Custodial Limited and Australian Securities and Investments Commission
[2005] AATA 775
•11 August 2005
CATCHWORDS – MANAGED INVESTMENTS – transition period before prescribed interest scheme required to be registered as a managed investment scheme – application to extend transition period refused – application to extend time to review decision– extension of time refused.
Administrative Appeals Tribunal Act 1975 ss. 29 and 30
Administrative Decisions (Judicial Review) Act 1977 s. 11
Australian Securities and Investment Commission Act 2001 s. 33
Corporations Act 2001 ss. 9, 70, 601EA-601EE, 601FA-601FT, 601GA-601GC, 601HA-601JJ, 601KA-601KE, 601NA-601NG and 601PA-601PC
Corporations Law ss. 9, 66, 92, 1063, 1064, 1065, 1066-1069A, 1070, 1071, 1076E‑1076H, 1076K-1076M, 1076P-1076Y, 1451 and 1454
Freedom of Information Act 1982
Managed Investments Act 1998
Bogaards v McMahon (1988) 80 ALR 342
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Chalk v Commissioner for Superannuation (1994) 50 FCR 150; 33 ALD 420
Chumbairux v Minister for Immigration and Ethnic Affairs (1986) 74 ALR 480
Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission and Others (2000) 203 CLR 194
Comcare v A’Hearn (1993) 119 ALR 85
Commissioner of Taxation v Brown (1999) 99 ATC 4852
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577; 2 ALD 60
Eurovox Pty Ltd v Chief Executive Officer of Customs [2000] FCA 1906
Hoare v Deputy Commissioner of Taxation (Vic) (1987) 14 ALD 476
Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment (1984) 3 FCR 344; 58 ALR 305
Kouflidis v City of Salisbury (1982) 29 SASR 321
Low v Swan Cove Holdings Pty Ltd and City of Subiaco [2003] WASCA 115
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24
R v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd (1979) 144 CLR 45
Re Bell and Australian Telecommunications Commission (1983) 5 ALN N186
Re Bogaards and Commonwealth of Australia (1987) 13 ALD 578
Re Bonavia and Secretary, Department of Social Security (1985) 9 ALD 97
Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634
Re Eurovox Pty Ltd and Chief Executive Officer of Customs (2000) 63 ALD 755; 32 AAR 15
Re Gray and Australian Securities and Investments Commission [2004] AATA 1235
Re Jebb and Repatriation Commission [2005] AATA 470
Re Managed Investments Australia Limited and Australian Securities and Investments Commission [2005] AATA 237
Re Mulheron and Australian Telecommunications Corporation (1991) 23 ALD 309
Re Pepper-Clayton and Australian Telecommunications Commission (1985) 7 ALD 508
Re Price and Official Trustee in Bankruptcy (1998) 49 ALD 785
Re Proctor and Commissioner of Taxation [2005] AATA 389
Re SAQ and Australian Securities and Investment Commission [2005] AATA 553
Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492
Windshuttle v Deputy Commissioner of Taxation (1993) 46 FCR 235; 93 ATC 4992; 27 ATR 88
Zizza v Commissioner of Taxation (1999) 55 ALD 451
DECISION AND REASONS FOR DECISION [2005] AATA 775
ADMINISTRATIVE APPEALS TRIBUNAL )
) V2004/1334
GENERAL ADMINISTRATIVE DIVISION )
custodial limitedRe
Applicant
AndAustralian Securities and InvestmentS Commission
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Date: 11 August 2005
Place: Melbourne
Decision:The Tribunal refuses the applicant’s application to extend the time within which it may apply for review of the respondent’s decision dated 8 July 2004.
S A FORGIE
Deputy President
REASONS FOR DECISION
The respondent, the Australian Securities and Investments Commission (“ASIC”) refused to extend the transition period in respect of a managed investment scheme known as the Hilston Grove Vineyards Project (“Project”). That meant that the Project could no longer be operated under the prescribed interest provisions of the Corporations Law (“Law”) as in force up to 30 June 1998. Custodial Limited (“Custodial”) was the trustee of the Project and the applicant for the extension. It was concerned about the management of the Project and had complained to ASIC about the actions of the Project’s manager, Managed Investments Australia Ltd (“MIAL”). Custodial was a party to proceedings in the Supreme Court of Queensland to which MIAL was also a party.
Custodial did not apply for review of ASIC’s decision within the time permitted by s. 29 of the Administrative Appeals Tribunal Act 1975 (“AAT Act”) and waited until 1 December 2004. Its reason for its delay was that the owner of the land on which the Project was carried out, was applying for an Australian Financial Services licence (“AFSL”). Consideration of its application had been deferred until 17 December 2004. I have decided not to extend the time within which Custodial may apply for the review of ASIC’s decision.
BACKGROUND
Provisions of the Law relating to prescribed interests and unlisted property trusts before 1 July 1998
Chapter 7 of the Law as in force before 1 July 1998, related to the regulation of various aspects of securities. “Securities” was defined in s. 92(1) and included “prescribed interests”. With certain exceptions, a “prescribed interest” was defined to mean a participation interest or, in general terms, a right to participate in a time-sharing scheme.[1] A “participation interest” is also defined. Again subject to certain exceptions and in general terms, a “participation interest” means any right to participate or any interest in:
any profits, assets or realisation of any financial or business undertaking or scheme;
any common enterprise in relation to which the holder of the right or interest is led to expect profits, rent or interest from the efforts of the promoter of the enterprise or a third party; or
any investment contract.[2]
[1] Law, s. 9
[2] Law, s. 9
Subject to modifications made by regulation,[3] Division 5 of Chapter 7 of the Law regulated prescribed interests other than an excluded issue or offer or invitation for subscription or purchase.[4] It restricted, for example, the issue of prescribed interests,[5] provided that they could not be issued without a deed,[6] regulated the content of a deed and provided for its approval and modification[7] and the compilation of certain information relating to prescribed interests and their holders.[8] At the time, an “excluded issue” was defined in s. 66(2). It listed 14 circumstances in which an “… issue or allotment of securities is an excluded issue …”.
[3] Law, s. 1063(2)
[4] Law, s. 1063(1)
[5] Law, s. 1064
[6] Law, s. 1065
[7] Law, ss. 1066-1069A
[8] Law, ss. 1070 and 1071
Division 5A of the Law related to unlisted property trusts. It provided for matters such as the restriction on the redemption of units,[9] the content of the trust deed,[10] and the amendment of entrenched provisions in that trust deed.[11]
[9] Law, ss. 1076E-1076H
[10] Law, ss. 1076K-1076M
[11] Law, ss. 1076P-1076Y
Repeal of provisions relating to prescribed interests and regulation of managed investment schemes
On 1 July 1998, the Managed Investments Act 1998 (“MI Act”) came into operation. It was enacted in response to the recommendations made by the Australian Law Reform Commission and the Companies and Securities Advisory Committee entitled “Collective Investments: Other People’s Money” (“Review”) and the Final Report of the Financial System Enquiry (“Report”). Division 5 of Part 7.12 of the Law had provided for the funds or assets of a scheme to be vested in a trustee and the scheme to be managed on a day-to-day basis by a management company. The Review had been very critical of the perceived confusion of responsibility between the management company and the trustee for the conduct of a scheme’s operations. It had recommended that there be a single scheme operator in relation to each scheme. The Report had also reached the same conclusion. As a result, this was the approach adopted when the MI Act added Chapter 5C to the Law. This is now found in the Corporations Act 2001 (“Act”).
