Caratti and Australian Securities and Investments Commission (Practice and procedure)
[2024] ARTA 103
•16 December 2024
Caratti and Australian Securities and Investments Commission (Practice and procedure) [2024] ARTA 103 (16 December 2024)
Applicant/s: Allen Bruce Caratti
Respondent: Australian Securities and Investments Commission
Tribunal Number: 2024/7887
Tribunal:General Member Darian-Smith
Place:Sydney
Date:16 December 2024
Decision:The Tribunal refuses the Applicant’s application for an order under s.32(2) of the Administrative Review Tribunal Act 2024 (Cth) staying the operation or implementation of the decision of the Respondent dated 7 October 2024.
...............[SGD].........................
General Member Darian-Smith
Catchwords
CORPORATIONS – s. 206F Corporations Act disqualification order – application for order staying operation or implementation of disqualification order and ancillary orders – factors relevant to the grant of a stay – prospects of success – consequences for applicant of refusal of a stay – considerations where criminal proceedings pending – the public interest – application for stay order refused
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) s.41
Administrative Review Tribunal Act 2024 (Cth) s.32
Corporations Act 2001 (Cth) ss. 206F, 1274AATax Administration Act 1953 (Cth) s. 350-10, Schedule 1
Cases
Re Scott and Australian Securities and Investments Commission [2009] AATA 798
Technical Education Australia Pty Ltd and Australian Skills Quality Authority [2018] AATA 3047
Australian Securities and Investments Commission v Administrative Appeals Tribunal (2009) 181 FCR 130
Greenfield Education Pty Ltd and Australian Skills Quality Authority [2018] AATA 4210
Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146
Deputy Commissioner of Taxation v Kocic [2023] FCA 1353
Bolton and Australian Securities and Investments Commission [2015] AATA 977
Van Dieren and Australian Securities and Investments Commission [2019] AATA 4777
Australian Securities and Investments Commission v Forge [2007] NSWSC 1489
Matai and Australian Securities and Investments Commission [2023] AATA 340
Sage v Australian Securities and Investments Commission [2005] FCA 1043Trustee for the Starbrake Holdings Trust & Gucce Holdings Pty Ltd and Commissioner of Taxation [2015] AATA 661
Statement of Reasons
BACKGROUND
On 7 October 2024, a delegate of the Respondent (ASIC) made an order under s 206F of the Corporations Act 2001 (Cth) (Corporations Act) disqualifying the Applicant form managing corporations for a four-year period (Disqualification Order).[1]
[1] T2.
The Disqualification Order came about as the result of Applicant’s role as a director of four companies which were wound up in each case on the petition of the Deputy Commissioner of Taxation in 2017 and 2018. The four companies in question are:
(a) ACN 142 745 337 Pty Ltd formerly known as Mammoth Civil Pty Ltd (ACN 142 745 337) (Mammoth Civil);
(b) Whitby Land Company Pty Ltd (ACN 115 233 193) (Whitby Land);
(c) MNWA Pty Ltd (ACN 101 717 177 (MNWA); and,
(d) 293 Nicholson Road Pty Ltd (ACN 620 674 268) (Nicholson Road) (collectively s.206F Companies).
The Disqualification Order became the subject of the Applicant’s application for review, filed 8 October 2024.[2] On the same date, the Applicant made an application for a stay of the Disqualification Order, pending determination of the review.[3]
[2] T1.
[3] T1.1.
The Applicant seeks an order in his stay application that the operation and implementation of the Disqualification Order “(including but not limited to the entry of the decision in the register maintained under s.1274AA of the Corporations Act and any media release) be stayed until the final determination of the substantive application or further order.”
The Applicant has filed written submissions, Applicant’s Outline of Submissions dated 16 November 2024 (Applicant’s Submissions), and the Applicant reads and relies upon the affidavits in support of the stay application of Allen Bruce Caratti sworn 15 November 2024 (Allen Caratti Affidavit) and Benjamin Mick Caratti sworn 15 November 2024 (Benjamin Caratti Affidavit). The Respondent has filed written submissions, Respondent’s Outline of Submissions dated 27 November 2024 (Respondent’s Submissions).
The Applicant’s Submissions, at paragraphs [10]-[13], provide an overview of the applicable principles involved in the decision to disqualify a person from managing a company under s.206F of the Corporations Act. The Respondent’s Submissions set out the pre-conditions for the exercise of the power to disqualify under s.206F (see paragraph [6]) and the matters which ASIC either must, or may, have regard to in determining whether disqualification was justified (see paragraph [7]). Those principles need not be re-stated for present purposes.
The parties are in broad agreement that a central reason why ASIC’s delegate made the Disqualification Order was due to the failure of the s.206F Companies to comply with their respective tax obligations. However, the parties are in dispute about what the concerns of ASIC surrounding the failure of the s.206F Companies,[4] and in turn under-pinning the Disqualification Order, demonstrate about the Applicant’s failure or otherwise to properly attend to the discharge of his duties as a director of the s.206F Companies.
