason of her previously particularised conduct. There were typographical errors in the notice, which will be referred to in more detail later in these reasons.
By further notice, also dated 13 October 2014 and addressed to UMS, ASIC expressed concern that it may have reason to believe UMS was likely to contravene its general conduct obligations under the credit legislation and that UMS was not fit and proper to engage in credit activities. The particulars were based on the concerns raised in relation to Ms Callychurn.
After a hearing, the delegate found that a number of the concerns set out in the notices, but not all, were made out. The delegate found that Ms Callychurn had provided false or misleading information in the 2011 and 2012 annual compliance certificates in contravention of the credit legislation, she was not a fit and proper person to engage in credit activities and there was reason to believe she was likely to contravene the credit legislation.[2] Having regard to these findings, the delegate banned Ms Callychurn from engaging in credit activities for a period of five years.[3] Based on the findings made in respect of Ms Callychurn and the fact that she was the sole director as well as the sole fit and proper person for UMS, the delegate found that UMS was likely to contravene its general conduct obligations under the credit legislation and there was reason to believe UMS was not fit and proper to engage in credit activities.[4] Accordingly, the delegate cancelled the Australian Credit Licence held by UMS.[5]
[2] Decision of the delegate of the ASIC dated 27 February 2015 at [21], [46] and [49].
[3] Decision of the delegate of the ASIC dated 27 February 2015 at [55].
[4] Decision of the delegate of the ASIC regarding UMS dated 27 February 2015 at [10].
[5] Decision of the delegate of the ASIC regarding UMS dated 27 February 2015 at [16].
As already noted, the applicants sought review of these decisions by this Tribunal. In essence, the Tribunal, as previously constituted, found that Ms Callychurn had contravened the credit legislation in relation to the 2011 and 2012 annual compliance certificates and that she was not a fit and proper person based on similar reasoning to that of the delegate.[6] The Tribunal also found that there was reason to believe Ms Callychurn would be likely to contravene the credit legislation in the future.[7] However, the Tribunal determined that any banning order should be at “the lighter end of the scale” and set aside the decision to impose a four year banning order.[8] The Tribunal stated that the cancellation of the Australian Credit Licence held by UMS “must inevitably follow” given Ms Callychurn was its sole director and in the absence of any other acceptable director being nominated, affirmed the decision to cancel the Australian Credit Licence of UMS.[9]
[6] Callychurn and Australian Securities and Investments Commission [2016] AATA 114 at [29], [43] and [59].
[7] Ibid at [72] - [77].
[8] Ibid at [82].
[9] Ibid at [83].
The applicants appealed the decision of the Tribunal to the Federal Court. Their appeals were dismissed.[10] The applicants then appealed to the Full Court of the Federal Court.[11] The Full Court found that the Tribunal erred in finding that Ms Callychurn had contravened the credit legislation in respect of certain answers given both in the 2011 and 2012 annual compliance certificates.[12] The Full Court also noted as follows (at [30]):
Counsel for the appellants accepted that if either or both grounds succeeded, the matter should be remitted to the Tribunal to enable reconsideration of the period of the banning order. In circumstances where no challenge is now made to the other bases upon which the Tribunal found that Ms Callychurn was not a fit and proper person to engage in credit activities, and where other grounds may be raised on remittal, counsel’s concession is an appropriate one. There was no issue on this appeal about the Tribunal’s cancellation of the Australian credit licence held by UMS.
[10] Callychurn v Australian Securities and Investments Commission [2017] FCA 29.
[11] Callychurn v Australian Securities and Investments Commission [2017] FCAFC 137.
[12] Ibid at [40] - [46] and [49] - [54].
The Full Court observed that the answers given by Ms Callychurn to one of the questions in both the 2011 and 2012 compliance certificates, being the fourth question under the heading “Offences”, was self-evidently untrue to Ms Callychurn’s knowledge but ASIC did not rely on that answer in the proceedings before the Tribunal, the primary judge or on appeal.[13]
[13] Ibid at [55].
The Full Court allowed the appeal and ordered that the matters “be remitted to the Tribunal for hearing according to law”.[14]
[14] Ibid.
The matters were reconstituted on remittal and listed for hearing in March 2018. The parties provided post hearing written submissions in May and June 2018. In May 2019, Ms Callychurn made a further written submission following the decision of the High Court in Frugtniet v Australian Securities and Investments Commission [2019] HCA 16, apparently taking issue with ASIC raising new grounds on remittal. Given this submission raised a significant matter, the parties were invited to provide further written submissions directed to the High Court case together with any updated evidence and/or submissions that they wished to rely on pending the Tribunal’s proposed determination of the matter. The parties were also invited to attend a further hearing if required. Both parties provided further written submissions and declined the invitation to attend a further hearing.
STATUTORY FRAMEWORK
ASIC has an important role in the regulation of credit activities and is responsible for granting, refusing, suspending and cancelling Australian Credit Licences under the National Consumer Credit Protection Act 2009 (Cth) (‘the NCCPA’). The NCCPA establishes a national consumer credit regime which includes, amongst other things, a comprehensive national licensing regime for persons engaged in credit activities, industry-wide responsible lending conduct requirements for licensees and a sanctions and consumer remedy framework that is supported by a three-tier dispute resolution system for consumer credit issues. The NCCPA also contains a National Credit Code which regulates aspects of the provision of certain types of credit and consumer leases.[15]
[15] The National Credit Code largely replicates the State and Territory based Uniform Consumer Credit Code and is contained in Schedule 1 of the NCCPA.
Generally speaking, a person or entity cannot engage in a credit activity if the person or entity does not hold an Australian Credit Licence: s 29 of the NCCPA. ASIC may impose conditions on an Australian Credit Licence (s 45 of the NCCPA) and has wide ranging powers under Part 6 of the NCCPA to undertake investigations, collect information through this issue of compulsory notices, inspect books and records, prosecute or commence civil proceedings, hold hearings, impose infringement notices and take administrative action such as product intervention orders. Licensees have general conduct obligations to, among other things, do all things necessary to ensure that all credit activities authorised by the licence “are engaged in efficiently, honestly and fairly” and to “comply with the credit legislation”: refer s 47(1) of the NCCPA. A licensee is obliged to lodge an annual compliance certificate no later than 45 days after the licensing anniversary date which must be in an approved form: s 53 of the NCCPA.
Section 225 of the NCCPA provides for criminal liability and civil penalties where a document is required to be lodged with ASIC and a statement made in the document is knowingly or recklessly false in a material particular or materially misleading or is knowingly based on information that is false in a material particular or materially misleading: s 225(2) of the NCCPA. This includes omissions that render a document “materially misleading” or “false in a material particular”. There is also an obligation under s 225(5) for a person to “take reasonable steps” to ensure the person does not make or authorise the making of such statements or omissions in a document required to be lodged. Subsection 225(5) provides:
A person must take reasonable steps to ensure that the person does not:
(a) make, or authorise the making of, a statement in the document that:
(i)is false in a material particular or materially misleading; or
(ii)has omitted from it a matter or thing the omission of which renders the document materially misleading; or
(iii)is based on information that is false in a material particular or materially misleading, or has omitted from it a matter or thing the omission of which renders the document materially misleading; or
(b) omit, or authorise the omission of, a matter from the document, without which the document is false in a material particular or materially misleading.
Section 80 gives ASIC discretion to make an order banning any person from engaging in credit activities. Relevantly, that section provides as follows:
ASIC's power to make a banning order
(1)ASIC may make a banning order against a person:
…
(d) if the person has:
(i)contravened any credit legislation; or
(ii)been involved in a contravention of a provision of any credit legislation by another person; or
(e) if ASIC has reason to believe that the person is likely to:
(i)contravene any credit legislation; or
(ii)be involved in a contravention of a provision of any credit legislation by another person; or
(f) if ASIC has reason to believe that the person is not a fit and proper person to engage in credit activities;
(2)For the purposes of paragraphs (1)(e) and (f), ASIC must (subject to Part VIIC of the Crimes Act 1914 ) have regard to the following:
(a) if the person is a natural person--the matters set out in paragraphs 37(2)(a) to (f) and subparagraph 37(2)(g)(i) in relation to the person;
(b) if the person is not a natural person:
(i)the matters set out in paragraphs 37(2)(a) to (f) in relation to the person; and
(ii)whether ASIC has reason to believe that any of the persons referred to in paragraph 37(2)(h) in relation to the person is not a fit and proper person to engage in credit activities;
(c) any criminal conviction of the person, within 10 years before the banning order is proposed to be made;
(d) any other matter ASIC considers relevant;
(e) any other matter prescribed by the regulations.
Note: Part VIIC of the Crimes Act 1914 includes provisions that, in certain circumstances, relieve persons from the requirement to disclose spent convictions and require persons aware of such convictions to disregard them.
(3)ASIC must (subject to Part VIIC of the Crimes Act 1914), in considering whether it has reason it has reason to believe that a person referred to in subparagraph (2)(b)(ii) is not a fit and proper person to engage in credit activities, have regard to the matters set out in paragraphs (2)(a), (c), (d) and (e) in relation to the person.
