Eugene Liu and Australian Securities and Investments Commission

[2013] AATA 117

[2013] AATA  117

Division	GENERAL ADMINISTRATIVE DIVISION
File Number(s)	2013/0608
Re	Eugene Liu
APPLICANT
And	Australian Securities and Investments Commission
RESPONDENT

DECISION

Tribunal	Professor R Deutsch, Deputy President
Date	6 March 2013
Place	Sydney

The application for a stay of the banning decision and the making of confidentiality orders is dismissed.

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Professor R Deutsch
 Deputy President

CATCHWORDS

PRACTICE AND PROCEDURE – interlocutory application - corporations – Australian Securities and Investment Commission - stay of decision and confidentiality orders – whether desirable to grant stay order and confidentiality order – stay and confidentiality orders refused

LEGISLATION

Administrative Appeals Tribunal Act 1975 ss 35, 41(2)

Australian Securities and Investments Commission Act 2001 s 1(2)

Corporations Act 2001 ss 920A, 920B, 1041G

CASES

Australian Securities and Investments Commission v Administrative Appeals Tribunal and Another [2009] FCAFC 185

John Fairfax Publications Pty Ltd v District Court of New South Wales (2004) 61 NSWLR 344
News Digital Media Pty Ltd v Mokbel [2010] VSCA 51 R v Perish [2011] NSWSC 1102
Re Repatriation Commission and Delkou (1985) 8 ALD 454
Re Zarfati and Australian Securities and Investments Commission (2005) 106 ALD 225
Waterhouse v Age Company Limited [2012] NSWSC 1349

XQZT v ASIC [2009] AATA 669

REASONS FOR DECISION

Professor R Deutsch, Deputy President

Date: 6 March 2013

BACKGROUND

1. The Applicant seeks a review of the decision (‘the Decision’) by a delegate of the Australian Investments and Securities Commission (ASIC) that the Applicant be permanently prohibited from providing any financial services.

2. The Decision was made on 7 February 2013 pursuant to ss 920A and 920B of the Corporations Act 2001 (Cth) (the Corporations Act), and the reasons for the Decision are set out in a document accompanying the Decision.

3. The Decision relates to certain alleged conduct by the Applicant in connection with funds which were administered by Astarra Asset Management Limited (‘AAM’) and Trio Capital Limited (‘Trio’) prior to the collapse of those entities in 2010.

4. In that Decision the delegate found, amongst other things, that for the purposes of s 1041G of the Corporations Act, the Applicant had engaged in dishonest conduct in connection with the financial services business carried on by AAM and Trio.

5. The hearing of this substantive matter will take place at a future date but in the interim, in these proceedings, the Applicant is seeking two separate but related orders as follows:

   (a)Pursuant to s 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) that the Tribunal stay the operation and implementation of the decision under review, including entry of the decision in any register maintained by the Respondent, publication of the decision in the Gazette, and disclosure of the decision in any of the media releases issued; and

   (b)Pursuant to s 35(2) of the AAT Act that:

   (i)the Applicant be described by a pseudonym for the purpose of protecting his identity; and

   (ii)the hearing shall take place in private and that only the parties and their representatives and witnesses, the Tribunal and its staff may be present; and

   (iii)the publication or disclosure of evidence or the contents of documents lodged with or received in evidence by the Tribunal is restricted to the parties and their representatives and witnesses, the Tribunal and its staff and the staff of transcription services.

   THE STAY APPLICATION

6. The power to grant a stay is conferred on the Tribunal under s 41(2) of the AAT Act. That section states that:

   ‘The Tribunal may, on request being made, as prescribed, by a party to a proceeding before the Tribunal…if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.’

