Gray v Australian Securities and Investments Commission

[2002] FCA 745

FEDERAL COURT OF AUSTRALIA

Gray v Australian Securities & Investments Commission [2002] FCA 745

ADMINISTRATIVE LAW – judicial review – grounds for judicial review – improper exercise of power – scope of authority of respondent – whether respondent authorized to release information to third party – whether statute creates relationship of confidentiality between the parties

Australian Securities and Investments Commission Act 2001 (Cth) ss 13, 19, 25, 127
Administrative Decisions (Judicial Review) Act 1977 (Cth) s 5
Corporations Law s 184
Queensland Criminal Code s 408C

Johns v Australian Securities Commission (1992-1993) 178 CLR 408 referred to

DAVID ANTHONY GRAY v AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Q 18 OF 2002

DOWSETT J
14 JUNE 2002
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 18 OF 2002

BETWEEN:	DAVID ANTHONY GRAY APPLICANT
AND:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION RESPONDENT
JUDGE:	DOWSETT J
DATE OF ORDER:	14 JUNE 2002
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1.        The application be dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 18 OF 2002

BETWEEN:	DAVID ANTHONY GRAY APPLICANT
AND:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION RESPONDENT

JUDGE:	DOWSETT J
DATE:	14 JUNE 2002
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. Pursuant to s 13 of the Australian Securities and Investments Commission Act 2001 (Cth) (the “Act”), the respondent (“ASIC”) may, where it has reason to suspect contravention of specified legislation, make such investigations as it thinks expedient. Section 19 provides:

   (1)This section applies where ASIC, on reasonable grounds, suspects or believes that a person can give information relevant to a matter that it is investigating, or is to investigate, under Division 1.

   (2)ASIC may, by written notice in the prescribed form given to the person, require the person:

   (a)to give to ASIC all reasonable assistance in connection with the investigation; and

   (b)to appear before a specified member or staff member for examination on oath and to answer questions.

   (3)A notice given under subsection (2) must:

   (a)state the general nature of the matter referred to in subsection (1); and

   (b)set out the effect of subsection 23(1) and section 68.

2. Section 13 is in Division 1.

3. At some time prior to 11 December 2000, ASIC was investigating possible breaches of s 408C of the Queensland Criminal Code and s 184 of the Corporations Law. The suspected offenders were Mr L G Daswani and the “Daswani Group of Companies”. The suspected offences were thought to have occurred between 1 July 1999 and 11 December 2000. The applicant had acted as solicitor for one or more of the “suspects”. On 11 December 2000, ASIC issued to the applicant a notice requiring him to appear on 18 December 2000 for examination pursuant to subs 19(2) of the Act. At the same time it served a notice requiring him to produce certain documents, which notice was authorized by s 33 of the Act. Subsequently, the date of the examination was changed and a new s 19 notice issued. However it was in substantially the same form as that of 11 December 2000. The applicant was examined and a record of that examination prepared.

4. Section 25 of the Act provides:

   (1)ASIC may give a copy of a written record of the examination, or such a copy together with a copy of any related book, to a person’s lawyer if the lawyer satisfies ASIC that the person is carrying on, or is contemplating in good faith, a proceeding in respect of a matter to which the examination related. 

   (2)If ASIC gives a copy to a person under subsection (1), the person, or any other person who has possession, custody or control of the copy or a copy of it, must not, except in connection with preparing, beginning or carrying on, or in the course of, a proceeding:

   (a)use the copy or a copy of it; or

   (b)publish or communicate to a person, the copy, a copy of it, or any part of the copy’s content.

   Penalty:10 penalty units or imprisonment for three months, or both.

   (3)ASIC may, subject to such conditions (if any) as it imposes, give to a person a copy of a written record of the examination, or such a copy together with a copy of any related book.

5. The term “books” is defined in s 5 of the Act as including:

   (a)      a register; and

   (b)financial reports or financial records, however compiled, recorded or stored; and

   (c)a document; and

   (d)banker’s books; and

   (e)any other record of information.

6. Five different parties (the “notifying parties”) have indicated to ASIC that they wish to acquire copies of the record of examination. ASIC has decided to provide such records to their legal advisers pursuant to subs 25(1). The applicant applies for review of that decision pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the “ADJR Act”).  It is common ground that the ADJR Act authorizes such application.  The amended application appears to rely upon pars 5(1)(e), (f), (h) and (j) of the ADJR Act. Although oral submissions took a somewhat different form, the ground covered was much the same as that identified in the amended application.