[4] Those concerns are summarised in the Applicant’s Submissions at [14].
TRIBUNAL’S POWER TO GRANT A STAY
The Administrative Appeal Tribunal’s power to stay was found in s.41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act). The equivalent provision in the Administrative Review Tribunal Act 2024 (Cth) (ART Act) is found in s.32(2), which reads:
“However, on application by a party to a proceeding for review of a reviewable decision, the Tribunal may make an order staying or otherwise affecting the operation or implementation of the decision if the Tribunal considers that it is desirable to do so for the purpose of ensuring the effectiveness of the review.”
It is important to bear in mind that s.32(2) operates as an exception to the General rule which is stated in s.32(1) of the ART Act, as follows:
“The making of an application to the Tribunal for review of a reviewable decision does not affect the operation of the decision or prevent the taking of action to implement the decision.”
The Tribunal must observe the pre-conditions set out in s.32(7) of the ART Act before it makes an order staying a reviewable decision, which are to give the parties to the application for review an opportunity to make submissions in relation to the making of a stay order,[5] and “has taken into account the interests of any person who may be affected by the review of the decision.”[6]
[5] ART Act s.32(7)(a).
[6] ART Act s.32(7)(b).
The Explanatory Memorandum to the Administrative Review Tribunal Bill makes it clear that although the wording in s.32 of the ART Act is different in some respects to the wording of s.41 of the AAT Act, those changes were made to reflect “modern drafting practices” and “not to affect the operation or effect of the provision.”[7] It follows that the authorities relevant to the principles to be applied in respect of s.41 of the AAT Act, remain relevant when considering s.32 of the ART Act.
[7] Explanatory Memorandum to the Administrative Review Tribunal Bill, [339].
APPLICANT’S AFFIDAVITS
At hearing, counsel for the Applicant explained that the two affidavits filed by the Applicant were directed to the different forms of prejudice which would be suffered by the Applicant if a stay of the Disqualification Order was not granted by the Tribunal.
The Allen Caratti Affidavit was focussed on the prejudice which was said to flow from the cessation of the Applicant’s involvement with Mammoth Contracting (WA) Pty Ltd (Mammoth Contracting (WA)),[8] and in relation to the ongoing civil proceedings in WA involving Mammoth Contracting (WA) and the criminal proceedings in WA involving the Applicant.[9]
[8] Allen Caratti Affidavit, [8]-[19], [29].
[9] Allen Caratti Affidavit, [20]-[28].
The Benjamin Caratti Affidavit was instead focussed on the projected prejudice to the financial arrangements of various Caratti family companies and the risk of events of default arising which would make maintaining current finance, or obtaining future finance or re-finance, for development projects very difficult.[10]
[10] Benjamin Caratti Affidavit, [8]-[38].
SUBMISSIONS OF THE PARTIES AND CONSIDERATION OF FACTORS RELEVANT TO THE GRANT OF A STAY
The Applicant identified the prejudice relating to the criminal proceedings involving him as the key issue of prejudice for present purposes. Counsel for the Applicant acknowledged that there was a hurdle to overcome in circumstances where the Applicant was asking not only that the Disqualification Order not come into effect until further order, but also that ASIC be prevented from entering the Applicant’s name on the register of disqualified company directors,[11] and from releasing any press-release concerning the Applicant’s disqualification.
[11] Under Corporations Act s.1274AA.
The “argumentative burden” accepted by the Applicant was the need for him to show that the circumstances of this case were sufficiently different from the normal case that the usual considerations favouring the publication of the disqualification decision would be outweighed by the likely prejudice to the Applicant arising from publication.[12]
[12] Transcript P-5 lines 4-10.
The Applicant submitted that this case diverted from the norm because of the real potential for adverse publicity to affect the Applicant’s right to a fair trial in the criminal proceedings in WA. Some details about the criminal proceedings are provided in the Allen Caratti Affidavit at paragraphs [23]-[28]. The Applicant’s evidence is that the criminal proceedings were commenced by the Commissioner of Taxation in the Perth Magistrates Court on 11 April 2021 and that one of the charges involves the tax affairs of Starbrake Pty Ltd (Starbrake Proceedings). The Applicant states that, having been sent for trial in early October 2024 after the committal hearing, the Starbrake Proceedings are scheduled for a jury trial to commence on 17 January 2026.
As the Respondent’s Submissions state,[13] the Starbrake Proceedings do not appear to involve the s.206F Companies or the tax debts which form part of the factual matrix upon which the Disqualification Order has been based. The common thread between the s.206F Companies and the Disqualification Order on the one-hand and the Starbrake Proceedings on the other, is that the Applicant was, at the material time or times, a director of each of the corporate entities involved.
[13] Respondent’s Submissions [119], [121].
