Centurion Custodian Funds Management Ltd - [2023] AATA 1110

Centurion Custodian Funds Management Ltd [2023] AATA 1110 (4 May 2023)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2023/0386
Re:Centurion Custodian Funds Management Ltd
APPLICANT

AndAustralian Securities and Investments Commission
RESPONDENT

DECISION
Tribunal:Deputy President Bernard J McCabe
Date:4 May 2023
Place:Sydney

The applicant’s request for a stay of the decision is refused.
.........................[SGD]...................................
Deputy President Bernard J McCabe
CATCHWORDS
Application for stay of decision - where applicants holds AFSL - where AFSL not used by the applicant - where AFSL cancelled as a result of dormancy - application refused
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Australian Securities and Investments Commission Act 2001 (Cth)
Corproations Act 2001 (Cth)
CASES
Scott and Australian Securities and Investment Commission [2009] AATA 798
trading life Services and Australian Securities and Investments Commission [2022] AATA 4746
REASONS FOR DECISION
Deputy President Bernard J McCabe
4 May 2023
BACKGROUND

The applicant is a member of a corporate group. Other companies within the group engage in property and infrastructure development. In more recent times, the group has also developed a training business which deals with defence and aviation clients, both here and overseas.
The applicant company has a single function within the group: it holds an Australian Financial Services Licence (AFSL). It has held the AFSL since 2005. As I understand the evidence, it has never done anything with the licence. It does not currently conduct a financial services business and does not have any immediate plans to do so. And therein lies the problem, at least as far as the Australian Securities and Investments Commission (ASIC) is concerned.
ASIC made a reviewable decision to cancel the applicant’s AFSL on 18 January 2023 pursuant to s 915B(3A) of the Corporations Act2001. That sub-section provides:
(3A) ASIC may also cancel an Australian financial services licence held by a body corporate, by giving written notice to the body, if the body does not provide a financial service covered by the licence before the end of 6 months after the licence is granted.
There is no suggestion the decision was prompted by the applicant company or any member of its corporate group doing anything wrong. That is not why ASIC cancelled the AFSL. The delegate made clear in the reviewable decision that the AFSL was cancelled because the applicant was not using the AFSL. In short, it seems the delegate thought the applicant had long enough to use the AFSL; in the absence of evidence the applicant was going to do something, cancellation was appropriate.
The applicant has asked the Tribunal to review the cancellation decision. As I understand the applicant’s case, the dispute to be agitated on review is whether the discretion to cancel should have been exercised. While that review proceeds, the applicant has sought orders under s 41(2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) that would restrain ASIC from gazetting and otherwise publicising news of the cancellation decision pending the outcome of the review. The applicant is not seeking a stay of the substance of the cancellation decision. The applicant accepts a stay order directed to the underlying decision would have no practical effect since the applicant is not currently supplying financial services under the AFSL.
Section 915F(2) of the Corporations Act says ASIC is obliged to publish notice of its decision in the gazette “as soon as practicable after notice has been given to the licensee”. ASIC says it is under a statutory duty to publicise the cancellation decision in this case in accordance with s 915F(2) in the absence of orders under s 41(2) of the AAT Act. I agree that is so, notwithstanding the application for review: apart from the plain words of s 915F(2) of the Corporations Act, s 41(1) of the AAT Act makes clear the decision under review takes effect according to its terms when it is made even though an application for review is made unless orders are made under s 41(2).
The applicant’s criticism of the reviewable decision is contained in the submissions. That position was discussed at the hearing of stay. In essence, the applicant claims ASIC acted precipitously when the delegate made the cancellation decision without proper regard to the rules of procedural fairness. In those circumstances, and given the applicant is not trading and does not therefore present a danger to anyone, the applicant says there is no harm in ASIC staying publication of the cancellation decision. The applicant suggests publication would compound the procedural fairness issues that have already arisen. Publication might also have collateral effects on the business of the wider group of companies.
I accept that once the reviewable decision is made to suspend or cancel, ASIC is obliged to announce it in accordance with s 915F(2) unless the Tribunal orders otherwise. Even if ASIC came to regret the delegate’s decision immediately after it was made, it is not clear ASIC has the power to voluntarily refrain from publication.
The question, then, is whether it would be appropriate to order a stay under s 41(2) of the AAT Act. There is no doubt the power in s 41(2) might extend in an appropriate case to restrain publication and refrain from performing other administrative acts that ordinarily follow a cancellation decision even where the cancellation decision itself is not being stayed. The Tribunal also has the power to make non-publication orders of various kinds under s 35 of the AAT Act where the Tribunal is satisfied it is appropriate to do so after having regard to the ‘openness principle’ embodied in s 35, and articulated most clearly in s 35(5). I note the applicant has expressly declined to seek orders under s 35 in these proceedings (although I did make a s 35 order in relation to some evidence produced by the applicant for the purposes of the interlocutory hearing because that material was obviously commercially sensitive).
