Jeffers and Australian Securities and Investments Commission
[2015] AATA 537
•22 July 2015
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL )
) No: 2015/2520
Taxation and Commercial Division )Re: Andrew Jeffers
Applicant
And: Australian Securities and Investments Commission
RespondentCORRIGENDUM
TRIBUNAL: Deputy President F J Alpins
DATE: 29 July 2015
PLACE: Melbourne
The Tribunal directs the Registrar, pursuant to s 43AA(1) of the Administrative Appeals Tribunal Act 1975 (Cth), to alter the text of the written statement of reasons for its decision made on 22 July 2015 as follows:
- In paragraph 21, in the first and seventh line, delete “Sch 2” and replace with “Sch 9”;
- In paragraph 48, delete “for a member to” and replace with “that a member may”.
.....[sgd]........................................
Deputy PresidentJeffers and Australian Securities and Investments Commission [2015] AATA 537 (22 July 2015)
Division TAXATION & COMMERCIAL DIVISION File Number(s)
2015/2520
Re
ANDREW JEFFERS
APPLICANT
And
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
RESPONDENT
Decision
Tribunal Deputy President F J Alpins
Date 22 July 2015 Place Melbourne The applicant’s application under s 41 of the Administrative Appeals Tribunal Act 1975 (Cth) is dismissed.
The applicant’s application under s 35 of the Administrative Appeals Tribunal Act 1975 (Cth) is dismissed.
.......[sgd].............................................
Deputy President F J Alpins
PRACTICE AND PROCEDURE – stay application – banning order – applicant prohibited from providing any financial services – proffered undertaking to Tribunal not to provide any financial services if stay granted and proposed same condition of stay – whether Tribunal of opinion that desirable to make orders sought – nature of public interest to be taken into account – whether stay would be for purpose of securing effectiveness of review – s 41(2) of Administrative Appeals Tribunal Act 1975 (Cth)
PRACTICE AND PROCEDURE – application for confidentiality orders – s 35 of Administrative Appeals Tribunal Act 1975 (Cth)
Legislation
Acts Interpretation Act 1901 (Cth), s 7
Administrative Appeals Tribunal Act 1975 (Cth), ss 35, 41, 63
Australian Securities and Investments Commission Act 2001 (Cth), ss 1, 93AA
Corporations Act 2001 (Cth), ss 760A, 912D, 920A, 920B, 920E, 920F, 922A, 989B, 989D, 990B, 1041E, 1317B
Corporations Regulations 2001 (Cth), reg 7.6.06Tribunals Amalgamation Act 2015 (Cth), Sch 9 ss 15AA, 15DF
Cases
Australian Securities and Investments Commission v Administrative Appeals Tribunal & Anor (2009) 181 FCR 130
Australian Securities and Investments Commission v Forge [2007] NSWSC 1489
Australian Securities and Investments Commission v PTLZ [2008] FCAFC 164
Australian Securities and Investments Commission v Vizard (2005) 145 FCR 57
Baini v R (2012) 246 CLR 469
Bell IXL v Life Therapeutics (2008) 68 ACSR 154
Brennan v Comcare (1994) 50 FCR 555
Catena v Australian Securities and Investments Commission [2010] FCA 598
Commissioner of Taxation v The Myer Emporium Ltd (1986) 160 CLR 220
Klusman v Australian Securities and Investments Commission [2010] AATA 709
Otter Gold Mines Ltd v Deputy President B M Forrest of the Administrative Appeals Tribunal (1997) 47 ALD 89
Pochi v Minister for Immigrationand Ethnic Affairs (1979) 2 ALD 33
Rawson Finances Pty Ltd v Commissioner of Taxation (2013) 133 ALD 39
Re Bundy v Australian Securities and Investments Commission [2013] AATA 59
Re Commonwealth of Australia v Quirke (1986) 9 ALD 92
Re Dart and Director-General of Social Services (1982) 4 ALD 553
Re Dekanic and Tax Agents’ Board of New South Wales (1982) 6 ALD 240
Re Repatriation Commission and Delkou (1985) 8 ALD 454
Re Scott and Australian Securities and Investments Commission [2009] AATA 798
Re XTWK and ASIC (2007) 98 ALD 131
Re Zarfati v Australian Securities and Investments Commission (2008) 106 ALD 225
Rich v Australian Securities and Investments Commission (2004) 220 CLR 129
Shi v Migration Agents Registration Authority (2008) 235 CLR 286
Yrttiaho v Public Curator (Qld) (1971) 125 CLR 228
REASONS FOR DECISION
Deputy President F J Alpins
22 July 2015
INTRODUCTION AND PROCEDURAL HISTORY
In May 2015, a delegate of the respondent, the Australian Securities and Investments Commission (“ASIC”), decided to make a banning order against the applicant, Mr Andrew Jeffers, prohibiting him from providing any financial services for a period of three years pursuant to s 920A of the Corporations Act 2001 (Cth) (see s 920B of that Act (the “Corporations Act”)).
That decision was made following a hearing before ASIC which took place in January 2015, at which Mr Jeffers was represented and made submissions, in accordance with s 920A(2) of the Corporations Act.
