Luff and Australian Securities & Investments Commission

[2024] AATA 2634

Luff and Australian Securities & Investments Commission [2024] AATA 2634 (3 July 2024)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):2024/2322       2024/2323

Re:Christopher Luff  

APPLICANT

Re:Build Your Wealth Pty Ltd

APPLICANT

AndAustralian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal:Deputy President Bernard J McCabe

Date:3 July 2024

Place:Sydney

1.The application for interim orders under s 35 of the Administrative Appeals Tribunal Act 1975 is refused.

2.These reasons for decision will not be published to anyone other than the parties and their legal representatives until further orders that will be considered at the resumed interlocutory stay hearing on 16 July 2024.

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Deputy President Bernard J McCabe

Catchwords

PRACTICE AND PROCEDURE – STAY APPLICATION – CONFIDENTIALITY APPLICATION – conditional interim stay application granted – ASIC undertaking – objectives of the regulators in making a decision – protection –– objective of transparency – confidentiality order refused

Legislation

Administrative Appeals Tribunal Act 1975 (Cth)
Australian Securities and Investments Commission Act 2001 (Cth)

Corporations Act 2001 (Cth)

Cases

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

REASONS FOR DECISION

Deputy President Bernard J McCabe

3 July 2024

1. A delegate of the Australian Securities and Investments Commission (ASIC) made reviewable decisions on 8 April 2024 to:

   (a)cancel the Australian Financial Services Licence (AFSL) of Build Your Wealth Pty Ltd (BYW) and

   (b)disqualify Mr Luff (the company’s director and former responsible manager) from providing financial services.

2. The Tribunal has been asked by the applicants to review both the decisions. BYW has also asked the Tribunal to stay the operation and implementation of the cancellation decision. (Mr Luff, for his part, has not asked for a stay.)

3. At an earlier interlocutory hearing, I agreed to order an interim stay of the reviewable decision in relation to BYW under s 41(2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) while BYW progressed an urgent application to ASIC seeking approval of a new responsible manager. The responsible manager plays a crucial role in the compliance arrangements of BYW which were found to be wanting.

4. The applicants have also asked for non-publication orders under s 35 of the AAT Act. I have not hitherto made those orders in circumstances where ASIC has given an undertaking that it would refrain from its usual practice of publishing news of the reviewable decisions on its website pending determination of the interlocutory applications.

5. The application for approval of one or perhaps two new responsible managers for BYW is currently being assessed by ASIC’s licensing team. That team has sought extra information from BYW. I am told the requested information is being collated and will be provided shortly. Ms Davidson, counsel for ASIC, said ASIC was content for the interim stay to remain in effect until the application for approvals is finalised. It is expected the outcome of the approval process will be known by the time of the resumed stay hearing on 16 July 2024.

6. Which brings me to the point of the urgent interlocutory hearing. In an email to the Tribunal dated 26 June 2024, ASIC advised the Tribunal it intends communicating with three named corporate entities and an unspecified number of individuals associated with those entities. In those communications, ASIC would disclose the following matters:

   ·ASIC’s banning decision in respect of Mr Luff and the reasons for that decision.

   ·ASIC’s AFSL cancellation decision in respect of BYW and the reasons for that decision.

   ·The fact that both decisions are subject to applications for review.

   ·The fact that both decisions are subject to applications for confidentiality orders.

   ·The fact that a stay was initially sought, but is no longer sought and has not been granted, in respect of the banning decision.

   ·The fact that a stay has been sought, and an interim stay granted, in respect of the AFSL cancellation decision.

7. Ms Davidson confirmed ASIC would provide the text of the two reviewable decisions to the named entities. ASIC also says it “would make clear [the named entities and other individuals who were provided with the information] that the information should not be disseminated further pending resolution of the confidentiality applications”.

8. BYW explained in correspondence (and Mr Flecknoe-Brown, its counsel, confirmed in submissions) that BYW did not necessarily oppose ASIC contacting the entities in question and providing the information. BYW was nonetheless concerned that, in the absence of orders under s 35 of the AAT Act that (a) defined the terms of the disclosure by ASIC and (b) imposed an enforceable obligation on the other parties to not further disseminate the information, the disclosed information might leak. That would compromise the interlocutory applications for stay and non-publication orders.

9. I agree ASIC does not currently require the Tribunal’s permission to contact the named entities and associated individuals. ASIC’s undertaking relates only to the public announcement of the reviewable decisions on its website or by media release. ASIC is nonetheless to be commended as a model litigant for informing the Tribunal and the applicants of its proposed course of action. That disclosure gives the Tribunal an opportunity to make orders. 