[Emphasis in original]
Section 55 of the NCCPA relevantly provides that:
(1)ASIC may suspend or cancel a licensee's licence (subject to complying with subsection (4)) if:
(a) the licensee has contravened an obligation under section 47 (which deals with general conduct obligations of licensees); or
(b) ASIC has reason to believe that the licensee is likely to contravene an obligation under that section; or
(c) ASIC has reason to believe that the licensee is not a fit and proper person to engage in credit activities;
Subsections (2) and (3) of s 55 are in the same terms as ss 80(2) and (3). These provisions refer to the matters that ASIC must have regard to when assessing whether there is reason to believe that a person or licensee is not fit and proper or is likely to contravene the credit legislation or, in the case of a licensee, the general conduct obligations of a licensee. They include certain matters set out in s 37(2), relevantly, whether a banning or disqualification order has ever been made in respect of the person either under the NCCPA or the Corporations Act 2001 (Cth) (‘Corporations Act’) or, in the case of a corporation, whether there is reason to believe that a director, secretary or senior manager of the body corporate who would perform duties in relation to the credit activities to be authorised by the licence is not fit and proper. Subsection 37(3) provides that when considering whether a director, secretary or senior manager of a body corporate is not fit and proper person to engage in credit activities regard must be had, amongst other things, to whether a banning or disqualification order has ever been made in respect of the person either under the NCCPA or the Corporations Act. While there is some circularity between ss 37(3), 55(3) and 80(3), the combined effect is that the existence of prior banning or disqualification orders is relevant to the question of whether there is reason to believe a person, and in some cases a corporation, is not fit and proper and whether that person or corporation is likely to contravene. Section 37 is extracted in full as an attachment to this decision.
As noted by the Full Court, there is no dispute that s 37 of the NCCPA does not impact on the decision in respect of Ms Callychurn because she has not previously been the subject of a banning or disqualification order.[16] However, ASIC contends s 37(3) (and presumably s 55(3)) is relevant to the question of whether there is reason to believe UMS is not fit and proper or is likely to contravene the credit legislation because if Ms Callychurn, as a director and senior manager of UMS is found not to be fit and proper, this is a matter to which the Tribunal must have regard in deciding whether UMS is fit and proper or likely to contravene the general conduct obligations under s 47 of the NCCPA.
[16] Refer at Callychurn v Australian Securities and Investments Commission [2017] FCAFC 137 at [19].
ASIC can only exercise its powers under ss 55 and 80 of the NCCPA, if it has first given the party the opportunity to appear and be represented at a private hearing and to make submissions on the matter: refer ss 55(4) and 80(4) of the NCCPA.
OUTLINE OF THE PARTIES’ CONTENTIONS
There is dispute about the matters that fall for determination in this review. Both parties rely on the decision of the Full Court to submit that the issues in dispute for determination on remittal were limited.
ASIC contends that the Full Court concluded the Tribunal erred in finding Ms Callychurn had contravened s 225 for the purposes of s 80(1)(d) of the NCCPA in respect of the 2011 and 2012 annual compliance certificates but considered she may have made a false or misleading statement by answering the fourth question of the 2011 and 2012 annual compliance certificates in the affirmative and, as a consequence, may have contravened s 225(5) of the NCCPA. The finding that the Tribunal had reason to believe Ms Callychurn was not a fit and proper person for the purpose of s 80(1)(f) was not challenged and this finding therefore remains. As such, ASIC contends there was no error shown to effect the Tribunal’s conclusion that there was power to make a banning order. Furthermore, there was no challenge to the decision made in respect of UMS. At the time of ASIC’s contentions, UMS had been deregistered and ASIC submitted it could no longer take part in any review. However, UMS was re-registered by the time of the hearing before this Tribunal and this issue was not subsequently pressed.[17]
[17] On 26 August 2019 ASIC wrote to the Tribunal to advise that ASIC commenced strike off action against UMS for unpaid annual review fees. As at the date of this decision the Tribunal has not been notified that UMS has been de-registered
Given the terms of the Full Court findings and the Tribunal’s task on remittal, ASIC submits that the Tribunal should find there is power to make a banning order under s 80 of the NCCPA.
First, it is submitted that the Tribunal should find Ms Callychurn contravened s 225(5) of the NCCPA in respect of the answer she gave to the fourth question in the 2011 annual compliance certificate.[18] Ms Callychurn knew there were proceedings against Mr Frugtniet which had by that time been determined adversely against him and in answering “yes” to this question she at least failed to take reasonable steps to ensure that she did not knowingly make a statement in which was false in a material particular or materially misleading or was based on information given to her by Mr Frugtniet that was false in a material particular or materially misleading. This was sufficient to engage the power under s 80(1)(d) of the NCCPA.
[18] ASIC also made this contention in relation to the 2012 annual compliance certificate in its Statement of Facts, Issues and Contentions but withdrew this at the hearing.
Secondly, it is submitted that Ms Callychurn was not a fit and proper person because she:
(1)allowed Mr Frugtniet to exercise continuing control over the credit activities of UMS and did so even after a delegate of ASIC had made a permanent banning order against him on 26 June 2014;
(2)failed to give any, or any adequate, response to ASIC’s requests for information;
(3)proffered another person, Ms Seyfarth, as a solution to ASIC’s concerns about the management of UMS, without disclosing relevant information about her that may have been relevant to her suitability;
(4)gave misleading information to her former employer, Australia New Zealand Banking Corporation (‘ANZ’), about her involvement in credit activities outside of her employment with ANZ; and
(5)allowed Mr Frugtniet to continue his involvement in and association with UMS even after he was prohibited from such involvement and association by reason of a condition on UMS’s conveyancing licence.
Having regard to the forgoing matters, ASIC contends that the power to make a ban under s 80(1)(f) of the NCCPA is enlivened. The matters referred to above at [26](1) and (2) of these reasons were raised before the delegate and the previous Tribunal and the Tribunal’s findings were not disturbed on appeal.
Thirdly, having regard to the first and second matters, ASIC submits that there is evidence to support a finding that Ms Callychurn was likely to contravene the NCCPA in the future. This is said to engage s 80(1)(e) of the NCCPA.
ASIC contends that, having regard to the seriousness of the matters said to form the basis for the banning order, the banning of Ms Callychurn for a period of five years was appropriate. ASIC further submits that Ms Callychurn’s evidence and submissions in the proceedings were “characterised by a lack of insight into inadequacies in her past conduct”, that she attempted to “downplay” the seriousness of her conduct and the Tribunal should have “serious reservations” about the credibility of Ms Callychurn’s evidence.[19] The Tribunal should therefore affirm the decision to ban Ms Callychurn for five years. She is the sole director and shareholder of UMS and there was no evidence that any other suitable person had been put forward as an alternative fit and proper and key person for UMS. As such, ASIC submits that if the Tribunal affirms the decision to make a banning order against Ms Callychurn, it should also be satisfied that it is appropriate to affirm the decision to cancel UMS’s licence. In oral submissions made at the opening of the hearing, ASIC expressly limited its case in respect of UMS to its contentions that there was reason to believe Ms Callychurn was not fit and proper, that she was likely to contravene the credit legislation and that UMS was thereby not fit and proper or likely to contravene having regard to s 37(2)(h) of the NCCPA.[20]
[19] ASIC’s Closing Submissions dated 11 June 2018 at [5].
[20] Transcript, T21 - T22.
The applicants submit that Counsel in the hearing before the Full Court did not concede the matter should be remitted only for reconsideration of the banning order but rather that, if the appeal succeeded, this would itself call for reconsideration of the banning order. According to the applicants, if the Tribunal is satisfied Ms Callychurn is a fit and proper person, it would inevitably follow that the licence of UMS would be reinstated.
The applicants further submit that ASIC had not previously raised an issue about her answer to the fourth question in the annual compliance certificates nor did the delegate make a finding on this issue. An issue that is not part of the valid exercise of power made by the delegate could not now be raised. ASIC had in its possession all the facts, information and evidence and the delegate was satisfied about the matters referred to in her decision but did not rule on this issue. This was not raised before the first Tribunal, the Federal Court or the Full Court and so could not be raised on remit. In any event, it is submitted that the evidence does not establish Ms Callychurn contravened s 225 of the NCCPA. She made adequate enquiries before answering the fourth question and she reasonably believed that the reference to “Offences” was confined to criminal matters and that she had undertaken all reasonable checks at that time, being checks relating to the band registers, credit checks and bankruptcy searches. Her affirmative answer to this question was therefore appropriate in the circumstances.
In relation to the ASIC’s allegation that Ms Callychurn is not a fit and proper person, the applicants submit that the Tribunal must consider the position at the time of the decision. There is no evidence Mr Frugtniet has continued his alleged control of UMS. The applicants further submit that it is not open to the Tribunal to make findings about contraventions or conduct in relation to ss 266 or 267 of the NCCPA by virtue of s 327, which sets out the decisions which may be reviewed by the Tribunal but does not include any decision made pursuant to those provisions of the NCCPA. The applicants dispute the evidence and contentions relied on by ASIC about the credibility of Ms Seyfarth, Ms Callychurn’s alleged false or misleading statements to her former employer ANZ and allegations about contraventions of conditions on UMS’s conveyancing licence. The applicants submit that the material provided to the Tribunal is fragmented and incomplete and should not be permitted on remittal. While it is not disputed that ASIC has broad information gathering powers under the NCCPA and Australian Securities and Investments Commission Act 2001(Cth) (‘ASIC Act’), the applicants submit that ASIC’s investigative powers are extinguished once it has made a decision that contraventions have occurred. As such, the applicants contend that the evidence obtained after the decision of the delegate in February 2015 by an ASIC investigator was acquired in circumstances where the investigator had acted outside the scope of his delegation. The new evidence referred to in and attached to the investigator’s affidavit was previously in the possession of ASIC but were not matters that were put to the applicants in the notice served prior to the delegate’s hearing. This evidence should be rejected by the Tribunal but is not relevant or probative in any event.
Further, the applicants submit that the Tribunal cannot be satisfied on the basis of the available evidence that Ms Callychurn would contravene the NCCPA in the future. She completed the 2012, 2013 and 2014 annual compliance certificates correctly and this demonstrated her diligence.
The applicants contend Ms Callychurn should not be banned in the circumstances of the case. Even if the banning order against Ms Callychurn remains in place, the applicants submit that Mr David Fu, who is an accountant and tax agent as well as the company secretary of UMS from 2016, could act as a fit and proper and key person for UMS.