7. In assessing the need for the grant of a stay order pursuant to s 41(2), there are two competing interests which need to be balanced:

   ·Firstly, to ensure the position of the Applicant is protected by preventing any undue prejudice to the Applicant’s case and any unnecessary deleterious consequences to the Applicant’s reputation and financial circumstances. Consideration in this context may also need to be given to the circumstances of any employees of the Applicant who might be adversely affected by banning orders that relate to the Applicant;

   ·Secondly, ASIC is charged with, among other things, the duty to promote the confident and informed participation of investors and consumers in the financial system and to ensure that information is published as soon as possible to the market. This is reflected in particular in s 1(2) of the Australian Securities and Investments Commission Act 2001 (Cth).

8. In considering the balance between these two competing interests the Tribunal requires sufficient evidence to reach a conclusion that a stay should be granted. For all practical purposes it is the Applicant who bears the onus of establishing that the considerations indicate a stay should be granted: Re Zarfati and Australian Securities and Investments Commission (2005) 106 ALD 225; (2008) AATA 989.

9. I will now consider these two competing interests specifically in the context of this proceeding.

   ‘The Applicant’s Position’

10. The Applicant raised the following factors as being relevant and pointing to why a stay should be granted:

    ‘The grounds for the request are as follows:

    1.to preserve the Applicant’s reputation;

    2.to preserve the Applicant’s ability to gain employment;

    3.the ASIC delegate failed to afford the Applicant procedural fairness and erred in his decision. A successful appeal is equivalent to no decision by ASIC;

    4.ASIC’s regulatory guide provides that ASIC may publish the fact of a banning order two business days after a person has given notice of a decision’. 

    Ground 1 – Reputation

11. The circumstances of the collapse of Trio, in particular, have received wide media coverage and public debate, and the Applicant’s name has been associated with that collapse since the story first became public. The fact that the Respondent was and is investigating the Applicant, and the nature of the enquiries which the Respondent was making as part of those investigations, was also widely published.

12. As far as I can discern, the Applicant has not sought to adduce any concrete evidence as to how the refusal of the stay could or would lead to any additional reputational harm.

13. The potential for reputational harm is not normally a sufficiently cogent reason for the grant of a stay especially if there is no other circumstance that would support the grant of such a stay.

    Ground 2 – Employment

14. The consequences to the Applicant’s prospects of future employment, within the financial services industry in Australia, is clearly coloured by the fact that the Applicant is not in Australia and nor does he possess an appropriate visa to allow him to re-enter Australia. Further, the Applicant has ceased all work in the financial services industry since late 2009, and no evidence has been tended to suggest that the Applicant will be seeking employment in the financial services sector in Australia.

15. There is no evidence to suggest that the publication of a banning order in Australia would prevent the Applicant from gaining any kind of employment outside of Australia, particularly employment outside of the financial services sector.

    Ground 3 – Issues of Procedural Fairness

16. The Applicant has asserted that certain deficiencies in procedural fairness were made by the delegate in reaching the Decision. The two matters in particular that are argued to be deficiencies in the manner in which the delegate conducted the process relate to the failure to allow the Applicant to:

    (i)cross-examine a certain Mr Richard who had given some evidence regarding the Applicant that was not favourable; and

    (ii)attend the hearing in Sydney in person.

17. At the hearing the Respondent explained that the delegate’s decisions on these and related issues were well reasoned, consistent with authorities on the subject and clearly explained, including by reference to the evidence on which the delegate would rely in making his decision.

18. The conclusions reached by the delegate contain no obvious procedural flaw.

19. In relation to the cross-examination of Mr Richard, the delegate wrote to the lawyers acting for the Applicant advising that ‘if it is the case that additional evidence is required of Mr Richard you should make a request of Mr Richard for a statement. If it is the case that evidence of Mr Richard is disputed you can tender a statement from Mr Liu that disputes the evidence of Mr Richard’.

20. It appears that no response was received by the delegate to these suggestions.

21. The delegate advised that in considering Mr Richard’s version of events, he will accept those parts of the statements of Mr Richard that are not contested, and those parts of the statements of Mr Richard which are contested where other factors show that it is highly probable that those parts of the statements of Mr Richard are correct.