Chapter 5C is concerned with managed investment schemes, which, with certain exceptions, are defined to include:
“(a) a scheme that has the following features:
(i)people contribute money or money’s worth as consideration to acquire rights (interests) to benefits produced by the scheme (whether the rights are actual, prospective or contingent and whether they are enforceable or not);
(ii)any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or benefits consisting of rights or interests in property, for the people (the members) who hold interests in the scheme (whether as contributors to the scheme or as people who have acquired interests from holders);
(iii)the members do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions); or
(b)a time-sharing scheme”.[12]
[12] Act, s. 9
Chapter 5C provides for matters such as the registration of a managed investment scheme,[13] regulation of the responsible entity of a registered scheme and prescription of its duties,[14] the constitution of a managed investment scheme,[15] compliance,[16] members’ rights to withdraw,[17] winding up[18] and deregistration.[19] Of particular relevance in this case is s. 601ED, which provides when a managed investment scheme must be registered under s. 601EB. One of the circumstances in which it must be registered is if it has more than 20 members.[20] If a managed investment scheme is required to be registered, a person must not operate it unless it is registered.[21] If a person does operate such a scheme, ASIC, the person or a member of the scheme may apply to the Court to have the scheme wound up.[22]
[13] Act, ss. 601EA-601EE
[14] Act, ss. 601FA-601FT
[15] Act, ss. 601GA-601GC
[16] Act, ss. 601HA-601JJ
[17] Act, ss. 601KA-601KE
[18] Act, ss. 601NA-601NG
[19] Act, ss. 601PA-601PC
[20] Act, s. 601ED(1)(a)
[21] Act, s. 601ED(5)
[22] Act, s. 601EE
Transitional provisions relating to prescribed interests after 1 July 1998
The MI Act also inserted Division 11 of Part 11.2 into the Law to provide transitional and savings provisions in relation to the introduction of Chapter 5C (“new Law”) and the repeal of Division 5 of Part 7.12 (“old Law”). Section 1454(1) provided, in so far as it is relevant in this case, that Division 11 of Part 11.2 of Chapter 11 applied to interests that were, immediately before 1 July 1998, prescribed interests and that are managed investment schemes as defined in s. 9 of the amended Law. Section 1454(2) provided that, unless an undertaking[23] became a registered scheme, the old Law continued to apply to the interests as well as the undertaking, the trustee or representative and the management company for a period of two years from the commencement of the MI Act. ASIC was given a discretion to extend the two year transition period if “… the undertaking is to be wound up at a fixed time after the 2 years and ASIC thinks it would be unreasonable to require the undertaking to become a registered scheme before being wound up.”[24]
[23] An “undertaking” includes a “… scheme, enterprise, contract or arrangement”: new Law, s. 1451.
[24] new Law, s. 1454(2)
ASIC’s Policy Statement PS 135
On 2 August 1998, ASIC issued Policy Statement PS 135 (“PS 135”) giving guidance on a number of issues arising from the changes effected by the MI Act. Among the issues addressed were the circumstances in which ASIC would
extend the transition period. It stated that relief would be given on a case by case basis and relief would be given:
“… when both the following criteria are satisfied:
(a)the scheme is certain to terminate at a particular time after 30 June 2000 that the approved deed does not allow the parties to the scheme to change;[[25]] and
(b)it would be unreasonable for the scheme to be required to be registered.”[26]
[25] PS 135 at [135.14] states that a “… fixed term scheme is one which is certain to terminate: (a) on a particular calendar date; or (b) by reference to some event certain to happen, that can be determined by reference to an existing agreement between the parties.”
[26] PS 135 at [PS 135.3]
It goes on to provide when ASIC will, and will not, regard the requirement to register such a scheme to be unreasonable.[27] ASIC will not regard it unreasonable for a scheme to be registered unless the scheme is closed. The word “closed” means that interests in the scheme could only be issued after the MI Act commenced:
[27] PS 135 at [PS 135.4] – [PS 135.6]
“(a) under a prospectus which was lodged before the MI Act commenced on 1 July 1998; and
(b)by excluded issues.”[28]
[28] PS 135 at [PS 135.4]. Section 66(2) of the new Law defines an ”excluded issue”: see [4] above.
If a scheme is closed, it is unreasonable for that scheme to be required to be registered when:
“(a) the scheme operator will have limited active management duties after 30 June 2000; or
(b)the scheme will be wound up soon after 30 June 2000.”[29]
[29] PS 135 at [PS 135.5]
It is unreasonable to require a pre 1991 exempt trust that is closed to be registered when:
“(a) the scheme would not have to be registered if it had less than 20 members;
(b)the scheme has less than 100 holders when it applies for the extension;
(c)the scheme’s constitution provides that the scheme must be wound up before 1 July 2010;
(d)all holders of the prescribed interests have been given at least 28 days notice of the intention to apply for the extension and have the right to send a written objection to the operator of the scheme;
(e)the notices include all the information that holders will reasonably require when deciding whether to accept or object to an extension; and
(f)less than 5% of the holders have objected to the extension.”[30]
[30] PS 135 at [PS 135.6]. If s. 1089(12) applies, ASIC does not regard a scheme as a fixed term scheme: PS 135 at [135.15].
ASIC deals separately with property trusts and syndicates.[31] Initially, ASIC would give an extension for up to three years after the standard two year transition period for property trusts or syndicates relying on fixed term relief given under Policy Statement 77 Property trusts and property syndicates [PS 77].[32] Its reason was that:
“These types of schemes have only limited operating functions because the property is held for the duration of the scheme and the income is rent. If the development of the property is not complete when an extension of time is requested, we will not give relief.”[33]
[31] PS 135 at [PS 135.16] and [PS 135.17]
[32] PS 135 at [PS 135.16]. Under the terms of relief under Policy Statement 77, these schemes have a term of 12 years with, if all prescribed interest holders agree, provision for further periods of 12 years. ASIC would only extend the transitional provisions for these schemes if the deed is amended so that the date for winding up the scheme is fixed at a time that is no later than 12 years after the MI Act commenced on 1 July 1998: PS 135 at [PS 135.17].
[33] PS 135 at [135.16]
ASIC will consider extending the transition period for non-mining primary production schemes, film schemes and similar schemes.[34] The reason is:
[34] PS 135 at [PS 135.18] – [PS 135.19]
“… for most of their operation, they are ‘passively’ operated in that the only role of the operator is maintenance and receiving income. We will initially give an extension for up to four years after the standard two year transitional period ends.”[35]
To be eligible for relief, ASIC continued:
“… such schemes need not be wound up by 30 June 2010 or any other particular date. However:
(a)the scheme must be a fixed term scheme; and
(b)the approved deed for the scheme must provide for the scheme to be wound up at a time reflecting the underlying cycle of the business.