In reply, ASIC contends that the Tribunal is entitled, and ought, to make its decision on the basis of relevant material before it at the time of the decision. ASIC’s case is not concerned with Mr Frugtniet’s current involvement in UMS but rather his involvement between 2013 and early 2015 when Ms Callychurn was the sole director and shareholder of UMS and its only key person and fit and proper person for UMS. ASIC’s concern regarding the nomination of Ms Seyfarth as a director of UMS hinges on the failure to disclose her familial relationship with Mr Frugtniet, her former bankruptcy and her place of residence. ASIC further submits that Ms Callychurn’s contention about its case in respect of her alleged failure to respond to its notices was misconceived; ASIC says that it does not seek a review of a decision made under ss 266 or 267 of the NCCPA but rather to rely on Ms Callychurn’s alleged inadequate response to its claim she is not a fit and proper person. Finally, ASIC submits that there is no evidence before the Tribunal to support a finding that Mr Fu would be willing, let alone able, to act as UMS’s fit and proper person or as its key person.
As already noted, following these submissions, the applicants sought to raise further submissions in the light of the High Court decision of Frugtniet v ASIC. The applicants contend that where there is a legal constraint on the decision-maker, the Tribunal is similarly constrained, relevantly, the Tribunal cannot make findings about contraventions of ss 266 and 267 of the NCCPA and this is not reviewable by the Tribunal. The applicants also contend that the High Court decision of Frugtniet v ASIC is authority for the proposition that the new grounds and evidence cannot be relied on by ASIC in the proceedings before the Tribunal.[21]
[21] Email from Ms Callychurn dated 16 May 2019.
In submissions made by the applicants following the High Court decision in Frugtniet v ASIC, which expanded on the original supplementary submissions,[22] the applicants contend that even though the delegate raised concerns about the contravention of s 225 on the basis of Ms Callychurn’s answer to the fourth question, the delegate made no finding of contravention. The allegation of contravention is therefore a new ground. The applicants submit that the Tribunal cannot take into account this new ground and if it were to do so “this would change the nature of the decision”, contrary to the finding of the High Court in Frugtniet v ASIC at [15]. The applicants also submit that the finding by the Full Court that nothing in s 37(2) applied to the case precludes consideration of this issue by the Tribunal on remittal. The applicants reiterated an earlier submission that the allegation Ms Callychurn had failed to comply with notices issued under ss 266 and 267 of the NCCPA created an offence under s 290 is not reviewable by the Tribunal given the terms of s 327 of the NCCPA. The applicants submit that the exercise of information gathering powers under s 247 of the NCCPA and s 13 of the ASIC Act are not authorised and are extinguished once ASIC has made a decision that a contravention has occurred. The new evidence or information referred to by the applicants relates to legally obtained new evidence. As such, information in the possession of ASIC but not put before Ms Callychurn in the areas of concern cannot now be raised as a matter of concern. Any information submitted by the ASIC investigator cannot now be raised because the delegate, and presumably the Tribunal by implication, must be impartial and independent of the investigation on these matters therefore could not form the basis for concerns before the Tribunal.
[22] Submissions dated 5 August 2019.
In reply, ASIC contends that the Full Court’s reference to s 37 was merely an observation and not a finding that limited the Tribunal’s consideration of the substantive issues on remittal. ASIC also submits that the High Court decision in Frugtniet v ASIC is about whether the Tribunal on review could take into account a spent conviction when ASIC was prohibited from doing so in making its decision to impose the banning order.[23] ASIC contends that principles set out by the High Court in Frugtniet v ASIC do not apply to the circumstances of this case and therefore does not support the applicants’ contention that the Tribunal’s considerations are confined to the matters previously raised on remittal. ASIC rejects the contention that the Tribunal cannot take into account information that was either obtained by ASIC after the banning order was made by the delegate or that was in ASIC’s possession but not considered by the delegate. In any event, ASIC says the new evidence sought to be relied on was not obtained through the use of compulsory notices issued after the findings of the delegate were made.
[23] As that term is defined within Pt VIIC of the Crimes Act 1914 (Cth). Generally, spent convictions are where 10 years has passed since a person was convicted, and the person was not imprisoned for more than 30 months in respect to that conviction.
QUESTIONS FOR DETERMINATION
The questions for determination are:
(1)What is the scope of this review on remittal?
(2)Can ASIC raise a new allegation that Ms Callychurn breached s 225 of the NCCPA by answering question four in the 2011 annual compliance certificate in the affirmative?
(3)If so, did Ms Callychurn contravene s 225 of the NCCPA?
(4)Can ASIC raise the new grounds and new evidence referred to in its Statement of Facts, Issues and Contentions in support of its claim that there are reasonable grounds to believe that Ms Callychurn is not fit and proper or that she is likely to contravene the credit legislation? In making this assessment, can ASIC rely on evidence obtained after the decision of the delegate and the decision of the previous Tribunal?
(5)Is the Tribunal satisfied that Ms Callychurn is not fit and proper or that she is likely to contravene the credit legislation?
(6)If the Tribunal is satisfied about any of the above matters, should Ms Callychurn be banned and if so, for how long? and
(7)Should the Australian Credit Licence of UMS be cancelled?
THE SCOPE OF THE REVIEW ON REMITTAL
The parties contend that the task of the Tribunal on remittal in this case is limited. ASIC contends the Full Court decision does not disturb the AAT’s finding that Ms Callychurn was not a fit and proper person nor the finding is that the Australian Credit Licence of UMS should be cancelled. The applicants contend that the Tribunal is not so limited but is nonetheless constrained in the nature of the enquiry it should undertake in assessing these matters. That is, the applicants say that the Tribunal cannot consider matters that were not raised previously.
Both the banning and cancellation proceedings were remitted to the Tribunal for hearing according to law. The parties accept that the question of whether the Australian Credit Licence of UMS should remain cancelled is dependent on the question of whether the Tribunal is satisfied there is reason to believe Ms Callychurn is not fit and proper or is likely to contravene the credit legislation. If the Tribunal is not so satisfied the applicants say the basis for the cancellation of the Australian Credit Licence held by UMS falls away. ASIC appears to contend that it has already been established by the findings of the previous Tribunal that Ms Callychurn is not fit and proper and as such the power to cancel has been established.
Given the time that has elapsed since the time of the delegate’s decision and the intervening appeals, it is useful to examine the task of the Tribunal in the circumstances of this case.
The decisions to ban Ms Callychurn from engaging in credit activities for a period of five years and to cancel the Australian Credit Licence of UMS were made by the delegate on 27 February 2015. There was no stay of these orders. Accordingly, the banning order in respect of Ms Callychurn and the cancellation of the Australian Credit Licence held by UMS came into effect from the date of the delegate’s decision. Ms Callychurn’s banning order expires on 27 February 2020. One of the reasons given for the cancellation of the UMS licence by the delegate was that Ms Callychurn was found not to be fit and proper. She was the sole director, key person and fit and proper person at the relevant time. No alternative person was put forward on behalf of UMS or was available to take her place so cancellation was appropriate. By the time of the hearing before this Tribunal following the remittal from the Full Court and the final and further submissions made by the applicants, over four years of Ms Callychurn’s banning period have expired.
The Tribunal’s role on review is to consider the matter afresh and to make the correct or preferable decision.[24] Unless the legislation which provides the source for the power specifies otherwise, the decision is generally based on the information and evidence available at the time of the decision.[25] It is well established that the Tribunal stands in the shoes of the decision-maker and exercises all the powers and discretions that were available to the original decision-maker for the purposes of reviewing the decision.[26] An authorised decision-maker has the power to make a banning order against a person in the circumstances enumerated in s 80(1) of the NCCPA. Relevant to the facts of this case, the power to make a banning order will arise if ASIC, and the Tribunal standing in the shoes of ASIC, is satisfied that the person has contravened any credit legislation or been involved in the contravention of credit legislation, has reason to believe that the person is likely to contravene any credit legislation or will be involved in a contravention or has reason to believe the person is not a fit and proper person to engage in credit activities.
[24] Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 589 (Bowen CJ and Deane J), 599 (Smithers J); Shi v Migration Agents Registration Authority [2008] HCA 31 at [35] (Kirby J), [98] (Hayne and Heydon JJ), [140] - [141] (Kiefel J).
[25] Minister for Immigration and Ethnic Affairs v Pochi (1980) 31 ALR 666 at 670-671 (Smithers J); Shi v Migration Agents Registration Authority [2008] HCA 31 at [134] (Kiefel J); see also Liedig v Commissioner of Taxation (1994) 50 FCR 461 at 464, adopting and adapting Mobil Oil Australia Ltd v Federal Commissioner of Taxation (1963) 113 CLR 475 at 502.
[26] Re Control Investment Pty Ltd and Australian Broadcasting Tribunal (No 2) (1981) 3 ALD 88 at 92 (Davies J); Re Brian Lawlor Automotive Pty Ltd and Collector of Customs (New South Wales) (1978) 1 ALD 167 at 175-176; Section 43 of the Administrative Appeals Tribunal Act 1975 (Cth).
The first ground alleged is based on the decision-maker being satisfied that a contravention has occurred and must therefore be assessed at the time the power is said to be engaged. The other grounds are not so limited. The language used in ss 80(1)(e) and (f) suggests that the assessment is to be undertaken by reference to information available at the time the decision is made. Both parties agree with this proposition.
