Glebe Administration Board and Australian Securities and Investments Commission
[2006] AATA 57
•25 January 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 57
ADMINISTRATIVE APPEALS TRIBUNAL ) N2005/14; N2005/17
)
GENERAL ADMINISTRATIVE DIVISION ) Re GLEBE ADMINISTRATION BOARD Applicant
And
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Respondent
DECISION
Tribunal Senior Member M D Allen Date25 January 2006
PlaceSydney
Decision 1. The decision in matter N2005/14 is affirmed.
2. The decision in matter N2005/17 is set aside and in lieu thereof, the Tribunal substitutes its decision namely:
(1) The Glebe Administration Board be exempted from:
(a) the requirement under s911A(1) of the Corporations Act 2001 (Cth);
(b) s992A of the Corporations Act 2001 (Cth); and
(c) Divisions 2 and 4 of Part 7.9 and sections 101F and 101G of the Corporations Act 2001 (Cth);
In relation to the provision of a cheque facility in conjunction with the Glebe Income Accounts subject to the conditions stated in paragraph 2.
(2)The exemption in paragraph 1 applies only:
(a) while the Glebe Administration Board continues to rely on the first exemption in ASIC Class Order [02/184] (or any other equivalent exemption in any ASIC Class Order that may be brought into effect from time to time); and
(b) in relation to the provision of the cheque facility to:
(i) a body constituted by or under the authority of an ordinance or by resolution of the Synod or its Standing Committee; or
(ii) a body in relation to which the Synod or its Standing Committee is empowered to make ordinances, or
(iii) a person acting as trustee of a trust for or for the use, benefit or purposes of the Anglican Church of Australia in the Diocese of Sydney.
(3) That for a period of four months from the date of this order, and subject to the conditions stated in paragraph 4, the Glebe Administration Board be exempted from:
(a) the requirement under s 911A(1) of the Corporations Act 2001 (Cth);
(b) s 992A of the Corporations Act 2001 (Cth); and
(c) Divisions 2 and 4 of Part 7.9 and sections 1017F and 1017G of the Corporations Act 2001 (Cth);
In relation to the provision of a cheque facility in conjunction with the Glebe Income Accounts to any person or body who or which:
(d) has cheque access to a Glebe Income Account as at the date of this order; and
(e) is not a body or person referred to in paragraph 2(b) above.
(4)The exemption in paragraph 3 applies only:
(a) while the Glebe Administration Board continues to rely on the first exemption in ASIC Class Order [02/184] (or any other equivalent exemption in any ASIC Class Order that may be brought into effect from time to time);
(b) if the Glebe Administration Board uses reasonable endeavours to notify as soon as practicable any person or body in respect of whom the exemption in paragraph 3 applies of the effect of these orders; and
(c) while the Glebe Administration Board uses reasonable endeavours to ensure that on expiry of the exemption in paragraph 3 no person or body in respect of whom the exemption applies has cheque access to a Glebe Income Account.
(5) In this decision:
(a) "Synod" means the Synod of the Anglican Church of Australia in the Diocese of Sydney constituted under the Schedule to the Anglican Church of Australia Constitutions Act 1902 (NSW);
(b) "Standing Committee" means the body constituted under the Standing Committee Ordinance 1897 to exercise delegated powers of the Synod; and
(c) "body" has the meaning given to that term in s 9 of the Corporations Act 2001 (Cth).
(Sgd) M D Allen
....................................
Senior Member
CATCHWORDS
CORPORATIONS LAW – provision of financial services – licence for cheque facility – discretion to exempt financial product from provisions of the Corporations Law – discussion of the application of policy – decision in respect of N05/14 affirmed – decision in respect of N05/17 set aside and substituted with Tribunal’s own decision that the Applicant be exempted from certain requirements under the Corporations Law with conditions.