When considering applications under s 41(2), the Tribunal typically has regard to a series of considerations that were articulated by Downes J in Scott and Australian Securities and Investments Commission [2009] AATA 798 at [4]. Those factors are:
1.The prospects of success.
2.The consequence for the applicant of the refusal of a stay.
3.The public interest.
4.The consequences for the respondent in carrying out its functions depending upon whether a stay is granted or not.
5.Whether the application for review would be rendered nugatory if a stay were not granted.
6.Other matters that are relevant, amongst which I would include the length of time that the ban has already been in place and the gap between today and the hearing of the application.
The so-called Scott factors must never be applied slavishly without regard to the words of s 41(2). Other or different factors may be relevant in the circumstances of a particular case. Moreover, as I pointed out in my reasons in Trading Life Services Pty Ltd and Australian Securities and Investments Commission [2022] AATA 4746 at [6]:
…the fifth factor referred to in Scott arguably encapsulates the requirement that the Tribunal be satisfied that the order is being sought for the requisite purpose. To the extent that is so, that consideration is not just a matter to be weighed in the balance; [and]…one must keep in mind the regulatory context – in this case, the objectives and powers in the Corporations Act and the Australian Securities and Investments Commission Act 2001 (ASIC Act).
The applicant’s written submissions provided in advance of the stay hearing did not address themselves to the Scott factors. ASIC’s written submissions did address themselves to those factors. The applicant provided brief written submissions in reply.
It is appropriate to address those matters briefly below notwithstanding the absence of material. I had the benefit of a discussion with the applicant’s representative, Ms Chatfield (an officer of the applicant) and the respondent’s representative, Ms Garsia of counsel.
Prospects of success
The applicant’s argument about its prospects is unclear. The applicant does not dispute the power to cancel was enlivened in circumstances where it acknowledged it was not providing financial services. Its argument about the exercise of the discretion refers to a failure to afford procedural fairness in circumstances where the delegate made the decision without a hearing. ASIC says the delegate was not required to hold a hearing but did ask the applicant to provide submissions before making the decision. The applicant said it would have had more to say if it had a better opportunity to discuss its circumstances, and it looks forward to providing that information to the Tribunal in the course of the review.
It is not appropriate for me to conduct a mini-trial at this point to seek out additional details that would permit a more robust evaluation of the applicant’s prospects. For now, on the material before me, I do not think the merits of the case weigh heavily in favour of the issue of a stay.
The consequences for the applicant
The applicant referred in its written submissions to reputational damage if the decision is published. During the discussion at the interlocutory hearing, it became apparent the applicant was concerned about the reputational damage that would accrue to other group companies as they went about their businesses. Ms Chatfield referred to some evidence filed with the application which suggested counterparties in sensitive negotiations with other group companies might be spooked if the cancellation notice were to be published. She explained some of those entities might be particularly sensitive to any suggestion that the applicant, or a member of the applicant’s group, was on the wrong side of a regulator. She also expressed concern that competitors of the group companies that learned of the cancellation might publicise it mischievously.
It seems the applicant itself is likely to suffer few consequences if it does not receive the benefit of a stay. It is not engaged in any business. I accept the interests of other companies in the group are relevant to my consideration.
Having said that, the notice of decision specifies the ground of cancellation – effectively, because the licence is dormant. A notice to that effect should not spook a counterparty conducting a due diligence investigation of the applicant and its group members. Second, a group company may also be obliged to disclose news of the cancellation if it were likely to be relevant to the decision of a counterparty in any negotiation in any event: if commercial counterparties think that sort of detail would be relevant to their negotiations, a group company would presumably be required to disclose it to avoid an allegation of misleading or deceptive conduct. (Whether a group company would in fact have that obligation is unclear, but that is something I do not need to resolve.) I acknowledge the applicant says it would disclose the information to counterparties but insists it would prefer to do so in a managed way. Third, the evidence before me – which at this stage is not much more than a bare assertion of damage – does not provide a basis to assess either the likelihood or the extent of any prejudice.
This consideration does not weigh in favour of granting a stay.
The public interest