Whilst it seems to be accepted by the Applicant that the Starbrake Proceedings concern the tax affairs of a different Caratti company to those which had formed the basis for the Disqualification Order, it was the combination of a forthcoming jury trial in the Starbrake Proceedings and the publication of the details of the Disqualification Order (including that the Applicant had been disqualified from being a company director for four years because of a failure to ensure that companies controlled by him complied with their tax obligations), which might cause serious prejudice to the Applicant. That was submitted by the Applicant’s counsel to be because the Disqualification Order was likely to be accorded real weight by prospective jurors, if they were to find out about it in advance of the trial.[14]
[14] Transcript P-5 lines 43-47, P-6 lines 1-12, P-28 lines 28-34.
It was agreed between the parties that the range of factors relevant to the Tribunal’s consideration of a stay are well established by the decision in Re Scott andAustralian Securities and Investments Commission (Scott),[15] and the Tribunal cases which have followed it.[16] The 6 matters listed by Downes J. in Scott are as follows:
(a) The prospects of success;
(b) The consequence for the applicant of the refusal of a stay;
(c) The public interest;
(d) The consequences for the respondent in carrying out its functions depending upon whether a stay is granted or not;
(e) Whether the application for review would be rendered nugatory if a stay were not granted; and,
(f) Other matters that are relevant.[17]
[15] [2009] AATA 798.
[16] See for example Technical Education Australia Pty Ltd and Australian Skills Quality Authority [2018] AATA 3047 at [59]; Birdseye and Tax Practitioners Board [2020] AATA 1250.
[17] [2009] AATA 798, [4].
The Tribunal notes that the Scott factors should not be treated as a complete checklist, as that risks losing sight of the discretion which the Tribunal is being asked to exercise when considering whether it is “desirable” to award a stay “for the purpose of ensuring the effectiveness of the review.” The Tribunal adopts what was said in Technical Education Australia Pty Ltd and Australian Skills Quality Authority by SM Cameron:
“Whilst these matters identified by Downes J in Re Scott are relevant to the exercise by the Tribunal of the discretion conferred upon it by section 41(2), they are not a complete code or a “checklist” that limits or fetters the exercise of such discretion.”[18]
[18] [2018] AATA 3047, [60].
Further, the facts and circumstances of the case, including the nature and content of the reviewable decision, will affect the respective weighting to be given to each of the factors under consideration with respect to the granting of a stay.[19] Scott factors (a)-(d) are in play in this matter and are considered in greater detail below.
[19] Hopfner and Tax Practitioners Board [2019] AATA 851, [7].
The Full Federal Court, in Australian Securities & Investments Commission v Administrative Appeals Tribunal (ASIC v AAT),[20] provides guidance to the Tribunal in the making of an order under the former s.41(2) of the AAT Act, as to whether “it is desirable to do so after taking into account the interests of any persons who may be affected by the review” (now expressed in s.32(2) of the ART Act as “for the purpose of ensuring the effectiveness of the review”). The interests of the persons affected are to be considered in the context of the statutory scheme under which the decision under review was made.[21]
[20] (2009) 181 FCR 130.
[21] (2009) 181 FCR 130, [51]-[54], [56]-[57].
Specifically, in the context of making banning orders under the Corporations Act, Downes and Jagot JJ said:
“[C]areful consideration..must be given by the AAT in any exercise of power under s.41(2) of the AAT Act to the balance of competing rights and interests struck by Parliament as embodied in the terms of the Corporations Act, particularly the balance between the rights and interests of the recipient of the banning order and of the public including existing and potential future clients of the recipient of the banning order. As we have said, the scheme which the provisions of the Corporations Act embody – with the potential making of a banning order to remain private unless and until ASIC decides to make such an order having given the recipient an opportunity to be heard — is not mere statutory background or a neutral factor in the process of the formation of the required opinion about what is desirable under s.41(2) of the AAT Act. The scheme which Parliament has established in the Corporations Act, and the public interest in the right of the market to know relevant information as soon as practicable, must be treated as a fundamental element in the decision-making process required under s.41(2) of the AAT Act.”[22]
[22] (2009) 181 FCR 130, [71].
The consideration of the public interest in the Tribunal’s deciding upon a stay application in the context of a banning order is recognised in the authorities as not only a relevant consideration but an important and often critical consideration.[23]
[23] See for example Re Nguyen and Australian Securities and Investments Commission [2011] AATA 398, [26]-[27].
In ASIC v AAT,[24] Downes and Jagot JJ. commented on the Tribunal’s need to consider the public interest when deciding on a stay application made in relation to a banning order:
“Moreover, information is the key to effective trading in any market. It takes the place of regulation in ensuring fairness. A market which is not fully informed is not operating properly. Is not an investor who is about to deposit funds with a person providing financial services entitled to know that a banning order has been made against the person? If the order has been stayed on substantial grounds the person is also entitled to know that. The informed investor may continue with the proposal. If the investor does not, then that is just an example of the operation of the marketplace. The critical matter is that the market is fully informed. If the banning order is not disclosed, but subsequently upheld, is not the investor entitled to complain that all the circumstances should have been made public?”[25]
[24] (2009) 181 FCR 130.
[25] (2009) 181 FCR 130, [54].
