Chapel Road v Australian Securities and Investments Commission

[2007] NSWSC 975

Reported Decision: (2007) Aust Torts Reports 81-912

New South Wales

Supreme Court

CITATION:	Chapel Road v ASIC (No 2) [2007] NSWSC 975 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	05/07/2007
JUDGMENT DATE :	31 August 2007
JUDGMENT OF:	Howie J at 1
DECISION:	The appeal is allowed in part. The order of Associate Justice Harrison dismissing the proceedings and the consequential costs order are quashed. The statement of claim is struck out but the appellant has leave to replead the cause of action in misfeasance in public office within 21 days of the date of the judgment.
CATCHWORDS:	Practice and Procedure - strike out application - Malicious Prosecution - whether tort applies to administrative proceedings - whether proceedings terminated favourably to the plaintiff - Misfeasance in Public Office - whether pleadings gave rise to cause of action.
LEGISLATION CITED:	Uniform Civil Procedure Rules 2005 - Part 13.4(1), Part 14.28(1) Corporations Law (now repealed) - s 837 Civil Liability Act
CASES CITED:	Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 Gibson v Parkes District Hospital (1991) 26 NSWLR 9 A v State of New South Wales (2007) 81 ALJR 763 Gregory v Portsmouth City Council [2000] 1 AC 419 Beach Club Port Douglas Pty Ltd v Page [2005] QCA 475 Noye v Robbins [2007] WASC 98 Little v Law Institute of Victoria [1990] VR 257 Rich v Australian Investment Commission (2004) 220 CLR 129 Herbert Berry Associates Limited v Inland Revenue Commission [1978] 1 All ER 161 Cheney v Spooner (1929) 41 CLR 532 Forrest v Kelly (1991) 32 FCR 558 Cameron v James [1945] VLR 113 Commonwealth Life Assurance v Smith (1938) 59 CLR 527 Boaler v Holder (1887) 52 LT 298 Northern Territory v Mengel (1994) 185 CLR 307
PARTIES:	Chapel Road Pty Ltd v Australian Securities and Investments Commission
FILE NUMBER(S):	SC 20014/2006
COUNSEL:	R.D. Marshall - Appellant J.R. Clarke - Respondent
SOLICITORS:	Creagh & Creagh - Appellant Blake Dawson Waldron - Respondent
LOWER COURT JURISDICTION:	Supreme Court (Associate Judge)
LOWER COURT JUDICIAL OFFICER :	Associate Justice Harrison
LOWER COURT DATE OF DECISION:	29/09/2006

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HOWIE J

FRIDAY 31 AUGUST 2007

2006/20014 CHAPEL ROAD PTY LTD v AUSTRALIAN
SECURITIES & INVESTMENTS
COMMISSION


JUDGMENT

Background

1 HIS HONOUR: This is an appeal from a decision of Associate Justice Harrison (the Associate Judge) striking out a statement of claim brought in this Court by the appellant, Chapel Road Pty Limited (“Chapel Road”), seeking damages against the respondent, the Australian Securities & Investments Commission (“ASIC”) on the basis of malicious prosecution and misfeasance in public office. Her Honour acted upon a notice of motion filed by ASIC and on 29 September 2006 found in effect that the claims brought by the appellant were hopeless and dismissed the statement of claim: see [2006] NSWSC 1014; 203 FLR 322.

2 The appellant filed five grounds of appeal. They are:

1. Associate Justice Harrison erred in finding that a company cannot maintain a claim for malicious prosecution.

2. The Associate Justice erred, on an Application to Strike Out, in not assuming the facts as pleaded to be true.

3. The Associate Justice erred in finding that the mere opportunity to appear at the Hearing, to give evidence and make submissions, was enough to suggest that the Delegate’s action did not involve an invalid or unauthorized act.

4. The Associate Justice erred in failing to consider the pleaded fact that the exercise of power was actuated by an intention to harm the Plaintiff, thereby invalidating the exercise of power.

5. The Associate Justice erred in finding that the claims for malicious prosecution and abuse of process were hopeless and should be dismissed.

3 ASIC filed a notice of contention. It asserts that her Honour’s decision should be affirmed for the following reasons:

1. Associate Justice Harrison erred in not finding that there were no legal proceedings for the purposes of the plaintiff's claim of malicious prosecution.

2. Associate Justice Harrison erred in not finding that the tort of malicious prosecution does not extend to proceedings which are not legal proceedings and/or only disciplinary or administrative proceedings for the purposes of the plaintiff's claim of malicious prosecution.

3. Associate Justice Harrison erred in finding that it was arguable that any proceedings could be terminated favourably for the purposes of the plaintiff's claim of malicious prosecution.