Mr Jeffers has applied to the Tribunal for review of ASIC’s decision (s 1317B of the Corporations Act). He has also requested, pursuant to s 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (the “Act”), orders staying the operation or implementation of the decision under review, including entry of the decision in any register maintained by ASIC (see s 922A of the Corporations Act and reg 7.6.06 of the Corporations Regulations 2001 (Cth)), publication of any notice about the decision in the Commonwealth Gazette (see s 920E of the Corporations Act) and the disclosure of the decision in any media release issued by ASIC.
Just before the hearing of the application made pursuant to s 41(2) of the Act, Mr Jeffers also applied pursuant to s 35 of the Act for orders that he be allocated a pseudonym for the purpose of the proceeding, that the hearing of the proceeding take place in private and that the publication or disclosure of evidence, or the contents of documents lodged with or received in evidence by the Tribunal, be restricted to the parties and certain other persons.
In support of his application made under s 41(2) Mr Jeffers, through his counsel, proffered an undertaking that he would not provide any financial services, whether “directly or indirectly” until the hearing and determination of the application for review if the stay were granted.
In an amended proposed form of order provided with supplementary submissions which were lodged after the hearing in compliance with a direction made by the Tribunal, Mr Jeffers sought orders pursuant to s 41(2) of the same kind I have indicated, but now subject to a condition reflecting and thus alternative to his proffered undertaking, that is “that until the hearing and determination of the application for review the applicant does not directly or indirectly provide financial services” (see s 41(6)(a) of the Act). I explain the reason for his proffering of such an undertaking and consent to such a condition later in these reasons.
FACTUAL BACKGROUND
ASIC’s banning order against Mr Jeffers was made on the basis, given in ASIC’s statement of reasons (see s 920F(1) of the Corporations Act) that “ASIC has reason to believe that [Mr Jeffers] is likely to contravene a financial services law” for the purposes of s 920A(1)(f) of the Corporations Act.
In its statement, ASIC gave the following reasons for its belief as founding the making of the banning order. First, the delegate made the following findings with respect to Mr Jeffers’ conduct in his capacity as a director of GTL Trade Up Pty Ltd (“GTL”). GTL held a financial services licence from January 2011 to November 2013, when it was cancelled by ASIC. During that time, GTL issued three product disclosure statements (“PDS”) concerning its business of dealing in financial products which were, or included, derivatives and foreign exchange contracts.
Each PDS was issued while Mr Jeffers was a director of GTL. The first was issued while Mr Jeffers was its sole director; the second and third PDS were issued while Mr Jeffers was its Australian resident director.
In September 2013, GTL was placed into voluntary administration and then liquidation. The delegate found that the liquidators reported that $4,402,894 was owed to GTL’s retail clients.
The delegate found that GTL contravened s 1041E of the Corporations Act in a number of respects because its business was not conducted in accordance with a number of representations made in each PDS. Those representations concerned matters including the basis upon which GTL executed transactions for clients, the nature of its own involvement in those transactions and also the basis upon which clients’ funds were kept.
With respect to Mr Jeffers, the delegate found that he knew or ought reasonably to have known that each of the relevant representations in each PDS were false or misleading. The delegate gave various factual and legal reasons for that conclusion.
The delegate’s belief that that Mr Jeffers is likely to contravene a financial services law was said to be based, in part, on the delegate’s consequent conclusion that in his capacity as a director of GTL Mr Jeffers had failed to exercise reasonable care and diligence because he had failed to ensure that GTL did not contravene s 1041E of the Corporations Act when in the circumstances he was obliged to do so.
The delegate gave other reasons for holding that belief for the purposes of s 920A(1)(f). In that regard, the delegate found that Mr Jeffers had failed to ensure, despite being obliged to do so, that:
(a)various companies of which he was a director, including GTL, OCM Online Capital Markets Pty Ltd (“OCM”), Golden Sky Australia Pty Ltd (“Golden Sky”), Forex TG Pty Ltd and Direct FX Trading Pty Ltd met their obligations to notify ASIC of “significant breaches” of their financial services licences in compliance with s 912D of the Corporations Act;
(b)GTL, OCM and Golden Sky complied with their obligations as financial services licensees to notify ASIC of the appointment of any auditor within the time prescribed by s 990B of the Corporations Act and that they complied with their obligations to lodge their annual audited financial reports in accordance with s 989B of the Corporations Act within the time prescribed by s 989D(1)(b) thereof.
The final reason for the delegate’s requisite belief was stated to be that “Mr Jeffers has not acknowledged responsibility for his failings in relation to the licensees”.
LEGISLATION
Section 41 of the Act relevantly provides:
“(1) Subject to this section, the making of an application to the Tribunal for a review of a decision does not affect the operation of the decision or prevent the taking of action to implement the decision.
(2)The Tribunal may, on request being made by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), 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.
(3)Where an order is in force under subsection (2) ..., the Tribunal may, on request being made by a party to the relevant proceeding, make an order varying or revoking the first-mentioned order.
...
...
(6)An order in force under subsection (2) .....
(a)is subject to such conditions as are specified in the order; and
(b)has effect until:
(i)where a period for the operation of the order is specified in the order—the expiration of that period or, if the application for review is decided by the Tribunal before the expiration of that period, the decision of the Tribunal on the application for review comes into operation; or
(ii)if no period is so specified—the decision of the Tribunal on the application for review comes into operation.”
It is relevant to Mr Jeffers’ stay application to note that s 63(2) of the Act provides that a person “commits an offence if ... the person engages in conduct” and that conduct “would, if the Tribunal were a court of record, constitute a contempt of that court”. The penalty for such an offence is specified as being imprisonment for 12 months or 60 penalty units, or both.
