Centurion Trust Company Limited and Australian Securities and Inv Estments Commission

[2003] AATA 1146

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 1146

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No   W2002/44

GENERAL DIVISION		)
Re		CENTURION TRUST COMPANY LIMITED

Applicant

And AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION 

Respondent

DECISION

Tribunal

Justice Garry Downes, President

Murray Allen, Member

Date              14 November 2003

PlacePerth

Decision

1. Set aside the decision of the delegate made on 11 January 2002 to refuse to revoke the varied s 73 orders affecting Centurion Trust Company Limited (“Centurion”).

2.    Remit the matter to the Australian Securities and Investments Commission (“ASIC”) for reconsideration in accordance with directions of the Tribunal that:

(a) the orders be revoked in accordance with the requirements of s 75 of the Australian Securities and Investments Commission Act 2001; and

(b)      the funds held on trust by ASIC be paid to Centurion provided that Centurion can give a sufficient receipt for payment.

...............................................

Justice Downes, President

CATCHWORDS

CORPORATIONS – Australian Securities and Investments Commission – refusal to revoke orders under ss 73 and 75 in Division 8 of Part 3 of the Australian Securities Commission and Investments Commission Act 2001 – Commission had restrained and subsequently permitted sale of shares on condition that it hold the proceeds pending finalisation of an investigation under Part 3 – Division 8 orders cannot impose a condition that proceeds be deposited with the Commission – the orders no longer restrain the sale of shares and should be revoked – no basis for lawfully retaining the proceeds – no evidence that proceeds might be attached pursuant to a proceeds of crime claim arising from the investigation – Division 8 orders are intended to temporarily preserve status quo and not to preserve funds in the long term – prospect that a court would estop applicant from claiming the proceeds cannot justify unlawful retention of proceeds – applicant’s representation addressed reclamation of proceeds – Tribunal decides pursuant to s 43 of the Administrative Appeals Tribunal Act 1975 that the proceeds should be repaid.

Administrative Appeals Tribunal Act 1975 (Cth) ss 25, 37, 43
Australian Securities and Investments Commission Act 2001 subs 11(4), 73, 75, 244

Australian Securities and Investments Commission v Donald (2002) 69 ALD 187
Hongkong Bank of Australia Ltd v Australian Securities Commission (1992) 40 FCR 402
Minister for Immigration and Ethnic Arffairs v Kurtovic (1990) 21 FCR 193
Minister for Immigration and Ethnic Affairs v Polat (1995) FCR 98
Re Pochi & Minister for Immigration & Ethnic Affairs (1979) 26 ALR 247
Re Upton and the Department of Transport (1977) 15 ALR 675

REASONS FOR DECISION

Justice Downes, President
  Murray Allen, Member

1. In 1998 ASIC (which was then known as the Australian Securities Commission) made orders pursuant to s 73 of the Australian Securities Commission Law 1989 (the ASC Law) restraining the applicant Centurion Trust Company Limited from selling certain shares. ASIC subsequently permitted the shares to be sold on condition that the proceeds of sale were deposited with ASIC to be held on trust. This was achieved by varying the original s 73 orders pursuant to s 75 of the ASC Law by a series of variations made between November 1999 and January 2000. In 2001 the ASC Law was replaced by the Australian Securities and Investments Commission Act 2001 (the ASIC Act) and the orders and variations had effect (for the purposes of the ASIC Act) as if they had been made pursuant to the corresponding provisions of the ASIC Act. Centurion subsequently asked ASIC to revoke the orders and transfer the funds to it. ASIC declined. Centurion appealed to the Tribunal pursuant to s 244 of the ASIC Act. We now have to decide whether we have jurisdiction to review that decision and, if we do, whether we should reverse it.

2.      The facts have been fully set out in three prior decisions of the Tribunal given on 10 February 2003, 21 May 2003 and 27 June 2003.  We will not set them out again.  Those reasons are to be treated as repeated and incorporated in these reasons.