4. Associate Justice Harrison erred in not finding that no invalid or unauthorised act could be established by the plaintiff in relation to the claim of misfeasance of public office.

4 There is no suggestion that her Honour did not have jurisdiction to make the order she made: see Part 13.4(1) and Part 14.28(1) of the Uniform Civil Procedure Rules 2005. Nor is there any dispute about the nature of this appeal: it is a rehearing in the nature of an appeal from a single judge to the Court of Appeal. There is no issue here of the weight to be given to any evidence before, or facts as found by, the Associate Justice. The manner in which a court should deal with an application such as that brought by the notice of motion is uncontroversial.

5 In coming to her conclusion the Associate Justice applied the following principle as stated by Master Allen (as he then was) in Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 at 373- 374 and quoted with approval in Gibson v Parkes District Hospital (1991) 26 NSWLR 9 at 35:

“…It is not by any means rare in the history of the development of the common law that a high appellate court, in enunciating a novel development in the law, albeit one avowedly based on a miscellany of old cases, has chosen to use general words of imprecise limits in meaning to facilitate the arrival, in later cases, of the final form of the development without the need to overrule what earlier had been stated. That being so I am of the opinion that a court at first instance should be particularly astute not to risk stifling the development of the law by summarily throwing out of court actions in respect of which there is a reasonable possibility that it will be found, in the development of the law, still embryonic, that a cause of action does lie. The risk of injustice to the plaintiff, which summary termination of his claim would entail, is real. One cannot predict, with firm assurance, what the future holds as the final formulation of the new development.”


It was not submitted before me that this was an inappropriate approach to be applied in determining the issues before her Honour although there is some question as to the extent to which it can be applied and was applied by the Associate Judge.

The factual background

6 Chapel Road held a securities dealer’s licence subject to nine conditions. It had been granted that licence in 1996. In September 1999 ASIC became concerned, as a result of surveillance and other material, that Chapel Road was in breach of the conditions of the licence. There was then some communication between ASIC and the company.

7 On 27 November 2000 ASIC gave Chapel Road notice under s 837 of the Corporations Law (now repealed), stating that it was concerned that the company:

(a) may have contravened a provision of the Securities Law (referring to section 826 (1)(c) of the Act);

(b) may have contravened a condition of the licence (referring to section 826(1)(d));

(c) may not have performed efficiently, honestly and fairly the duties of the holder of a Dealers Licence (section 826(1)(j)); and

(d) will not perform efficiently, honestly and fairly the duties of the holder of a Dealers Licence (section 826(1)(k)).

8 The notice provided Chapel Road with the date for a hearing to take place before a delegate of ASIC in order to determine whether any action should be taken in respect of the licence. It also gave notice of the company’s right to appear, give evidence and make submissions at the hearing: see s 837(2) of the Corporations Law. The date appointed for the hearing was 21 December 2000. Those proceedings were adjourned to enable the material relied upon by ASIC to be given to the company and then arrangements were to be made for the matter to be continued by either evidence at a hearing or written submissions. Unfortunately there was some misunderstanding and the company supplied written submissions to ASIC without taking the opportunity to have the hearing reconvened.

9 On 26 April 2001 ASIC’s delegate determined that Chapel Road’s licence should be revoked acting on his view that the company would not conduct its business efficiently, honestly and fairly.

10 Chapel Road sought a review of the decision by way of appeal to the Administrative Appeals Tribunal (the AAT). A decision was reached returning to the company its licence but imposing further conditions. The judgment of the Tribunal included the following:

“ASIC’s power to revoke a dealers licence under s 826(1) is discretionary. As stated above, other enforcement action is open to ASIC. It is clear that the exercise of ASIC’s power should be protective of the public interest and preventative in nature although the Tribunal recognises that deterrence may also be a relevant consideration.

In the case of Chapel Road, there is evidence that by the time of the ASIC delegate’s decision in April 2001, it had made significant improvements in its compliance regime such that there is reason to believe that it would satisfy the required compliance standards and perform its duties as a dealer efficiently, honestly and fairly.

Bearing in mind the protective/preventative nature of ASIC’s power, in the Tribunal’s opinion the appropriate course was not to revoke Chapel Road’s licence but to impose appropriate conditions pursuant to s 786(1). Such conditions might have required regular reviews, perhaps six monthly, of Chapel Road’s compliance regime by an external consultant approved by ASIC, over a period of perhaps two years, on the basis of Chapel Road undertaking to implement reasonable recommendations for change made by the consultant and approved by ASIC considered necessary to achieve the required standard of compliance.