This being the case, it appears to be common ground that the decision-maker must have reason to believe that the person is likely to contravene or that the person is not a fit and proper person to engage in credit activities at the time of making a decision and exercising the discretion to cancel. As such, even though there may have been concerns about the person’s ability to discharge their role under the credit legislation or to properly engage in credit activities, by the time of any decision the person may have proven themselves or may be able to demonstrate to the decision-maker that there is no longer any reason for the decision-maker to have concerns. This is what the applicants contend. Once the decision-maker is satisfied that the basis for the grounds to exercise the discretion have been established, there is a further decision-making process to be undertaken and that is to decide whether the banning order should be made. There appears to be no controversy that this decision-making process involves consideration of all available material as at the time of the exercise of the discretion, which will be at the time of the decision.
The issue that arises is whether the banning of Ms Callychurn is the correct or preferable decision and whether this decision should be affirmed, varied or set aside and substituted with a different decision.
There are similar considerations in relation to the cancellation of an Australian Credit Licence under s 55 of the NCCPA. The power to suspend or cancel a licence will only arise if the decision-maker is satisfied that the licensee has contravened an obligation under s 47 of the NCCPA or that the decision-maker has reason to believe the licensee is likely to contravene an obligation or is not a fit and proper person to engage in credit activities. When a licence has been cancelled and there is no stay order in place, the practical question for the Tribunal is whether the licence should remain cancelled. If it is determined that this should be the case, the Tribunal will affirm the decision under review and the licence will remain cancelled. If it is determined the licence should not be cancelled, the decision under review will be set aside or varied. Regardless of the outcome, the effect of subs 43(6) of the AAT Act is that the decision of the Tribunal is taken to be the decision of the original decision-maker and has effect, unless the Tribunal otherwise order, on and from the date on which the decision has or had effect.
One of the material issues identified by the delegate and the previous Tribunal in respect of UMS was the practical implication that would arise if Ms Callychurn was banned. According to the previous Tribunal (at [89]), the cancellation “must inevitably follow” because Ms Callychurn was the sole director, key person and fit and proper person for the purposes of the credit legislation. However, this is not the legal basis on which the licence of UMS could be cancelled, even though it may be a compelling discretionary consideration warranting cancellation.
The grounds for the exercise of the discretion under s 55(1) arise in respect of UMS if it is established there has been a contravention by UMS or there is reason to believe UMS is not fit and proper or is likely to contravene s 47 of the NCCPA. The relevance of a finding that there is reason to believe Ms Callychurn is not a fit and proper person or is likely to contravene the credit legislation is that she is (and was at the relevant time) a director and senior manager who would perform duties in relation to the credit activities to be authorised by UMS. This is a matter that must be taken into account under ss 37(2)(h) and (3) in assessing whether UMS is not fit and proper or likely to contravene the credit legislation. As such, the legal basis for enlivening the power to suspend or cancel would be a finding that Ms Callychurn, as a director or senior manager of UMS, is not a fit and proper person or is likely to contravene the credit legislation. If Ms Callychurn is banned and therefore could not discharge her functions as a director or fit and proper or key person of UMS and there was no other person to discharge those functions, this would be a compelling reason to cancel the Australian Credit Licence held by UMS.
These matters were not referred to in the previous Tribunal’s decision, nor was this reasoning exposed in any detail in the delegate’s decision, ASIC’s Statement of Facts, Issues and Contentions or its written submissions. However, Counsel for ASIC explained this in oral submissions during the hearing.[27]
[27] Transcript, T16 – T17.
These matters have relevance to the task of the Tribunal on review of a matter following remittal by the Full Court.
The Full Court recognised that the legal error by the Tribunal could have an impact on any disqualification order. Ms Callychurn says that the effect of this is that all of the issues need to be remitted to the Tribunal for reconsideration. While ASIC does not accept this, it appears that at a practical level this may be the preferable course.
For instance, if on remittal the Tribunal is not satisfied Ms Callychurn contravened the NCCPA and is not satisfied she is not a fit and proper person or is likely to contravene or, if satisfied, is not satisfied that her banning should continue, the impact on the UMS cancellation decision would be material. Clearly, these issues are interrelated. Further, if as ASIC contends the findings of the previous Tribunal in February 2016 that there was reason to believe Ms Callychurn was not a fit and proper person remain in effect, how does this impact on this Tribunal’s decision making, which is to be made at the time of this decision?
Both parties argue that new information, available as at the time of decision, should be taken into account by the Tribunal on review following remittal by the Full Court. Accordingly, both parties seek to rely on new evidence in support of their claims before this Tribunal – ASIC in respect of a new ground for contravention and additional evidence to support findings that Ms Callychurn is not fit and proper or is likely to contravene and the applicants to argue that given the time that has passed and other new evidence, the Tribunal should find she is in fact fit and proper, or at least should find there is no reason to believe she is not fit and proper.
These issues are not only relevant to the exercise of any discretion but go to the heart of whether the power to make a banning order or cancel a licence arises. ASIC contends these matters are already established based on the previous findings of the Tribunal that have not been disturbed on appeal. However, the position is far from clear, particularly where ASIC seeks to rely on additional grounds to further establish why Ms Callychurn is not fit and proper and new evidence to establish a further contravention of by Ms Callychurn of the credit legislation. Notably, this ground was originally argued but the basis for the contention was rejected by the Full Court because of legal error. The nature and extent of any findings on these additional matters are matters that would be likely to impact on any banning order made and this was recognised by the Full Court in its decision. Similarly, it is not consistent for Ms Callychurn to contend that only the new information that is favourable to her should be considered on the remitted review.
For this reason, the approach that has been taken to the hearing of this review on remittal is to conduct the hearing de novo and to allow both parties to raise new issues and evidence, subject to submissions about relevance, procedural fairness and the matters raised by the applicants as considered below.
This approach is consistent with the commentary in Dennis Pearce, Administrative Appeals Tribunal (LexisNexis Butterworths, 4th ed, 2015) at [13.47] to the effect that unless the order of the court referring the matter back expressly forbids it, the Tribunal may receive further evidence.[28] It is also consistent with decision of the Full Court in Peacock v Repatriation Commission [2007] FCAFC 156, the Court suggested that in the absence of some express limitation, the whole of the matter must be considered by the Tribunal hearing the remittal.
[28] Referring to Repatriation Commission v Yates (1997) 46 ALD 487; Perpetual Trustee Co (Canberra) Ltd v Commissioner for ACT Revenue (1994) 123 ACTR 17 at 25.
CAN ASIC RAISE NEW GROUNDS AND RELY ON NEW EVIDENCE?
The applicants contend that ASIC cannot allege a contravention of s 225 of the NCCPA based on Ms Callychurn’s answer to question four of the 2011 annual compliance certificate. While this matter was raised before the delegate, no findings were made about this. The applicants contend that it is implicit the delegate found there was no contravention. ASIC did not raise this issue before the previous Tribunal and the applicants cannot raise this issue now.
The applicants also contend that ASIC cannot now raise new grounds to establish Ms Callychurn is not a fit and proper person. The new grounds alleged are that Ms Callychurn gave misleading information to ANZ and that she allowed Mr Frugtniet to continue his involvement and association with UMS even after he was prohibited from doing so by a condition on UMS’s conveyancing licence. The applicants rely on the decision of the High Court in Frugtniet v ASIC at [15] as follows:
Depending on the nature of the decision the subject of review, the AAT may sometimes take into account evidence that was not before the original decision-maker, including evidence of events subsequent to the original decision. But subject to any clearly expressed contrary statutory indication, the AAT may do so only if and to the extent that the evidence is relevant to the question which the original decision-maker was bound to decide; really, as if the original decision-maker were deciding the matter at the time that it is before the AAT. The AAT cannot take into account matters which were not before the original decision-maker where to do so would change the nature of the decision or, put another way, the question before the original decision-maker. As Kiefel J observed in Shi, identifying the question raised by the statute for consideration will usually determine the facts that may be taken into account in connection with the decision. The issue is one of relevance, to be determined by reference to the elements of the question necessary to be addressed in reaching a decision.
[Footnote references omitted]
The applicants further contend that ASIC cannot rely on its compulsory powers to obtain new evidence to establish contraventions and that Ms Callychurn is not a fit and proper person.
ASIC rejects these contentions. ASIC submits that it is entitled to rely on new grounds and evidence not previously raised. In particular, it is said that the Tribunal is entitled to have regard to information obtained by ASIC following the banning decision made by the delegate in February 2015 and any information in ASIC’s possession prior to the banning decision but not relied upon the delegate. ASIC contends that none of the information referred or attached to the investigator’s affidavits was obtained using ASIC’s compulsory powers following the banning decision in February 2015 and there is no evidence this information or the documents relied on were unlawfully obtained. The Tribunal is entitled to, and ought, make its decision on the basis of all relevant materials before it at the time of its decision, including any new evidence or information.
It is further submitted that Frugtniet v ASIC does not limit the matters the Tribunal can consider on review in the circumstances of this case. In Frugtniet v ASIC the central issue was whether the Tribunal could take into account a spent conviction in considering whether Mr Frugtniet was not a fit and proper person for the purposes of a banning order under s 80 of the NCCPA when ASIC was not entitled to do so. The High Court held that the Tribunal exercises the same powers as the decision-maker whose decision is under review and is subject to the same constraints, including the considerations that could be taken into account. As such, the Tribunal had erred in taking the spent conviction into account and the appeal was allowed. ASIC contends that the observations in Frugtniet v ASIC at [15] must be considered in light of the question that was before the High Court. This decision does not stand for the broader principle that no new grounds or evidence can be considered on review.
These submissions should be accepted.
Review by the Tribunal is de novo. It is not in the nature of an appeal limited by the matters argued before or found by the original decision-maker.
The powers of the Tribunal on review are set out in s 43(1) of the Administrative Appeals Tribunal Act1975 (Cth) (‘the AAT Act’) which provides:
(1)For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing:
(a) affirming the decision under review;
(b) varying the decision under review; or
(c) setting aside the decision under review and:
(i)making a decision in substitution for the decision so set aside; or
(ii)remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal.