Corporations Act 2001 sections 760A, 763A, 763D, 911A, 992A, 1017F, 1017G
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Queensland Power Training Corporation t/a Entertrade and Australian Securities and Investments Commission [2005] AATA 945
Australian Securities and Investments Commission v Donald (2003) 203 ALR 566
REASONS FOR DECISION
25 January 2005 Senior Member M D Allen 1.By applications made the 5th day of January 2005 the Applicant sought review of decisions by the Respondent made 28 October 2004 and 6 December 2004 regarding the provision of financial services by the Applicant.
2.By the time the matter came on for hearing before me the issues had resolved to the extent that the only “product” upon which I was required to decide was a cheque facility attached to an at call service account maintained by the entity known as the Glebe Income Accounts (GIA).
3.In order to understand the application made, some understanding is required of the structure of the Sydney Diocese of the Anglican Church of Australia.
4.That structure is conveniently set out in the affidavit of David Ross Cannings the General Manager (Treasury) of the Applicant. Commencing at paragraph 10 of his affidavit he states:
5.“…
10. The SDS is a body incorporated under the 1938 Bodies Corporate Act and constituted by the Synod under the Sydney Diocesan Secretariat Ordinance 1973. The SDS is the central administrative body of the Diocese, the nominal employer of diocesan administrative staff and the body responsible for providing secretarial, administrative and office support to certain individuals and entities in the Diocese including the Archbishop, the Standing Committee of the Synod (the Standing Committee), and the Glebe Administration Board. The members of the board of the SDS are the same as the members of the board of the GAB and they are appointed by the Standing Committee.
11. The Glebe Administration Board is a body incorporated under the 1938 Bodies Corporate Act and constituted by the Glebe Administration Ordinance 1930. The Glebe Administration Board acts as trustee of the Diocesan Endowment, the largest fund of the Diocese and held on trust in accordance with the Diocesan Endowment Ordinance 1984. The Diocesan Endowment was originally established with capital derived from the sales of parcels of land held by the Diocese in Sydney. Since then, the size of the Diocesan Endowment has grown because of capital growth, income derived from capital, funds invested in the Diocesan Endowment, income from reinvestment of those funds and other similar contributions. The net assets of the Diocesan Endowment (that is, net of liabilities relating to amounts invested with, or borrowed by, the Diocesan Endowment) were $194,699,793 as at 31 December 2004.
12. The assets of the Diocesan Endowment are invested in cash, mortgages, listed and unlisted equities, units in unlisted equity, property and fixed interest trusts, and real property. The GAB has among its investment objectives for the Diocesan Endowment the requirements that investments have prospects of capital growth ahead of the rate of inflation and an income growth at least apace with inflation. In this way, the investment strategy for the assets of the Diocesan Endowment is relatively low risk.
13. In accordance with the Diocesan Endowment Ordinance 1984, the assets held by the Diocesan Endowment and the income generated from them must be used for ‘the purposes of the Anglican Church of Australia in the Diocese of Sydney’. ‘Purposes’ is defined in the Trust Property Act to include religious, educational, cemetery, and all other purposes of the Church whether within or outside the Diocese. Each year the GAB gives the Standing Committee 5.4 per cent per annum of the average net assets of the Diocesan Endowment over the previous three years for allocation by the Synod to approved causes and activities. This currently amounts to approximately $8.2 million per annum, more than 80 per cent of the total annual income of the Synod available for distribution.
14. The activities and causes to which distributions from the Diocesan Endowment (and other trusts) are generally allocated is determined by way of an ordinance of the Synod. The ordinance is drafted following a process of consultation between the Mission Taskforce (a subcommittee of the Standing Committee), Regional Councils in the Diocese (administrative areas for which bishops have responsibility) and organisations and entities within the Diocese
…”
6.In 2002 a decision was taken to increase the services made available by the GIA and increase the funds invested with the GIA with the intention that the Diocese would benefit from the returns on the increased funds invested.
7.To this end the Synod on 15 October 2003 passed the following resolution namely:
“In light of this Synod’s commitment to the Mission, and the need to increase funds available for the Mission, Synod hereby requests –
(a) every parish, provisional parish, Anglican School and Diocesan organisation within the Sydney Diocese to transfer their main cheque account facility and deposits to the Glebe Income Accounts, by 31 March 2004; and
(b) All Sydney Anglicans consider investing their own term deposits and other funds into Glebe Income Accounts.”