As stated above, while the Tribunal recognises that deterrence may also be a relevant consideration in the exercise of ASIC’s powers, in the case of Chapel Road there has been a sufficient deterrent effect arising from the revocation and present proceedings – and, more particularly, from the effective cessation of Chapel Road’s business in the intervening period.

In conclusion, the Tribunal sets aside the decision under review and remits the matter to the Respondent with the direction that Chapel Road’s securities dealers licence be reinstated subject to appropriate conditions, pursuant to s 786(1), with a view to ensuring effective compliance with condition 1 of its licence and with regulation 7.3.02 of the Corporations Regulations.”

11 By its statement of claim Chapel Road seeks damages amounting to $5,700,00.00 for loss of business as a result of the action taken by ASIC and $180,000.00 for expenses incurred in defending itself before ASIC and the AAT.

The judgment appealed against

12 Her Honour set out the allegations that the plaintiff must prove to make out a claim based upon malicious prosecution as follows (at 17):

“1. that the proceedings complained of were instituted or continued by the defendant;

2. that the defendant instituted or continued the proceedings maliciously;

3. that the defendants acted without reasonable and probable cause; and,

4. that the proceedings were terminated in the plaintiff’s favour.”

13 In A v State of New South Wales (2007) 81 ALJR 763, a case decided after her Honour’s judgment, the High Court stated the elements of the cause of action somewhat differently but the difference is of no significance. The matter determined by the High Court is of no relevance to the issues raised in these proceedings. That case was concerned with the second and third elements stated above. The issues raised before the Associate Justice and on this appeal are concerned with the first and fourth elements.

14 In respect of the claim based upon misfeasance in public office, her Honour stated the elements of the tort as follows (at [84]):

“1. there is a public officer;

2. who owes a public duty (including to the plaintiff as a member of the public);

3. which the public officer has breached;

4. the breach of duty has caused loss or damage to the plaintiff; and

5. the public officer breached the duty with the intention of causing harm to the plaintiff or with the knowledge that he or she was acting in excess of his or her powers.”

15 The Associate Justice made the following findings in dismissing the malicious prosecution claim:

1. It was arguable that the tort of malicious prosecution was applicable to administrative decisions, so this was not a basis to dismiss the claim for malicious prosecution at an interlocutory stage (at [77]);

2. It was arguable that the decision by the AAT involved a “favourable termination of the prosecution” in the company’s favour, so this was not a basis to dismiss the claim for malicious prosecution at an interlocutory stage (at [80]);

3. It was not open for a company to maintain such a claim or to be eligible to the types of damages available in the tort of malicious prosecution (at [77]) and so the claim was hopeless (at [100]).

16 In relation to the claim based upon misfeasance in public office, her Honour held:

1. It was arguable that ASIC holds public office (at [93]).

2. There was nothing to suggest that the delegate’s action involved an invalid or unauthorised act (at [100]).

The issues for determination
Malicious prosecution
(a) Standing of the plaintiff

17 Her Honour held that a company could not maintain a claim based upon malicious prosecution. There is no authority given for that finding or any reasoned argument to support it. The Court was informed at the outset of the appeal that ASIC had made no such submission before her Honour and would not wish to be heard in support of the finding. The submissions in support of the notice of motion made by ASIC are summarised in the judgment of her Honour as follows:

[20] ASIC submitted there are two fatal flaws in the pleading of malicious prosecution that cannot be cured by amendment. The perceived flaws are that firstly, the tort of malicious prosecution does not apply to administrative decisions and secondly, the proceedings were not terminated in Chapel Road’s favour.

They are the only two issues ventilated on the appeal.

18 There seems to me, with respect, to be no good reason why in policy or principle a company cannot seek damages for malicious prosecution if it suffers injury as a result of proceedings brought against it for some breach of the Corporations Law or otherwise. It is unnecessary, in the absence of any suggestion by decided authority that it cannot recover by such a claim, to consider the matter in any further detail, especially as ASIC has conceded that the first ground of appeal should succeed.

(b) The nature of the proceedings to which the tort relates.

19 There was an issue raised as to the nature of the hearing before ASIC’s delegate and whether that should be regarded as a proceeding rather than merely an administrative decision arrived at in accordance with the provisions of s 837 after a hearing in private. I will return to that matter shortly.

20 There was no dispute that on the present law a claim based upon malicious prosecution does not arise from administrative proceedings. The Associate Justice did not decide otherwise; see at [21]. Rather her Honour held, after an extensive review of the relevant cases in different jurisdictions, that the development of the law in this area “should not be stifled at an interlocutory stage”.