If the business venture, when applying for relief, has not entered a phase where only limited management functions are needed, we will not give relief. For example, in the case of a film scheme, the film must be complete and, in the case of a forestry scheme, the trees must have been planted and the plantation set up complete.”[36]
[35] PS 135 at [135.18]
[36] PS 135 at [PS 135.19]
Where a scheme is to be wound up within one year after the standard two year transition period ends, ASIC will extend the transition period. If this extension were not granted, ASIC continued, “… the cost of registering would be unreasonable due to the short period when the managed investments provisions of the Law would give protection.”[37]
Initially, ASIC would only give extensions for specified periods depending on the type of scheme.
[37] PS 135 at [PS 135.20]
PS 135 also set out the principles underlying ASIC’s guidelines. Generally ASIC considered that new investments should not be deprived of the protection of the managed investment provisions of the new Law for longer than the two year transition period:
“… unless this would unreasonably disadvantage a promoter who has incurred significant costs.”[38]
[38] PS 135 at [PS135.9]
Registering a pre 1991 exempt trust is likely to be especially costly because those schemes had not previously been regulated. Normally, ASIC would only give relief to a pre 1991 exempt trust when it is not large. The cost of registering a scheme of a scheme with up to 100 members is likely to be disproportionate to the benefits of registration. Initially, extensions of up to four years would be given.[39]
[39] PS 135 at [PS 135.21]
ASIC stated that it would initially give extensions for specified periods depending on the type of scheme. Initial extensions would be for periods up to four years after the standard two year transition period ends.[40] PS 135.10 then states that:
“Schemes will only be given extensions of the transitional period when it is clear that the cost of registering is disproportionate to the benefits to prescribed interest holders. When deciding whether or not to give relief, we will also consider the future difficulties of continuing to administer the Law as it existed before 1 July 1998.”
[40] PS 135 at [PS 135.7]
ASIC recognised that the costs and benefits of registering a particular scheme may change over time. If an operator of a scheme were to apply for a further extension before the initial extension expires, ASIC said that it would consider whether there was a more appropriate basis for regulating the schemes on an ongoing basis after their extension ends. Unless there is a more appropriate basis, it would give a further extension when the first ended. The further extension may be for a period ending at the fixed time when the scheme is wound up or for some shorter period.[41]
[41] PS 135 at [135.23]
There are instances in which in which it may not be in the best interests of prescribed interest holders for the scheme to be wound up at the fixed time when it was originally due to be wound up. This may occur, for example, if the exigencies of the real property market may mean it is not in the best interests of the holders for scheme property of a property trust or syndicate to be sold at the original fixed time. ASIC would consider giving a further short extension of time in such circumstances if a new fixed time, which is shortly after the original fixed time, is provided in the approved deed.[42]
[42] PS 135 at [135.24]
ASIC’s Policy Statement PS 51
Policy Statement 51 is entitled “Applications for relief” (“PS 51”) and was issued on 17 June 1996. It gives guidance to those who apply to the then Australian Securities Commission (“ASC”), now ASIC, for relief from the Law. It states that the ASIC cannot give relief concerning breaches of provisions of the Law which have already taken place. Generally, ASIC does not have the power to give retrospective relief but s. 70 of the Act is an exception.[43] Clause [51.64] of PS 51 provides that:
“To the extent that the ASC can give relief which is not clearly retrospective but may take away the future consequences of past conduct, its general policy is not to do so. However, the ASC may give relief in those circumstances where:
(a)no mischief has yet occurred; and
(b)the regulatory detriment of the breach is minimal and clearly outweighed by the commercial benefit which would result from the ASC giving the proposed relief.
The ASC’s paramount consideration in exercising its powers in these circumstances is whether anyone has already been adversely affected by the previous breach.”
[43] PS 51 at [PS 51.63]
ASIC Media Release 04/162
On 26 May 2004, ASIC issued a media release: Media Release MR 04/162. It noted that ASIC had allowed passively managed and closed managed investment schemes a longer transition period before they had to become managed investment schemes complying with Chapter 5C of what had been the Law but, since 15 July 2001, had become the Act. It noted that relief it had granted would expire on 30 June 2004. Entities that were affected were listed: non-mining primary production schemes; film schemes; other passively managed schemes; pre-1991 exempt trusts; and other prescribed interest undertakings that have relief extending that regime. Unless ASIC were to extend the transition period beyond 30 June 2004, those schemes would be required to become registered managed investment schemes.
ASIC noted that applications to extend the transition period for a further period to 1 July 2010 had to be made before 30 June 2004. It advised applicants for extension that, if they were to be successful, they would have to:
“1 Provide a written certificate from the management company (or applicant) that:
(a)the relevant prescribed interest scheme is closed and:
(i)in the case of non-mining primary production schemes, film schemes and similar schemes, the scheme is still a fixed-term scheme; the approved deed for the scheme provides that the scheme is to be wound up at a time reflecting the underlying cycle of the business; and the scheme is passively managed;
(ii)in the case of pre-1991 exempt trusts, the scheme has less than 100 members;
(b)the prescribed interest scheme is viable on an ongoing basis, all payments have been made to investors in accordance with the prescribed interest deed, and there is no increase in business activity by the scheme since the granting of the first extension;
(c)an unqualified audit report has been obtained in respect of the scheme;
(d)the scheme is solvent;
(e)there have been no material breaches of the approved deed;
(f)the management company and/or trustee has complied with the terms and conditions of the existing interim relief; and
(g)all members of the scheme have been notified in writing of the application to further extend the transition, and less than 50 holders or 10% by value have objected to the extension.
2.Provide a letter from the approved trustee of the scheme, or a undertaking in support of the application, in which the trustee:
(a)declares and certifies that it reasonably believes the further extension of the transition would be in the best interests of the prescribed interest holders, and is not contrary to the interests of the prescribed interest holders;
(b)confirms that the scheme satisfies the criteria for an extension of the transitional period (as described above); and
(c)certifies that the scheme or undertaking is solvent.”[44]
[44] Book, tab16
The Project
The Project is a primary production investment scheme that was established in 1998 for the business of growing, cultivating and harvesting grapes in order to process and sell grapes and grape juice. It was established by a trust deed dated 12 May 1998 as a scheme offering prescribed interests. The deed was made between Grapes of Australia Management Limited, the management company, and Inteq Custodians Ltd, the trustee. ASIC approved the trust deed on 27 June 1998.