[Emphasis added]
As such, the Tribunal stands in the shoes of the decision-maker[29] and may exercise all powers and discretions conferred on the original decision-maker for the purpose of reviewing the decision.[30]
[29] Nation v Repatriation Commission (No 2) (1994) 37 ALD 63 at 68.
[30] Administrative Appeals Tribunal Act 1975(Cth), s 43(1).
The nature and scope of the Tribunal’s role on review was considered by the High Court in Shi v Migration Agents Registration Authority [2008] HCA 31, which is expressly referred to in Frugtniet v ASIC at [14] and [15]. Relevantly, the High Court noted at [14] that the question for determination by the Tribunal on review is whether the decision under review is the correct or preferable decision and that this question is “required to be determined on the material before the AAT, not on the material as it was when before the original decision-maker.” The High Court also observed that “the AAT is not at large” and was “subject to the same general constraints as the original decision-maker.” The High Court made the further observations, at [15], referred to by the applicants and did not derogate from the principles set out in Shi but reaffirmed them.
As there are parallels between Shi and the facts in this case, it is useful to outline the arguments raised and the findings of the Court in some detail.
Like ASIC the Migration Agents Registration Authority (‘MARA’) has regulatory oversight and in July 2003 cancelled the appellant’s registration as a migration agent under s 303 of the Migration Act 1958 (Cth) (‘the Migration Act’). This provision gives MARA discretion to cancel the registration of a migration agent if satisfied, relevantly, that the agent has not complied with the Code of Conduct prescribed under the Migration Act or that the agent is “not a person of integrity or is otherwise not a fit and proper person to give immigration assistance”.[31] The power under s 303, which was considered by the High Court in Shi, has similarities to the power under the NCCPA to make a banning order and cancel a licence. For instance, in both cases the decision-maker must decide whether the grounds which give rise to the power to ban or cancel exist, namely, whether there has been a relevant contravention by the regulated person or entity or whether the regulated person or entity is not fit and proper. MARA found there had been breaches of the Code of Conduct and that the appellant was not a person of integrity or a fit and proper person to give immigration assistance.[32] Unlike in this case, there were conditional stay orders in place enabling the appellant in the Shi to continue acting as a migration agent for some time after the cancellation decision was made.
[31] See generally, s 303(1) of the Migration Act. The Code of Conduct is prescribed pursuant to s 314 of the Migration Act and is set out in the Migration Agents Regulations 1998 (Cth), Sch 2.
[32] Migration Act, s 303(1)(f); Shi v Migration Agents Registration Authority [2008] HCA 31 at [12].
In deciding whether or not the appellant was not a person of integrity or otherwise not fit and proper to give immigration assistance, the Tribunal took into account evidence of the conduct of the appellant from the date of the original decision to the date of the decision by the Tribunal.[33] In deciding whether there were contraventions of the Code of Conduct, the Tribunal only considered evidence about alleged non-compliance up to the time of the decision of the original decision-maker.
[33] Shi v Migration Agents Registration Authority [2008] HCA 31 at [86].
There were two critical issues in the appeal. First, whether the Tribunal could consider information available as at the date of its decision or whether it was limited to the information that was available at the time of the original decision and, secondly, the nature of the orders that could be made.[34] The second issue is not relevant for the purposes of this case.
[34] Ibid at [116] (Crennan J).
The High Court allowed the appeal. In summary, the Court found that the Tribunal’s role was to determine the correct or preferable decision.[35] The question of whether this should be determined based on information available at the time of the decision of the original decision-maker or at the time of the Tribunal’s decision was dependent on the terms of the applicable legislative provision.[36] The Court found that there was no temporal element in the relevant legislative provision and, as such, the Tribunal should have regard to all material before it at the time of its decision, including information and evidence obtained after the original decision was made.
[35] Ibid at [140].
[36] Ibid at [132].
In reaching this view, the High Court discussed the role of the Tribunal in three separate but consistent judgements.
His Honour, Justice Kirby observed at [37], while regard may be had to the decision of the primary decision-maker as part of the material before the Tribunal:
…ultimately it was for the Tribunal to reach its own decision upon the relevant material including any new, fresh, additional or different material that had been received by the Tribunal as relevant to its decision.
According to Kirby J, the Tribunal was not ordinarily confined to material that was before the original decision-maker or to consideration of events that occurred up to the time of that decision.[37] According to his Honour, the Tribunal’s function is part of a continuum,[38] although it was important to recognise that it may be “inherent in the nature of a particular decision that review of that decision is confined to identified past events”.[39] His Honour summarised the role of the Tribunal as follows:
There is thus a general approach deriving in particular from the statutory function of substituting one administrative decision for another. Nevertheless, the particular nature of the "decision" in question may sometimes, exceptionally, confine the Tribunal's attention to the state of the evidence as at a particular time.[40]
[Emphasis and citations omitted]
[37] Ibid at [44] - [46].
[38] Ibid at [45] quoting with approval Davies J in Jebb v Repatriation Commission (1988) 80 ALR 329 at 333 - 334.
[39] Ibid at [44].
[40] Ibid at [46].
His Honour further observed that it is necessary to consider the nature of the review in respect of a particular decision by directing attention to the scope of the legislative provision giving rise to the power. Once it is considered the Tribunal is authorised have regard to new, additional or different evidence and should make its decision on the basis of current facts and circumstances, it “necessarily follows” that the Tribunal is able to use all powers available to the original decision-maker, including powers that have accrued since the original decision was made.[41]
[41] Ibid at [60] (Kirby J).
In a separate joint decision, Hayne and Hayden JJ made similar observation noting at [99]:
Once it is accepted that the Tribunal is not confined to the record before the primary decision-maker, it follows that, unless there is some statutory basis for confining that further material to such as would bear upon circumstances as they existed at the time of the initial decision, the material before the Tribunal will include information about conduct and events that occurred after the decision under review. If there is any such statutory limitation, it would be found in the legislation which empowered the primary decision-maker to act; there is nothing in the AAT Act which would provide such a limitation.
Their Honours found there was no temporal element in the relevant provisions of the Migration Act and the question of whether the appellant is not a fit and proper person to give immigration assistance “invites attention to the state of affairs as they exist at the time the Tribunal makes its decision”.[42]
[42] Ibid at [110].
Her Honour, Justice Kiefel (as her Honour then was and with whom Crennan J agreed on this issue) drew a distinction between the role of the Tribunal in assessing whether the ground alleging a contravention had been made out (being contraventions of the Code of Conduct under s 303(1)(h) of the Migration Act and the enquiry that would need to be undertaken on whether the agent was not a person of integrity and not a fit and proper person to provide immigration assistance: s 303(1)(f) of the Migration Act. The observations are useful in the context of the present case where there is dispute between the parties about the role of the Tribunal on remittal and information that should be considered. Her Honour noted at [146]:
The question which here arose for the Authority under s 303(1), which it answered, was whether it should exercise its powers, under pars (a) to (c) of the sub-section, because the grounds in pars (h) and (f) were established, in particular because the appellant had breached the Code of Conduct. That part of the decision which comprises the finding, that the ground in par (h) had been made out, was referable to conduct which had occurred to a point in time. That is the nature of the finding required by the provision. It follows that the Tribunal was restricted to a consideration of events to that point and not those occurring later, in determining for itself whether there had been non-compliance with the Code. The appellant accepted as much in his submissions.
[Emphasis added]
And at [149]:
Section 303(1)(f) provides that the Authority may take disciplinary action if it "becomes satisfied" that a registered migration agent is not a person of integrity or otherwise not a fit and proper person to give immigration assistance. The Migration Act provides the Authority with an ongoing role, to monitor the conduct of agents and to take disciplinary action where necessary. The reference to the Authority becoming satisfied was considered by Tracey J [in Shi v Migration Agents Registration Authority [2007] FCAFC 59] to identify a point in time, one at which the Authority was no longer satisfied about the agent. The topic with which s 303(1)(f) is concerned is not, however, one which identifies particular conduct, as is the case with respect to breaches of the Code of Conduct. The enquiry posed by the paragraph is a general one, and it may be considered by the Tribunal in that way. It does not limit an assessment of an agent's integrity and fitness to what has been conveyed by any breaches. There is no reason why the Tribunal's review should not extend to any information which sheds light upon the presence or absence of the necessary characteristics in the migration agent. The list in s 290(2) is not exhaustive. There is good reason why the Tribunal should be in a position to consider the most recent material bearing upon the question of an agent's integrity and their fitness to continue to provide immigration assistance. By this means facts such as an agent's subsequent conviction for a serious offence could be taken into account. The relevance of such a factor, to the question of an agent's integrity and fitness, is confirmed by its specification in s 290(2), as a matter which must be taken into account by the Authority in connection with their registration.
[Emphasis added; citations omitted]
It is clear from the High Court’s decision of Shi that where there is a temporal element to a provision which establishes the ground for cancellation, the Tribunal must make an assessment as to whether the ground is established at a fixed point of time. When the provision does not contain a temporal element, regard should be had to all relevant information available at the time of the decision.
Applying the principles enunciated in Shi and the foregoing conclusions on the scope of the review on remittal from the Full Court to this case, the following findings are relevant and can be made:
(1)The alleged contravention in respect of question four of the 2011 annual compliance certificate was referred to in ASIC’s notice of concerns to the delegate. There was a typographical error because the notice referred to another question number but the notice extracted the question correctly and in full. Accordingly, the applicants were on notice of the allegation.
(2)The delegate made findings in respect of Ms Callychurn’s answers to two of the questions but made no findings in relation to the alleged contravention in respect of question four. It is unclear from the delegate’s reasons as to why no findings were made. However, it cannot be said that the delegate found in favour of the applicants on this issue simply because of a failure to refer to the alleged contravention in her reasons.