8.The GIA actively sought investments. In a prospectus issued the Archbishop of Sydney made the following statement:
“An investment in Glebe Income Accounts is an investment in the future of the Anglican Church. While you receive a competitive return on your investment, profits from operating Glebe Income Accounts will be made available to fund the Mission of the Diocese and its various ministries. Additionally, you can invest in a Support Account which channels interest directly to a ministry of your choice. I hope that all Anglican individuals, parishes, organisations and others of like mind will consider investment in Glebe Income Accounts.”
9.Attached to the GIA was a cheque facility which permits depositors to write cheques to effect withdrawals from their accounts. The manner in which the cheque facility operates is set out at paragraph 26 of Mr Cannings’ affidavit namely:
“26.The Cheque Facility is provided under an arrangement between the GAB and CreditLink Services Limited (CreditLink) which in turn has, an arrangement with Westpac Banking Corporation (Westpac) for clearing and paying cheques... The following paragraphs (a) to (j) describe the key steps in the processing of cheques written by holders of GIA accounts:
(a) a GIA account holder draws a cheque in favour of a third party;
(b) the third party presents the cheque to its bank (the collecting bank);
(c) the collecting bank requests payment from Westpac;
(d) in accordance with an agreement between them, Westpac refers the cheque to CreditLink;
(e) CreditLink refers the cheque to the GAB. If there are insufficient funds in the GIA account holder’s account, CreditLink provides the GAB with an ‘exceptions report’. If GAB decides not to honour the cheque, it must advise CreditLink within one day of receipt of the exceptions. Otherwise the cheque will be honoured;
(f) Westpac settles the cheque with the collecting bank;
(g) Westpac reimburses itself in the amount of the cheque from a settlement account held by CreditLink with Westpac;
(h) CreditLink reimburses itself from a settlement account held by the GAB with Westpac. CreditLink currently requires that the GAB have $201,000 in that account. Separately, the GAB has a security deposit of $435,300 with CreditLink; and
(i) the GAB deducts the amount of the cheque from the GIA account holder’s account.”
10.Initially the GIA was receptive to accepting as depositors any person or anybody who thought fit to invest with it, subject to some exceptions eg it would not, according to Mr Cannings’ evidence, accept deposits from a body or persons whose interests were inimicable to the Christian religion in general or the Anglican Church in particular, or to morality.
11.The evidence before me however was that a number (but not all) of the parishes in the Sydney Diocese and individual parishioners thought it proper that their funds be invested with the GIA. A factor that made this course of investment more practical was that the GIA was able to provide a cheque facility and hence, a separate operating account for the payment of outgoings did not have to be maintained.
12.Exhibit A3 is a draft order proposed by the Applicant. That Exhibit is of paramount importance in these proceedings as it limits the bodies and persons to whom any cheque facility will be made available. Paragraph 2 of the Exhibit reads:
“The exemption in paragraph 1 applies only:
(a) while the Glebe Administration Board continues to rely on the first exemption in ASIC Class Order [02/184] (or any other equivalent exemption in any ASIC Class Order that may be brought into effect from time to time); and
(b) in relation to the provision of the cheque facility to:
(i) a body constituted by or under the authority of an ordinance or by resolution of the Synod or its Standing Committee; or
(ii) a body in relation to which the Synod or its Standing Committee is empowered to make ordinances; or
(iii) a person acting as trustee of a trust for or for the use, benefit or purposes of the Anglican Church of Australia in the Diocese of Sydney.”
13.I will say at the outset that different considerations would have applied had any wider exemption regarding the cheque facility been sought, for example any invitation to the public at large or to bodies or persons outside the Diocese of Sydney.
14.The relevant law is set out in sections 911A, 992A and Divisions 2 and 4 of Part 7.9 and sections 1017F and 1017G of the Corporations Act 2001.