Interests in the Project were first issued under a prospectus dated 28 May 1998 and lodged with ASIC on 5 June 1998. Another prospectus was lodged with ASIC on 22 January 1999 and further interests were issued under it. Investors subscribed to a bundle of 250A class shares in Hillston Grove Vineyards Limited (“HGVL”), which owned a vineyard at Hillston in New South Wales. Each bundle carried with it the right to occupy sufficient land for growing, harvesting and cultivating 150 grape vines. Each investor’s licence to occupy the land was granted to a trustee company which held the licences on trust for those investors. Each investor paid an annual occupancy fee of $300 to the Project as well as a management fee to MIAL. In exchange for the management fee, MIAL carried out management duties including planting, maintaining, harvesting and selling the grapes. The Project’s income gained through the sale of the grapes is distributed to the investors under the deed.
By a deed of retirement and appointment dated 12 October 1999, MIAL became the manager of the Project. ASIC approved that deed on 22 October 1999. By a further deed of retirement and appointment, Custodial became the trustee of the Project by a further deed of retirement and appointment of trustee dated 31 December 2001. ASIC approved that deed on 17 May 2002.
The first extension of the transition period
On 22 June 1999, the solicitors for MIAL asked ASIC to extend the two year transition period so that the Project could remain subject to the old Law. ASIC issued a relief instrument for the Project dated 21 July 1999 after its earlier decision on 25 June 1999 to extend the Project until:
“(a) 30th of June 2004; or
(b)the date upon which an interest in the Scheme, if any, is issued after 30 June 1998, other than:
(i)under a prospectus which was lodged before 1 July 1998; or
(ii)by an excluded issue; or
(c)the date upon which there is a change, if any, to the time by which the scheme is to be wound up, whichever is the earliest.”[45]
[45] Book, tab 12
Appointment of Custodial
For the purposes of this proceeding, I accept that it understood at the time of its appointment that the Project was dormant. Some six months later, it concluded that interests were being issued in the Project that were outside both the managed investment regimen and the prescribed interests regimen. In April 2003, it lodged a complaint with ASIC and supported it with documentation.
Proceedings involving MIAL
On 23 July 2003, HGVL and MIAL commenced proceedings against Custodial in the Supreme Court of Queensland. I do not have documents specifying the basis of those proceedings apart from an affidavit by Mr Rodney Harold Jellyman, the Managing Director both HGVL and MIAL.[46] I note that Deputy President Muller referred to an affidavit of Mr Jellyman lodged in the proceedings in the Tribunal before him.[47] Mr Jellyman had deposed that HGVL and MIAL had brought their proceedings for false and misleading statements made in Custodial’s report to investors in the Project for the years ending 30 June 2001 and 2002.
[46] Book, tab 2
[47] Re Managed Investments Australia Limited and Australian Securities and Investments Commission [2005] AATA 237
Section 1065(2) of the old Law provided that the ASC might direct that an approved deed continue to be an approved deed. On 14 August 2003, MIAL applied under that provision for approval for the deed to continue as an approved deed without trustee or representative.
On 9 September 2003, ASIC issued a notice to MIAL under s. 33 of the Australian Securities and Investments Commission Act 2001 requiring copies of certain documents. Those documents included applications for interests in the Project bearing dates in 2001 and 2002.
On 19 September 2003, MIAL’s solicitors applied under s. 1454(2) of the new Law asking ASIC to extend the transition period to give its approval under s. 1065(2) for the Project to continue as an approved deed in the absence of an approved trustee.[48] On 3 October 2003, ASIC advised MIAL’s solicitors that it had decided to refuse the application because:
(a)the transition period had ceased;
(b)therefore, ASIC did not have any power to approve the Deed to continue under s. 1065(2) of the Law;
(c)ASIC did not have the power under the old Law to extend the transition period;
(d)the respondent did not consider that it would be within the scope of the policy guidelines to amend the instrument dated 22 July 1999; and
(e)the application demonstrated no special circumstances that would justify a departure from policy.
[48] Book, tab 2
MIAL applied to the Tribunal for review of ASIC’s decision. It did so on 28 October 2003. One of the issues was whether the transition period should have been further extended to 2010.
On 22 November 2003, Custodial filed a Defence and Counterclaim in the proceedings in the Supreme Court of Queensland.[49]
[49] Affidavit of Mr Jellyman: Book, tab 2
Proceedings involving or of concern to Custodial
On 10 June 2004[50] and then again on 29 June 2004,[51] Custodial applied to ASIC for a further extension of the transition period for the Project. In its first letter, it sought a temporary extension to permit ASIC to investigate its allegations that the Manager had committed serious breaches of its duties. Custodial saw itself as being appointed interim manager. It would report to ASIC with its recommendations as to how the Project should be “regularised”, a transition made to its being a managed investment scheme and the members’ electing a suitable and qualified Responsible Entity/Manager. In its second letter, Custodial gave further details including that the Project is not closed but is for a fixed term and is not passively managed. While Custodial was solvent, the Project might not be and there had been material breaches of the Trust Deed.
[50] Book, tab 10
[51] Book, tab 8
ASIC refused Custodial’s application to extend the transition period on the basis that the circumstances of the Project did not come within its guidelines. Its decision was dated 8 July 2004[52] and was received by Custodial on 13 July 2004.
[52] Book, tab 7
In a letter dated 26 August 2004, ASIC told Custodial about MIAL’s application to the Tribunal. It did so in the context of advising Custodial that it would give MIAL the application it, Custodial, had lodged to relieve the Project from the requirement to register as a managed investment scheme as well as its decision dated 8 July 2004.[53] In a letter dated 31 August 2004, Custodial asked ASIC for further details about the Tribunal’s proceedings.[54] It noted that it had been trying to protect the scheme property and the interests of growers and investors but that the manager had ceased all communications with it. If ASIC were unable or unwilling to give details, Custodial advised that it might request the information under the Freedom of Information Act 1982.
[53] Book, tab 6
[54] Book, tab 5
ASIC responded on 6 September 2004 giving details of MIAL’s two applications and of its decisions on those applications.[55] It also advised that, in making the decisions, ASIC had taken the view that the transition period had ended because interests had been issued in the Project under a prospectus dated 22 January 1999 and, after the expiration of that prospectus, in circumstances that did not constitute an “excluded issue” within the meaning of s. 66(2) of the old Law. MIAL had lodged its application for review in the Tribunal on 29 October 2003 and it would be heard in Brisbane on 17 September 2004.
[55] Book, tab 4
In an application dated 26 November 2004, Custodial applied to the Tribunal on 1 December 2004 for review of ASIC’s decision. The basis of its application was that:
“The Trustee was not made aware of the current landowning companies [sic] attempts to obtain an FSR Licence. This issue has been referred to a Delegate for consideration and this too has been deferred after 17/12/04.”[56]
[56] Book, tab 2
HGVL’s application for an Australian Financial Services licence
HGVL applied for an AFSL. In a letter dated 6 July 2004, ASIC advised Custodial that HGVL’s application was being considered and that its licensing section had been advised of Custodial’s concerns. ASIC refused HGVL’s application. In a letter dated 25 October 2004, Custodial advised HGVL and MIAL that it had provided ASIC with appropriate information as well as with the names of three prospective entities which had relevant licences so that it, the trustee, could assist in the transition to a managed investment scheme if the investors were to resolve to take that course rather than wind up the scheme.[57]
[57] Material provided by Custodial by facsimile on 18 February 2005
HGVL’s application was refused by ASIC, which was asked to review its decision. ASIC did so but advised Custodial in a letter dated 22 September 2004 that it had deferred the review until 17 December 2004. The deferral had come about because of the proceedings in the Tribunal regarding “… a separate decision … which has common grounds with bases for the licensing application hearing.”[58] ASIC gave Custodial the opportunity to make submissions before it made its decision on HGVL’s application for review. It did so in a letter dated 14 December 2004 and Custodial responded on 21 December 2004. Custodial acknowledged that it did not have new material to give to ASIC but referred to material already held by ASIC. It questioned HGVL’s suitability to deal with public funds and the suitability of MIAL and HGVL to be granted an AFSL.