ASIC has an obligation to publish the cancellation decision. That obligation arises directly under s 915F(2) but publication would in any event be consistent with the objectives in s 760 of the Corporations Act and s 1(1) of the ASIC Act 2001 which emphasise the importance of transparency. While transparency is intended to protect consumers directly in circumstances where they should be informed about regulatory action taken against an active participant in the market, there is a more general requirement for transparency even where the interests of potential customers are not immediately at stake.
The applicant says nobody is at risk because it is not actively operating under the AFSL. But the fact an entity holds an AFSL – or is thought to still hold an AFSL when it has been cancelled - is potentially important reputational information that might be of value to the applicant and other group companies. (The whole thrust of the application for review and the stay application suggests holding an AFSL, or at least not letting it be known that the AFSL has been cancelled, reflects on the integrity or perhaps the prestige of the group.) While ASIC and the Tribunal are not responsible for enforcing the provisions of the Australian Consumer Law, we must also be conscious of the danger that orders under s 41(2) of the AAT Act may intrude into commercial negotiations and become an obstacle to disclosure that might otherwise be required. We must also be conscious of the danger that suppressing news of administrative action might lead participants in a range of markets to make assumptions about the absence of administrative action.
The public interest weighs against granting a stay in this case.
The consequences for the respondent
The power to order a stay of an administrative decision is not ordinarily regarded as a rebuke to a primary decisionmaker. The power to order a stay is an incident of the power of review, and the power of review is an accepted feature of the administrative decision-making process. Having said that, the Tribunal must be conscious of the risk that its orders might unintentionally embarrass the regulator in the performance of its function. Where I refer to embarrassment in this context, I am not referring to an adverse reflection on ASIC’s reputation. I am referring to the danger a regulator might be inhibited in the performance of its function. That function is, in part, an educative and informative function. Non-publication orders might embarrass the regulator in the performance of that function if the regulator were to be asked by a third party about the applicant – one of the counterparties said to be conducting due diligence in this case, for example, or a commercial rival. If the regulator were prevented from being open about administrative action in circumstances where a third party would assume the regulator would publish news of that action in the ordinary course, that would be damaging to the role of the regulator and contrary to the objectives of the Corporations Act.
This might be one of those cases where there is potential for the regulator to be embarrassed in the performance of its proper function. This factor weighs against the exercise of the discretion to order a stay.
Whether the application for review would be rendered nugatory
As I pointed out in the Trading Life Services decision (at [6]), this consideration arguably focuses on the purpose of the power in s 41(2). The power is provided to the Tribunal “for the purpose of securing the effectiveness of the hearing and determination of the application for review.”
The applicant has not clearly explained how the review would be rendered nugatory. There is a claim that damage might be done to other group companies in the short term if the news of the cancellation decision were to reach unspecified counterparties to negotiations. I infer the applicant says that damage might be unrecoverable even if the applicant is vindicated on review. Even if I assume in the applicant’s favour that announcing the cancellation decision would impact on its reputation and the reputation of other group companies, I do not have enough material before me to be satisfied the loss which might result would render the hearing nugatory. Given the limited nature of the disclosure in the gazette and the fact that announcement would not suggest the applicant has done anything wrong, it is difficult to see how damage might be done – and the gazette can be corrected in due course should the Tribunal reach a different view. I should add that the Tribunal’s reasons for decision when they are ultimately published will provide additional context for any decision it makes, which will limit the damage associated with a decision which does not allege misconduct.
I am not satisfied this consideration weighs in favour of the exercise of the discretion.
Other matters?
There is no reason to doubt this application for review will be unreasonably delayed. The issues in dispute appear to be narrow and there is unlikely to be a lengthy hearing that requires extensive preparation and delay. It seems to me the best course would be for the matter to be brought on for hearing at the earliest opportunity.
CONCLUSION
Having regard to the interests of those affected by the review, I am not satisfied it is desirable to stay the operation or implementation of any part of the decision under review.

I certify that the preceding 29 (twenty -nine) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

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Associate
Dated: 4 May 2023

Date(s) of hearing:

27 April 2023

Applicant:

Via video link

Counsel for the Respondent:

Ms A Garsia of Counsel

Date(s) of hearing:	27 April 2023
Applicant:	Via video link
Counsel for the Respondent:	Ms A Garsia of Counsel