3. At the time of the June decision it was our expectation and, we understood, that of the parties, that by the time the matter came on for final hearing ASIC’s investigation would have reached the stage where it could disclose to Centurion all of the documents filed pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (the AAT Act) (the T documents) that had not previously been disclosed. In the event that was not possible; but Centurion raised no objection to the final hearing proceeding without it having access to a substantial part of the T documents. Consequently, part of the final hearing occurred without Centurion’s legal advisers being present, during which we were referred to documents not disclosed to Centurion.

4.      In our previous decisions we concluded that:

(a)ASIC did not have power pursuant either to s 73 or s 75 to require the proceeds of the sale of shares to be deposited with it;

(b)ASIC might be able to justify its holding of such funds where they were deposited with it voluntarily; and

(c)Such a justification would require ASIC to be exercising a statutory power (such as holding the funds pursuant to subs 11(4) of the ASIC Act) as part of the performance of its functions.

5. Section 25 of the AAT Act provides that an enactment may permit an application to be made to the Tribunal for review of a decision made in the exercise of a specified power conferred by the particular enactment, and that the Tribunal has power to review any decision in respect of which application is made to it under any such enactment.

6. The Tribunal’s review jurisdiction in respect of decisions made under the ASIC Act is conferred, and limited, by subs 244(2) of that statute, which relevantly provides that applications may be made to the Tribunal for review of a decision by ASIC:

“(a)      to make an order under section 72 or 73; or

(b)to make an order under subsection 75(1) varying an order in force under Division 8 of Part 3; or

(c) to refuse to vary or revoke an order in force under Division 8 of Part 3.”

7. Division 8 of Part 3 of the ASIC Act consists of sections 71 to 75 inclusive. ASIC undoubtedly exercised power under s 73 of the ASIC Act in imposing the original restraints on Centurion by the making of the original orders. Although the original orders were altered pursuant to s 75, so that sale was permitted on conditions, the varied orders continued to impose restraints and are still in existence. The decision under review is that of the delegate made on 11 January 2002 to refuse to revoke the three orders that were purportedly made under s 73 and varied under s 75. They were, therefore, orders that purported to be made and to be in force under Division 8 of Part 3. The power of ASIC to revoke such orders is found in subs 75(1) and it is not in dispute that a refusal to exercise such power is a “decision” within the meaning of subs 3(3) of the AAT Act. Paragraph 244(2)(c) of the ASIC Act does, therefore, provide the basic jurisdiction of the Tribunal to review ASIC’s decision to refuse to revoke the orders.

8. However, ASIC has submitted that if we were to conclude that the variations of the original orders were beyond the powers conferred by s 73 and s75, but were authorised by the incidental power of subs 11(4), then the Tribunal would have no jurisdiction to review the exercise of that power because s 244 does not confer jurisdiction to do so.

9. We do not believe that that the submission is correct. First, we concluded in our February decision that orders could be made against persons who were not in default and the original orders restraining sale of the shares made under s 73 were a valid exercise of the power conferred by that section.

10. Secondly, s 75 does authorise variation or revocation of those original orders. At least in part the variations were within the power conferred by s 75 – for example the continuing restraints on sale and the limited permission for the sale of shares. Only the part of the variation orders that attempted to impose the conditions regarding the deposit of funds with ASIC exceeded the combined powers of s 73 and s 75. Even if subs 11(4) and the agreement of the parties was the only authority for the conditions imposed, the varied orders continued to be operative under s 73 – at least to the extent that they were authorised by that section – and they were, therefore, orders “in force under Div 8 of Part 3” for the purposes of subs 244(2).

11. Thirdly, it is the delegate’s refusal to revoke (both the parts of the varied orders that were within power and the parts that were arguably out of power) that is the operative decision under review – and s 244 expressly authorises review of that decision. There can be no suggestion that revocation (had it occurred) would not have involved exercise of the s 75 power to revoke. Accordingly, a refusal to revoke must involve equally the making of a decision under s 75.