22. I am of the view that these steps were prudent and reasonable in the circumstances.

23. In relation to the Applicant’s non-attendance at the hearing, I am satisfied that the Applicant was given ample opportunity to give instructions from overseas and did so through his legal representatives, and that he was able to prepare a statement and submissions and was legally represented at the hearing.

24. The Applicant further suggested that if the appeal is successful it would be equivalent to no decision having been made by ASIC. The direct relevance of this comment is unclear. However, if it were a relevant matter then it follows a stay would be granted in relation to every application in which an applicant seeks to have a decision set aside - this simply cannot be the case.

    Ground 4 – Publication

25. The way in which this so-called ground is expressed does no more than reiterate the point that in the absence of a stay the banning order will come into effect – that is true but in and of itself does not amount to a ground for a stay.

    ‘ASIC’s Role’

26. The availability of information is one of the key ingredients for effective trading in a market and can take the place of regulation in ensuring fairness. To put it the other way, a market which is not fully informed is to that extent not operating properly or fairly.

27. Part of that information would include information relating to the banning of a particular person or persons. In that context, an investor who is about to deposit funds with a person providing financial services is usually entitled to know that a banning order has been made against the person by the key market regulator of the financial services sector even if that order is, or may become, the subject of review by the Tribunal.

28. By parity of reasoning, that investor would be justifiably aggrieved if a banning order was not publicised, and the investor deposited monies with the person in question only to find that those monies were then inappropriately dealt with.

29. This in particular is why ASIC has been so clearly charged with the responsibility and duty of ensuring that information regarding the making of a ban order is published as soon as possible to the market.

30. In making stay orders the Tribunal needs to be mindful of these considerations and the overall desire to protect the public.

    In this case the banning order concerns very serious breaches of the Corporations Act, involving dishonesty and misleading conduct. In such circumstances the integrity of the financial services market, and the maintenance of confidence in the financial services industry as a whole, is threatened by staying the operation of a banning order.

    Other relevant matters

31. It is generally recognised that it is also necessary to have regard to the Applicant’s prospects of success at the final hearing (see for example XQZT v ASIC [2009] AATA 669), but it is not the role of the Tribunal to conduct a preliminary trial of the issues to be raised during the substantive hearing of the application for review: Re Repatriation Commission and Delkou (1985) 8 ALDA 454 at [32].

32. Having considered the evidence which has been presented to date, but without in any way seeking to pre-judge the matter, the Applicant’s case is not that strong as to warrant the grant of a stay for that reason alone.

    Conclusion on the Stay Application

33. In conclusion, having regard in particular to the Applicant’s grounds, and balancing them against the interests of ASIC and the role it is charged to perform, there is no basis for the grant of a stay in these proceedings. However, the Respondent should make it clear as part of the banning order that the Applicant does have review rights which are still current. 

    THE CONFIDENTIALITY APPLICATION

34. In relation to the application made in respect of confidentiality, the key guiding principle the words of s 35 of the AAT Act directs the Tribunal to:

    ‘take as the basis of its consideration of the principal that it is desirable that hearings of proceedings before the Tribunal should be held in public and that evidence given before the Tribunal and the contents of documents lodged with the Tribunal or received in evidence by the Tribunal should be made available to the public and to all the parties, but shall pay due regard to any reasons given to the Tribunal why the hearing should be held in private or why publication or disclosure of the evidence all the matter contained in the document should be prohibited or restricted’.

35. In other words, the hearing should be held in public and all the evidence should be available to the public unless a cogent reason can be provided by the Applicant to do otherwise.

36. This position is also endorsed in Australian Securities and Investment Commission v Administrative Appeals Tribunal and Another [2009] FCAFC 185, where the Federal court adopts the view that the norm is that proceedings before the Administrative Appeals Tribunal (AAT) shall be in public, and that only if there is some cogent reason by reference to the particular case at hand that requires a departure from the ordinary requirement of a public hearing should such a departure occur.