7. The various grounds depend substantially upon the correctness of a construction of subs 25(1) advanced by the applicant. In effect, he submits that the sub-section should be given a very narrow operation by reference to ss 13 and 127 of the Act. Section 127 relevantly provides:

   (1)ASIC must take all reasonable measures to protect from unauthorised use or disclosure information:

   (a)given to it in confidence in or in connection with the performance of its functions or the exercise of its powers under the corporations legislation (other than the excluded provisions); or

   (b)that is protected information.

   …

8. The applicant submits firstly, that any disclosure pursuant to subs 25(1) must be for a purpose incidental to the role of ASIC, pointing to the decision of the High Court in Johns v Australian Securities Commission (1992-1993) 178 CLR 408 as establishing this proposition. However that case primarily concerned subs 25(3). Although there are other passing references to subs 25(1), the only reference of any substance is at 468 where McHugh J observed:

   Section 25(1) authorizes the giving of a copy of a written record of the examination to a person’s lawyer if the ASC is satisfied that a person is carrying on or is contemplating in good faith a proceeding in respect of a matter to which the examination related.  A record handed to a lawyer pursuant to the terms of s 25(1) must be regarded, therefore, as an authorized disclosure for the purpose of s 127(3).

9. This proposition is beyond dispute, but it in no way supports the applicant’s submission. In my view, ASIC is entitled to provide a copy of the record of examination to a lawyer acting for any person who is carrying on, or contemplating, in good faith, a proceeding of the type described. The applicant’s second construction point concerns the identification of the proceedings which meet that description. This argument has two aspects. It is firstly submitted that there must be “direct correspondence between the contemplated proceeding and the subject matter of the examination”. The argument focuses upon the reference in subs 25(1) to “a proceeding in respect of a matter to which the examination related” and the requirement in s 19(1) that before issuing a notice, ASIC must believe that a person can give information “relevant to a matter that it is investigating, or is to investigate …”. The applicant’s submission is that a “matter” for the purposes of subs 25(1) must also be a “matter” for the purposes of subs 19(1), namely a matter which it may investigate pursuant to Division 1. For present purposes such matters are suspected contraventions of the corporations legislation and of relevant state law. The question is whether the proceedings or contemplated proceedings for the purposes of subs 25(1) must be “in respect of” one or other of those matters.

10. It is only the use of the word “matter” in both subsections which suggests that outcome. Were it not for the use of that word in s 19, the expression “a matter to which the examination related” in subs 25(1)would be appropriate to describe any subject which was addressed in the course of the examination. The word “matter” must take its meaning from the context in which it appears. The contexts of s 19 and subs 25(1) are quite different. I see no reason to conclude that the word describes the same subject matter in each case. Provided the proceedings or contemplated proceedings are in respect of a matter addressed in the course of the examination, then the requirements of subs 25(1) are satisfied. It is not necessary that such proceedings be “in respect of” the subject matter of the ASIC investigation pursuant to s 19. I expect, however, that in the vast majority of cases there will be such a relationship simply because the expression “in respect of” is so broad and because the subject matter of the examination will be limited by its purpose. Secondly, it is submitted that subs 25(1) does not authorize the release of a record other than to facilitate proceedings for a contravention of a law mentioned in s 13. There is no textual justification for this view. Clearly, the proceedings contemplated by subs 25(1) include civil proceedings.

11. My construction of subs 25(1) disposes of most of the other grounds raised in the amended application. However some further comments are necessary. I will follow the sequence adopted in that document.

    ERRORS OF LAW

12. I have already dealt with most of these matters. One further submission is that subs 25(1) does not authorize the respondent to solicit requests for the release of transcripts and that such conduct would be in breach of s 127. Whatever may be merits of that argument, and I do not think that there is much in it, there is no point in the submission. The notifying parties have asked for copies of the record. It does not matter whether ASIC invited them to make such requests.

    NO EVIDENCE

13. Paragraph 5(1)(h) of the ADJR Act provides that a ground for judicial review is that there was no evidence or other material to justify the making of the decision in question.  However subs 5(3) provides that such ground shall not be taken to be made out unless:

    (a)the person who made the decision was required by law to reach that decision only if a particular matter was established, and there was no evidence or other material (including facts of which he or she was entitled to take notice) from which he or she could reasonably be satisfied that the matter was established; or

    (b)the person who made the decision based the decision on the existence of a particular fact, and that fact did not exist.

14. Little or no attention was paid to this qualification in the course of argument.  In any event the submission is based upon the assumption that the proceedings must be for a contravention of relevant legislation.  I do not accept that view.  The matter was put in a slightly different way in the course of argument.  It was suggested that the information provided by the various notifying parties did not necessarily disclose that the proceedings were “in respect of a matter to which the examination related”.  This submission could only be addressed after a detailed consideration of the record.  It was for ASIC to determine whether or not each of the various proceedings or contemplated proceedings was “in respect of a matter to which the examination related”.  No attempt has been made to demonstrate any specific error in this regard, and so there can be no ground for review.