Section 63(2) of the Act was very recently (upon the commencement of the Tribunals Amalgamation Act 2015 (Cth) (the “Amending Act”) on 1 July 2015) inserted in the Act in substitution for the former s 63(5), which took the same form save that it used the expression “is guilty of” instead of “commits” and provided for a lesser penalty (30 penalty units or imprisonment for 6 months, or both).
Section 35(1) of the Act provides that, “[s]ubject to this section, the hearing of a proceeding before the Tribunal must be in public”. Subsections 35(2) to 35(4) provide for orders the Tribunal may make which depart from the requirement expressed in s 35(1). Section 35(5) (formerly s 35(3) of the Act) requires that the Tribunal, “in considering whether” to make orders giving directions pursuant to those preceding subsections, “take as the basis of its consideration the principle that is it desirable” that the subject matter of such orders be public (and available to all the parties) but also requires that the Tribunal “pay due regard to any reasons in favour of” giving such directions.
I note that s 35 in its current form was also inserted in the Act in substitution for the former provision by the Amending Act, although any relevant differences between the former and current provision largely involve the use of more modern nomenclature and form, save that s 35(5) requires the Tribunal to “pay due regard to any reasons in favour” of confidentiality orders, while the former s 35(3) required merely that the Tribunal have such regard to reasons which had been “given”. Furthermore, s 35(3)(a) now provides expressly for the use of pseudonyms (cf. ASIC v AAT at [78] -[79]).
Section 15AA(1) of Sch 2 to the Amending Act relevantly provides that the amendments made by that Act apply in relation to proceedings commenced, and decisions made, before the commencement day. Accordingly, it seems that the Tribunal must apply ss 41 and 35 in their amended (in the former case) and substituted (in the latter case) forms, which accords with statutory and general principles governing the distinction between accrued rights and changes in procedures by which rights might be enforced (see s 15DF of Sch 2 to the Amending Act, s 7 of the Acts Interpretation Act 1901 (Cth); see also Yrttiaho v Public Curator (Qld) (1971) 125 CLR 228 at 245 per Gibbs J). In any event, nothing turns in this case upon any difference between the former and substituted provisions of s 35 on the facts of this case (nor does anything turn on minor amendments to s 41 of the Act), so it is unnecessary for me to consider that issue further. The true issue is whether the Tribunal should make the orders sought by Mr Jeffers.
RELEVANT PRINCIPLES
As North and Downes JJ stated in Australian Securities and Investments Commission v PTLZ [2008] FCAFC 164 at [34] in the context of ss 41 and 35 of the Act, citing with approval Shi v Migration Agents Registration Authority (2008) 235 CLR 286 at [92], “[t]he starting point for any matter in the Tribunal is the legislation from which it derives its jurisdiction” and “[i]n most cases the words of the legislation will be a sufficient guide to the Tribunal’s exercise of jurisdiction”. It is important to bear in mind that the statutory text cannot be displaced by words employed in judicial decisions about that statutory text (Baini v R (2012) 246 CLR 469 at [14]). It is nevertheless instructive to make reference to certain principles expounded in such decisions concerning ss 41 and 35 (see Brennan v Comcare (1994) 50 FCR 555 at 572 per Gummow J).
Furthermore, one must bear in mind that “[a]lthough ss 41(2) and 35(2) address issues which may be related they are quite different issues” (PTLZ at [36]). Those provisions “not only address a different subject matter and different powers, they create different qualifying conditions for the exercise of the powers” (PTLZ at [41], see also at [14] per Black CJ). That much is apparent upon a comparison of their terms. Nevertheless, where both ss 41 and 35 arise for consideration, in any given case the relevant issues might not be discrete in the context of the application of those provisions – for instance, the decision to grant a stay might affect the desirability of making a confidentiality order (PTLZ at [52]).
Section 41(2) of the Act
Although, as I have said, the statutory text has primacy, it is instructive to note that in Re Scott and Australian Securities and Investments Commission [2009] AATA 798 at [4], Downes J said that it was appropriate in considering an application made under s 41(2) of the Act to consider matters including the prospects of success with respect to the application for review, the consequences for the applicant of the refusal of a stay, the public interest, the consequences for the respondent in carrying out its functions depending upon whether a stay is granted or not, and the timing of the hearing of the application for review.
Another matter to which Downes J referred was whether the application for review would be rendered nugatory if a stay were not granted. In terms of the statutory text, it is important to note that the terms of s 41(2) allow for “such .. orders ... as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review” (see Re Repatriation Commission and Delkou (1985) 8 ALD 454 at [8]). Accordingly, the Tribunal must necessarily bear in mind the statutory purpose for which orders under s 41(2) may be made (Re Dart and Director-General of Social Services (1982) 4 ALD 553 at 556).
As the Tribunal may only form the requisite opinion for the purposes of s 41(2) after taking into account “the interests of any persons who may be affected by the review”, it is necessary to identify and consider the relevant interests for the purposes of that provision (Australian Securities and Investments Commission v Administrative Appeals Tribunal & Anor (2009) 181 FCR 130 (“ASIC v AAT”) at [50]). Such interests “are to be identified by reference to the statutory scheme under which the decision under review was made” (ASIC v AAT at [51]).