STAY FACTOR (a) PROSPECTS OF SUCCESS
It is common ground between the parties that the Tribunal’s consideration of the Applicant’s prospects of success for the purpose of determining the stay application does not require the Tribunal to conduct a preliminary hearing of the review application (on the evidence then available). As was explained in Greenfield Education Pty Ltd and Australian Skills Quality Authority,[26] by SM Poljak:
“The authorities establish that a consideration of the prospects of success of an application and so the merits of a substantive application must not involve the Tribunal undertaking a full consideration of those merits. While it is neither necessary or appropriate for me to determine the substantive matter on an interlocutory application, I must be satisfied that that the applicant has some prospects of success.”[27]
[26] [2018] AATA 4210.
[27] [2018] AATA 4210, [7].
It follows that the Tribunal must satisfy itself that the Applicant’s prospects of success are high enough to clear the threshold of “some prospects of success” before a stay can be granted.
The Applicant’s Submissions make three prospects points in contending that the threshold has been met:
(a) First, that ASIC’s conclusions about the failures of the s.206F Companies were largely based on untested reports provided by the liquidators of those companies. Further, when the s.206F Companies had sought merits reviews of the relevant adverse income tax assessments, the Australian Taxation Office (ATO) took enforcement action and wound up the companies before the merits reviews could be conducted.[28]
(b) Second, ASIC’s delegate had placed too much emphasis on the Applicant’s failures to cause the s.206F Companies to comply with their lodgement requirements, in circumstances where the Applicant had been relying on accountants to manage the compliance aspects. Further, that the seizure of records by the ATO had made it difficult for the accountants to carry out their roles;[29] and,
(c) Third, to the extent that ASIC’s delegate had made a finding that the Applicant had deliberately sought to misrepresent his current directorships, there had been no misrepresentation, rather a “miscommunication” had occurred.[30]
[28] Applicant’s Submissions [24] and T2.2, p.45 at [145]-[147].
[29] Applicant’s Submissions, [25] and T5, p. 210-211 at [25]-[28], p.214 at [44].
[30] Applicant’s Submissions, [26] and T2.2, p.45 at [145].
The Respondent’s Submissions deal in considerable detail with the factual background and the decision of ASIC’s delegate in respect of each of Mammoth Civil,[31] Whitby Land,[32]MNWA,[33] and Nicholson Road.[34] Against that factual backdrop, the Respondent’s primary submission is that the merits of the Applicant’s case in respect of the non-lodgements and the tax debts is “very low”.[35]
[31] Applicant’s Submissions, [32]-[38].
[32] Applicant’s Submissions, [8]-[25].
[33] Applicant’s Submissions, [26]-[31].
[34] Applicant’s Submissions, [39]-[41].
[35] Applicant’s Submissions, [42].
A summary of the reasons given for ASIC’s assessment of the Applicant’s prospects on the application for review include that:
(a) It is not credible that an experienced property developer such as the Applicant would fail to register the relevant entities for an ABN, TFN and for GST purposes given the scale and history of the development projects;
(b) Numerous tax returns and BAS statements amounting to tens of millions of dollars were not filed;
(c) The tax debts are beyond dispute because they are based on tax assessments which are to be treated as conclusive evidence of the existence and amounts of those debts.[36] Counsel for the Respondent referred the Tribunal to the decisions in Commissioner of Taxation v Futuris Corporation Ltd,[37] and DeputyCommissioner of Taxation v Kocic,[38] as examples of cases involving the operation of Part IVC of the Taxation Administration Act 1953 (Cth) (TAA), and to make the point that tax assessments can only be challenged through the mandated pathway in Part IVC; and,
(d) Some of the alleged conduct which led to the assessments and penalty assessments was “extremely egregious.”[39]
[36] For current provisions see s.350-10 Schedule 1 TAA.
[37] (2008) 237 CLR 146.
[38] [2023] FCA 1353.
[39] Applicant’s Submissions, [42(7)].
The Respondent referred to Bolton and ASIC (Bolton) in their submissions,[40] in which Deputy President Forgie refused to order a stay in a s.206F disqualification case. Thiscase also had facts around failures by the taxpayer companies to pay tax debts and to lodge income tax returns and BAS statements. Counsel for the Respondent submitted that the present case was a worse case on its facts than Bolton, because of the intentional disregard of the law by some of the s.206F Companies. The Respondent’s counsel held it therefore followed that there was a greater need for the protection of the public in this case.
[40] [2015] AATA 977.
With respect to the Applicant’s first prospects point, the Respondent’s Submissions address the evidence in the Benjamin Caratti Affidavit about the conduct of the ATO, countering that the matters and decisions referred to all concern different taxpayers and tax debts from the s.206F Companies.[41] Criticisms are then raised by the Respondent about the “opinion” expressed in paragraph [58] of the Benjamin Caratti Affidavit,[42] where the deponent says in effect that the tax assessments of some of the s.206F Companies are liable to be set aside by reason of the ATO having taken enforcement action while merits review proceedings were on foot. Having regard to the conclusive evidence provisions of Part IV of the TAA, the Tribunal accepts that it is far from clear that the tax assessments in question can, or would necessarily, be set aside.