    IMPROPER EXERCISE OF THE POWER

15. This ground also depends upon the assumption that the contemplated proceedings for the purposes of subs 25(1) must be “those set out in s 13” of the Act or other contraventions of the law. I have rejected this view. It is also submitted that ASIC failed to take into account numerous alleged policy objectives of the Act and other relevant considerations in exercising the discretion conferred by subs 25(1). These matters are:

    (a)the failure of those requesting release of the transcripts to identify the relevant contraventions;

    (b)the role of ASIC in relation to investigations conducted pursuant to Part 3 of the ASIC Act;

    (c)the obligation of confidentiality pursuant to section 127 of the ASIC Act;

    (d)the proper construction of section 25(1) of the ASIC Act;

    (e)whether the party to which the transcripts were to be released was a liquidator in respect of which powers of examination are conferred under the Corporations Act 2001.

    …

16. I will deal with each of these matters in turn.

    Identification of “the relevant contraventions”

17. This submission is based upon the erroneous view that proceedings for the purposes of subs 25(1) must be for breach of relevant legislation.

    The role of ASIC in relation to investigations

18. In some circumstances, ASIC might consider that its own role would be impeded by the provision of a copy of the record to another person.  Questions may then arise as to whether, in those circumstances, it would be entitled to withhold it.  There has been no suggestion in this case that there are any such circumstances.  There is nothing in this point.

    The obligation of confidentiality pursuant to s 127

19. This point appears to have arisen because of the inter-relationship between subs 25(3) and s 127 referred to in cases such as Johns.  Johns establishes that subs 25(3) does not authorize general disclosure (per Brennan J at 425, per Dawson J at 435-6, per Toohey J at 452-3, per Gaudron J at 458 (agreeing with Brennan J) and per McHugh J at 468-9). However the power conferred by subs 25(1) contains its own limitations as to the method of disclosure (to the relevant lawyer), as to the circumstances in which disclosure may be made (where proceedings have been commenced or are contemplated in good faith) and as to the use which may be made of the record (in connection with preparing, beginning or carrying on or in the course of proceedings). There is no reason to consider s 127 in this context.

    The proper construction of s 25(1)

20. I have dealt with this matter. 

    Whether the party was a liquidator

21. Two of the notifying parties are liquidators. The submission seems to imply that they might conduct their own examinations and so avoid the need for obtaining copies of the record. There is no reason to adopt such a narrow view of subs 25(1).

    IMPROPER PURPOSE

22. It is asserted that ASIC may not exercise its subs 25(1) power for purposes other than those found in Part 3 of the Act and in particular, in s 13. There is no warrant for so limiting the operation of subs 25(1).

    ABUSE OF POWER

23. It is asserted that there was an abuse of power in that ASIC acted beyond the limited purposes for which the powers of investigation are conferred and in breach of its obligations of confidence. No basis is demonstrated for the assertion that it acted beyond power in connection with the conduct of the investigation. For reasons which I have given it has not breached any duty of confidence pursuant to s 127.

    OTHERWISE CONTRARY TO LAW

24. Finally, it is said that the decision was contrary to law in that release of the record would breach confidence reposed in the respondent by the applicant “which the respondent would in equity be obliged to maintain”. This again overlooks the clear provisions of subs 25(1). There is nothing in this point.

    PARTIES

25. At the hearing of this matter I raised with the applicant the question of service of notice of the proceedings upon the notifying parties.  The applicant had not served them.  In my view he should have done so.  However the respondent had given them some indication that proceedings were on foot.  One notifying party (the liquidators of Ganesh Australia Pty Ltd) appeared by counsel.  Evidence demonstrated that another (Australian and New Zealand Banking Group Ltd) knew of the proceedings and was content to abide the order of the Court.  The attitudes of the other notifying parties were not known.  For that reason the matter proceeded upon the basis that the proceedings would be disposed of in a way which would not compromise their interests.  However they have since indicated that they are content to abide the order of the Court.  

    ORDERS

26. The application should be dismissed.  I will hear submissions as to costs.

I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

Associate:

Dated:             14 June 2002

Solicitor for the Applicant:	Deacons
Counsel for the Respondent:	Ms E Ford
Solicitor for the Respondent:	Australian Securities & Investments Commission
Counsel for the Liquidator:	Mr I Perkins
Solicitor for the Liquidator:	Blake Dawson Waldron
Date of Hearing:	25 March 2002
Date of Judgment:	14 June 2002