12.     We consider that cases such as Hongkong Bank of Australia Ltd v Australian Securities Commission (1992) 40 FCR 402 concerning the reviewability of decisions made under subs 11(4) of the ASIC Act are unlike the present case in that they involved decisions made in respect of a section of the Corporations Law (or, since 2001, the Corporations Act 2001) that conferred a function but no power - in circumstances where subs 11(4) supplied the power that was actually exercised. The present case involves an operative decision to refuse to revoke an order where there is an express power to revoke - at least insofar as there was an order “in force under Div 8 Part 3”, which we think was the case because the orders as varied were at least partly valid.

13.     Finally, a decision purportedly made in exercise of a reviewable statutory power, but outside that power, is not a decision which there is no jurisdiction to review.  Indeed, Brennan J said in Re Upton and the Department of Transport (1977) 15 ALR 675 at 682 that the making of a decision outside power was “relevant to the Tribunal’s decision, not to its jurisdiction. It requires the tribunal to set the decision aside: it does not require the Tribunal to refuse to review the decision.”

14.     Our conclusion is, therefore, that the Tribunal does have jurisdiction to review the decision to refuse to revoke the orders as varied.  The next question that we must answer is whether we should affirm the delegate’s refusal to revoke or, if we consider that the orders should be revoked, whether we should make some other appropriate decision.

15.     We have held that to the extent to which the orders as varied sought to require proceeds of sales of shares to be deposited with ASIC they were beyond power.  Undoubtedly, the orders as originally made and as varied were within power to the extent to which they restrained the sale of shares.  However, all relevant shares have now been sold with the consent of ASIC and the orders now have no role to play in restraining disposal of the shares that were originally of interest to ASIC.  The thrust of our earlier decisions is that the natural consequence is that the orders should be revoked and the moneys paid to Centurion unless there is another lawful basis upon which the moneys are now and can continue to be held.  It was this possibility that we addressed in paras [47] and [48] and paras [55] to [57] of our reasons for decision of 10 February 2003.

16. Accordingly, we invited ASIC to put to us any basis upon which it sought to maintain that it was entitled to continue to hold the funds. In particular, we asked whether there was any claim that the conduct being investigated might lead to a court making orders for payment of all or part of the funds to ASIC or third parties pursuant to enabling powers conferred by the Corporations Act or the ASIC Act. We were told that no such argument was put, although reference was made to the possibility of an order being made by ASIC under s 91 of the ASIC Act that a person pay the costs of ASIC’s investigation. Such an order can be made against a person who has been convicted of an offence in a prosecution, or against whom a judgment has been awarded in certain types of proceedings, begun as a result of an investigation by ASIC. ASIC may recover the amount payable as a debt. It seems to us that, even if such an outcome were considered likely (about which we express no view), it would not, without more, create any right in ASIC to access the trust fund and would not provide a sufficient basis for ASIC to continue to hold the funds at the present time.

17.     The only basis upon which it was put to us that the funds might be attached directly was pursuant to possible claims under proceeds of crime legislation.  In our reasons for decision of 10 February 2003 we rejected an argument that possible proceedings under proceeds of crime legislation with respect to circumstances outside the investigation could justify the retention of the funds.  However, the submission now put to us is somewhat higher than that.  It is said that the matters being investigated might lead to applications being made under proceeds of crime legislation for the forfeiture of the funds.  However, no orders have yet been made, interlocutory or otherwise, nor have any relevant proceedings been commenced under the relevant legislation of the Commonwealth or of Western Australia.  ASIC declined to put a case before us, based on evidence disclosed to Centurion, to satisfy us that there was at least a prima facie case available.  Even had we had evidence put before us, in the absence of its disclosure to Centurion, it would be necessary for the evidence to be particularly persuasive:

“[I]f an applicant is not given a full opportunity to deal with confidential information adverse to his interests, the probative force of the information must be particularly cogent if that information is to be acted upon.  There are notorious risks in failing to hear an opposing view – slender proofs may falsely seem irrefragable, and the scales of justice may falsely seem to be tipped by the weight of insubstantial factors.” (Re Pochi & Minister for Immigration & Ethnic Affairs (1979) 26 ALR 247 at 274).