21 The present situation in relation to the scope of the tort of malicious prosecution is evident in the way the first element of the claim was stated in A v State of New South Wales in the first paragraph of the joint judgment:

“(1) that proceedings of the kind to which the tort applies (generally, as in this case, criminal proceedings) were initiated against the plaintiff by the defendant;”

22 True it is that the High Court was relying upon the 1868 edition of Bullen & Leake Precedents of Pleading to identify the elements of the tort but their Honours were intending to state the present position of the law. The Court in that case, as has already been noted, was not concerned with considering that element of the tort and, in particular, whether there remained a limitation on the applicability of the tort to certain proceedings, generally criminal. However the fact that the Court was prepared to adopt it as a correct statement of the first element of the tort, without any comment or caveat but with the inclusion of the words in parenthesis, is not an irrelevant matter.

23 I have been taken at length to the decisions that were considered and analysed in detail by her Honour. But given the issue before the Court it seems to me that the position can be stated briefly. By doing so I do not mean to demean her Honour’s discussion of the history of the tort, her analysis of relevant cases, or her review of the academic criticisms of the present position. But applying as widely as I can the statement of principle set out in paragraph 5 above, it does not permit this Court to indulge in simple speculation about where the law might move in the foreseeable future. It seems to me that there has to be some reasonable prospect, Master Allen described it as a “reasonable possibility”, that, even though the established law did not permit the plaintiff’s action at the present time, there might, within the life of the proceedings, be a change in the law that would give the plaintiff a valid cause of action.

24 I accept that the trial court should be careful not to visit injustice upon a plaintiff who may have suffered significant loss by the actions of the defendant by too readily dismissing a claim. But on the other hand the defendant is entitled not to be vexed by proceedings which have no real prospect of success simply because there is some chance, however remote, that the law might change and provide the plaintiff with a cause of action, where currently there is none, or permit a cause of action to be pursued, where presently it cannot be sustained. With respect to the Associate Justice there does not seem to me to be any reasonable prospect in the foreseeable future, certainly within the life of these proceedings, that the law will change to such a degree as to permit a claim of malicious prosecution to be brought against a decision such as was made by ASIC under the provisions of the Corporations Law, however that decision might be categorised.

25 The Court is here concerned with a common law tort and such a cause of action is developed or refined, subject to legislative intervention, over time as the common law develops in order to meet situations that it needs to address. There is a considerable reliance on policy considerations in the development or refinement of the common law, as can be seen in cases relating to claims for damages based upon personal injury arising from dangerous public places decided before the Civil Liability Act came into force.

26 It is not as if the scope of the tort has been a matter that has been left unexplored and unconsidered since the 3rd edition of Bullen & Leak was published so that the common law may have fallen behind the needs of modern society and is therefore ripe for review. It is a subject that has been specifically considered by one of the highest courts in the common law world as recently as the year 2000. That decision has been applied by an intermediate appellate court in Queensland without the slightest suggestion that the winds of change are mounting to such a degree that a tornado is suddenly to be whipped up over-turning at least a century of established law.

27 If ASIC is to be made liable for compensation for the misuse of its power under the provisions of the Corporations Law, or the statute that replaced it, then the most likely response is for the legislation to provide such a right to the person injured by the misuse of the power. As I have indicated, there are matters of policy arising in considering whether the common law should provide a remedy in such a case and a court in considering that issue would have to take into account the function and duty of ASIC to act quickly to protect the public from possible harm arising from the misconduct of a company operating with a license under its control.

28 The present position stated simply is that the tort of malicious prosecution has never been seen to extend beyond legal proceedings and is generally confined to criminal proceedings and some specific civil proceedings: see Gregory v Portsmouth City Council [2000] 1 AC 419. In that case the House of Lords refused to extend the tort to disciplinary proceedings brought by a local authority against a councillor. The Court of Appeal by majority held that the tort did not apply. The House of Lords unanimously dismissed the appeal. Lord Steyn, who delivered the principal judgment, stated (at 431):

“Given that the tort has never in England been held to extend beyond legal proceedings the proposed development would be a radical reform. Moreover, it is significant that counsel have been unable to find any decided cases in Australia, Canada and New Zealand which extend the tort to disciplinary proceedings. While the modern tort books published in these countries almost universally criticise the rule, or apparent rule, precluding actions for malicious prosecution in civil proceedings, there is no hint of any development of the boundaries of the tort beyond legal proceedings, or any call for such a development: see Fleming pp 673–688, Balkin Law of Torts (2nd edn, 1996) pp 709–723 (Australia)…”

Lord Steyn went so far as to express the view that the tort should not be extended to civil proceedings generally: see at 432.

