Ehrenfeld and Australian Securities and Investments Commission

[2019] AATA 6892

Ehrenfeld and Australian Securities and Investments Commission [2019] AATA 6892 (13 August 2019)

Division:TAXATION AND COMMERCIAL DIVISION

File Number:          2016/3122

Re:Gabriel Ehrenfeld

APPLICANT

AndAustralian Securities and Investments Commission

RESPONDENT

INTERLOCUTORY DECISION

Tribunal:Deputy President B W Rayment OAM QC

Date:13 August 2019

Place:Sydney

The Tribunal has decided not to dismiss the application for review lodged by the applicant on 15 June 2016 and to make the directions set out in the reasons for decision.  

................................[sgd].............................

Deputy President B W Rayment OAM QC

CATCHWORDS

PRACTICE AND PROCEDURE – application for dismissal under s 42A(5) of the Administrative Appeals Tribunal Act 1975 – repeated non-compliance with Tribunal’s directions – application not dismissed

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth) ss 2A(b), 25(4A), 33(1)(b), 42A(5),

Corporations Act 2001 (Cth) ss 206F, 533(1)

CASES

Berry v Commissioner of Taxation [2015] FCA 1244
Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd [1979] FCA 21; (1979) 24 ALR 307
Jacek Guse v Comcare [1997] FCA 961

Murdaca v Australian Securities and InvestmentCommission [2009] FCAFC 92
Tobin and Department of Transport [1977] AATA 7; (1977) 1 ALD 7
Upton and Department of Transport [1977] AATA 8; (1977) 1 ALD 150
Zubair v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 248

DIRECTIONS AND REASONS FOR INTERLOCUTORY DECISION

Deputy President B W Rayment OAM QC

13 August 2019

1. The respondent applies for the dismissal of the application for review of the five year banning order relating to the applicant’s management of corporations which was imposed on the applicant by the respondent on 12 May 2016.

2. The banning order was made under s 206F(3) of the Corporations Act 2001 (the Act).

3. That section empowers ASIC to disqualify a person from managing corporations for up to five years if, within 7 years immediately before ASIC gave a notice to demonstrate why they should not be disqualified, the person has been an officer of 2 or more corporations, and while the person was an officer or within 12 months after the person ceased to be an officer, each of the corporations was wound up and a liquidator lodged a report under s 533(1) of the Act.

4. The respondent moves for dismissal of the proceedings under s 42A(5) of the Administrative Appeals Tribunal Act1975 (the AAT Act). That section confers discretion on the Tribunal to dismiss an application without proceeding to review the relevant decision if the applicant fails within a reasonable time to proceed with the application or to comply with a direction made by the Tribunal. In Jacek Guse v Comcare [1997] FCA 961 Burchett J said of that provision:

   This is plainly a valuable discretionary power. But paragraph (b) does involve denying an applicant a hearing of the merits of his application. That should be done very sparingly, and only, I think, as a decision of last resort. Particularly is this so in a case where the genuineness of the claim is not in dispute.

5. As Davies J observed in Berry v Commissioner of Taxation [2015] FCA 1244 at [35], the power is in aid of the objective in s 2A(b) of the AAT Act which provides that the Tribunal must pursue the objective of providing a mechanism of review that is fair, just, economical, informal and quick. Her Honour added a reference to s 33(1)(b) of the AAT Act which also stresses the need for lack of formality and technicality and the need for expedition.

6. Expedition in these proceedings is lacking to date.  The applicant says that the hearing would take four weeks. On three separate occasions, there has been a need to vacate those dates. At non-compliance hearings, the applicant has produced documents purporting to comply with prior directions on the day of the non-compliance hearings rather than when they ought to have been filed. On some 44 occasions the applicant made Freedom of information requests of the respondent said to be related to his defence of the proceedings.

7. On the other hand, the draconian and exceptional nature of the relief claimed in the circumstances of this matter has made me reluctant to accede to the respondent’s application. Instead, I have considered making fresh directions designed to permit the proceedings to be set down for hearing as soon as practicable. One thing missing in what the applicant has filed to date is his own detailed statement on oath or affirmation in answer to detailed allegations made by the respondent. If he does not intend to give evidence on his own behalf, I have not been so informed.

8. ASIC’s power to ban the applicant depended, amongst other things, on the allegation that the applicant was an officer of eight corporations, each of which was wound up, and the liquidators of each of which lodged reports under s 533(1) of the Act. Mr Ehrenfeld desires to challenge each of the allegations to which I have just referred.

9. The applicant has filed both an original and an amended statement of facts issues and contentions by each of which he challenges those allegations and a great many other things.  He raises whether the respondent made a decision at all, and whether there was a reviewable decision. If there was not, the review cannot be conducted.  The grounds on which he says there was no reviewable decision are quite unclear.  All that requires is a decision in fact, valid or invalid.