Given the nature of a banning order, the persons who may be affected by the review for the purposes of s 41(2) “include not only the recipient and his or her dependants, associates and employees but also that person’s existing and potential clients, as well as the public at large” (ASIC v AAT at [51], see also at [71]). In particular, careful consideration must be given particularly to the proper balance “between the rights and interests of the recipient of the banning order and of the public including existing and potential future clients of the recipient of the banning order” (ASIC v AAT at [71]; see also at [57]). As I have indicated, the interests of ASIC in fulfilling its statutory duties may also be affected (see s 1(2) of the Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”)).
In forming its opinion for the purposes of determining whether to make an order under s 41(2), the Tribunal must resolve “these potentially competing interests” in the context of the statutory intendment disclosed by the statutory scheme governing banning orders, being the protection of the public and the importance of the timely availability of information to the market generally and to existing and potential customers of the subject of the banning order.
The statutory scheme reflects the legislature’s assessment of the appropriate resolution of the competing interests of persons who may be affected by a banning order in providing for a private hearing before ASIC yet requiring that the banning order, which must be accompanied by a statement of reasons, be made public (ASIC v AAT at [52]-[56], [71]; see also Klusman v Australian Securities and Investments Commission [2010] AATA 709 at [15] per Downes J).
The “requirement for publication in the Gazette shows that the legislature considered that publication of a banning order was important” and “is consistent with the need for a fully informed market” (ASIC v AAT at [81]).
I note that if an order staying a banning order (being the “primary interlocutory remedy” which might be sought) is made, the “need for secrecy by the imposition of a further stay of publication will not usually arise [as] [t]he occasion for such a further order will be rare” (ASIC v AAT at [55]). Consideration of such a further order “should be separate from consideration of the stay of the banning order itself (at [55]).
Although in ASIC v AAT the Full Federal Court focussed on the importance of a banning order being made public in the context of the specific protective effect of a banning order, in that it precludes the banned person from participating in the market and informs the market of that preclusion (see, for example, at [54]), in my view the Court’s reasoning should not be taken as suggesting that that is the sole context in which the market being informed of a banning order bears importance.
Another important object served by a banning order and particularly by its publication which bears upon the Tribunal’s consideration of an application made under s 41(2) is its general deterrent effect (see Catena v Australian Securities and Investments Commission [2010] FCA 598 at [21] per Barker J; see also, in the relevantly analogous context of disqualification orders, Australian Securities and Investments Commission v Vizard (2005) 145 FCR 57 at [35] per Finkelstein J, citing with approval Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; Australian Securities and Investments Commission v Forge [2007] NSWSC 1489 at [102]-[103] per White J).
This more general effect of a banning order, achieved through it being made public, serves to maintain public confidence in the financial services market. It reflects the wider statutory context, particularly the objects enumerated in s 760A of the Corporations Act, which include the promotion of “confident and informed decision making by consumers of financial products and services”, which is to be considered by the Tribunal in forming the requisite opinion for the purposes of s 41(2) of the Act.
Section 35 of the Act
Section 35(1) of the Act “establishes a norm ... that the proceedings before the [Tribunal] shall be in public”, which is reinforced by the terms of the former s 35(3) (now s 35(5)) (ASIC v AAT at [74] per Downes and Jagot JJ, Moore J at [1]). The power in s 35(2) to depart from this norm has been described as one to be exercised “sparingly” (at [74], citing with approval Pochi v Minister for Immigrationand Ethnic Affairs (1979) 2 ALD 33 at 55 per Brennan J).
It is significant that the terms of s 35(5) (formerly s 35(3)) are expressed as requiring that desirability to be “the”, rather than “a”, basis of the Tribunal’s consideration (ASIC v AAT at [74], [1]). The statutory requirement in the former s 35(3) was described by North and Downes JJ in PTLZ as being “both wider and deeper than under s 41(2)”, the statutory obligation in the latter provision being confined to “taking into account the interests of any persons who may be affected by the review”, although Black CJ in his judgment stated that both ss 41 and 35 required that the Tribunal undertake the task of “weighing up competing considerations” (at [13]).
Given the norm established by s 35(1) and the scheme established by the Corporations Act with respect to banning orders, the Tribunal “would need some cogent reason by reference to the particular case to depart from the ordinary requirement of a public hearing” (ASIC v AAT at [76]).
CONSIDERATION
Section 41(2) of the Act
In determining whether to make orders pursuant to s 41(2) of the Act, I turn first to the issue of Mr Jeffers’ prospects of success with respect to his application for review. I note that this is not the occasion for any preliminary trial of the issues to be considered upon review (Re Dart and Director-General of Social Services (1982) 4 ALD 553 at 555 per Davies J). It is sufficient for present purposes if there are facts and circumstances put, or points of law raised, which if established at the hearing will result in success (Dart at 555; Re Commonwealth of Australia v Quirke (1986) 9 ALD 92 at 95).
In my view, Mr Jeffers’ case as presented for the purposes of his stay application was less than compelling. It is sufficient for present purposes to mention three flaws. The most immediately apparent flaw was that his submissions failed to address the text and proper construction and application of the provision founding ASIC’s decision to make the banning order, being s 920A(1)(f) of the Corporations Act. Moreover, they failed to address the standard of conduct applicable to him in his capacity as a director of the companies in question in that context and his actual conduct in that context.