18.     In the absence of a cogent proceeds of crime claim which we can assess we cannot find any basis for the moneys to be attached arising out of proceeds of crime legislation.

19. We should note that ASIC expressly stated that it did not claim to hold the moneys pursuant to s 93AA of the ASIC Act.

20. One of the contentions made on behalf of Centurion was that the time taken by ASIC to complete its investigation has been unreasonable, inexcusable and oppressive to Centurion and that any continuation of the orders would result in further prejudice to Centurion. Because of the view we take about revocation of the orders it is not necessary for us to arrive at any final conclusion in relation to this contention. We observe, however, that investigations of the type undertaken by ASIC in cases, such as this, involving overseas transactions will often take a very considerable time in the face of very considerable investigative difficulties. On the evidence available to us our preliminary view is that we would not have been prepared to revoke the orders on the basis of the ground of delay alone. We would also observe, however, that the powers available to ASIC under Division 8 of Part 3 of the ASIC Act are unusual powers for an administrative body to have conferred upon it. In our opinion they are powers that are intended to be used in an interim, short term, way in order to preserve the status quo during an investigation if a person fails to comply with ASIC’s requirements to provide information. The Corporations Act contains many remedial provisions pursuant to which ASIC or other interested parties may approach a court (including whilst an investigation is underway) to obtain a variety of orders of a protective or preservative nature. We would not expect ASIC to rely on Division 8 orders as the principal or only method of preserving the subject matter of an investigation for long periods of time throughout the duration of an investigation – in the present case more than 5 years.

21. We accordingly conclude that the orders under s 73 should now be revoked both because there are no longer any shares held by Centurion which are subject to the orders and because no basis has been shown for ASIC lawfully to retain the proceeds of sale of the shares. We must next consider whether the Tribunal has the power to decide that the funds should be paid to Centurion.

22.     The arrangement under which the moneys were deposited with ASIC included provision for Centurion (and others) to seek repayment of the moneys.  A letter from ASIC dated 9 December 1998 to Centurion’s representative set out a “specific proposal” that the orders be varied to permit the conditional sale of shares. The letter contained the following proposed conditions:

“2.       Subject to paragraphs 3 and 4, the funds will remain in ASIC”S trust account until it has finalised its investigation.  This is consistent with the existing …s 73 orders.

3.        If your client (or any other person) wishes to have the funds released, then that person should write to ASIC … setting out the basis of the claim and reasons why the funds should be released.  ASIC will consider that request and respond within 14 days.  This is essentially the same position as your client is in now as it is able to request that ASIC revoke its decision to make orders pursuant to …s 73 pursuant to …s 75.

4.        If ASIC decides not to release the funds, your client is able to seek a determination from a court.  ASIC reserves the right to oppose any application made by your client.”

23.     Subsequently the orders of variation contained a provision that

“Any person seeking a release of the funds may write to ASIC setting out the basis of the claim and reasons why the funds should be released.  ASIC will consider any such request and respond in 14 days.”

and also contained a notification that rights of appeal or review of the orders existed.

24. Section 43 of the AAT Act confers on the Tribunal the power to exercise all the powers and discretions that are conferred on ASIC provided that the exercise is for the purpose of reviewing the decision. A distinction must be drawn between whether the Tribunal has jurisdiction to review a decision and what powers are available to the Tribunal once it is seized with jurisdiction. The powers available to the Tribunal, once it has jurisdiction, extend to relevant powers available to ASIC that are not themselves reviewable by the Tribunal: Australian Securities and Investments Commission v Donald (2002) 69 ALD 187; [2002] FCA 1174. At the time the varied orders were made both parties must have considered that the proceeds of sale were to be paid to and held by ASIC pursuant to the orders. Because the orders must be revoked we consider that it follows that the moneys should be repaid. That issue is so bound up with the making, varying and revoking of the orders that we consider that a decision by us that the money should be repaid has the necessary connection with the review of the s 75 decision not to revoke the varied orders. We consider that we have power to make such a decision pursuant to s 43.