15.Section 911A reads inter alia:
“(1) [Need for licence]
Subject to this section, a person who carries on a financial services business in this jurisdiction must hold an Australian financial services licence covering the provision of the financial services.
Note 1: Also, a person must not provide a financial service contrary to a banning order or disqualification order under Division 8.
Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(2) [Exemptions]
However, a person is exempt from the requirement to hold an Australian financial services licence for a financial service they provide in any of the following circumstances…
(l) the provision of the service is covered by an exemption specified by ASIC in writing and published in the Gazette…”
Whereas subsection 992A(1) reads:
“[Unsolicited offers]
(1)A person must not offer financial products for issue or sale in the course of, or because of, an unsolicited meeting with another person.”
16.Division 2 and Division 4 of Part 7.9 and ss 1017F and 1017G of the Corporations Act impose product disclosure and other obligations in relation to the issue and sale of financial products.
17.A financial product is defined in s 763A as:
(1) For the purposes of this Chapter, a ‘financial product’ is a facility through which, or through the acquisition of which, a person does one or more of the following:
(a) makes a financial investment (see section 763B);
(b) manages financial risk (see section 763C);
(c) makes non-cash payments…”
Whereas non-cash payments defined in s 763D as:
(1) For the purposes of this Chapter, a person makes non-cash payments if they make payments, or cause payments to be made, otherwise than by the physical delivery of Australian or foreign currency in the form of notes and/or coins.”
More relevant however is s 760A which states:
“The main object of this Chapter is to promote:
(a) confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and
(b) fairness, honesty and professionalism by those who provide financial services; and
(c) fair, orderly and transparent markets for financial products; and
(d) the reduction of systemic risk and the provision of fair and effective services by clearing and settlement facilities.”
Opposition to the Applicant’s request for exemption from compliance with the requirement to :
(a) Hold an Australian financial services licence;
(b) Offering financial products for issue or sale in the course of or because of an unsolicited meeting with another person; and
(c) The product disclosure and other obligations in relation to the issue and sale of financial products imposed by Divisions 2 and 4 of Part 7.9 and sections 1017F and 1017G of the Corporations Act in relation to the cheque facility provided by the GIA
was based upon the following considerations namely:
(i) That to grant the exemption would not advance the objects of the Corporations Law as set out in s 760 Corporations Act.
(ii) The grant would be contrary to the Respondent’s policy as set out in ASIC Policy Statement 167.
(iii) The imposition of a licence would not be unduly burdensome on the Applicant.
(iv) The imposition of a licence would advance market integrity and allow the Respondent full use of regulatory tools used to promote market integrity eg licence conditions, banning orders and suspensions or revocation of the licence.
(v) Competitive Neutrality.
18.The discretion to exempt a financial product from the provisions of the Corporations Law was discussed by Senior Member McCabe in Re Queensland Power Trading Corporation t/a Enertrade and ASIC [2005] AATA 945. In that matter the learned Senior Member referred to the head of power to grant exemptions from the provisions of the Corporations Law as s 926A(2) which reads:
“ASIC may:
(a) exempt a person or class of persons from all or specified provisions to which this section applies; or
(b) exempt a financial product or class of financial products from all or specified provisions to which this section applies; or
(c) declare that provisions to which this section applies apply in relation to a person or financial product, or a class of persons or financial products, as if specified provisions were omitted, modified or varied as specified in the declaration.”
19.Senior Member McCabe then went on to discuss the exercise of the discretion, commencing at paragraph 85 of his decision he said:
“I have already noted the Corporations Act does not set out criteria governing the granting of exemptions. That does not mean the power can be exercised ‘for any reason whatever or for no reason at all.
The decision- maker may only exercise a power or discretion under the Act for the purpose for which it was given.
86. Section 760A sets out the objectives of Chapter 7…
87. Any discretion exercised under Chapter 7 must have regard to these objectives. But the list in s 760A is not exhaustive. A decision-maker contemplating the exercise of the discretion to exempt someone from the obligation to hold an AFSL must not lose sight of the fact the power is given in order to provide relief from the strict operation of the rules. It is therefore appropriate to have regard to the individual circumstances of the person seeking the exemption. If the operation of the rules would lead to unusually burdensome results for the applicant, a decision-maker should consider granting relief provided the objectives of the regulation are not compromised.