Second, Mr Jeffers’ submissions were insufficiently directed to the question of why ASIC’s decision should be disturbed upon review and overly directed to attacking particular aspects of ASIC’s reasons for that decision. In that respect, there was little said as to the facts he would establish at the hearing (see Re Bundy v Australian Securities and Investments Commission [2013] AATA 59 at [13] per DP Tamberlin QC). As Mr Jeffers did not give evidence, he instead relied largely on an affidavit of his solicitor, Mr Mark Bland, and certain transcript of an ASIC examination of GTL’s former manager, both apparently in that respect for the purpose of attacking the delegate’s findings of fact. Nor was some unanswerable point of law raised.
Third, little if anything at all was said about Mr Jeffers’ conduct in his capacity as a director of companies other than GTL, despite ASIC’s decision being based in part on that conduct.
Nevertheless, Mr Jeffers’ case as presented appears to be an arguable one. As the case put for Mr Jeffers’ appears to be neither particularly strong nor particularly weak, I have concluded that his prospects of success is a relevant, but not in itself a determinative, matter to be taken into account in forming the requisite opinion for the purposes of s 41(2).
As I have said, Mr Jeffers, whether by his proffered undertaking or by the granting of a conditional stay, is prepared to forgo providing financial services until the hearing and determination of his application for review. That is essentially because he is concerned to retain his membership of CPA Australia in the interim; Mr Jeffers practises as an accountant. As put in his written submissions, he submitted that if a stay were not granted, he was likely to be the subject of disciplinary proceedings and consequently would likely lose his membership of CPA Australia. He submitted as a consequence of losing his membership, he would be prevented from earning fees and thus he would be unable to afford legal representation at the hearing of the application for review, which would mean that the application for review would be rendered nugatory.
In his affidavit, Mr Bland stated that “[t]he Applicant’s practice as an accountant exists by reason of his position as a CPA”. I note that Mr Jeffers did not press the tender of an email he sent to his legal representatives on the day of the hearing, which apparently contained a message from him to similar effect. It is apt to reiterate at this point that Mr Jeffers did not give evidence at the hearing, neither in oral nor written form.
In a letter sent to Mr Jeffers in October 2014, CPA Australia advised that “an enforceable undertaking or banning order by ASIC would be viewed by CPA Australia as an adverse finding” for the purposes of Article 39 of its Constitution and referred him to a list of possible penalties contained in that article, which include, but are not limited to, forfeiture of membership. It is convenient to interpolate at this point that the delegate recorded in ASIC’s statement of reasons that it was submitted by Mr Jeffers at his hearing before ASIC that he was not willing to give an enforceable undertaking to ASIC (pursuant to s 93AA of the ASIC Act) because of the envisaged adverse consequences for his membership of CPA Australia; Mr Jeffers submitted the same before the Tribunal.
ASIC submitted that, as a member could only be subject to penalties under Article 39 of CPA Australia’s Constitution in respect of an “adverse finding” if they had been “the subject of an adverse finding that has not been overturned on appeal”, Mr Jeffers’ submission that a stay was justified in order to prevent him losing his membership was not sustainable. Mr Jeffers submitted that it is possible that the banning order would result in CPA Australia relying on some provision of Article 39 other than that to which they had referred in their letter, so that it was possible that he could be disqualified prior to the hearing of his application for review.
ASIC also pointed to the fact that Part 5 of CPA Australia’s By-Laws provides for a disciplinary process comprising numerous steps following any complaint that might be initiated following the banning order and that, consequently, whether by practical reason of those provisions, or by the terms of Article 39, Mr Jeffers could not be disqualified prior to the hearing and determination of his application for review.
I note that the provisions governing the disciplinary process provide for a member to be suspended pending the investigation and determination of a complaint, although neither party referred to or relied upon that provision. A member may seek a hearing as to the merits of the suspension.
One can reasonably assume that, in the absence of a stay being granted, a complaint may be initiated against Mr Jeffers in accordance with CPA Australia’s disciplinary procedures as a consequence of the banning order, given the content of its correspondence. There is little utility in engaging a speculative exercise of assessing what the consequences of that process might be (in terms of findings as to breach and any penalty) and when they might occur so as to estimate the probability that his membership will be forfeited prior the Tribunal’s decision on the application for review coming into operation. Certainly it puts it too high to assume that he will lose his membership and, more to the point, that he will lose it prior to that time. That is not to say that such a consequence is not possible, but based on CPA Australia’s letter, the terms of the provision of its Constitution referred to in that letter and the provisions governing its disciplinary process, it appears to be unlikely, particularly if the hearing of the application for review is expedited; I return to that point later. What seems more possible, and therefore is more relevant in my view, is that his membership might be suspended in the interim.
As ASIC submitted, there is no evidence that if Mr Jeffers loses his membership of CPA Australia he will thereby be precluded from practising as an accountant, as membership of CPA Australia is not a prerequisite to such practice; the point is the same if his membership is suspended. Although Mr Bland’s evidence that Mr Jeffers’ practice as an accountant “exists by reason of his position as a CPA” is essentially mere assertion, and there was no evidence given by Mr Jeffers about his accounting practice, it is reasonable to assume that at least some clients of his accounting practice might lose confidence in him if he either lost or was suspended from his membership of CPA Australia and I shall make such an assumption for present purposes.
However, as I have indicated, the possible adverse consequences to Mr Jeffers of a stay not being granted are not determinative – his interests must be weighed against the competing interests I have mentioned. I return to this issue shortly in these reasons.
