Hardy (by his tutor, Lynette Maree Hardy) and Australian Securities and Investments Commission

[2021] AATA 799

Hardy (by his tutor, Lynette Maree Hardy) and Australian Securities and Investments Commission [2021] AATA 799 (8 February 2021)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2020/3220

Re:Robert Hardy (by his tutor, Lynette Maree Hardy)  

APPLICANT

AndAustralian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal:Deputy President Bernard J McCabe 

Date:8 February 2021

Place:Sydney

1. Items 4 and 6 of the Respondent’s summons are disallowed.

.................................SGD.......................................

Bernard J McCabe, Deputy President

Catchwords

PRACTICE AND PROCEDURE – objection to summons – where summons issued to applicant – where summons issued to obtain evidence of applicant’s capacity – where summons concerns particulars of other proceedings in which the applicant is a party – whether documents sought are relevant to these proceedings – whether the creation of a document in order to comply would be too onerous on the applicant - whether compliance in general would be oppressive – summons amended – summons upheld

Legislation

Administrative Appeals Tribunal Act 1975 (Cth)
Corporations Act 2001 (Cth)

Cases

Cosco Holdings Pty Ltd v Commissioner of Taxation (1997) 37 ATR 432
Eldridge v Commissioner of Taxation [1990] FCA 369

Hearne v Street (2008) 235 CLR 125

REASONS FOR DECISION

1. The Australian Securities and Investments Commission (ASIC) asked the Tribunal to issue a summons directed to Mr Robert Hardy. Mr Hardy is the applicant in these proceedings. The applicant has asked the Tribunal to set the summons aside. 

   Background to the proceedings

2. Mr Hardy was a director of several companies that were wound up while (or shortly after) he was a director. Liquidators of those entities filed reports under s 533(1) of the Corporations Act 2001 (Cth)(Corporations Act). In due course, ASIC sent Mr Hardy a notice under s 206F(1)(b) of the Corporations Act requiring him to demonstrate why he should not be disqualified from managing corporations for a period of five years. The notice was served on 23 March 2020.

3. After several extensions of time, Mr Hardy’s solicitors informed ASIC on 4 May 2020 that Mr Hardy was unable to provide a response to the notice because he was suffering from a serious medical condition. The condition “significantly impaired” the applicant in the performance of his duties as a director since at least 2017. The letter went on to explain “Robert Hardy is no longer ‘fit to plead’ to the allegations against him”. The solicitors enclosed a report from a specialist medical practitioner that described Mr Hardy’s medical condition. The solicitors added Mr Hardy was prepared to give an undertaking through his tutor that he would not thereafter participate in the management of a corporation.

4. ASIC decided to disqualify the applicant from managing a corporation on 11 May 2020. That reviewable decision has now come before the Tribunal. Mr Hardy’s application was filed by his tutor, Lynette Hardy. Mrs Hardy is the applicant’s wife and holds his power of attorney.

   The key issues in dispute

5. Section 206F(1) of the Corporations Act empowers ASIC to disqualify a person from managing corporations where that person has a track record of being an officer of corporations that were wound up in insolvency. Sub-sections 206F(1)(a)-(c) establish preconditions which must be satisfied before the discretion is enlivened. Relevantly, s 206F(1)(b) requires that:

   (b)  ASIC has given the person:

   (i)a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and

   (ii)an opportunity to be heard on the question…

6. The applicant says (through his tutor) he was denied a genuine and meaningful opportunity to be heard because his medical condition left him in a state where he could not respond. He similarly asserts that the discretion in s 206F(1) was never enlivened because one of the preconditions to its exercise was not, and cannot, be satisfied.

7. Mr Hardy also argues the disqualification does not serve any lawful purpose in circumstances where he has already given an undertaking not to participate in the management of corporations.

   The summons

8. ASIC asked the Tribunal to issue a summons directed to the applicant which requires production of a number of documents. Most of the documents sought relate to other legal proceedings in which Mr Hardy and his wife have been involved. The documents sought are:

   1The originating process filed in each of the named proceedings.

   2The pleadings filed in each of those proceedings.

   3Robert Hardy’s evidence filed in Coates Hire Operations Pty Ltd v Hardy NSWDC Proceeding No. 2019/83346, referred to in paragraph 8 of a statutory declaration filed by Mr Oliver Lacey, a solicitor engaged by the applicant.

   4The particulars of each of the disputes.

   5A ‘show cause’ notice issued to Robert Hardy by the Australian Building and Construction Commission, referred to in paragraph 8 of Mr Lacey’s Statutory Declaration.