(3)Even if the delegate had made such a finding, the Tribunal is not bound by that finding.
(4)Subsections 80(1)(d) and 55(1)(a) of the NCCPA provide that the decision-maker must be satisfied a contravention has occurred before the discretionary power under the provisions can be exercised. This imports a temporal element which suggests that the point of time for assessing whether the ground exists to enliven the statutory discretion is fixed at some time prior to the time of the original decision. Whether the power could be exercised in respect of contraventions after the original decision was made and the discretionary power exercised is not the subject of dispute or active consideration in this matter because the contravention is alleged to have taken place prior to the time of the original decisions.
(5)It does not matter that this issue was not raised before the previous Tribunal. On remittal, the task of the Tribunal is to consider the matters afresh and consider all issues in dispute that require determination.[43] It is not apparent from the orders or the decision of the Full Court that the nature of this remittal should be confined and, as already noted, both parties generally contend otherwise.
(6)On review, the Tribunal must consider the matter afresh and make the correct or preferable decision based on all the available material. ASIC may therefore rely on, and the Tribunal should have regard to, any evidence that is relevant to the issues in dispute. It does not matter that the evidence was not provided to the delegate. Nor does it matter whether the evidence was provided to the delegate and not considered or whether the evidence was provided and found to be insufficient. If relevant, ASIC can rely on new evidence to establish a contravention but Shi suggests a contravention must be one that is alleged to have been in existence at the time of the decision.
(7)In so far as the applicants contend that ASIC is not able to make new claims or to rely on new evidence that she is not fit and proper, this contention is rejected. Subsections 80(1)(e) and 55(1)(b) of the NCCPA require the decision-maker to determine whether an applicant “is not fit and proper”. There is no temporal element in the wording of these provisions. The use of the word “is” obliges the Tribunal to have regard to all information and evidence provided by the parties at the time of the decision which is relevant to this issue. This includes information that may be either adverse or favourable to Ms Callychurn. As previously noted, it does not matter that these grounds and evidence were not considered by the delegate or by the previous Tribunal. The Tribunal is not bound by these previous decisions. The basis for ASIC’s claims were set out in its Statement of Facts, Issues and Contentions and in submissions made during the hearing and in written submissions subsequently made to the Tribunal. Accordingly, the applicants have been afforded procedural fairness as part of the proceedings before this Tribunal.
[43] Refer Allesch v Maunz (2000) 203 CLR 172, 180-181 at [23] (Gaudron, McHugh, Gummow and Hayne JJ); Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194, 203 at [13] (Gleeson CJ, Gaudron and Hayne JJ).
The applicants also contend that ASIC should not be entitled to rely on new evidence because of the nature of this new evidence.
The new evidence relied on by ASIC in these proceedings is the evidence contained in and attached to the affidavit of the investigator who was involved in referring the original concerns to the delegate. The applicants submit that the investigator should not be entitled to submit evidence in this review because any material submitted by ASIC should be submitted by someone who is impartial. It is also submitted that ASIC is precluded from relying on information which was obtained by the use of compulsory powers exercised after the decision of the delegate.
There are two answers to these contentions.
First, while there is no requirement that evidence from the original decision-maker should be ‘impartial’, the evidence of the investigator is factual and does not comprise any statements of opinion or commentary. The investigator’s evidence is not in itself controversial because the investigator merely annexes various documents on which ASIC relies and explains the process for obtaining the documents. Relevantly, the evidence relied on was served prior to the hearing and the applicants were given the opportunity to cross-examine the investigator, Mr McKinnon, which she did on the first day of the hearing.
Secondly, the material relied on by ASIC and referred to by the investigator was either material that was in ASIC’s possession prior to the hearing before the delegate and the first proceedings before the Tribunal or was information obtained after the previous Tribunal hearing but was from sources other than by the use of compulsory powers. For instance, the documents and information referred to in the investigators first two affidavits comprised information that was publically available on the internet or in public records and information provided under notices issued during the course of ASIC’s original investigation. In a further affidavit dated 23 February 2018, Mr McKinnon annexed copies of various documents including an application for incorporation for Ozwide Financial Services Pty Ltd (‘Ozwide’), notices to produce issued to several organisations including Suncorp-Metway Limited, Westpac Banking Corporation, Ozwide and UMS, email correspondence between Ms Callychurn and ASIC regarding notices issued to UMS and Ozwide, documents produced in response to the notices consisting of financial information, applications for mortgage lending broker for various persons and documents relating to employees and pay. These documents were obtained as a result of the exercise of ASIC’s compulsory powers as part of its investigations prior to the decision of the delegate was made.
In summary, ASIC is entitled to rely on the allegation that there was a contravention by Ms Callychurn in respect of the answer that she gave to question four of the 2011 annual compliance certificate. ASIC is entitled to rely on the new evidence put in support of this allegation and the Tribunal is not confined to considering the material that was available to the delegate or before the previous Tribunal. ASIC is also entitled to rely on new evidence to establish its contention that Ms Callychurn is not a fit and proper person. The evidence relied on was either obtained through compulsory powers exercised prior to the decision of the original decision-maker or after that decision but through other sources. As such, for the purpose of this review it is unnecessary to determine whether the use of information obtained by the use of compulsory powers is so constrained.
DID MS CALLYCHURN CONTRAVENE SECTION 225 OF THE NCCPA?
The Full Court found the Tribunal erred in finding Ms Callychurn contravened s 225 of the NCCPA in respect of her answers to two questions in both the 2011 and 2102 annual compliance certificates under the heading “Licences, Authorisations”. The Full Court referred to these questions as the “authorisation questions”. I am bound by these findings. In reaching this conclusion the Full Court had regard to an order made by the VCAT on 8 April 2011 to the effect that Mr Frugtniet was disqualified from practising as a lay associate of a legal practice in Victoria for three years for the purposes of Division 3 of Part 2.2 of the Legal Profession Act 2004 (Vic).[44] Having reviewed the evidence, the Full Court observed that the answer given by Ms Callychurn to one of the other questions was “self-evidently untrue”, to Ms Callychurn’s knowledge, since she knew of the VCAT order made in respect of Mr Frugtniet.[45] This is not a finding which binds the Tribunal because it was not the subject of the appeal nor an issue in dispute argued by the parties. However, the observations of the Full Court on this matter were strongly worded and this is no doubt why ASIC sought to pursue this claim on review before this Tribunal following remittal by the Full Court.
[44] Callychurn v Australian Securities and Investments Commission [2017] FCAFC 137 at [18] – [19], referring to Law Institute of Victoria Limited v Frugtniet (Legal Practice) [2011] VCAT 596 (8 April 2011).
[45] Callychurn v Australian Securities and Investments Commission [2017] FCAFC 137 at [55].
The Tribunal is satisfied that Ms Callychurn contravened the NCCPA in January 2012 when she completed the 2011 annual compliance certificate by providing an answer that was false or misleading in a material particular. The Tribunal is also satisfied that Ms Callychurn allowed Mr Frugtniet to continue his involvement in the credit activities of UMS without providing adequate supervision or oversight after he had ceased to be a fit and proper person, after Mr Frugtniet had been banned by ASIC in June 2014 and at a time when Ms Callychurn was the sole fit and proper person for UMS. Ms Callychurn allowed Mr Frugtniet to submit credit applications that she did not review, she allowed him to continue as the loan writer for UMS clients with AFG because it was convenient, she allowed him to continue as the contact person for UMS with COSL and she allowed him to operate the UMS website and the UMS bank accounts. It is significant that this conduct occurred over a substantial period from January 2013 until at least late 2014 after ASIC had served its notices.
While this conduct took place a number of years ago, it was serious and reflects poorly on Ms Callychurn’s character and judgement. It is also relevant to note that during the course of this review, namely in her evidence at the hearing and in submissions, Ms Callychurn did not acknowledge these errors. It was not until she was challenged in cross-examination that Ms Callychurn made what seemed to be a number of reluctant concessions.[118]
[118] For instance, Transcript, T172, T226-7 and T234-5.
While Ms Callychurn is entitled to put ASIC to proof of contentious matters, her failure to acknowledge matters that are clearly established by objective facts, leads the Tribunal to infer either that Ms Callychurn does not appreciate the significance of the issues raised or that she was being unnecessarily obstructive. In the alternative, it may be inferred that Ms Callychurn was lacking in candour. Any one of these explanations raises concerns about Ms Callychurn’s character, judgement and fitness to manage credit activities.
The same can be said in relation to ASIC’s allegations that Ms Callychurn made misleading statements to ANZ as part of its investigations and that UMS and Ozwide, companies that she was controlling, did not comply with ASIC notices.
The Tribunal is satisfied Ms Callychurn made misleading statements to ANZ in 2015 about her involvement in credit applications with financiers on behalf of UMS. This does not reflect well on her character and she did not concede the statements were incorrect until there had been extensive questioning on this issue on the second day of the hearing. The fact Ms Callychurn was not prepared to make this concession also does not reflect well on her character or candour.
Ms Callychurn has consistently maintained that she caused UMS and Ozwide to comply with ASIC notices. She does not concede there was non-compliance and her evidence about this is confusing and inconsistent. The Tribunal is not satisfied that there was adequate and complete compliance with these notices and, even more concerning, that Ms Callychurn gave a full and frank account about the documents held by UMS and Ozwide to the ASIC investigator, the delegate or the Tribunal. According to RG204, consistent with the leading authority of the High Court in Australian Broadcasting Tribunal v Bond, the good character of a person will be integral to the question of whether they are fit and proper.
This is not a case where Ms Callychurn says she did not understand or misunderstood her obligations. Nor is this a case where Ms Callychurn concedes errors and gives a plausible explanation or excuse for those errors. While Ms Callychurn gave evidence about the difficulties she was facing in trying to move Mr Frugtniet out of the business, Tribunal is not satisfied that Ms Callychurn approached this with any sense of urgency or that she had sufficient commitment to the important role she had taken on as the sole fit and proper person for UMS.