[41] Respondent’s Submissions, [46]-[47], Benjamin Caratti Affidavit [40]-[57].
[42] Respondent’s Submissions, [48]-[49].
The Respondent’s main submissions on the Applicant’s second prospects point, concerning the failures of the accountants with respect to compliance issues for the s.206F Companies, and the ATO seizure of records, are:
(a) That the Applicant has the ultimate responsibility to ensure tax returns are lodged and that his past business experience, including as a party to tax litigation,[43] put him “on notice that he needed to be extra vigilant in dealing with tax obligations, including those of companies of which he was the director”;[44]
(b) The Applicant had not filed any evidence in the stay application from the accountants who were engaged by the s.206F Companies, to explain the compliance failures;[45] and,
(c) The seizure by the ATO of documents belonging to Mammoth Civil and MNWA happened some years before those companies were wound up and could not explain the record keeping failures since that time.[46]
[43] Deputy Commissioner of Taxation v Caratti & Ors [1992] WASC 533.
[44] Respondent’ Submissions, [53]-[54].
[45] Respondent’s Submissions, [57].
[46] Respondent’s Submissions, [59].
In response to the third prospects point, as to the signed assurance given by the Applicant dated 20 February 2024, the Tribunal was taken by the Respondent’s counsel to the signed assurance document.[47] The submission was then made by the Respondent that the Applicant’s non-compliance with his written undertaking to resign as the director of each of the Caratti companies listed in the Schedule to the undertaking, was correctly characterised by the ASIC delegate as being a false, or at best a careless, representation, and not a “miscommunication.”[48]
[47] ST 12.1 Respondent’s Materials pp. 2879-2880.
[48] Respondent’s Submissions, [63]-[64].
It is not the Tribunal’s task on an interlocutory stay application to make definitive findings of fact or to make credibility findings without the benefit of a full substantive hearing, including the cross-examination of witnesses. The Tribunal agrees with the Applicant’s counsel’s submission that it cannot, at this point, make other than a high-level assessment of the merits.[49]
[49] Transcript P-26 lines 38-43.
I am satisfied that the Applicant’s prospects of success are high enough to clear the threshold of “some prospects of success” but I am not persuaded at this early interlocutory hearing stage that the Applicant has a “strong arguable case”, as his submissions contend.[50]
STAY FACTOR (b) CONSEQUENCES FOR THE APPLICANT OF THE REFUSAL OF A STAY (INCLUDING RISK OF PREJUDICE IN RESPECT OF THE STARBRAKE PROCEEDINGS)
[50] Applicant’s Submissions, [5(a)].
It is in the very nature of a banning order that it is likely to cause some degree of prejudice or hardship to the party who is the recipient of the order.
The Applicant accepts,[51] as he must, that the prejudice or hardship of the kind caused to him by the Disqualification Order “is hardly ever a sufficient basis for securing a stay but..it is relevant when considered in the context of the other matters raised.”[52]
[51] Applicant’s Submissions, [27].
[52] McLean and Australian Securities and Investments Commission [2016] AATA 22, [22].
The Applicant submits that the evidence as to prejudice in the Allen Caratti Affidavit and the Benjamin Caratti Affidavit shows that there are significant risks of prejudice to the Applicant and others if the Disqualification Order is not stayed.[53] The Applicant points to:
(a) The likelihood that Mammoth Contracting (WA), a significant property development contracting company of which the Applicant is a director, will have its operations impacted, putting at risk significant property development projects and the jobs of 40 employees.
(b) Concerns that Mammoth Contracting (WA), and other Caratti family companies, will be unable to retain finance or obtain finance for future projects. Further, that the Disqualification Order may operate as an event of default under the existing finance agreements between RMBL Investments and Newhome Nominees Pty Ltd and Torradup Nominees Pty Ltd;[54] and,
(c) The risk that the Applicant’s ability to have a fair trial in the Starbrake Proceedings will be prejudiced by the publication of the Disqualification Order.[55]
Of these three matters, the Applicant submitted orally that the third was the most important for the purposes of the stay application, including the ancillary non-publication aspects of the order sought.
[53] Applicant’s Submissions, [28].
[54] Benjamin Caratti Affidavit, [37].
[55] Allen Caratti Affidavit, [28].
Other than the Applicant’s concern about the possible impacts arising from his inability to participate in the day to day operations of Mammoth Contracting WA, the risks of prejudice identified by the Applicant all relate to different aspects of, and the consequences which flow, from the reputational damage to him which the Applicant says will follow on from the entry of his name on the s.1274AA register and the media coverage which will attend upon that event.
The Respondent’s submissions on the consequences for the Applicant are based around the proposition that purported effects on reputation alone will not justify the granting of as stay. So much is made clear in ASIC v AAT,[56] where Downes and Jagot JJ. stated:
“It is difficult to accept that harm (even serious harm) to the recipient’s reputation resulting from public awareness of the banning order will be a sufficiently cogent reason to justify the grant of a stay in most cases. This is because the risk of harm of this type is inherent in the nature of a banning order.”[57]
[56] (2009) 181 FCR 130.