29 Gregory has been followed in Australia in Beach Club Port Douglas Pty Ltd v Page [2005] QCA 475, [2006] 1 Qd R 307. There McPherson JA stated:

“14 It is different if you are prosecuted without reasonable and probable cause. Then you may have an action for damages for malicious prosecution against your tormentor; but only if the proceedings brought against you are criminal and terminate in your acquittal, and not if they are simply penal, administrative or disciplinary: see Gregory v Portsmouth City Council [2000] 1 AC 419….”

The Associate Judge noted that this statement was obiter . It may have been, but it does not lessen the fact that the Court of Appeal viewed Gregory as a correct statement of the present position as to the inapplicability of the tort to non-legal proceedings.

30 In the more recent decision of Noye v Robbins [2007] WASC 98 EM Heenan J at [228]-[229] expressly rejected the extension of the cause of action beyond legal proceedings. His Honour referred to the decision of the Associate Justice in this matter when reviewing the case law on the subject but seemed unpersuaded that there was any likelihood of a change in the law. His Honour stated:

“[228] In the present case there can be no doubt that the internal police disciplinary proceedings were brought pursuant to a statutory disciplinary regime, which had the force of law under delegated legislation — Police Force Regulations 1979 (WA); or that, if the charges had been made out, Noye would have been subject to significant penalties, including discharge from the Police Force, and the termination of the special office which he held as a member of the Police Force: Attorney-General (New South Wales) v Perpetual Trustee Co Ltd (1955) 92 CLR 113.

[229] Despite this, and the potential for this severe impact and damage which might be suffered by a police officer who was wrongfully subjected to the malicious institution of police disciplinary proceedings, the authorities are, to my mind, clear and uncompromising against the extension of the tort of malicious prosecution to any such situation. It follows that I conclude that that cause of action, as distinct from the claims for injurious falsehood, misfeasance in public office or abuse of process, does not lie in relation to the disciplinary charges laid against Noye.”

31 The analysis by her Honour in the present case relied heavily upon the dissenting judgement of Schiemann LJ in the Court of Appeal in Gregory, a judgment that was emphatically rejected by the House of Lords. Her Honour also considered in some detail the decision in Little v Law Institute of Victoria [1990] VR 257, a case concerned with the scope of the tort in its application to civil proceedings. She also found some suggestion that the law might change in the decision of the High Court in Rich v Australian Investment Commission (2004) 220 CLR 129 on the basis that in some way it blurred the distinction between disciplinary and administrative proceedings, at least where a penalty is involved. With respect, I can see nothing in that decision that touched on the present issue as that case was concerned with the classification of proceedings as either protective or punitive.

32 In my respectful opinion there was no basis for her Honour to conclude, for the purposes of determining the notice of motion, that it was arguable that the tort of malicious prosecution applied to administrative proceedings. The present law is overwhelmingly against that proposition and there is nothing that suggests that the situation might possibly change during the currency of these proceedings if they were allowed to continue.

33 This finding is sufficient to determine the matter and dismiss the appeal so far as the claim based upon malicious prosecution is concerned. However, at the hearing of the appeal an issue arose as to whether the decision made by the ASIC delegate could be considered to be a proceeding, let alone an administrative proceeding, to which malicious prosecution might one day in the foreseeable future apply. This was not a matter to which argument was directed before her Honour.

34 It is sufficient for me to note that I am unpersuaded that the decision made by the delegate of ASIC was a “proceeding” for the purposes of the tort of malicious prosecution. I accept that the traditional concept of a proceedings as the ‘invocation of jurisdiction of the court by process other than a writ’; Herbert Berry Associates Limited v Inland Revenue Commission [1978] 1 All ER 161] or an application by a suitor to a court in its civil jurisdiction for its intervention or action; Cheney v Spooner (1929) 41 CLR 532 at 535–536 has been widened for some purposes to include administrative processes such as the seeking and obtaining of an extradition order; Forrest v Kelly (1991) 32 FCR 558 at 568–569. There are statutes that define the word for the purposes of their provisions very widely.

35 The meaning to be attributed to the word will no doubt depend upon the context in which it is being considered. But I would not conclude for the purposes of considering the scope of the tort of malicious prosecution that a decision made in respect of the company’s licence was a “proceeding” notwithstanding that the company was entitled to have a hearing in relation to the decision and to give evidence before the decision maker. There was no compulsion on the company to attend or to take any action in respect of the decision being made. The legislation gave the company a measure of procedural fairness in relation to the decision because it might affect the company’s rights, but that does not seem to me to convert the hearing into a proceeding to which the tort applied.

(c) Favourable termination of the proceedings

36 Her Honour concluded that it was arguable that the proceedings in the AAT resulted in a favourable determination for the company. This is the fourth of the elements of the tort as her Honour listed them.

