Mark Levi and Companies Auditors and Liquidators Disciplinary Board Australian Securities and Investments Commission JOINED PARTY
[2013] AATA 463
•5 July 2013
[2013] AATA 463
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2013/3139
Re
Mark Levi
APPLICANT
And
Companies Auditors and Liquidators Disciplinary Board
RESPONDENT
And
Australian Securities and Investments Commission
JOINED PARTY
Decision
Tribunal Deputy President RP Handley
Date 5 July 2013 Date of written reasons 5 July 2013 Place Sydney The application for a stay and confidentiality orders is refused.
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Deputy President RP Handley
Catchwords
PRACTICE AND PROCEDURE – Cancellation of registration of a liquidator under s 1292 of the Corporations Act - power to stay or otherwise affect the operation or implementation of a decision under review - whether stay necessary to secure effectiveness of hearing and determination of the application for review – prospects of success – prejudice to parties - public interest – confidentiality orders sought – hearings to be in public except in exceptional circumstances – whether it is desirable to make an order by reason of the confidential nature of any evidence or matter or for any other reason
Legislation
Administrative Appeals Tribunal Act 1975 ss 35, 41(2)
Corporations Act 2001 ss 1292(2), 1296, 1297
Cases
Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185
Klusman and Australian Securities and Investments Commission [2010] AATA 709
ML v Australian Securities and Investments Commission [2013] NSWSC 283
ML v Australian Securities and Investments Commission [2013] NSWCA 109
Re Griffith Griff-Air Helicopters Pty Ltd and Civil Aviation Authority (1993) 31 ALD 380Scott and Australian Securities and Investments Commission [2009] AATA 798
REASONS FOR DECISION
Deputy President RP Handley
The following reasons for this decision were given orally on the morning following the hearing and, due to the urgency of the matter, they are necessarily not as extensive or polished as might otherwise have been the case.
Mr Levi has applied to the Tribunal for the review of a decision of the Companies Auditors and Liquidators Disciplinary Board (the Board) dated 2 July 2013 to cancel his registration as a liquidator. Mr Levi has also applied for an order staying the operation and implementation of the decision and ancillary orders (the stay application), and for confidentiality orders. This interlocutory decision and the reasons that follow concern the stay application and the application for confidentiality orders.
The background to this matter is set out in in the written reasons for the Board’s decision dated 2 July 2013 provided to Mr Levi. In brief, on 12 October 2012, Australian Securities and Investment Commission (ASIC) lodged an application with the Board for the cancellation of Mr Levi’s registration as a liquidator. The allegations made by ASIC concerned actions taken by Mr Levi when he was a senior member of the staff of Jamieson Louttit & Associates (JLA), an insolvency and corporate advisory practice in Sydney. This is a firm owned and controlled by Jamieson Louttit who is a registered liquidator and who, at the relevant time, was the receiver of a company known as Biseja Pty Ltd (Biseja).
The Board states at paragraph 3 of its reasons:
ASIC alleges that in April 2009 and again in October 2009, Mr Levi used Biseja’s funds to pay his personal tax. ASIC alleges that Mr Levi falsified the records of Biseja to disguise these payments. ASIC alleges that Mr Levi admitted the defalcations in October 2010, after he had just left JLA. ASIC alleges that Mr Levi has, since that admission, falsely asserted that the payments were made with Mr Louttit’s knowledge and consent.
The Board conducted a hearing in this matter on 6 to 9 May 2013 and handed down its determination on 14 June 2013. The Board summarised its findings at paragraph 464 of its reasons:
… Suffice to say that we have made findings that Mr Levi engaged in serious acts of dishonesty in misappropriating funds, in falsification of records in order to disguise misappropriation and in putting forward a false version of events after having admitted the misappropriation to Mr Louttit. Mr Levi’s dishonesty was not an isolated lapse, but involved dishonesty on a number of occasions over a period of time. We have found that Mr Levi has been persistently dishonest, that it is inappropriate to assume (and the community could not be confident) that his conduct will not recur and that his actions show that he has a character which is fundamentally inimical to fitness to practice as a liquidator.