[57] (2009) 181 FCR 130, [76].
The Respondent also makes the point that the tax issues (concerning at least MNWA and Whitby Land) which underpin the Disqualification Order have been reported in the press and are to some extent already in the public domain.[58] In addition, there are publicly available judgments of the Western Australia Supreme Court,[59] and elsewhere in which some of the tax issues of the Caratti family group of companies have been considered.
[58] ST17, ST18.
[59] For example, Caratti v Mammoth Investments Pty Ltd (2016) 50 WAR 84, ST22; Deputy Commissionerof Taxation v Caratti & Ors [1992] WASC 533.
Further, the Respondent’s Submissions quote at length from the judgment of Martin CJ in Esperance Cattle Co Pty Ltd v Granite Hill Pty Ltd,[60] in support of its submission that in effect the Applicant has no reputation in need of protection. The Tribunal need make no finding of that kind in an interlocutory hearing, but notice is taken of the fact that matters of and concerning the Applicant’s reputation have been, and are, in the public domain.
[60] (2014) 47 WAR 318; Respondent’s Submissions, [55].
The Respondent makes some further submissions in response to areas of risk of prejudice raised by the Applicant.
(a) First, it says that the concerns raised by the Applicant about suppliers and financiers withdrawing support are speculative claims, not supported by evidence called from any of the suppliers or financiers in question. That in turn is said to lead to the possible inference that those third parties have not been informed about the Disqualification Order, which in turn leads to the submission that publication is in the public interest so that parties dealing with the Applicant can make informed commercial decisions.[61]
(b) Second, reference was made to the Applicant’s assurance document, referred to in paragraph [35] above, in support of the contention that it is possible for the companies listed in the Schedule to the assurance document, including Mammoth Contracting (WA), to be run by others.[62] The further point is made that the Applicant’s son, Benjamin Caratti, has previously been a director of Mammoth Consulting (WA), is closely involved in Caratti family property development projects and could assume a role in managing the operational risks which might be posed by the Applicant ceasing to be a director.[63]
[61] Respondent’s Submissions, [81].
[62] Alisha Caratti is nominated as the incoming director for Mammoth Contracting (WA).
[63] Respondent’s Submissions, [82]-[83].
The Benjamin Caratti Affidavit refers to the “irreversible reputational damage” which he says will be caused to him, and to a few companies of which he is a director, if the Disqualification Order is not stayed and the decision is publicised.[64] Those companies are Ardross Street Pty Ltd, Torradup Nominees Pty Ltd, Wattleup Pty Ltd, Wickham Street Pty Ltd, Cell 6 Land Company Pty Ltd and Newhome Nominees Pty Ltd. The Applicant is not a director of any of these companies. Further, none of these companies are among the s.206F Companies which are bound up with the Disqualification Order.
[64] Benjamin Caratti Affidavit, [7]-[8].
The Respondent’s submission is that none of the claims set out in the Benjamin Caratti Affidavit are relevant to the stay application. The Tribunal has considered the Benjamin Caratti Affidavit and the Respondent’s Submissions which address the claims raised in it.[65] The Tribunal finds that the claims are only peripherally relevant for present purposes, and are not sufficiently connected to the position of the Applicant or to the s.206F Companies to be a weighty consideration in deciding the question of whether a stay is required for the purpose of securing the effectiveness of the review.
[65] Respondent’s Submissions, [85]-[96].
In contrast, what is a weighty consideration for the Tribunal is the potential for significant prejudice to the Applicant’s defence of the Starbrake Proceedings.[66] The Tribunal agrees with the Applicant’s counsel that it should adopt a “somewhat cautious approach to ensure that the jury process is not interfered with or impeded.”[67]
[66] Transcript P-5 lines 31-41.
[67] Transcript P-7 lines 12-15.
The Applicant acknowledges that no stay of the application for review pending determination of the Starbrake Proceedings is sought and that different Caratti companies and different tax debts are involved in this proceeding to those involved in the Starbrake Proceedings. The real practical concern, and why the Applicant submits that this case departs from the ordinary case, is around a prospective juror doing a Google search and turning up details of the Disqualification Order or any press release which ASIC may have issued about the Disqualification Order.[68]
[68] Transcript P-6 lines 43-47, P-7 lines 1-3.
Counsel for the Respondent focussed on the question of whether there is a real risk, as opposed to a lesser and more remote possibility, of the jury trial process being interfered with should the Disqualification Order be entered on the register and publicised in an ASIC media release.[69] The Respondent referred to Sage v ASIC,[70] in which case Goldberg J. refused an injunction seeking to restrain ASIC from proceeding with a hearing relating to the making of a banning order, pending the determination of criminal proceedings involving overlapping subject matter.
[69] As to applicable principles dealing with stays in the context of subsequent criminal proceedings, see DKZN and Companies Auditors and Liquidators Disciplinary Board & Anor [2009] AATA 765.