Moreover, it is appropriate to reiterate and address at this point the statutory purpose for which orders may be made under s 41(2), namely “for the purpose of securing the effectiveness of the hearing and determination of the application for review”. Mr Jeffers’ submission that he would be unable to afford legal representation at the hearing of the application for review if the stay were not granted was effectively addressed to this requirement.
This submission, as put in Mr Jeffers’ written submissions, was formulated as previously indicated on the basis of what I might describe as successive likelihoods – that if the stay is not granted, Mr Jeffers is “likely to be the subject of disciplinary proceedings” which are “likely to prevent the application from engaging in his profession as a CPA and earning fees that will allow him to retain legal representation for the purposes of this application for review”. What it essentially involved was successive implicit assumptions leading to a final assertion made in the absence of probative evidence.
I am prepared to make those assumptions for present purposes, but not to make a factual finding necessary for the exercise of the Tribunal’s discretion in the absence of sufficient evidence to found that finding. The Tribunal cannot exercise its discretion under s 41(2) in the absence of sufficient evidentiary material enabling it to do so, as “the Tribunal must be satisfied the considerations for the granting of a stay have been established” (Re Gabay and Australian Securities and Investments Commission [2013] AATA 956 at [13] per DP Tamberlin QC, citing Re Zarfati v Australian Securities and Investments Commission (2008) 106 ALD 225; Re XTWK and ASIC (2007) 98 ALD 131 at [15]).
Even if I were to assume the worst possible consequences would occur if a stay is not granted, in that Mr Jeffers will, whether by disqualification or by suspension, lose his CPA Australia membership prior to the Tribunal’s decision on the application for review coming into operation, and that consequently his accounting practice will be affected to such an extent that he earns no more fees from that practice, there is no sufficiently probative evidence before me that he will be unable to afford legal representation at the hearing.
I have taken into account Mr Bland’s statement in his affidavit that Mr Jeffers “will be unable to fund his application for review”, but that is essentially an assertion, made without reference to its source or basis. The Tribunal “must proceed by reference to ‘rationally probative evidence”, rather than on mere ‘suspicion or speculation’” (Rawson Finances Pty Ltd v Commissioner of Taxation (2013) 133 ALD 39 at [62] per Jessup J) and in absence of any evidence as to Mr Jeffers’ financial circumstances which might found that statement as an inference I might properly draw, it amounts to mere conjecture (see Bell IXL v Life Therapeutics (2008) 68 ACSR 154 at [14] per Middleton J).
Nor is there sufficient evidence to found a conclusion that a stay is justified because the statutory purpose of “securing the effectiveness” of the Tribunal’s review would be met on some other basis, for example, there is no rationally probative evidence establishing a real risk that he could not be restored to his former position upon succeeding upon review in the absence of a stay (see Commissioner of Taxation v The Myer Emporium Ltd (1986) 160 CLR 220; cf. Re Dekanic and Tax Agents’ Board of New South Wales (1982) 6 ALD 240 at 242). As Mr Jeffers did not give evidence, the evidence bearing on his personal and financial circumstances and his accounting practice is therefore significantly deficient.
I have noted that the delegate’s reasons make brief reference to a submission Mr Jeffers made as to what consequences would follow if he lost his CPA membership (which was vague in any event). Furthermore, I have taken into account Mr Bland’s statement in his affidavit that if the applicant loses his CPA membership “his reputation as an accountant will be irreversibly harmed”. However, in the absence of any probative evidence properly founding such an inference, such as might have been given by Mr Jeffers, such a conclusion is, again, mere conjecture.
My conclusion that I am not satisfied based on the evidence before the Tribunal that the requisite statutory purpose expressed in s 41(2) would be met by the orders sought under that provision is sufficient to dispose of the application made thereunder.
However, even if I were satisfied that the orders sought would serve the requisite purpose, in my opinion it is not desirable to make orders pursuant to s 41(2) in any event. That is so even though Mr Jeffers has proffered an undertaking that he will not engage in the very conduct the subject of the banning order at all before the Tribunal reviews ASIC’s decision or alternatively is prepared to accede to a stay being granted subject to an equivalent condition.
Mr Jeffers submitted that the interests of the public, and also of ASIC in fulfilling its statutory duties, would be protected by such an undertaking and also by such a condition. Amongst other things, he also relied in that regard on the fact that GTL is no longer trading and the fact that ASIC had issued media releases concerning both the cancellation of GTL’s licence and its liquidation and also warning generally of the dangers of foreign exchange trading for retail investors. He also relied on the fact that, with respect to his conduct which had led to the banning order, Mr Jeffers had merely been a director of the relevant companies and had not previously provided financial services himself.
I shall deal with the last points first. To submit that the fact that a company of which a banned person was director is no longer trading provides comfort in terms of the interests of the public or the respondent relating to that banning order is, at the very least, unpersuasive, particularly given the statutory basis upon which the banning order has been made in this case and the factual findings underlying ASIC’s decision. The banning order has arisen as a result of ASIC’s findings with respect to Mr Jeffers past conduct (which, as I have said, was not confined to GTL in any event), but it is directed towards protecting the public with respect to his future conduct.
Furthermore, the suggestion that comfort should somehow be derived from the fact that he had “merely” been a director of the companies in question seems to disregard, or at least fails to address, the basis upon which the banning order was made and reflects one of the same flaws of his case as presented at the hearing of his application.