10. The applicant raises whether the eight corporations were wound up, and if so, whether they were wound up “for reasons intended to trigger s 206F of the Act”. Whose intention is intended to be put in issue in issue is quite unclear.

11. The applicant also raises whether the respondent initiated and/or interfered in the process of the winding up of the 8 corporations, whether the 8 corporations “met the conditions of s 533(1) of the Act”, whether the 8 corporations were related, and whether he was a director of the 8 corporations, whether the respondent’s notice to demonstrate met the requirements of s 206F of the Act, and whether the respondent had motives for the issue of a notice to demonstrate that were other than those intended to trigger the provisions of s 206F of the Act. He raises issues expressed very broadly such as “whether the Notice to Demonstrate was proper”.

12. I have so far summarised only a few of the issues described by the applicant in the current statement of facts issues and contentions which covers 67 pages. Some of the allegations challenge what occurred before the respondent’s decision, and some do not.  The proceedings have a great propensity to canvass some issues not genuinely in dispute, and which are irrelevant.

13. In Murdaca v Australian Securities and InvestmentCommission [2009] FCAFC 92 the appellant (applicant before the Tribunal) had been made the subject of a banning order under s 206F of the Act following the filing by a liquidator of several reports under s 533(1) of the Act. Lack of procedural fairness before the delegate was alleged by the applicant and the Full Court (North Kenny and Foster JJ) held that the processes of the Tribunal if procedural fairness were accorded to the applicant was capable of curing a defect in the affording of procedural fairness before the delegate.

14. The Full Court also held that the filing of s 533 reports, apparently regular on their face, was sufficient to give the respondent power to make a banning order. The respondent was required by s 206F(1)(c) to be satisfied that the disqualification is justified. The merits of the opinion stated by the liquidators in the s 533 reports were capable of being part of what was put in issue before the delegate, not as a matter going to power or jurisdiction, but as a matter going to the discretion to ban. As the Court said at [118] the s 533 reports are not conclusive of anything. At [86]-[120] the Full Court rejected the proposition that the respondent had to be satisfied of the correctness of the opinions stated by the liquidator in the s 533 reports before initiating the s 206F process against the applicant.

15. The Full Court also observed, in agreement with the primary judge, that the fact that the disqualification order was about to expire was not a reason to be taken into account in exercising discretion in the Tribunal, because the making of a disqualification order had important consequences for the future, because ASIC was obliged to record that fact in a public register. That is also a matter proper for me to take into account in considering whether to make an order under s 42A(5), if the section is engaged.

16. The applicant desires to examine the legality of steps taken by the delegate when the reviewable decision was made, and steps taken by ASIC in the windings-up. In Zubair v Minister for Immigration & Multicultural Affairs [2004] FCAFC 248, the Full Court of the Federal Court discussed whether it was the function of the former Migration Review Tribunal to examine whether a decision of a delegate under the Migration Act 1958, which was brought before the MRT on review, was itself lawful or unlawful. The Full Court looked to a number of authorities about the Administrative Appeals Tribunal to answer that question. The Court referred to Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd [1979] FCA 21; (1979) 24 ALR 307 where the question arose whether the AAT had jurisdiction to review the purported revocation of a licence where the Court held that there was no statutory power to revoke the licence. Bowen CJ at [314] stated that the decision in s 25 of the AAT Act refers to a decision in fact made, whether or not it was legally effective. Smithers J held at [337] that the jurisdiction of a court or appeal tribunal is not removed because the power of the maker of the reviewable decision is absent. The Collector had decided that he had power to revoke a licence. The AAT decided that it had power to hear the application, that there was no power to revoke the licence, and the reviewable decision was set aside on that ground.

17. At [26] the Court said that there is no qualification on the use of the word “decision” requiring it to be a decision under the Act. There is nothing, the Court said in the Act, which would suggest that the MRT does not have the power or obligation to review a decision properly brought before it, where the respondent may, or may arguably, have failed to comply with a procedural requirement imposed by the Act, or in some other way may have committed an error of law either in determining the application or in applying the law. Those remarks seem to me to be directed to the absence of need.

18. It is clear that what the Tribunal is to review, speaking generally is the reviewable decision, not the reasons given for it. If, for example, an applicant were to establish that the respondent failed to serve a valid notice to demonstrate, or, possibly, failed to give the applicant an opportunity to be heard, then there might be a case to set aside the banning order on such a ground, leaving it open to the respondent to start again if the time limits permitted it.  Such an order was once made in the early days of the Tribunal by Brennan J, and other members of the Tribunal in Re Tobin and Department of Transport (1977) 1 ALD 7 and in Re Upton (1977) 1 ALD 150 and in the Brian Lawlor decision itself (1 ALD 167) by Brennan J sitting alone as a Tribunal member.