37 As the tort generally applies to criminal proceedings, most of the authorities upon the scope of this element of the tort are in terms of the resolution of criminal proceedings in something less than a conviction. The argument proceeded on this issue at the hearing of the appeal by analogy with the outcome of criminal proceedings including conviction and sentence. So the fact that the prosecution resulted in a more lenient sentence on appeal does not mean that the plaintiff enjoyed a favourable termination of the proceedings, even where the offence was found proved but no conviction was recorded: Cameron v James [1945] VLR 113. However a favourable termination will occur regardless of how the prosecution came to an end; whether through acquittal, with the quashing of the indictment, by a nolle prosequi, or the setting aside of the conviction on appeal. The significant fact is that the plaintiff has not been convicted of the offence in respect of which the prosecution was brought: Commonwealth Life Assurance v Smith (1938) 59 CLR 527 at 535.

38 The AAT proceedings concluded in the company having its licence reinstated with the matter being referred back to ASIC to determine the appropriate conditions to which the licence was to be subject. The relevant part of the reasons of the Tribunal has been quoted above. But the AAT made findings that the company “may have breached its licence” and “may not at the time have performed efficiently, honestly, and fairly the duties of the holder of a dealer’s licence….”. For the purposes of the Tribunal it did not have to, or did not see fit to, make findings of fact to the same degree of precision as would be required in criminal proceedings. But these findings, such as they are, did not favour Chapel Road. By analogy with criminal proceedings, the conviction was confirmed but the sentence varied. This would not be an outcome that could support proceedings for malicious prosecution.

39 One of the difficulties in the determination of this issue is that ASIC was exercising a discretion based upon the facts and circumstances relevant at the time of the making of the decision in relation to the licence. It can be seen from the AAT’s reasons that its decision was to a very significant degree based upon the facts and circumstances at the time of the hearing of the appeal. One of the circumstances tending to favour Chapel Road was the very fact that the licence had been revoked and the company had been without it for a period of time. This was seen as fulfilling the deterrent aspect of ASIC’s decision.

40 But the AAT’s decision was not in effect to clear the company of any suggested wrongdoing as if it were being acquitted of the charge brought against it by ASIC. Rather the AAT decided that, as an alternative to taking away the company’s licence, it would have been appropriate for the licence to have been subject to further conditions. The relevant portion of the judgment is:

“Bearing in mind the protective/preventative nature of ASIC’s power, in the Tribunal’s opinion the appropriate course was not to revoke Chapel Road’s licence but to impose appropriate conditions pursuant to s 786(1). Such conditions might have required regular reviews, perhaps six monthly, of Chapel Road’s compliance regime by an external consultant approved by ASIC, over a period of perhaps two years, on the basis of Chapel Road undertaking to implement reasonable recommendations for change made by the consultant and approved by ASIC considered necessary to achieve the required standard of compliance.”

41 The only way in which the proceedings terminated favourably to the company was that, instead of its licence being further suspended or revoked, it received the licence back but on conditions to enforce its compliance with the spirit of the licence. The fact that ASIC chose not to impose any further conditions when the licence came back to it for consideration does not seem to me to matter. At the outcome of the AAT proceedings Chapel Road was, theoretically at least, in a worse position than it had been before ASIC made its decision to revoke the licence.

42 There were a number of allegations made by ASIC to justify the proceedings it took and the decision that was made in relation to the company’s licence. They are set out in a schedule attached to further submissions made on behalf of Chapel Road after the Court reserved its decision on the appeal. The schedule sets out against each allegation what purportedly was the outcome of the appeal in relation to that particular allegation. The schedule indicates that many of the allegations were either “not proven” or “not pressed”. I am willing to act on the schedule although it is not altogether clear to me what was the result of each and every allegation.

43 In this regard Chapel Road relies upon a decision that, for the purposes of the tort, a prosecution results in a favourable termination where only one out of a range of charges was proved: Boaler v Holder (1887) 52 LT 298. It seems to me that this approach is misconceived. I do not believe that it is appropriate to consider each allegation upon which ASIC relied to justify a review of the company’s licence as the equivalent of a separate charge in criminal proceedings for multiple offences. Each of the criminal charges gives rise to a separate prosecution that can terminate in that charge being made out and, if so, in the imposition of a distinct penalty for that offence. It is in such a case understandable that each charge gives rise to a separate proceeding in respect of which the tort of malicious prosecution might apply. In my opinion there is no analogy between multiple criminal prosecutions and multiple allegations relied upon as the basis for a single decision to be made in the exercise of a discretionary power.

44 In any event it cannot in my view be argued that the proceedings before ASIC terminated favourably to the company given the terms of the decision that in effect found that at least some of the allegations brought by ASIC justified some change in the terms of the licence so as to impose more obligations upon the company than previously had been the case.