   6All documents containing Robert Hardy’s response to the particulars in each of the disputes, including:

   (a)any written response to the show cause notice issued to Robert Hardy by the Australian Building and Construction Commission referred to in paragraph 8 of Mr Lacey’s Statutory Declaration.

9. ASIC’s stated rationale for seeking the documents was set out in the request for summons form it filed with the Tribunal. ASIC said:

   The Applicant in these proceedings says that he lacked capacity to respond to ASIC’s Notice to Show Cause, and was thus denied an opportunity to be heard, in respect of the decision to ban him from acting as a Director. The nature and extent of Mr Hardy’s participation in the disputes and proceedings, the allegations he makes in his pleadings, his response to other show cause notices, and the nature of his evidence in those other proceedings are relevant to whether he could have responded to ASIC’s show cause notice. The documents are relevant both to questions of his capacity and whether he could have responded to ASIC.

   The summons power

10. In Eldridge v Commissioner of Taxation [1990] FCA 369, Foster J observed of the Tribunal (at [41]):

    Although it could be said to be part of an administrative hierarchy, its functions partake far more of the Court than of the office desk.

11. One of the Tribunal’s court-like features is the power to issue a summons “[f]or the purposes of a proceeding before the Tribunal”. The power is found in s 40A of the Administrative Appeals Tribunal Act 1975 (Cth)(AAT Act). The summons may require a person to appear to give evidence, or to produce any document or thing. Unsurprisingly, the principles governing when a summons will be issued or set aside are the same as those which apply to subpoenas used in court proceedings. In Cosco Holdings Pty Ltd v Commissioner of Taxation (1997) 37 ATR 432, Spender J explained a summons to produce documents will have a legitimate forensic purpose if the documents (at 440):

    could reasonably be expected to throw light on some of the issues in the principal proceedings. It is not a question of looking at the documents to see if the documents might permit a case to be made.

12. The second sentence in the passage quoted above is a reference to the concept of ‘fishing’. A summons may not be used as part of a speculative enquiry, as in: “I wonder if the person has any documents that might be useful to our case?”. A ‘fishing expedition’ of this kind is objectionable because it is oppressive. One must not forget a summons is intrusive, and any request to exercise a power involving compulsory disclosure – especially when directed to a third party that is unrelated to the proceedings – must be scrutinised with care.

    The summons in this case

13. The applicant’s counsel argued in written submissions that material filed in other courts was not relevant to these proceedings. Subject to what follows, I generally agree with ASIC that the filed materials might shed light on what I take to be one of the central issues in the case, namely: was Mr Hardy competent to respond to ASIC’s show cause notice? The relevance of the documents does not lie in their content, which might have nothing to do with the current proceedings. The relevance lies in the fact they may suggest on their face that Mr Hardy was competent at about the same time as he was required to deal with ASIC. We do not need to resolve for now whether Mr Hardy is to be questioned about those documents and his role in their preparation, and whether any claim of privilege is available that would prevent Mr Hardy or anyone else disclosing instructions while in the witness box. The parties can make submissions in due course about what I should make of anything that is produced under the summons and subsequently tendered in evidence. I should add that ASIC has made clear it is not seeking material that has not been filed with the Supreme or District Courts, or the Australian Building and Construction Commission.

14. Having said that, I am not satisfied with the wording of item 4 in the summons as it stands. The applicant’s counsel argues the wording suggests the applicant would be required to create a document containing the particulars. That would not be an appropriate use of the summons power. ASIC says item 4 is plainly a request for existing documents that record particulars. Even if I accept ASIC is referring to documents in existence, I fear the category of documents is too broad. In litigation, any number of documents might contain relevant particulars. The request is potentially oppressive Item 4 should be struck out.

15. To the extent that item 6 requires creation of a document, it would also be impermissible. Item 6 should be amended so that it makes clear it is directed to the response that has actually been provided to the Australian Building and Construction Commission in response to the ‘show cause’ notice.

16. I am not satisfied the applicant can rely on the so-called Harman principle: it is unclear how the implied undertaking applies to court documents like pleadings and originating applications. It is also unclear why the applicant’s own evidence in those proceedings would attract the operation of the principle in the circumstances. He was not forced to give that evidence, and it is not apparent why he should be able to resist a valid summons on that basis.

    Conclusion

17. Subject to my conclusions with respect to items 4 and 6 of the summons, which I would disallow, the summons is otherwise in order. I decline to set it aside. The Respondent may file a revised request for a summons to be issued on that basis.

I certify that the preceding 17 (seventeen) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

..............SGD.................

Associate

Dated: 8 February 2021

Date(s) of hearing:	On the papers
Counsel for the Applicant:	Mr Jethro Horowitz
Counsel for the Respondent:	Mr Patrick Knowles
Solicitors for the Respondent:	Self-Represented