[70] [2005] FCA 1043.
Goldberg J. considered the disclosure aspects of the potential banning order, including a submission that an adverse inference might be drawn in the criminal proceeding arising from the fact of the banning order. His Honour considered that submission to be “misconceived”. He went on to say:
“Even if the applicant did remain silent and a banning order was made against him I cannot see any basis upon which the existence or content of the banning order could be admitted into evidence in the criminal proceeding or used against him. I do not consider that there is any basis upon which an adverse inference could be drawn from the banning order at the criminal proceeding whether by a judge or a jury.”[71]
[71] [2005] FCA 1043, [27].
The Respondent submitted that as the Disqualification Order does not relate to the same factual background as the charges in the Starbrake Proceedings, or to the same companies or tax debts, it is not clear, whether, or how, the Disqualification Order would be admissible in the Starbrake Proceedings or could result in an adverse inference being drawn against the Applicant.[72]
[72] Respondent’s Submissions, [124].
Further, returning to the theme of there having already been publicity of the tax debts relating to the s.206F Companies, and of the charges in the Starbrake Proceedings,[73] the Respondent referenced the published decision of the Tribunal (then constituted as the AAT) in Trustee for the Starbrake Holdings Trust &Gucce Holdings Pty Ltd and Commissioner of Taxation,[74] which it says appears to reference the royalty payment which is the subject of the Starbrake Proceedings. Counsel for the Respondent, in his oral submissions, said that matters relating both to the Applicant and to the tax affairs of Caratti family companies is “already out there to be Googled by anyone who might look up the names.”[75]
[73] ST19, ST20.
[74] [2015] AATA 661.
[75] Transcript P-24 lines 37-45 (at lines 41-42).
STAY FACTOR (c) THE PUBLIC INTEREST
The consideration of the public interest factor begins with the fact that ASIC is a regulator charged with administering the statutory scheme, including supervisory control over the conduct of company directors. Noting that an avenue of appeal from an adverse decision by ASIC exists, which is being exercised by the Applicant in this case, the present position is, as noted by Downes J in Re Scott, that ASIC “has made an adverse decision and all other things being equal, the public is entitled to the protection of such a decision.”[76]
[76] [2009] AATA 789, [10].
The Applicant submits that the failure of the s.206F Companies is all attributable to unpaid tax assessments levied against the companies by the ATO, and the subsequent enforcement steps taken by the Commissioner of Taxation, combined with record keeping failures by the accountants for the companies.[77] The further submission is made that ASIC ought not to be concerned about members of the public being harmed by dealings with companies controlled by the Applicant or that contractors with, or employees of, those companies would be adversely affected by the Applicant continuing to be a director of them.[78]
[77] Applicant’s Submissions, [30].
[78] Applicant’s Submissions, [31].
The public interest considerations raised in ASIC v AAT have been referred to in paragraphs [24]-[26] above. In addition to the public interest in having an informed market, the Respondent also refers to:
(a) the important object of general deterrence as explained in Australian Securities and Investments Commission v Forge,[79] where White J stated:
“A disqualification order is protective of the public for the period of disqualification against misconduct by the person disqualified. However, that is not its only purpose. The object of general deterrence is also of great importance. That object is served by the public disapproval of the impugned conduct being marked not only by a declaration that the conduct has contravened the Act, but by an order for disqualification of the contravener from managing a corporation either for a fixed period or for life. The shame or embarrassment which accompanies such an order is not designed as punishment, although it may have that effect, but serves as a general deterrent to others who might be tempted to breach their duties as directors or officers of a company.”[80] and,
(b) the public interest in ASIC decisions being announced without delay, as general deterrence may be less effective if decisions cannot be announced.[81]
[79] [2007] NSWSC 1489.
[80] [2007] NSWSC 1489, [103].
[81] Trading Life Services Pty Ltd and ASIC [2022] AATA 4746, [25].
The significant public interest concerns with the Applicant which are identified by the Respondent include the Applicant’s alleged failure to cause the s.206F Companies to comply with their statutory tax obligations and the need for third parties who deal with the Applicant, and the Applicant’s family companies, to be informed about the Disqualification Order and act thereafter as fully informed parties. The relevant third parties will include suppliers, employees, financiers, and consultants who are involved with the significant Mammoth Contracting (WA) property development projects.[82]
[82] Respondent’s Submissions, [101]-[103].
Although the Applicant is not dealing with retail consumers as a tax agent or provider of financial services might be, the Tribunal accepts that there are a significant number of persons and entities who might have reason to complain if the fact of the Disqualification Order was to be withheld from the public domain for any longer than was necessary to ensure the effectiveness of the review.
STAY FACTOR (d) CONSEQUENCES FOR ASIC IN CARRYING OUT ITS REGULATORY FUNCTION
The Applicant submits that the factor relating to the consequences for ASIC in carrying out its regulatory functions should be treated as a neutral factor because “it is not apparent that the grant of a stay would have any particular effect on the performance of the Respondent’s regulatory functions.”[83]
[83] Applicant’s Submissions, [32].