[58] Letter from ASIC to Custodial dated 22 September 2004: Material provided by Custodial by facsimile on 18 February 2005
Deputy President Muller’s decision
Deputy President Muller gave his decision on MIAL’s application in the Tribunal on 18 March 2005.[59] He concluded that MIAL’s breaches of the legislation were serious and outweighed the commercial benefit, if any, which would result from extending the transition period.[60] He refused to extend it and affirmed ASIC’s decision not to do so.
CONSIDERATION
[59] Re Managed Investments Australia Limited and Australian Securities and Investments Commission [2005] AATA 237
[60] [2005] AATA 237 at [60]
The principles that guide my decision
In considering the manner in which the discretion to grant an extension should be exercised, regard is traditionally paid to the principles set out by Wilcox J in Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment.[61] In that case Wilcox J considered an application for extension of time pursuant to s. 11 of the Administrative Decisions (Judicial Review) Act 1977 (“ADJR Act”). After noting that s. 11 does not set out any criteria to be followed in exercising the Court’s discretion and noting that there had been a number of decisions of judges of the Federal Court all sitting at first instance, he said, in part:
“... I venture to suggest that from them may be distilled the following principles to guide, not in any exhaustive manner, the exercise of the court’s discretion:
(a) Although the section does not, in terms, place any onus of proof upon an applicant for extension, an application has to be made. Special circumstances need not be shown, but the court will not grant the application unless positively satisfied that it is proper so to do. The ‘prescribed method’ of 28 days is not to be ignored …: Ralkon v Aboriginal Development Commission (1982) 43 ALR 535 at 550. Indeed it is the prima facie rule that proceedings commenced outside that period will not be entertained: Lucic v Nolan (1982) 45 ALR 411 at 416. It is a pre-condition to the exercise of discretion in his favour that the applicant for extension show an ‘acceptable explanation of the delay’ and that it is ‘fair and equitable in the circumstances’ to extend time: Duff v Freijah (1982) 43 ALR 479 at 485; Chapman v Reilly (Neaves J, 9 December 1983, unreported, at p7).
(b) Action taken by the applicant, other than by making an application for review under the Act, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished. A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision-maker aware that he contests the finality of the decision (who has not ‘rested on his rights’: per Fisher J in Doyle v Chief of General Staff (1982) 42 ALR 283 at 287) and a case where the decision-maker was allowed to believe that the matter was finally concluded. Compare Doyle, Chapman, Ralkon, and Douglas v Allen (Morling J, 3 April 1984, unreported, at p18 of the transcript) with Lucic at 414–5 and Hickey v Australian Telecommunications Commission (1983) 47 ALR 517 at 519. The reasons for this distinction are not only the ‘need for finality in disputes’ (see Lucic at 410) but also the ‘fading from memory’ problem referred to in Wedesweiller v Cole (1983) 47 ALR 528.
(c) Any prejudice to the respondent, including any prejudice in defending the proceedings occasioned by the delay, is a material factor militating against the grant of an extension: see Doyle at p287; Duff at pp484–5; Hickey at pp525–7 and Wedesweiller at pp533–4.
(d) However, the mere absence of prejudice is not enough to justify the grant of an extension: Douglas at p18; Lucic at p416; Hickey at p523. In this context, public considerations often intrude: Lucic, Hickey. A delay which may result, if the application is successful, in the unsettling of other people (Ralkon at p550; Becerra v Fowell (Morling J, 18 February 1983, unreported, at 12– 13)) or of established practices (Douglas at 19) is likely to prove fatal to the application.
(e) The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted: Lucic at p417; Chapman at p6.
(f) Considerations of fairness as between the applicants and other persons otherwise in a like position are relevant to the manner of exercise of the court’s discretion: Wedesweiller at pp534–5.”[62]
[61] (1984) 3 FCR 344; 58 ALR 305
[62] (1984) 3 FCR 344; 58 ALR 305 at 348-349; 310-311
The Hunter Valley case has since been cited with approval and applied by the Federal Court in relation to applications for judicial review under the ADJR Act e.g. Burchett J in Chumbairux v Minister for Immigration and Ethnic Affairs[63] and Northrop J in Hoare v Deputy Commissioner of Taxation (Vic).[64] It has also been followed in reported decisions of this tribunal such as Re Bonavia and Secretary, Department of Social Security,[65] Re Bogaards and Commonwealth of Australia[66] and Re Mulheron and Australian Telecommunications Corporation.[67] Similar principles were applied by Mr R K Todd, Deputy President, in the case of Re Bell and Australian Telecommunications Commission,[68] which pre-dated the decision in Hunter Valley, and in Re Pepper-Clayton and Australian Telecommunications Commission,[69] which post-dated it but made no reference to it.
[63] (1986) 74 ALR 480
[64] (1987) 14 ALD 476
[65] (1985) 9 ALD 97
[66] (1987) 13 ALD 578
[67] (1991) 23 ALD 309 at 314
[68] (1983) 5 ALN N186
[69] (1985) 7 ALD 508
The Federal Court has also expanded upon the principles in subsequent cases. In Windshuttle v Deputy Commissioner of Taxation,[70] von Doussa J considered an appeal from the Tribunal’s decision to refuse to extend the time within which Mrs Windshuttle might seek review of an objection decision on her objection to her taxation assessment. The Tribunal had held that:
“Turning now to any prejudice which may be caused to the respondent were I to grant the application, I am unable to find any. The area of dispute between the parties is documented and is not particularly dependant upon memories which may fail over time. On the evidence I have, I find that the Commissioner was not aware that the assessment was disputed after judgement was entered in September 1991 until action was taken to have the judgement set aside in December 1991 but I am satisfied that he was not prejudiced in this regard or by subsequent delays.”