10. The Tribunal will carefully scrutinise any request for what amounts to a suppression order. The reasons for that wariness are apparent from the text of s 35(5) of the AAT Act which says the Tribunal shall, when considering an application for orders:

    …take as the basis of its consideration the principle that it is desirable:

    (a)  that hearings of proceedings before the Tribunal should be held in public; and

    (b)  that evidence given before the Tribunal and the contents of documents received in evidence by the Tribunal should be made available to the public and to all the parties; and

    (c)  that the contents of documents lodged with the Tribunal should be made available to all the parties.

11. The sub-section nonetheless contemplates there may be reasons – such as the inherently confidential nature of the information – which might justify a departure from what is sometimes called the ‘openness principle’.

12. The Tribunal must also keep in mind the objectives of the regulatory regime when considering whether orders should be made notwithstanding the openness principle. Section 760A of the Corporations Act 2001 (Cth) emphasises the regulatory regime contained in Chapter 7 is intended to (amongst other things) protect the public and promote efficient markets. Those objectives assume a high degree of transparency. The instructions to the regulator contained in s 1(2) of the Australian Securities and Investments Commission Act 2001 (Cth) are – unsurprisingly – consistent with those objectives. As Downes and Jagot JJ explained in in Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185 (ASIC v AAT) (at [76]):

    When measured against the existence of the norm of a public hearing and the scheme established by the Corporations Act with respect to banning orders, it is apparent that the AAT would need some cogent reason by reference to the particular case to depart from the ordinary requirement of a public hearing. It is difficult to accept that harm (even serious harm) to the recipient’s reputation resulting from public awareness of the banning order will be a sufficiently cogent reason to justify the grant of a stay in most cases. This is because the risk of harm of this type is inherent in the nature of a banning order.

13. The applicants in this case say there is inherently confidential information at issue. A quick perusal of the contents of the two reviewable decisions does not reveal anything inherently confidential. Mr Flecknoe-Brown suggested the fact the decisions had been made was itself commercially sensitive, and therefore inherently confidential. I accept the adverse decisions potentially have commercial implications for the applicants once disclosed, but that does not make them inherently confidential. The decisions are made by the regulator, and they are ordinarily publicised. The fact the applicants might experience loss or damage upon publication is not an especially compelling reason to make orders under s 35 given what the Full Federal Court said in ASIC v AAT.

14. I am certainly not inclined to make orders under s 35 at this juncture if doing so would incidentally impede ASIC in the discharge of its regulatory function. In fairness to the applicants, I do not apprehend that is what they are asking me to do: they appear to accept ASIC has a legitimate interest in communicating with the named entities and associated individuals. The applicants wish to guard against further disclosure.

15. It is unclear whether the other entities or individuals have any interest in disseminating the information to the public at large; their inclination may be quite the opposite depending on the substance of their discussions with ASIC.

16. Fashioning and enforcing orders against the named entities and associated individuals presents a logistical challenge. Each of them may legitimately need to disseminate news of the regulatory action within their own organisations, or to outside advisers, or to others with a legitimate interest in knowing the news (eg, insurers or even clients). Without hearing from all those individuals, it is difficult to be sure of how the information might be properly managed. I am particularly concerned about the impact any orders I make would have on ASIC in the performance of its regulatory function.

17. In the circumstances, I am not satisfied it would be appropriate at this juncture to make the orders sought under s 35. I acknowledge there is a risk that information about the reviewable decisions will leak before the interlocutory application for stay and non-publication orders is adjudicated. The adjudication of that interlocutory application has been delayed while the BYW engages with the ASIC licensing team in relation to the appointment of a suitable responsible manager. That cannot be helped, but the risk of disclosure is an incident of the delay – and that delay is the product of an act of forbearance on the part of the Tribunal which has agreed to adjournments because the appointment of a new responsible manager might assist BYW. For now, it is enough that ASIC has given an undertaking not to make a public announcement; I do not have sufficient material before me to justify making further orders that would constrain ASIC in the performance of its regulatory function.

18. These reasons for decision will not be published to anyone other than the parties and their legal representatives until further orders that will be considered at the resumed interlocutory stay hearing on 16 July 2024.

I certify that the preceding 18 (eighteen) paragraphs are a true copy of the reasons for the decision herein of

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Associate

Dated:  3 July 2024

Date(s) of hearing:	2 July 2024
Counsel for the Applicant:	Alexander Flecknoe-Brown
Solicitors for the Applicant:	Barry Nilsson Lawyers
Counsel for the Respondent:	Joanna Davidson
Solicitors for the Respondent:	Australian Securities and Investments Commission Lawyers