25. An argument was put to us that Centurion was estopped from denying that ASIC lawfully held the moneys – on the basis that Centurion had represented to ASIC as part of the agreed arrangements that the proceeds of sale could be retained by ASIC until the completion of the investigation and that ASIC had acted to its detriment by varying the original orders to permit sale on conditions that it had no authority under s 73 and s 75 to impose. We consider that there are a number of problems with this argument.

26.     The first is that the terms of the representation made by Centurion and which is said to found this estoppel included (as noted at [22] and [23] above) provisions permitting Centurion to reclaim the moneys and to commence proceedings if ASIC did not pay the money to Centurion following such a claim.

27.     Secondly, we have found that ASIC has no lawful basis for continuing to hold the moneys. An estoppel might have justified ASIC continuing to hold the moneys where the power under which it purported to hold the moneys was not effective provided there was some other lawful basis upon which the moneys could be held.  We cannot see how an estoppel could be used to justify a statutory body holding moneys that it has no lawful basis to hold.  See Minister for Immigration and Ethnic Affairs v Polat (1995) FCR 98 at 105; Minister for Immigration and Ethnic Arffairs v Kurtovic (1990) 21 FCR 193.

28. Thirdly, the real basis upon which ASIC made the variations to the orders which permitted the sale was its belief that s 73 and s 75 permitted it to require that it hold the proceeds of sale. This belief was not based on any representation.

29.     Finally, there is a real problem in this Tribunal, not being a court of law, determining that moneys are irrecoverable because of the existence of an estoppel.  Estoppel is a curial doctrine.

30.     A more relevant question for a decision-maker exercising the administrative power of the Commonwealth might be whether continuing to hold the money is justified because a court would (or might) find that Centurion was estopped from asserting a critical part of the claim for their recovery.  We are, however, of the opinion that no such basis for not repaying the moneys exists.  This is because we have found that there is no basis for lawfully holding the moneys.  Holding the proceeds of sale is not, in our opinion, a substitute for restraining the disposal of the shares.    It may be that ASIC would not have agreed to the sale if it had not thought that it would be entitled to hold the proceeds until the end of its investigation;  but that does not seem to us to be the relevant matter for consideration.  It may be assumed that ASIC agreed to the sale of the shares because it was satisfied that the sale would not impede its investigation.  Once it formed this view it should, in any event, have revoked the orders because there was no longer any proper basis for them to remain in place.  It would, of course, have been open to ASIC at that time to approach a court for other forms of preservative orders had that been thought necessary and appropriate.

31.     In the result we are not satisfied that there is any basis upon which ASIC can lawfully retain the funds.  The funds must be repaid.  We do not know the precise way in which the funds were received.  They may have been paid by a broker.  ASIC will need to be satisfied that Centurion can give a receipt for the funds.  We do not mean that the funds must be paid to anyone other than the legal owner but ASIC is entitled to satisfy itself that it will be protected if it pays the moneys to Centurion if they were not in fact paid over by Centurion.  This matter may be simply resolved but we do not have the material before us to undertake it ourselves.  We also note that revocation of the orders may involve statutory requirements, such as publication, which cannot be carried out by us.

32. In accordance with s 43(1) of the AAT Act we propose to set aside the decision of the delegate made on 11 January 2002 to refuse to revoke the varied s 73 orders affecting Centurion and to remit the matter to ASIC for reconsideration in accordance with directions of the Tribunal that:

(a) the orders are to be revoked in accordance with the requirements of s 75; and

(b)the funds held on trust by ASIC are to be paid to Centurion provided that Centurion can give a sufficient receipt for payment.

I certify that the thirty-two (32) preceding paragraphs are a true copy of the reasons for the decision herein of:
Justice Garry Downes, President
Murray Allen, Member

Signed:         .......................................................................................
  Associate

Dates of Hearing  11 and 12 December 2002; 21 and 22 May 2003; 28 and 29 July 2003            

Date of Decision  14 November 2003

Counsel for Applicant                M Bennett and J Hill

Solicitor for Applicant               Bennett & Co.

Counsel for Respondent         L Jones and J McGrath

Solicitor for Respondent          Australian Securities and Investments Commission