45 Were it necessary to do so, I would find that her Honour erred in determining that it was arguable that the proceedings brought by ASIC terminated favourably to Chapel Road in a manner sufficient to support a claim for damages based upon malicious prosecution.

46 It follows that in my opinion, but for different reasons than those found by the Associate Justice, that her Honour was right to strike out that part of the statement of claim relying upon the tort of malicious prosecution.

Misfeasance in public office

47 In relation to this cause of action there were two main issues ventilated before her Honour. The first was whether ASIC held a public office. Her Honour held that it did. This is not a matter that was subject to the notice of contention by ASIC or argued before me.

48 The second issue was whether on the pleadings there was an invalid or an unauthorised act by ASIC that would support the cause of action. Her Honour found that there was none. In effect her Honour concluded that ASIC had acted in accordance with the power vested in it by the relevant provisions of the Corporations Law. She found that “[t]here is nothing to suggest that the delegate’s action involved an invalid or unauthorised act”.

49 There was some controversy before me as to the appropriateness of the pleadings in the statement of claim in relation to this cause of action. One problem that has arisen is that her Honour decided the issue on what appears to be a false premise as to fact. The Associate Judge stated:

“98 Chapel Road appeared before the delegate, led evidence in answer to the concerns the subject of the notice and made submissions to the effect that an order should not be made revoking the licence. On 26 April 2001, the delegate rejected Chapel Road’s submissions and made an order revoking the licence [paras 6 & 7 S/C]. Chapel Road was given an opportunity to be heard in accordance with s 837(2) and Chapel Road availed itself of that opportunity.”

50 Her Honour was under the impression that Chapel Road had given evidence at a hearing before the delegate whereas it appears, because of a misunderstanding, the company merely made written submissions upon which ASIC’s delegate determined to revoke the licence. The basis for her Honour’s misapprehension could well be a paragraph of the pleading that occurs on the twelfth page of the statement of claim as follows:

“6 The plaintiff duly appeared at a hearing before the defendant, led evidence in answer to the concerns made the subject of the notice and made submissions to the effect that an order should not be made revoking the licence.”

51 But it seems to me that the simple fact that Chapel Road only made written submissions and did not appear at a hearing before ASIC’s delegate would not without more be sufficient to render the decision of ASIC to revoke the licence invalid or unauthorised. The pleadings are silent as to what the real situation was particularly as to the suggested misunderstanding between ASIC and the company. In any event this aspect of the history of the matter is not pleaded as giving rise to any invalidity in the decision maker or to a knowledge of any invalidity of the decision on the part of ASIC or its delegate. There is no pleading based upon a failure to accord the company procedural fairness or a failure to comply with the requirements of the Corporations Law. On the material in the pleadings there is no arguable case that would support the cause of action based merely upon the conduct of the proceedings leading to the decision to revoke the licence.

52 However, the complaint is not so much that there was a lack of procedural fairness in the nature of the hearing but rather that unfairness arose in the conduct of ASIC leading up to the hearing, and in particular the failure of ASIC to provide an opportunity to meet the case made against the company. As I understand the argument, it would not have mattered had there been a hearing where Chapel Road could have given evidence. The allegation is that ASIC so organised matters that it deprived the company of addressing the allegations by giving it the opportunity to amend its behaviour and alleviate any concern that it was not complying with the conditions of its licence.

53 There is an allegation that ASIC had acted in a manner inconsistent with its function and duty in that it had acted to punish the company rather than to protect the public. In light of the decision of the High Court in Rich, that allegation is no longer pursued.

54 The argument on appeal is that her Honour failed to consider whether there was an arguable case on the basis of the allegations raised in the pleadings to the effect that ASIC had carried out its functions and duties in respect of Chapel Road in bad faith, with the intention of harming the company and that such can be inferred from its conduct prior to the hearing by its delegate and is confirmed by the unreasonableness of the delegate’s findings.

55 The statement of claim relies upon a number of allegations that are set out in that part dealing with the cause of action for malicious prosecution and are in effect referred to and adopted by the pleader for the purpose of that part of the claim relying upon misfeasance in public office. These were summarised, fairly, in the appellant’s written submissions and can be further summarised as follows.

56 The allegations that ASIC commissioned three compliance reports in respect of the company’s business in March 2000, August 2000, and November 2000. It intentionally withheld them from the company until 21 December 2000 being the scheduled hearing date following the issuing of the notice under the Corporations Law. ASIC did not give the company the opportunity to address the allegation of a failure to comply with the conditions of its licence because it was intent on revoking the company’s licence in order to make an example of it.