Von Doussa J said:
[72]“The kind of prejudice which is relevant is prejudice that could arise to the opposing party in properly and fairly dealing with the subject matter of the dispute that will require determination if the extension of time is granted. Relevant matters will be whether witnesses have disappeared or their recollections have faded (provided of course that the evidence of the witnesses would have been material: Ulowski v Miller (1968) SASR 277 at 283-284 and cannot be refreshed Wedesweiller and Others v Cole and Others (1983) 47 ALR 528 at 534); whether avenues of useful enquiry have dried up or become difficult to pursue; and whether material documents have been destroyed. In a case like the present it may be open to the party potentially entitled to recover money to establish that by reason of the delay, the financial resources of the applicant have so altered for the worse that the chance of recovery of whatever sum is ultimately found to be due has seriously diminished. But as Bray CJ observed in Ulowski v Miller, at 284 and also in Victa Limited v Johnson (1975) 10 SASR 496 at 504, a court (or tribunal) should be slow to infer something to the existence of which the party asserting it is unwilling to depose. So, if a party against whom an extension of time is sought, intends to oppose that extension on the ground of prejudice, that party should adduce evidence which shows the nature and extent of that prejudice. In the present case no cause for prejudice beyond those matters listed above was asserted or deposed to.”
[70] (1993) 46 FCR 235; 93 ATC 4992; 27 ATR 88
In Windshuttle, von Doussa J also expanded upon what Wilcox J meant by taking proper account of the substantial merits of the case:
“The issue which the AAT was required to consider was whether, for the purposes of the exercise of the discretion under s 188A [of the Income Tax Assessment Act 1936], the applicant's case had prospects of success, and what those prospects were. It is sufficient for that purpose, if the parties chose to so argue their case, to merely identify the factual assertions which the applicant made in the objection, and then to consider whether the application of the law to those assertions would bring about the result for which the applicant contends. In other words the assertions can, if the parties so choose, be treated as pleadings are treated where an application is made to strike out an action on the ground that the pleadings disclose no cause of action. On an application of that kind the true existence of the facts alleged in the pleadings is not explored by evidence. That is left for the trial if there is an arguable case on the pleadings. It would, of course, have been open before the AAT for the Commissioner to attack the history of the transaction asserted by the applicant. If it could have been demonstrated that an essential part of that history was wrong, that would go directly to the prospects of success to the objection. However the Commissioner chose not to [attack] the veracity of the facts alleged by the applicant, and this is understandable having regard to judicial pronouncements to the effect that where the issue is whether leave should be given to extend time it is inappropriate for the tribunal concerned to embark on a full scale trial of the merits of the underlying question which will be agitated only if time is extended. See Barrett v Minister for Immigration, Local Government and Ethnic Affairs (1989) 18 ALD 129 at 130, Repatriation Commission v Tuite (1992) 37 FCR 571 at 577. It would not be appropriate on an application to extend time to seek to attack the facts alleged on the ground that the credit of the applicant, or that of supporting witnesses, should not be accepted. Arguments of that kind are best left for later consideration if and when an extension of time is granted. Only where there is some obvious and easily demonstrated flaw in the applicant's case would it be appropriate to challenge the factual basis for the asserted claim on an application to extend time.”[73]
[73] (1993) 46 FCR 251; 93 ATC 4992; 27 ATR 88 at 243-244; 4999 and 95 and approved by Commissioner of Taxation v Brown (1999) 99 ATC 4852 at 4856 per Drummond, Sackville and Hely JJ
In Commissioner of Taxation v Brown[74] Drummond, Sackville and Hely JJ summarised the essential principles in considering the substantial merits of the application:
“ It is important to appreciate the limits of the Commissioner's argument. Mr Bevan, who appeared with Mr Iuliano for the Commissioner, explicitly (and properly) made the following concessions:
(i) In determining whether a taxpayer seeking an extension of time in which to lodge an objection has prospects of success, the test to be applied is whether the objection arguably has merit.
(ii) The arguable merits test requires the taxpayer's case to be assessed at its highest.
(iii) It follows that, in applying the arguable merits test, findings of credit have no place. In other words, it is an error of law for the AAT to decide that the taxpayer’s objection has no arguable merits on the basis that the taxpayer's evidence is not worthy of belief.(iv) Ordinarily, it is inappropriate for the AAT to permit or to engage in cross-examination of the taxpayer’s witnesses with the view to testing the veracity of their evidence so far as the merits of the objection were concerned. Mr Bevan specifically conceded that it was ‘inappropriate’ for the AAT Member to have cross-examined the taxpayer as to the truth of his claim that the unit was an unsolicited gift offered by Mr Ray.”[75][74] (1999) 99 ATC 4852
[75] (1999) 99 ATC 4852 at 4858
In applying the guidelines set out in the Hunter Valley case, I have also kept in mind that it was stated in that case and has been consistently stated in decisions of the Federal Court since that they are not exhaustive. The Full Court of the Federal Court has also said that there is no precondition that there must be an acceptable explanation of the delay before an application for an extension of time can be successful. While there is no pre-condition it is, however, to be expected that such an explanation will normally be given as a relevant matter to be considered.[76] Where that explanation involves delays by a solicitor, those delays are not visited upon the client.[77]
[76] Comcare v A’Hearn (1993) 119 ALR 85 at 88
[77] Comcare v A’Hearn (1993) 119 ALR 85 at 88
In Chalk v Commissioner for Superannuation,[78] Davies J, with whom Black CJ agreed, went beyond a description of particular factors to which regard should be had to an explanation of, as it were, the spirit in which an application for extension should be approached. He said:
“ Most provisions which authorise an extension of time are instances of beneficial legislation which, accordingly, should be applied beneficially. With respect to such discretions in rules of court, Reynolds, Hutley and Bowen JJA said, in Outboard Marine Australia Pty Ltd v. Byrnes: Bauknecht [1974] 1 NSWLR 27 at 30:-
‘We appreciate that the rules of court, particularly those relating to time, should never be allowed to be an instrument of tyranny. They do, however, have purposes, one of which is that the parties may know where they stand and regulate their affairs accordingly. It is also appreciated that where genuine issues ought to be litigated, if such can be done with fairness to all concerned, it is appropriate to take a benign view of applications to extend time.’
Those remarks indicate the importance of forming a view as to whether it is in the interests of justice that time be extended.”[79]
[78] (1994) 50 FCR 150; 33 ALD 420
[79] (1994) 50 FCR 150; 33 ALD 420 at 155; 425
Similar sentiments were expressed by McHugh J in the High Court in Brisbane South Regional Health Authority v Taylor:[80]
“Even where the cause of action relates to personal injuries …, it will be often just as unfair to make the shareholders, ratepayers or taxpayers of today ultimately liable for a wrong of the distant past, as it is to refuse a plaintiff the right to reinstate a spent action arising from that wrong. The final rationale for limitation periods is that the public interest requires that disputes be settled as quickly as possible …
In enacting limitation periods, legislatures have regard to all these rationales. A limitation period should not be seen therefore as an arbitrary cut off point unrelated to the demands of justice or the general welfare of society. It represents the legislature's judgment that the welfare of society is best served by causes of action being litigated within the limitation period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated. Against this background, I do not see any warrant for treating provisions that provide for an extension of time for commencing an action as having a standing equal to or greater than those provisions that enact limitation periods. A limitation provision is the general rule; an extension provision is the exception to it. The extension provision is a legislative recognition that general conceptions of what justice requires in particular categories of cases may sometimes be overridden by the facts of an individual case. The purpose of a provision such as s 31 is ‘to eliminate the injustice a prospective plaintiff might suffer by reason of the imposition of a rigid time limit within which an action was to be commenced.’ (35)[[81]] But whether injustice has occurred must be evaluated by reference to the rationales of the limitation period that has barred the action. The discretion to extend should therefore be seen as requiring the applicant to show that his or her case is a justifiable exception to the rule that the welfare of the State is best served by the limitation period in question. Accordingly, when an applicant seeks an extension of time to commence an action after a limitation period has expired, he or she has the positive burden of demonstrating that the justice of the case requires that extension.”[82]
[80] (1996) 186 CLR 541
[81] Sola Optical Australia Pty Ltd v Mills (1987) 163 CLR 628 at 635
[82] (1996) 186 CLR 541 at 553-554
Should I extend the time in this case?