With respect to the media releases, it is one thing that ASIC has informed the public of the matters with which they were concerned. It is quite another thing to inform the public that a person who was a director of a company which engaged in activities the subject of those media releases has been banned from providing financial services. That is information of a significantly different nature. The fact that Mr Jeffers was mentioned in the media release concerning GTL as being a former director of that company is not to the point. As I have said, the banning order is concerned with Mr Jeffers’ own conduct, both past and future.
I turn now to Mr Jeffers’ proffered undertaking. The parties lodged detailed submissions following the hearing about the basis and significance of that undertaking. It suffices to say for present purposes that Mr Jeffers submitted that the undertaking justified a stay being granted because its breach would constitute a contempt of the Tribunal for the purposes of s 63 of the Act. ASIC submitted that the Tribunal has no power to accept such an undertaking and it was unenforceable in the sense that, consequently, no contempt would therefore arise by its breach.
It is not necessary for me to address and reach conclusions about the basis and significance of the proffered undertaking, because ultimately, even if one assumes for present purposes that the undertaking could properly be accepted and taken into account by the Tribunal in exercising its discretion under s 41(2), it would not alter my opinion as to the desirability of making the orders sought in this case in any event. Furthermore, the equivalent condition proposed by Mr Jeffers does not alter my opinion either, for consonant reasons.
Before I explain why that is so, it is worth commenting in passing that the obiter dicta of Merkel J in Otter Gold Mines Ltd v Deputy President B M Forrest of the Administrative Appeals Tribunal (1997) 47 ALD 89 at 95 and the decision of Davies J in Dekanic at 243 both appear to suggest that an undertaking given to the Tribunal can properly be taken into account in the context of a stay application.
However, it seems to me that the granting of a stay subject to specified conditions would generally be a preferable course in any event, given that a breach of a condition can be dealt with in a timely and predictable manner by the Tribunal, particularly by revoking the stay order pursuant to s 41(3). In contrast, even if one assumes that a breach of an equivalent undertaking would constitute contempt for the purposes of s 63 of the Act, the practical consequences would likely be far less timely and predictable. That difference in itself might mean as a general matter that a stay with conditions attached might be justified while an unconditional stay accompanied by an undertaking equivalent to such conditions might not.
The reason why neither an undertaking, nor a stay granted on condition, that Mr Jeffers will not provide financial services (as put, either directly or indirectly), leads me to conclude that the banning order should be stayed is because although such an undertaking or condition would, or would largely, achieve the protective effect of the banning order, what would be lost is the general deterrent effect and maintenance of market confidence achieved by the banning order being made public (see Forge at [102]-[103]). As Barker J said in Catena in the context of a decision to make a banning order which was affirmed by the Tribunal (at [21]):
“Even though the AAT does not consider that the applicant personally poses a threat to the public, the general deterrence of [a] .. banning order should not be underestimated. The public are entitled to know of it and to know the industry knows of it.”
What is also lost is the aspect of the protective effect which lies in the banning order being made public, namely the fact that the banned person is not merely precluded from participating in the market, but also that the market is informed of that fact so that investors are made aware of it – in ASIC v AAT the Full Federal Court characterised such information as being an entitlement of investors (at [54], [1]). The fact that the stay order may be revoked (pursuant to s 41(3)) or that the breach of the undertaking may result in the person being prosecuted for contempt, does not offer the same degree of protection.
Of course, depending on the facts of any given case, there are circumstances where, upon weighing the relevant competing interests, it is nevertheless desirable to stay a banning order and to do so on an unconditional basis. There are others where it is desirable to stay a banning order but to make it subject to specified conditions, thereby permitting limited engagement in the banned conduct. However, I note in passing that in the latter kind of cases it is common for further conditions to be specified by which the existence of the banning order must be disclosed to specified people, such as clients of the banned person.
There may also be circumstances, such as those of this case, where the subject of a banning order is prepared to give an undertaking, or submit to a condition, that they not engage in any conduct the subject of the banning order at all until the application for review is heard and determined.
In such circumstances, it nevertheless remains necessary to form an opinion as to the desirability of the stay, taking into account all relevant matters and in doing so it cannot be assumed that any adverse consequences for others who may be affected by the review will be ameliorated, or sufficiently ameliorated by such an undertaking or condition. To give examples at each end of the spectrum, there might be a case where an unconditional stay is justified, yet the banned person is willing to submit to a condition precluding them from engaging in the banned conduct at all. There might be another case where a stay is not justified, and such an undertaking or condition does not alter that conclusion.
I consider that the present case falls in the latter category. Given the numerous findings of fact with respect to Mr Jeffers’ conduct upon which the banning order is based, the flaws in his case as presented, the lack of evidence concerning Mr Jeffers’ financial circumstances and the nature of his accounting practice and the extent to which the public interest is served by the publication of a banning order, neither Mr Jeffers’ proffered undertaking nor his proposed condition lead me to form the requisite opinion for the purposes of s 41(2).
I have taken into account the possible adverse consequences for Mr Jeffers which are of particular concern to him with respect to the possible forfeiture of his CPA Australia membership in the interim, such as they in fact are. I have also taken into account the more likely possibility that he might be suspended in the interim, even though he did not raise such a concern. However, I nevertheless give greater weight to the public interest in the banning order and its publication. Mr Jeffers’ proffered undertaking and his willingness to submit to the condition proposed indicate that if the stay is not granted, it will not affect his interest in being able to provide financial services in the interim as he does not intend to do so in any event (see Catena at [20]). With respect to his concern about possible adverse consequences for his CPA status, it seems to me that the preferable course is that he request an expedited hearing of his application for review, although I express a reservation about that course later in these reasons.