This is not a case where Ms Callychurn has provided detailed and credible evidence to the effect that she acknowledges her previous actions were unacceptable and that she has taken steps to ensure these matters do not arise in the future. Ms Callychurn states that she regularised the position in relation to the UMS bank statements and website but this was done after ASIC served its notice of concerns in October 2014.
Many consumers engage with credit providers and this will often be one of their most significant undertakings. Accordingly, it is important that those involved in providing credit activities are competent and diligent and that they undertake those activities with integrity and good judgement.
Having regard to the evidence, the Tribunal is not only satisfied that Ms Callychurn was not fit and proper at the time the incidents alleged by ASIC occurred but there but that there is reason to believe she is currently not fit and proper.
IS THERE REASON TO BELIEVE THAT MS CALLYCHURN IS LIKELY TO CONTRAVENE THE CREDIT LEGISLATION?
ASIC contends that, by reason of the matters set out in its Statement of Facts, Issues and Contentions and Ms Callychurn’s lack of insight into the seriousness of the allegations made, the Tribunal should have reason to believe she is likely to contravene the credit legislation in the future.
The applicants submit that there is no evidence of a pattern of behaviour over a long period and the alleged contravention and non-compliance have been “isolated to a particular period of time”.[119] It is also submitted that Ms Callychurn lodged the 2012, 2013 and 2014 annual compliance certificates for UMS and no complaint has been made by ASIC about these certificates.
[119] Applicant’s Closing Submissions dated 1 June 2018 at [50].
The applicants rely on the decision of Deputy President Forgie in Horwarth v Australian Securities and Investments Commission [2008] AATA 278 at [135], where DP Forgie opined about the seriousness of the consequences of a banning order in describing the context of assessing what amounts to reasonable grounds, noting that a banning order “is a power that is exercised on the basis of the protection of the public and not for the punishment of the person banned or to penalise that person.” The part of the passage extracted by the applicants focusses on issues relating to the exercise of discretion rather than whether the question of whether the ground for the exercise of the discretion exists. However, what DP Forgie is highlighting, which is undoubtedly correct and consistent with the decision of the Full Federal Court in Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93, is that in considering whether the Tribunal is satisfied there is reason to believe a person is likely to contravene, when findings of fact may have serious consequences “it may be accepted the Tribunal would exercise greater caution in evaluating the factual foundation for the decision to be reached.”[120] In other words, the Tribunal should not rely on inexact proofs and speculative evidence but should be comfortably satisfied about a finding based on objective probative evidence.
[120] Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93 at [120] (Flick and Perry JJ).
The issue for the Tribunal is whether there is reason to believe this Callychurn is likely to contravene credit legislation in the future. This is not a subjective analysis and “the belief must rest on objective facts that would induce the relevant state of mind in a reasonable person.”[121] As noted in Story v National Companies and Securities Commission (1988) 13 NSWLR 661 at [674] the ordinary construction of these words is “that the person in question had the relevant belief and there were reasonable grounds to cause or cause for that belief” but, according to Callinan J in Daniels Corporation International Pty Ltd v AustralianCompetition And Consumer Commission [2002] 213 CLR 245 at [130], this connotes a “relatively low threshold.”
[121] Power v Hammond [2006] VSCA 25 (22 February 2006) at [106].
As observed by DP Forgie in Superannuation Warehouse Australia Pty Ltd v Australian Securities And Investments Commission [2019] AATA 88 at [56] when considering whether an entity is “likely to contravene”, the issue is not whether the entity will do so, which requires a degree of certainty is not required under the legislative test.[122] As DP Forgie noted, and the Tribunal accepts, the ordinary meaning of the word “likely” in this context is “probable”.
[122] The Corporations Act was amended in 2012 to “clarify” the statutory test under ASIC’s licensing regime to provide that ASIC was not required to believe with a matter of certainty that the person will contravene obligations in the future but rather that they were likely to do so.
In this case, the Tribunal satisfied there is cogent evidence Ms Callychurn:
(1)contravened the NCCPA on one occasion in January 2012;
(2)failed to properly discharge her duties as a fit and proper person from January 2012 until at least late 2014 by allowing Mr Frugtniet to continue involvement in the credit activities of UMS;
(3)did not take steps to remove Mr Frugtniet from being involved in the credit activities of UMS until after ASIC had served its notices of concerns;
(4)failed to cause UMS and Ozwide to adequately comply with ASIC notices or, at the least, did not cooperate with ASIC’s investigations; and
(5)did not give a full and frank account to her former employer, ANZ, in response to its investigations.
The Tribunal is also satisfied that Ms Callychurn did not give a full and frank account to the Tribunal in her evidence in this review and that she demonstrated a lack of insight about the significant of her failures. Relevantly, the Tribunal is not satisfied Ms Callychurn understands or accepts the seriousness of the role of a fit and proper person in undertaking credit activities and therefore cannot be satisfied she is likely to comply with the credit legislation in the future.
Accordingly, the Tribunal is satisfied that there is reason to believe Ms Callychurn is likely to contravene the credit legislation in the future.
SHOULD MS CALLYCHURN BE BANNED AND IF SO FOR HOW LONG?
Given the Tribunal’s findings of contravention, its findings Ms Callychurn is not fit and proper and the findings that she is likely to contravene, ASIC has established at least three of the grounds which give rise to the discretion to make a banning order under s 80 of the NCCPA.
The applicants contend Ms Callychurn has suffered financially and she has lost her capacity to earn a livelihood and to take care of her children. It is submitted that ASIC’s ban not only caused Ms Callychurn to lose her employment but affected her future employment prospects. She contends that there was no financial gain by her and UMS customers have not suffered any loss. Ms Callychurn also submits that she has taken steps to ensure UMS has distanced itself from Mr Frugtniet successfully for almost four years and she has demonstrated a genuine desire to comply with credit legislation.
ASIC contends Ms Callychurn should be the subject of a banning order and that a period of five years is appropriate. It is further contended that the Tribunal should have regard to Regulatory Guide 218,[123] which provides guidance on how ASIC uses its administrative powers and, relevant to this case, the matters that should be taken into account when exercising those powers. Table 2 of RG218 provides guidance of potential banning periods and the factors to be considered. It is submitted the Tribunal should have regard to the fact that Ms Callychurn’s conduct involved the provision of false or misleading information to ASIC, inappropriate acquiescence to Mr Frugtniet’s ongoing involvement with UMS, failure to comply with ASICs notices and a general lack of frankness and candour towards ASIC and the Tribunal. According to ASIC, Ms Callychurn has shown little awareness of her past shortcomings and the Tribunal could not have any confidence in her ability to engage in credit activities in a fit and proper manner in the future. Relevantly, Ms Callychurn did not present any character references. ASIC contends that it is therefore necessary and appropriate for Ms Callychurn to spend time away from the credit services industry to learn from her past mistakes and ensure that she will not repeat them. Is submitted that a five-year banning order will serve the purpose of protecting the public from risk and will send a message of general deterrence to participants in the industry.
[123] Australian Securities and Investments Commission, Regulatory Guide 218 - Licensing: Administrative action against persons engaging in credit activities, November 2010 (‘RG218’).
According to the note to Table 2, the factors and examples set out in the table have been compiled having regard to the propositions formulated by Santow J in HIH Insurance Limited and HIH Casualty and General Insurance Ltd; Australian Securities and Investments Commission v Adler [2002] NSWSC 483 at [56]. ASIC v Adler was civil penalty proceeding commenced by ASIC against a number former directors who were alleged to have contravened the Corporations Act 2001. ASIC sought, among other things, disqualification orders. His Honour considered the relevant authorities and set out 15 factors which were considered to be relevant to the issue of disqualification. Relevantly, Santow J noted that banning orders were “designed to protect the public interest” by safeguarding consumers and investors.[124] His Honour also observed that a banning order has “the motive of personal deterrence” and “the objects of general deterrence”, although it is not intended to be punitive.[125] His Honour stated:
In assessing an appropriate length of prohibition, consideration has been given to the degree of seriousness of the contraventions, the propensity that the defendant may engage in similar conduct in the future and the likely harm that may be caused to the public.[126]
[124] HIH Insurance Limited and HIH Casualty and General Insurance Ltd; Australian Securities and Investments Commission v Adler [2002] NSWSC 483at [56](ii).
[125] Ibid [56](v) and (vi).
[126] Ibid [56](ix).
His Honour recognised that it was “necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct” and that “[a] mitigating factor in considering a period of disqualification is the likelihood of the defendant reforming”.[127]
[127] Ibid [56](x) and (xi).
Table 2 sets out potential outcomes, factors and examples of conduct (which are stated to be indicative only) for administrative action. As stated in Table 2, it may be appropriate for a banning order of a period of 10 or more years or a permanent banning order where there is dishonesty and intent to defraud, continued knowing and wilful contraventions of the law, causing a large financial loss or making large financial gain, previous contraventions, serious incompetence and irresponsibility, likelihood that the person will engage in similar contravening contract in the future and significant adverse impact on consumer confidence. A banning order for a period of between three and 10 years may be appropriate where there is an adverse impact on consumer confidence, false, misleading, deceptive or unconscionable conduct or conduct with a lesser degree of dishonesty, conduct causing a significant financial loss or making a significant financial gain, a deliberate course of conduct to enrich themselves or others at others’ expense, incompetence and irresponsibility but with the possibility that the person may develop requested skills and abilities and disregard for the law and compliance with regulations. A banning for less than three years is considered to be appropriate where there is some loss to the client but as a result of carelessness or inadvertence rather than dishonesty, an attempt to remedy the contravention and full co-operation with ASIC, no previous history of contraventions and indications of a clear intention to comply with legal obligations in demonstrated behaviour.