I have only limited evidence and it has not been the subject of cross‑examination. With that limitation in mind, I accept that Custodial has acted with the best interests of the investors in the Project in mind. It has been concerned about the way in which MIAL and HGVL have conducted themselves in the management of the Project and its assets. Custodial has reported its concerns to ASIC which, in turn, has conducted itself as it thought appropriate. MIAL and HGVL have also taken their own views as to the actions of Custodial. I am not able to draw any conclusions as to who is right and who is wrong and it is not appropriate that I do so.
I also accept for the purposes of this matter that Custodial wishes to extend the two year transition period to enable the transition of the scheme from a prescribed interests scheme to a managed investment scheme. It believes that to do so is in the best interests of the investors; to wind up the Project and take no action against the directors is not as it would lead to the Project’s assets vesting in HGVL.
I also accept that Custodial first knew that it could apply to the Tribunal for review of the decision in July 2004. It did not do so at that time because it was involved in legal proceedings in the Supreme Court of Queensland. Custodial believed that ASIC would vest the Project’s property in it as trustee. At the time, Custodial was not aware that MIAL and HGVL had applied to ASIC for an AFSL. It did not find out about it until August 2004. At the same time, it found out from ASIC’s letter dated 26 August 2004 that there was a proceeding relating to the Project in the Tribunal. The letter did not give any details about what the proceedings were about but ASIC’s letter dated 6 September 2004 did let Custodial know that the Tribunal would review, among others, ASIC’s decision to refuse to extend the transition period.
This was only a very short period before the Tribunal heard MIAL’s application on 17 September 2004. Despite that, it could have applied under s. 30(1)(d) of the AAT Act to be joined as a party to the proceeding.[83] I considered the position of the party joined in Re Eurovox Pty Ltd and Chief Executive Officer of Customs.[84] In my view, a party joined to an application may lead evidence and cross-examine witnesses as well as make submissions regarding the decision under review. The Tribunal’s decision on review does not affect any decision made in respect of the party joined, as opposed to the applicant for review, and in respect of which he or she has not lodged a separate application. Therefore, being joined could not lead to the Tribunal’s reviewing ASIC’s decision to refuse Custodial’s application to extend the transition period. It could, lead to Custodial’s being permitted to put forward its case as to why the transition period should be extended.
[83] Any person whose interests are affected by the decision may apply in writing to be made a party. Once it has decided that the person’s interests are affected, the Tribunal has a discretion whether or not to allow joinder. Matters that will be taken into account include whether or not the applicant has been dilatory in making the application and whether or not the expeditious resolution of the application will be impeded. See, for example, Re Price and Official Trustee in Bankruptcy (1998) 49 ALD 785.
[84] (2000) 63 ALD 755; 32 AAR 15 (appeal dismissed in Eurovox Pty Ltd v Chief Executive Officer of Customs [2000] FCA 1906).
As it turned out, Custodial did not apply to be made a party to the proceedings in relation to MIAL’s application. I have not been given reasons for this and they must necessarily remain a matter for conjecture. They may have been tied up with its reasons for not seeking review of ASIC’s refusal of its own application. I have set out those reasons above: it was involved in legal proceedings in the Supreme Court of Queensland and it believed that ASIC would vest the Project’s property in it as trustee.
Whatever its reasons, the fact that Custodial did not apply to be a party to the earlier Tribunal proceedings is important. The Tribunal was called upon to review what is essentially the same decision as that of which Custodial now seeks review. That decision was the extension of the transition period. Approving or refusing an extension would not give to or take away from MIAL any right. The same applied to Custodial. Extension of the transition period was a matter that affected the Project whether MIAL, Custodial or some other person had applied for it. After all, s. 1454(2) of the new Law gave ASIC a discretion to extend the two year transition period if “… the undertaking is to be wound up at a fixed time after the 2 years and ASIC thinks it would be unreasonable to require the undertaking to become a registered scheme before being wound up.” What is unreasonable is not affected by the character and qualities of the applicant for the extension. Custodial permitted the Tribunal to decide that question without the benefit of its putting its point of view.
Custodial has, in effect, permitted two opportunities to take part in a review ASIC’s decision to refuse to extend the transition period to pass it by. It permitted a little over three months to pass before it sought review of ASIC’s decision to refuse its own application. It did not take part in MIAL’s review of ASIC’s decision refusing its application. Its reasons for delaying lodgement of its own application in the Tribunal were tactical. While it is understandable that Custodial’s energies were directed to the Supreme Court proceedings, it seems that it also made a decision based on its view that ASIC would vest the Project’s property in it as trustee.
Custodial’s failure to take any action in relation to the previous Tribunal proceedings despite ASIC’s advising it of them suggested to ASIC and any other interested party that Custodial had accepted the decision. This suggestion was reinforced by its having failed earlier to lodge its own application to review ASIC’s decision in relation to its own application. Custodial had continued to make ASIC aware that it was not happy with MIAL’s actions and that it was concerned about the investors in the Project.
There is no suggestion in the material that I have that ASIC would suffer any prejudice in the sense of collating relevant material or witnesses. ASIC, though, is being asked to take part in the review of a decision that it has only recently “defended” in the Tribunal. Had Custodial applied for review within time it is conceivable that the proceedings could have been joined with those lodged by MIAL as there were common issues. As it is, Deputy President Muller has heard and decided MIAL’s application and decided not to extend the transition period. Another Tribunal would not be bound by his findings of fact or his conclusions but it would be costly for ASIC, in effect, to repeat its preparation and presentation of its case. There is no suggestion that there is any new evidence or argument that was not presented to Deputy President Muller. If I were to grant Custodial an extension of the time to lodge its application, in the absence of new evidence or some other persuasive reason justifying my doing so, it would unsettle what the Tribunal has already determined.
That brings me to the merits of the case. There is no question that ASIC may extend the transition period even though it has well and truly ended in relation to the Project. That follows from s. 70 of the Act, which provides that:
“Where this Act confers power to extend the period for doing an act, an application for the exercise of the power may be made, and the power may be exercised, even if the period, or the period as last extended, as the case requires, has ended.”