37. In requesting the Tribunal to make confidentiality orders the Applicant submitted that:

    ‘The grounds that the applicant relies on for seeking confidentiality orders are twofold and are that:

    Ground 5 - Defamation

    The Applicant is involved in a defamation case on the New South Wales Supreme Court and the publication of his name in appeal proceedings in the AAT could prejudice his case and the administration of justice; and

    Ground 6 – Trio Collapse

    The collapse of Trio, a business associated with the Applicant was widely publicised in Australia and abroad and thus there is a very high probability that a review of ASIC’s decision by the AAT would receive publication.’

    Ground 5 – Defamation

38. The Applicant submits that the publication of the Applicant’s identity, on matters relevant to the application for review, may have an adverse effect on the administration of justice and, in particular, the jury trial in certain defamation proceedings between the Applicant and a newspaper organisation. Those proceedings are set down for trial by jury and will be heard on or around 11 June 2013. The Applicant submits that the publication of the Respondent’s investigations and any outcomes from those investigations would prejudice the outcome of the defamation proceedings.

39. In support of this contention the Applicant has brought to the Tribunal’s attention three Supreme Court cases, namely Waterhouse v Age Company Limited 2012 NSWSC 1349; R v Perish 2011 NSWSC 1102 and News Digital Media Pty Ltd v Mokbel 2010 VSCA 51. The first two are decisions of the New South Wales Supreme Court and the third a decision of the Victorian Supreme Court. Each deals with issues regarding jury trials.

40. Whilst these cases do have some peripheral relevance, they are not in any way significant in determining whether a confidentiality order should be granted in the current circumstances. At most, these cases do no more than recognise the role of the judge conducting a civil or criminal jury in protecting the jury from events which threaten the integrity of the jury and the jury process. They do not go any further so as to suggest, as the Applicant does, that the administration of justice and the integrity of the jury system requires that judges or a Tribunal should, in conducting other proceedings, make orders regulating the prosecution of those other proceedings, by taking into account some potential, unproven and unspecified impact on a jury which would be selected and empanelled at some future point in time.

41. The argument put forward by the Applicant seems to be based on the premise that jury members are unduly sensitive, prone to act irrationally and are unlikely to heed the control and direction of the trial judge. In commenting on the ability of jury members to heed directions from trial judges albeit in a different context, Spigelman CJ in John Fairfax Publications Pty Ltd v District Court of New South Wales (2004) 61 NSWLR 344 at 366 commented that :

    ‘There are now a significant number of cases in which the issue has arisen as to whether or not an accused was able to have a fair trial in the light of substantial media publicity, indeed publicity much more sensational and sustained than anything that occurred here. Those cases have decisively rejected the previous tendency to regard jurors as exceptionally fragile and prone to prejudice. Trial judges of considerable experience have asserted, again and again, that jurors approach their task in accordance with the oath they take, that they listen to the directions that they are given and implement them. In particular that they listen to the direction that they are to determine guilt only on the evidence before them.’

42. I strongly agree with the sentiment expressed above and consequently it would be inappropriate to make a confidentiality order based on some theoretical chance of an adverse impact on the conduct of the jury in future defamation proceedings. It is more appropriate for the trial judge in the defamation proceedings to make appropriate directions.

    Ground 6 – Trio collapse

43. The fact that the Trio collapse and a review of ASIC’s decision by the AAT would receive publicity is hardly a ground for seeking a confidentiality order. Further, the fact that this publicity may cause some damage to the Applicant’s reputation, whilst unfortunate, does not appear to be a basis for a confidentiality order.

    Conclusion on Confidentiality Application

44. There are no grounds for the making of confidentiality orders in this case.

    DECISION

45. The application for a stay of the banning decision and the making of confidentiality orders is dismissed. The Tribunal orders that the Respondent in publicising the ban make it clear that the Applicant has current rights of review which he may choose to exercise.

I certify that the preceding 45 (forty -five) paragraphs are a true copy of the reasons for the decision herein of

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Associate

Dated  6 March 2013

Date(s) of hearing	20 February 2013
Counsel for the Applicant	Mr Carey
Advocate for the Applicant	Kennedys
Counsel for the Respondent	Mr Golledge