ASIC does not agree that its interests are a neutral factor. The Respondent submits that there is a public interest in maintaining the efficacy of subsisting decisions taken by it. There is also a public interest in its decisions being implemented immediately after being made, with the Disqualification Order being recorded on the register in accordance with ASIC’s statutory duty. The granting of a stay and preventing ASIC from issuing a media release is not consistent with it being seen to be carrying out its statutory functions. In Van Dieren and ASIC,[84] a banning order case, Deputy President Boyle said:
“The courts have made it clear that there is a significant public interest in the general deterrence effect of such orders and in those charged with regulation being seen to be doing their job.”[85]
[84] [2019] AATA 4777.
[85] [2019] AATA 4777, [43] (see also [24]).
ENTRY ON THE REGISTER AND PRESS RELEASE
Pending the determination of the Applicant’s stay application, ASIC has agreed not to make an entry in the register maintained under s.1274AA of the Corporations Act of persons disqualified under s.206F from managing corporations, or to make a public announcement by way of media release.
The Tribunal’s power in s.32(2) of the ART Act is to be treated no differently to the AAT’s power under s.41(2) of the AAT Act, with respect to preventing or modifying consequential ancillary acts arising from the implementation of the decision under review. In this case, in relation to the Disqualification Order, the Tribunal’s power would extend to staying the making of an entry on the register maintained under s.1274AA of the Corporations Act and preventing any media release. The Applicant references an additional source of the Tribunal’s power to do these things in s.70(1) of the ART Act (the equivalent of s.35(3) of the AAT Act) but has not made a formal application for confidentiality orders.
Although a formal application for confidentiality orders has not been made, I accept what was said by the Tribunal in Matai and Australian Securities and Investments Commission (Matai),[86] about the importance of the “openness” principle (as stated in s. 35(5) of the AAT Act and now to be found in s.71(1) of the ART Act), even though it is not directly relevant to an application under s.41(2) of the AAT Act (now s.32(2) of the ART Act). In Matai, DP McCabe said:
“The ‘openness’ principle in s.35(5) is not directly relevant to an application under s.41(2), but – given the evident commitment to principles of openness in the Corporations Act and the Australian Securities and InvestmentsCommission Act 2001 – the Tribunal will be slow to make what are, in substance, suppression orders under s.41(2).”[87]
[86] [2023] AATA 340.
[87] [2023] AATA 340, [5].
Whilst the Tribunal agrees it should exercise caution in this case having regard to the Applicant’s concerns about the Starbrake Proceedings, the Tribunal is not persuaded that staying entry on the register under s.1274AA of the Corporations Act and staying the issue of any media release are necessary to secure the effectiveness of the review.
CLOSING CONSIDERATIONS AND DECISION
In his oral submissions, counsel for the Applicant was clear that the Applicant was not seeking to delay the hearing of the review application on account of the Starbrake Proceedings, or to have it heard in closed session, and that the Applicant would be content for the application to be heard as “quickly as possible” in the normal course. Counsel further indicated that the factual issues in the case were for the most part “not particularly complex” and that it was likely that only lay evidence would need to be called by the Applicant.[88]
[88] Transcript P-9 lines 8-22.
As the Tribunal is presently constituted, and barring any unexpected delay, the Tribunal is proceeding on the basis that the hearing and determination of this proceeding will be completed as expeditiously as possible and most likely in the second or third quarter of 2025. If that were to be achieved, there would be a period of some months at least between the publication of the Decision and Reasons for Decision in this proceeding and the likely commencement of the Starbrake Proceedings in January 2026.
The Tribunal accepts that there is a qualitative difference between the entry of the Applicant’s name on the public register of banned directors (and that fact referenced in an ASIC media release) and the findings in past judgments and/or press reports of matters concerning the Applicant and companies associated with him which are before the courts.
However, the Tribunal needs to be persuaded that the happening of the former events, at a moment in time likely to be more than 12 months before the jury in the Starbrake Proceedings is empanelled, does, in all the circumstances, present the real risk of the jury trial process being interfered with, as the Applicant contends. I am not so persuaded. The Tribunal thinks it is desirable to pursue the course which seeks to manage the relevant risk to the jury trial process by facilitating the hearing and determination of the application for review as far in advance of the commencement of the Starbrake Proceedings as that outcome can sensibly be achieved.
I have considered and weighed up the factors relevant to the grant of a stay in this matter. On balance, I do not think it is desirable to make an order staying the operation or implementation of the Disqualification Order for the purpose of ensuring the effectiveness of the review.
It follows that I have decided to refuse the Applicant’s application for a stay order under s.32(2) of the ART Act.
Date of Hearing: 28 November 2024
Counsel for the Applicant: Mr P Knowles SC
Solicitor for the Applicant: Mr J O’Loughlin
Counsel for the Respondent: Dr P Bender
Solicitors for the Respondent: Ms G Wong and Mr W P Soh
3
21
0