There seems to be no question between the parties that the transition period ended with the issue of further interests issued under the prospectus lodged with ASIC on 22 January 1999. There was no evidence that it was an excluded issue under s. 66(2) of the old Law. The issue occurred well before 30 June 2004 which would otherwise have been the date marking the end of the transition period according to the terms of ASIC’s determination to extend it. As the transition period no longer applied to it, the Act required the Project to be registered as a managed investment scheme. Extension, whether by ASIC or by the Tribunal exercising the same powers and discretions, does not correct any error or relieve a person who has breached any duty or failed to fulfil any obligation that occurred before that extension was given. I refer to my discussion of this issue in Re SAQ and Australian Securities and Investment Commission[85] and the cases to which I referred.[86] The consequence for the Project is that, if I were to decided that the transition period were to be extended again, any breach of, for example, s. 601ED relating to the operation of a managed investment scheme without its being registered, would not be nullified.
[85] [2005] AATA 553 at [134]-[136]
[86] Kouflidis v City of Salisbury (1982) 29 SASR 321 at 323; Low v Swan Cove Holdings Pty Ltd and City of Subiaco [2003] WASCA 115 at [181] and see generally the analysis of the issue at [172]-[181]
What are the merits of Custodial’s case that the transition period should be extended in relation to the Project? As I have mentioned, Deputy President Muller has decided this very issue in relation to the Project. There are various cases considering estoppel and like doctrines but it is important to distinguish the various situations with which they are concerned.[87] I am concerned only with the situation in which a differently constituted tribunal hearing a matter brought by a different applicant has reviewed a decision that has been made by the same respondent, in the same terms and affecting the same Project as the decision that I must review. The courts have generally not found it necessary to decide this question[88] but, in so far as they have, it is clear that the decisions of statutory tribunals not exercising judicial power may create estoppels.[89] What is also clear is that, if the doctrine of estoppel applies, it finally determines a question between the parties but does not determine that question, even if it is in the very same terms, between different parties. In that case, Deputy President Muller’s decision does not determine the decision that the Tribunal would reach were it to review ASIC’s decision to refuse Custodial’s application for an extension of the transition period.
[87] Deputy President Jarvis canvassed some of these in Re Jebb and Repatriation Commission [2005] AATA 470 and I have in Re Proctor and Commissioner of Taxation [2005] AATA 389.
[88] e.g. Bogaards v McMahon (1988) 80 ALR 342 at 351 per Pincus J
[89] Bogaards v McMahon (1988) 80 ALR 342 st 350
In considering the merits of Custodial’s case, I have had regard to the guidelines issued by ASIC in PS 135 and PS 51. The limits of ASIC’s power to make guidelines are determined by reference to “… the subject matter, scope and purpose of the statute …”.[90] That may mean that the latitude of the discretion is considerable[91] but it depends on the latitude of the subject matter, scope and purpose of the Act. ASIC is free to adopt a policy to guide it in the exercise of its discretion provided its policy is consistent with the Act[92] and does not require it to take irrelevant circumstances into account.[93] A policy “… must leave … [the decision-maker] free to consider the unique circumstances of each case … [It] does not control the making of decisions … [but] is informative of the standards and values which a … [decision maker] usually applies. …”.[94]
[90] Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 40 per Mason J. See also R v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd (1979) 144 CLR 45 at 49 per Stephen, Mason, Murphy, Aickin and Wilson JJ citing with approval Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505.
[91] Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission and Others (2000) 203 CLR 194 at 205 and see also Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577; 2 ALD 60 at 590; 70 per Bowen CJ and Deane J and 602; 80 per Smithers J
[92] Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634 at 640 per Brennan J
[93] Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) at (1979) 2 ALD 634 at 641
[94] Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) at 641 and see also the general discussion of the principles by Mr SC Fisher, Member, in Re Gray and Australian Securities and Investments Commission [2004] AATA 1235
The Act does not provide that either ASIC’s delegates or the Tribunal is bound by those guidelines. They do not purport to fetter the discretion and are consistent with both the provisions of the Law or Act to which they relate and with the principles underpinning those provisions. With regard to the principles, these are clear from the Law or Act but are spelled out in the Explanatory Memorandum to the MI Act introducing them. Parliament clearly intended that there be a move from divided responsibility between a trustee and a management company to single responsibility vested in a responsible entity. In that way, responsibility clearly lies at the feet of one entity and the chances of that entity’s dissipating responsibility are significantly reduced. Parliament clearly intended that schemes move to the new situation with some expedition but, in allowing a transition period and the opportunity to extend that period, recognised that a rapid move, or a move at all, was not always reasonable. The Explanatory Memorandum gave fixed term schemes that were no longer issuing further interests as an example of schemes which it would be unreasonable to register as a managed investment scheme.[95] This is consistent with PS 135 or, more importantly, PS 135 is consistent with the principles underpinning the Act.
[95] Explanatory Memorandum, Proposed Division 12 of Part 11.2, cl. 2
In this case, the Project is not, on the material that I have been given, a fixed term scheme and nor is it closed. Indeed, the very fact that it issued new interests under a prospectus lodged with ASIC on 22 January 1999 making it clearly an open scheme was the reason for its extension of the transition period coming to an abrupt halt. Given its nature, the Project cannot be passively managed and continue to operate for a vineyard requires constant attention. Putting it in its kindest light, there is friction between Custodial and MIAL and it would appear that there is some tension between Custodial and HGVL. Custodial’s position is that it is concerned about the investors. At the same time, the Project has been left in a position in which it had, at the time of Custodial’s application for an extension in December 2004, been operating as an unregistered managed investment scheme for somewhere approaching five years. Custodial wants an extension of the transition period so that the Project’s situation may be “regularised”. Given the friction and the lack of any progress towards regularisation in the last five or so years, though, there is no reason to think that there will be any further progress in the immediate future. Taking all of these matters into account, I satisfied that Custodial does not have a strong case.
The final matter to which I should have regard in this case is whether it is in the interests of justice that time be extended. I do not think that it is. The essential issues have already been heard and determined in circumstances in which Custodial could have played a part and put forward its views. It chose not to just as it chose not to apply for review of the decision within the allotted time. The merits of its case are not strong and ASIC would be required to incur significant cost were I to extend the time. In all the circumstances, I do think it appropriate to do so.
For the reasons I have given, I refuse the applicant’s application to extend the time within which it may apply for review of the respondent’s decision dated 8 July 2004.
I certify that the sixty-six preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: ...............................................................
Nathaniel Wills Associate
Date of Extension of Time Hearing 17 February 2005
Date of Decision 11 August 2005
For the Applicant Mr I. Bond
C/- Custodial Limited
Counsel for the Respondent Mr R. Knowles
Solicitor for the Respondent Ms J. Birch,
Administrative Law Co-ordinatorAustralian Securities and Investment Commission
[71] (1993) 46 FCR 235; 93 ATC 4992; 27 ATR 88 at 249; 5003 and 100
[72] (1993) 46 FCR 251; 93 ATC 4992; 27 ATR 88 at 249-250; 5003-5004 and 100-101 and subsequently approved by Katz J in Zizza v Commissioner of Taxation (1999) 55 ALD 451at 460.
27
0