In any event, as I have said I am not satisfied based on the evidence before the Tribunal that a stay is required to secure the effectiveness of the review.
Section 35 of the Act
I turn now to Mr Jeffers’ application for confidentiality orders under s 35 of the Act. He submitted, accepting the need for a “cogent reason” for such orders in this case (as described in ASIC v AAT at [76]) that such a reason existed, as threats had been made against his life and the lives of his wife and infant children, relying on the affidavit of Mr Bland in that regard.
In his affidavit, Mr Bland said that he had been informed by Mr Jeffers and believed that Mr Jeffers is likely to receive further threats of such a nature in the future “as has occurred on a number of occasions”.
He then referred to a telephone call he had received from Mr Jeffers on the evening of 30 January 2015 when Mr Jeffers, apparently in a distressed state, had told him that after the hearing before ASIC, he had been assaulted by a former general manager of GTL in the street and that that person had threatened his life and the lives of his wife and children.
I note that, despite the reference in Mr Bland’s affidavit to other threats having been made, when he gave oral evidence it became apparent that the threats to which he referred in his affidavit were confined to the one which occurred on the day of the ASIC hearing and one other matter.
In the latter regard, he said that Mr Jeffers had told him of an internet “blog” or “thread” concerning GTL’s insolvency where someone had on some occasion in 2014 apparently referred to Mr Jeffers and had written words to the effect that “I hope he sleeps well at night at [...]”, disclosing Mr Jeffers’ residential address. However, Mr Bland’s firm has not been able to find the blog and he believes it must have been removed.
Mr Bland gave evidence that, although Mr Jeffers resides in Sydney, he had advised him as a result of the threat made on the day of the ASIC hearing to lodge his application for review in the Victorian registry of the Tribunal, as “a lot of [the] heat” about the circumstances of GTL’s insolvency is in Sydney. Mr Bland said that he believes that a class action might be brought in relation to GTL’s insolvency by investors and former employees.
I return now to Mr Bland’s oral evidence about the threat made on the day of the ASIC hearing referred to in his affidavit. Under cross-examination and in response to questions posed by the Tribunal, Mr Bland said that he understood from Mr Jeffers that the former general manager had assaulted Mr Jeffers on the street because he was angry that he was himself the subject of threats and criticisms from former employees and investors who had lost money as a result of GTL’s insolvency. Mr Bland said that he understood that Mr Jeffers had not reported the assault to police because the former general manager had telephoned him the following day and had apologised for assaulting him, explaining that he had been drunk.
Mr Bland said that the matter had been reported to police on the day of the hearing of Mr Jeffers’ stay application, although I note that it was unclear whether that had occurred before or after the hearing commenced and particularly whether it occurred before or after the Tribunal raised the issue of whether the matter had been reported to police.
Mr Bland also gave evidence that, although he understood that the assault had occurred on the day of the ASIC hearing, he also understood from Mr Jeffers that is was, as Mr Bland put it, “pure coincidence” that it occurred then, in the sense that Mr Jeffers believed that the former general manager had crossed paths with him late that afternoon merely by chance.
I infer from Mr Bland’s evidence that any assault which occurred was an isolated event, unconnected with the fact that the ASIC hearing was held that day. Given the assailant’s apparent contrition, the fact that Mr Jeffers’ concern was evidently diminished by that person’s apology, and given that the blog to which he referred apparently is no longer operative, I am not satisfied based on the evidence before the Tribunal that any of the orders sought by Mr Jeffers pursuant to s 35 should be made.
In particular, I am not prepared to infer from the evidence that Mr Jeffers therefore faces any threat in the future of a kind justifying such orders, nor do I consider that there are any other reasons why such orders should be made. Bearing in mind the statutory text and the principles governing s 35 that I have set out above, I am not satisfied on the evidence before me that there is a “cogent reason” to depart from the norm established by s 35(1) of the Act in this case.
CONCLUSION
For the above reasons, the applications made under ss 41(2) and 35(2) of the Act will be dismissed.
Mr Jeffers’ counsel indicated at the hearing that Mr Jeffers would request an expedited review of ASIC’S decision if his stay application were unsuccessful. I observe that, given the lack of evidentiary material provided by Mr Jeffers for the purpose of his stay application and the complexity of the case, Mr Jeffers and his legal representatives should first consider whether in the circumstances his interests are better served by instead maintaining the customary timetable so that he is afforded more time to gather evidence and prepare for the hearing of his application for review.
If Mr Jeffers decides that he nevertheless wishes to request an expedited review, it is open to him to make such a request to the Tribunal.
I certify that the preceding 90 (ninety) paragraphs are a true copy of the reasons for the decision herein of Deputy President F J Alpins. .........[sgd].....................................................
Associate
Dated 22 July 2015
Date of hearing 9 June 2015 Date final submissions received 10 July 2015 Counsel for the Applicants Mr J M Brereton Solicitors for the Applicants Mills Oakley Lawyers Counsel for the Respondent Dr P Bender Solicitors for the Respondent
ASIC, Chief Legal Office
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