57 The statement of claim is, with respect, poorly drafted. It is difficult to understand how a pleading could be made to the effect that the company gave evidence at a hearing before ASIC’s delegate when it did not. The pleadings suffer from the fact that much of the statement of claim uses the language of the tort of malicious prosecution even when dealing with the claim for misfeasance in public office. So in respect of a finding by ASIC’s delegate of a breach of a condition of a licence as set out in paragraph 54 of his reasons and a consequential finding that the company was “a perceived threat to the public interest and to public confidence in the securities market”, the statement of claim alleges that ASIC’s delegate knew that his act was invalid and unauthorised on the basis that:

“a person of ordinary prudence and caution in the circumstances in which the defendant was placed would not have drawn any connection between the matters set out in the said paragraph 154 of the said Statement of Facts and the perception of such a threat to the public interest or to public confidence in the securities market, whereupon knowledge that revoking the licence was invalid or unauthorised act should be imputed to the defendant.”

58 As I understand the allegation from the argument before me, it is claimed that the finding made by the delegate as to the threat posed by the company could not reasonably follow upon the finding of the breach of the condition so, the argument runs, it can be inferred from all the circumstances of the actions taken by ASIC, that it and the delegate were motivated by an intention to damage the company by removing its licence knowing that such a step was unwarranted even had the breach of the conditions been made out.

59 Another difficulty is that much of the statement of claim is based upon an assumption that ASIC could not use its power to punish the company but merely to protect the public. Since the decision in Rich many of the allegations in the statement of claim lose any validity they might have had. So in asserting malice for the malicious prosecution claim, the statement of claim states that ASIC intended to harm the company by:

“1. Denying the plaintiff an opportunity to rectify any concerns the defendant may have had in relation to any compliance issues before moving to revoke the licence;

2. making an example of and punish (sic) the plaintiff, as distinct from acting to protect the public by taking steps to ensure compliance by the plaintiff that any requirement of the Securities Law, or the conditions on which the licence was issued, when the duty of the plaintiff as the holder of a Dealers Licence; and

3. causing the plaintiff to go out of the (sic) business.”

Although the matter was not argued before me, I have doubts that it was not legitimately open for ASIC to seek to protect the public by punishing the plaintiff, although a question of degree might arise.

60 It seems to me clear that, with respect, the Associate Justice did not properly deal with the claim for misfeasance in public office. Her Honour thought that it was enough to defeat the claim that ASIC acted within its power under the Corporations Law, having provided the company with a hearing at which it gave evidence. The real basis of the claim, without the matters that are no longer relied upon because of the decision in Rich, is an allegation that ASIC, through its delegate, acted in bad faith, intending to inflict harm on the company by the course of conduct it adopted up to the time of the hearing and resulting in an unreasonable decision of the delegate to revoke Chapel Road’s licence. The allegation is to the effect that ASIC had determined to revoke the licence before the hearing and thereby deprived the company of a chance of meeting the concerns of ASIC and maintaining its licence. Upon that allegation which can be derived from the pleadings, although with some difficulty, an arguable case of misfeasance in public office is made out: Northern Territory v Mengel (1994) 185 CLR 307 at 357 per Brennan J. The allegation was of a lack of procedural fairness, not as a result of any defect in the hearing, but on the basis that the result of the proceedings had been contrived at by ASIC in the manner in which the whole of the investigation and procedure had been conducted and that ASIC acted in the way in order to harm the company by depriving it of its licence so that it could not operate its business.`

61 I am not to be taken as indicating that the case is anything but arguable on the allegations that can be derived from the pleadings. In fact there seems to me to be real difficulties in proving these allegations on the material before me. For example it seems highly unlikely that the appellant could prove, at least from the reasons given by the delegate, that it was not open to him to form the opinion that he did. However I am not dealing with the likelihood of success of the cause of action except in determining that it is not completely hopeless.

62 In light of the failure of the Associate Judge to deal appropriately with the pleadings and upon the arguments that have been put before me in explanation of the allegations, I am of the opinion that the appeal should succeed in part so far as the cause of action for misfeasance in public office is concerned. I believe the appropriate course is to strike out the statement of claim but give leave to Chapel Road to replead the cause of action in misfeasance in public office.

63 I make no order as to costs but the parties have leave to make submissions in writing within 14 days of the date of the judgment as to the order I should make as to costs both before me and the Associate Justice unless such orders can be agreed between the parties.

Orders

64 The appeal is allowed in part. The order of Associate Justice Harrison dismissing the proceedings and the consequential costs order are quashed. The statement of claim is struck out but the appellant has leave to replead the cause of action in misfeasance in public office within 21 days of the date of the judgment.

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06/09/2007	-	Edit error - Paragraph(s) Cover sheet
20/11/2013	-	case title amended - Paragraph(s) coversheet