88. While the decision-maker would be sympathetic to requests for relief in cases where an exemption would clearly advance the objectives of the Act, it should be circumspect in other cases. Parliament has created a regulatory regime that was intended to apply to all but exceptional cases…” (citations omitted)
The learned Senior Member then went on to state that his approach to the exercise of the discretion was consistent with ASIC’s policy as set out in Policy Statements numbers 51 and 167.
20.Although reference was made to policy in Re Queensland Power (supra) and in the Respondent’s submissions in this matter, it must be kept in mind that whereas in the normal course of events the AAT will not depart from policy, it will do so for good and cogent reasons, cf the now very familiar discussion by Brennan J (as he then was) in Re Drake and Minister for Immigration and Ethnic Affairs (No.2) (1979) 2 ALD 634, especially at pp 636 and 640 to 645. See also the discussion by Davies J in Skoljarev v Australian Fisheries Management Authority (1996) 39 ALD 517 at pp 521-524.
21.The policy, as expressed in Policy Statement No. 167 entitled “Licensing – Discretionary Powers and Transition”, reads inter alia:
“167.3
We will consider giving relief under s 911A(2)(l), 951B and 992B to address atypical or unforeseen circumstances and unintended consequences of the licensing provisions of the Corporations Act. We may give relief on our initiative or on application…
167.3C
Factors that we may consider when deciding whether to exercise our relief powers include whether:
(a) strict compliance with the new regulatory regime would be impossible or disproportionately burdensome;
(b) persons to whom financial services are provided would still have the protection intended by Parliament;
(c) those to whom the relief applies (eg the applicant) will receive any benefits;
(d) a reasonable person would think that the predominant purpose of the product to which the service relates is not a financial product purpose;
(e) the service is subject to adequate alternative regulation;
(f) the likelihood and extent of potential consumer detriment resulting from the proposed relief is minimal; and
(g) the service is only provided to wholesale clients (or in some cases only to professional investors as defined in s 9).
Note 1: The above list is not exhaustive. Relevant considerations will always depend on the applicable facts and circumstances. How much weight is given to any particular item in the list or any other relevant consideration will depend on the circumstances.”
Notwithstanding the factors listed in paragraph 167.3C above including note 1 paragraph 167.3A reads:
“We have the flexibility under the law to give partial or complete relief from the licensing provisions (including with conditions). The kind of relief that is given (if any), the extent of the relief and the situations in which the relief applies will depend on what is appropriate in the circumstances.” (Tribunal’s emphasis).
22.Also contained within the documents before me were Policy Statement No 87 entitled Charitable investment schemes and school enrolment deposits and PS 51 Applications for relief. I consider that PS 51 has general application only and that in this matter PS 167 is the more specific Policy Statement. The activities of the Applicant however go beyond the charitable purposes envisaged in PS 87 and again, to my mind, recourse should be had to PS 167.
23.I am satisfied given the evidence of Mr Cannings and Exhibit A1, that to require the Applicant to obtain a licence for its cheque facility would be unduly burdensome in that the costs of not only obtaining the said licence but more importantly in complying with the licence would be disproportionate relative to the income generated by the cheque facility, which income would be the source of the expenditure incurred. The net result, on Mr Cannings’ figures, is that the cost of compliance would exceed the income generated.
24.Whereas the imposition of a licence would result in oversight of the activity by the Respondent, there are already in place sufficient checks and balances to preserve the integrity of the facility.