It is clear the factors listed in Table 2 are intended to provide guidance, based on the analysis undertaken by Santow J in ASIC v Adler, as to how the gravamen of certain conduct will be assessed by ASIC in the exercise of the discretion to ban. This guidance is consistent with Court authority and with the objects of the NCCPA. It is a generally accepted principle that the Tribunal should follow government policy unless there are cogent reasons for not doing so, in the particular circumstances of a given case.[128] Having regard to the applications under review, the Tribunal considers it is relevant and appropriate to have regard to the policy contained in RG218, including those factors set out in Table 2.
[128] Re Drake and Minister for Immigration and Ethnic Affairs [1979] 2 ALD 634 (‘Re Drake No 2’) discussed in Tarrant v Australian Securities and Investment Commission [2013] AATA 926 at [19] – [21] (President D Kerr and Senior Member J Redfern).
The shortcomings identified by the Tribunal are significant. They involve misleading statements to ASIC and ANZ, a failure to supervise the credit activities of UMS, a lack of insight about the significance of these shortcomings, the failure to adequately comply with ASIC notices and co-operate with ASIC’s investigations and a lack of candour in her evidence in the proceedings. When the evidence is examined as a whole, it is apparent Ms Callychurn’s conduct falls below what would be expected by a person undertaking the important role of overseeing the operations of a regulated entity. This would be likely to have an adverse impact on consumer confidence and, as such, a banning order would promote consumer confidence and serve the purpose of general deterrence. This is not a case where there has been inadvertence or carelessness. Nor is this a case where Ms Callychurn has demonstrated an understanding of the significance of the conduct and made a commitment to comply with the legal obligations into the future. Relevantly, the changes made by Ms Callychurn were made after ASIC served its notices of concerns.
The applicants’ submission that there was no financial gain is rejected. There is evidence Ms Callychurn made misleading statements to ANZ and allowed Mr Frugtniet to continue his involvement with UMS, particularly in relation to AFG, and this was based on self-interest. While it can be accepted Ms Callychurn was in a difficult position following the VCAT orders made against Mr Frugtniet, this does not justify her conduct and the fact she raises this as an excuse does not reflect well on her character or integrity. Further, Ms Callychurn’s submission that there were no consumer losses is also rejected. While it can be accepted ASIC does not put forward evidence of consumer loss, there is no evidence to support Ms Callychurn’s contention that there was no loss. At best, there is no evidence either way in relation to this matter but this cannot count in Ms Callychurn’s favour.
The Tribunal accepts that Ms Callychurn has already been banned for a period of over four years and accepts she has suffered hardship by being unable to operate the UMS business. Ms Callychurn’s employment was terminated but this was in part because of her failure to seek approval from ANZ to carry on the UMS business and for providing misleading information to ANZ as part of its investigation. Neither of these matters were a consequence of ASIC’s banning action.
Having regard to these matters and the Tribunal’s findings, the Tribunal is satisfied a banning order is warranted and that an order of at least five years is appropriate in the circumstances.
IS THERE REASON TO BELIEVE THAT UMS IS NOT FIT AND PROPER OR THAT IT IS LIKELY TO CONTRAVENE SECTION 47?
Subsection 55(1) of the NCCPA provides the power to cancel a credit licence if ASIC (or the Tribunal on review) has reason to believe the licensee is not a fit and proper to engage in credit activities or the licensee is likely to contravene an obligation under 47 of the NCCPA. A licence may also be cancelled if the licensee has contravened an obligation under s 47 but there is no such allegation in this case.
Subsection 55(2)(b)(ii) provides that if the licensee is not a natural person and, for instance, is a corporation (as in this case), in considering whether there is reason to believe the licensee is likely to contravene any credit legislation or is not fit and proper to engage in credit activities, ASIC must have regard to:
whether ASIC has reason to believe that any of the persons referred to in paragraph 37(2)(h) in relation to the person is not a fit and proper person to engage in credit activities;
Subsection 37(2)(h)(i) refers to “each director, secretary or senior manager of the body corporate who would perform duties in relation to the credit activities to be authorised by the licence” of the body corporate.
The Tribunal has found that Ms Callychurn, who is director and senior manager of UMS, is not fit and proper to engage in credit activities. She is the only person who has been put forward to perform duties in relation to the credit activities to be undertaken by UMS. In their closing submissions, the applicants contend that Mr David Fu, who is an accountant and tax agent, is the secretary of UMS and has maintained this position since 2016. However, Ms Callychurn provided no evidence in support of this contention. There is no evidence about Mr Fu’s current involvement with UMS nor whether he would consent to undertaking such a role. Further, there is no evidence that Mr Fu would meet the requirements to be a fit and proper or key person for the purposes of the credit legislation.
Accordingly, the Tribunal finds that UMS is not fit and proper to engage in credit activities.
UMS is not licensed. As such, a further question arises as to whether, if the licence held by UMS was reinstated, there is reason to believe UMS would be likely to contravene the general conduct obligations set out in s 47 of the NCCPA. Those obligations include doing all things necessary to ensure that the credit activities authorised by the licensee are engaged in efficiently honestly and fairly, that the licensee has in place adequate arrangements to ensure the clients of the licensee are not disadvantaged by any conflict of interests, that the licensee complies with the credit legislation and maintains the competence to engage in the credit activities authorised by the license. Given that the Tribunal has found the purported fit and proper person for UMS is not fit and proper and should remain banned from undertaking credit activities, UMS does not have an appropriate responsible manager in place to undertake these duties to ensure compliance. This being the case, there is reason to believe UMS would be likely to contravene the general conduct obligations if it was reinstated.
SHOULD THE LICENCE OF UMS BE CANCELLED?
The Tribunal is satisfied that the ground for cancellation exists, namely that UMS is not fit and proper to engage in credit activities and that, if its licence was reinstated, UMS would be likely to contravene the credit legislation. As already noted, there is no alternative fit and proper person identified to take over this role and, in the circumstances, it is appropriate for the cancellation of the credit licence of UMS to be affirmed.
DECISION
The decisions under review are affirmed.
I certify that the preceding 238
(two hundred and thirty-eight) paragraphs are a true copy of the reasons for the decision herein of
Deputy President J Redfern.
......................[sgd]..................................................
Associate
Dated: 25 October 2019
Dates of hearing:
Date of last submission:
7 and 26 March 2018
13 August 2019
Applicant: In person Respondent: In person ATTACHMENT - Extract from National Consumer Credit Protection Act 2009
37 When a licence may be granted--applicants other than ADIs
When ASIC must grant a licence
(1)ASIC must grant a person (other than an ADI) a licence if (and must not grant the person a licence unless):
(a)the person has applied for the licence in accordance with section 36; and
(b)ASIC has no reason to believe that the person is likely to contravene the obligations that will apply under section 47 if the licence is granted; and
(c)ASIC has no reason to believe that the person is not a fit and proper person to engage in credit activities; and
(d)the person has given ASIC any additional information or audit report requested by ASIC under subsection (4); and
(e)the person meets any other requirements prescribed by the regulations.
Note: ASIC must not grant a licence to a person contrary to a banning order or disqualification order, or if a prescribed State or Territory order is in force against the person or certain representatives of the person (see section 40).
Matters ASIC must have regard to
(2)For the purposes of paragraphs (1)(b) and (c), ASIC must (subject to Part VIIC of the Crimes Act 1914 ) have regard to the following:
(a)whether a registration under the Transitional Act, a licence or an Australian financial services licence of the person has ever been suspended or cancelled;
(b)whether a banning order or disqualification order under Part 2-4 has ever been made against the person;
(c)whether a banning order or disqualification order under Division 8 of Part 7.6 of the Corporations Act 2001 has ever been made against the person;
(d)whether the person has ever been banned from engaging in a credit activity under a law of a State or Territory;
(e)any relevant information given to ASIC by a State or Territory, or an authority of a State or Territory, in relation to the person;
(f)if the person is not the trustees of a trust--whether the person has ever been insolvent;
(g)if the person is a single natural person:
(i) whether the person has ever been disqualified from managing corporations under Part 2D.6 of the Corporations Act 2001 ; and
(ii) any criminal conviction of the person, within 10 years before the application was made;
(h)if the person is not a single natural person, whether ASIC has reason to believe that any of the following persons is not a fit and proper person to engage in credit activities:
(i) if the person is a body corporate--each director, secretary or senior manager of the body corporate who would perform duties in relation to the credit activities to be authorised by the licence;
(ii) if the person is a partnership or the trustees of a trust--each partner or trustee who would perform duties in relation to the credit activities to be authorised by the licence;
(i)any other matter ASIC considers relevant;
(j)any other matter prescribed by the regulations.
Note: Part VIIC of the Crimes Act 1914 includes provisions that, in certain circumstances, relieve persons from the requirement to disclose spent convictions and require persons aware of such convictions to disregard them.
(3)ASIC must (subject to Part VIIC of the Crimes Act 1914 ), in considering whether it has reason to believe that a person referred to in paragraph (2)(h) is not a fit and proper person to engage in credit activities, have regard to:
(a)the matters set out in paragraphs (2)(a) to (g); and
(b)any other matter ASIC considers relevant; and
(c)any other matter prescribed by the regulations;
in relation to that person.
ASIC may request information or audit report from applicant
(4)ASIC may give a written notice to a person who has applied for a licence requesting the person to lodge with ASIC, within the time specified in the notice, either or both of the following:
(a)additional information specified in the notice in relation to any matters that ASIC may have regard to in deciding whether to grant the licence;
(b)an audit report, prepared by a suitably qualified person specified in the notice, in relation to matters that ASIC may have regard to in deciding whether to grant the licence.
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