19. The ability of the Tribunal in an appropriate case to examine whether conditions for the exercise of a statutory power have been complied with in the reviewable decision does not mean that proceedings in this Tribunal will always open up such questions. Nor does either party have power to dictate the issues which the Tribunal will consider on a review. There is power in the AAT Act to limit issues before the Tribunal, contained in s 25(4A) of the Act.

20. The power of limiting issues was exercised by Senior Member Toohey, on 7 June 2017. The order made related to the first statement of facts Issues and contentions filed by the applicant on 10 May 2017.

21. On 15 December 2017, the respondent filed a statement of facts issues and contentions of some 390 paragraphs. In it, the respondent made allegations against the applicant, some of which did not appear in the delegate’s reasons for decision, but which the respondent says justify a banning order for five years. In January 2018 I directed the filing by the applicant of a responsive statement of facts issues and contentions. 

22. Purportedly in response to that direction, the applicant filed an (amended) statement of facts issues and contentions (undated) in which he repeated almost all of the allegations which the order of Senior Member Toohey had ruled out. The applicant submits that because the current version of the applicant’s statement of facts issues and contentions was filed after the one to which Senior Member Toohey’s orders refers, the orders are not infringed by the filing of the document which he has filed.  

23. I treat the orders of Senior Member Toohey as continuing to apply to the new statement of facts issues and contentions filed by the applicant, with all necessary changes to paragraph numbers.

24. I do not (and cannot) entertain the submission made to me by the applicant that bias affected the orders made by the Senior Member. Nor is it apparent to me that the submission has any substance, or any evidence to support it.

25. The proceedings are to be heard by me, instead of the Senior Member to whom the hearing was previously allocated.  Her term of appointment has now expired.

26. The filing of a fresh statement of facts issues and contentions by the applicant, in disregard of the orders of 7 June 2017 involves in a sense a failure to comply with directions made by the Tribunal, but it is capable of remedy by means of the statement I have made in [23] above and by the making of fresh directions to prepare the matter for hearing. There is also evidence to which the respondent has referred of other failures by the applicant to comply with directions made by the Tribunal.

27. Rather than requiring a further document in the nature of a pleading to be filed by the applicant, and in order to dispose of the matter otherwise than by making an order of last resort dismissing the proceedings, I have decided to make fresh directions in different terms to the previous orders.

28. The first of those directions is that the applicant file and serve a detailed and itemised statutory declaration of his own answering the allegations made by the respondent in its statement of facts issues and contentions dated 15 December 2017 and stating all of the evidence he wishes to give about each such matter.  If the applicant denies or does not admit any allegation in the respondent’s statement of facts issues and contentions, he is to identify the allegation by paragraph number in the respondent’s statement of facts issues and contentions and set out any contradicting fact relied upon to support his denial or non-admission. He is also to set out in detail his own evidence supporting the case that he ought not to be disqualified, or ought to be disqualified for some period less than 5 years, identifying the paragraph or paragraphs (if any) in his own statement of facts issues and contentions to which each such matter is said to relate.

29. He should at the same time file and serve in the form of a statutory declaration the evidence of any person who he intends to call, who has agreed to give evidence on his behalf, setting out all the evidence he wishes to obtain from each such person.

30. The statutory declarations mentioned in [28] and [29] are to be filed and served within 28 days.  If the applicant has decided not to give evidence himself in these proceedings, he should so inform the Tribunal within 14 days, in which case the direction in [28] will be vacated.

31. I direct that until further order no summons to give evidence or to produce documents is to be issued by the applicant to any person without prior leave, and that if the applicant desires to seek leave to issue any summons to give evidence or produce documents, he should make application to do so supported by his own statutory declaration stating, in the case of summonses to give evidence, his reason for seeking such leave and the issue or issues to which the evidence will go, all the evidence he expects to be able to lead from the witness, and the basis of his expectation.

32. In the case of a summons to produce documents, he should support an application for leave with his own statutory declaration indicating why he seeks the documents in question, identifying the documents with particularity, and indicating which paragraphs in the statement of facts issues and contentions of either party the documents are expected to relate to.

33. The applicant is to file any application for leave to issue summonses either to give evidence or produce documents together with his statutory declarations mentioned in [31] and [32] within 14 days of the expiry of the 28 day period mentioned in [30] above.

34. After the filing and service of the documents mentioned in these directions, I will list the proceedings for further directions before me.

I certify that the preceding 34 (thirty-four) paragraphs are a true copy of the reasons for the interlocutory decision herein of Deputy President B W Rayment OAM QC

.................................[sgd]..............................

Associate

Dated: 13 August 2019