25.The cheque facility is provided as an ancillary service to assist those bodies that have invested with the Glebe Investment Accounts. The GIA are subject to oversight by the Applicant and the Applicant is in turn, subject to oversight by the Sydney Synod and subject to various ordinances passed by the Synod and Acts relating to the Anglican Church in NSW. Exhibit A2 lists the various Acts and Ordinances that govern the activities of the Anglican Church in the Diocese in Sydney and of particular relevance are the following:
· The Anglican Church of Australia Constitution Act 1961 (NSW)
· The Anglican Church of Australia Trust Property Act 1917 (NSW)
· Anglican church of Australian (Bodies Corporate) Act 1938 (NSW)
and the:
· Accounts Audits and Annual Reports Ordinance 1995
· Anglican Church Property Trust Diocese of Sydney Ordinance 1965
· Investment of Church Trust Property Ordinance 1990
· Glebe Administration Ordinance 1930.
Then as was stated by Mr Cannings:
“In accordance with these regulations, the GAB must report annually to the Synod. Its reports for each financial year ending 31 December must include audited accounts and must be lodged, together with liquidity reports, by 30 June the following year. The reports and accounts are reviewed by the Finance Committee of the Standing Committee and any questions are reported to the Synod.”
It was also pointed out by Mr Cannings that the Applicant has developed a risk management program based on the Australian Standard for Risk Management.
26.That the Ordinances of the Sydney Diocese so far as they affect property are capable of giving rise to legally enforceable rights and obligations, was made clear by the decision of New South Wales Court of Appeal in Scandrettt v Dowling (1992) 27 NSW LR 483 especially at pp 405; 584.
27.That the prudential standards of the Applicant are appropriate for its business is the opinion of the Australian Prudential Regulatory Authority who has issued an exemption from s 8 of the Banking Act1959 to Glebe Income Accounts.
28.To my mind if APRA is satisfied as to the integrity and effectiveness of the internal controls exercised by GIA this is cogent evidence that ASIC can also be satisfied as to their integrity and effectiveness.
29.The Respondent also referred to “competitive neutrality” as a reason for not exercising its discretion. The term “competitive neutrality” was taken from the Financial System Inquiry, Final Report of March 1997 (The Wallace Report). At page 197 of that document its authors state:
“Competitive neutrality requires that the regulatory burden applying to a particular financial commitment or promise apply equally to all who make such commitments…”
30.Despite the fact that the cheque facility offered will compete for the deposit of funds with other banking institutions the proposed decision limits the class of institutions from which funds are sought to a very narrow range namely parishes or institutions of the Anglican Diocese of Sydney. In the scheme of financial regulation in Australia, I cannot envisage how the raising of funds from such a small base can in any way be said to imperil competitive neutrality.
31.Taken as a whole, it is to my mind a proper case for the exercise of the appropriate discretion given:
(a)the limited purpose of the cheque facility;
(b)the narrow class from whom deposits are now sought;
(c)the considerable financial burden that would be placed upon the Applicant and its subsidiary the Glebe Investment Accounts should a licence be required;
(d)the place of the Applicant within the Anglican Diocese of Sydney;
(e)the already existing prudential requirements existing within the Glebe Investments Accounts.
32.At present there are persons and bodies who have availed themselves of the cheque facility offered by the GIA and who under the proposed decision would not be eligible to maintain those accounts. The Applicant has suggested a period, namely four months, within which those persons or bodies can be notified of the decision and required to make alternative arrangements. I consider a period of four months to be entirely reasonable.
33.It was submitted by the Respondent that it had not been able to consider the proposed decision as set out in Exhibit A3 and therefore this matter should be remitted to it. I disagree. As pointed out in Australian Securities and Investments Commission v Donald (2003) 203 ALR 566, this Tribunal has all the powers and discretions possessed by the maker of the original decision.
34.The decision under review in matter No. N2005/14 is affirmed whereas the decision in matter No. N2005/17 is set aside and in lieu thereof, the Tribunal substitutes its own decision which is in the same terms as Exhibit A3 in these proceedings.
I certify that the 34 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Allen
Signed: (E.Pope) .....................................................................................
Associate
Date of Hearing 16, 17, 18 November 2005
Date of Decision 25 January 2006Counsel for the Applicant Mr I M Neil
Solicitor for the Applicant Allens Arthur Robinson
Counsel for the Respondent Mr J Stoljar
Solicitor for the Respondent Australian Securities & Investments Commission
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