The Board conducted a further hearing on 26 June 2013 to hear submissions on appropriate sanctions. The Board decided that in view of the “serious acts of dishonesty”, a period of suspension was not appropriate and that “Mr Levi’s conduct in the present case was fundamentally at odds with proper performance of the office of liquidator, to such a degree that cancellation of his registration is demanded”. The Board decided that within 14 days of the date of the decision, a formal notice of the decision would be given to Mr Levi, a copy of the notice would be lodged with ASIC, and the Board would cause a notice in writing setting out the decision to be published in the Gazette, and that cancellation of Mr Levi’s registration would take effect 28 days after the date of the decision.
Relevant Legislation
Section 1292(2) of the Corporations Act 2001 provides that the Board may, if satisfied on an application by the ASIC, that a person is not a fit and proper person to remain registered as a liquidator, suspend or cancel the registration of the person as a liquidator.
Section 1296 provides relevantly that the Board must, within 14 days after the decision, give the person a notice in writing setting out the decision and the reasons for it, lodge a copy of the notice with ASIC and cause to be published in the Gazette a notice in writing setting out the decision.
Section 1297 provides that an order made by the Board cancelling a person’s registration as a liquidator comes into effect at the end of the day on which the person is given notice of the decision or at the end of such longer period as the Board determines.
In these interlocutory proceedings, the Applicant seeks orders staying the operation and implementation of the decision and confidentiality orders. The Tribunal is empowered to issue a stay and ancillary orders pursuant to s 41(2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act). This states:
(2) The Tribunal may, on request being made, as prescribed, by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if 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.
Section 35 of the AAT Act empowers the Tribunal to issue confidentiality orders. Section 35 states relevantly:
(1) Subject to this section, the hearing of a proceeding before the Tribunal shall be in public.
...
(2) Where the Tribunal is satisfied that it is desirable to do so by reason of the confidential nature of any evidence or matter or for any other reason, the Tribunal may, by order:
(a) direct that a hearing or part of a hearing shall take place in private and give directions as to the persons who may be present; and
(aa) give directions prohibiting or restricting the publication of the names and addresses of witnesses appearing before the Tribunal; and
(b) give directions prohibiting or restricting the publication of evidence given before the Tribunal, whether in public or in private, or of matters contained in documents lodged with the Tribunal or received in evidence by the Tribunal; and
(c) give directions prohibiting or restricting the disclosure to some or all of the parties to a proceeding of evidence given before the Tribunal, or of the contents of a document lodged with the Tribunal or received in evidence by the Tribunal, in relation to the proceeding.
(3) In considering:
(a) whether the hearing of a proceeding should be held in private; or
(b) whether publication, or disclosure to some or all of the parties, of evidence given before the Tribunal, or of a matter contained in a document lodged with the Tribunal or received in evidence by the Tribunal, should be prohibited or restricted;
the Tribunal shall take as the basis of its consideration the principle that it is desirable that hearings of proceedings before the Tribunal should be held in public and that evidence given before the Tribunal and the contents of documents lodged with the Tribunal or received in evidence by the Tribunal should be made available to the public and to all the parties, but shall pay due regard to any reasons given to the Tribunal why the hearing should be held in private or why publication or disclosure of the evidence or the matter contained in the document should be prohibited or restricted.
Issues
The first issue for the Tribunal, pursuant to the application under s 41(2) of the AAT Act, is whether, in the Tribunal’s opinion, after taking into account the interests of any persons who may be affected by the review, it is desirable to “make such order or orders staying or otherwise affecting the operation or implementation of the decision” to cancel Mr Levi’s registration as a liquidator “for the purpose of securing the effectiveness of the hearing and determination of the application for review”.
The second issue for the Tribunal is whether, bearing in mind the Tribunal’s obligation to take as the basis of its consideration the desirability of its hearings being held in public, and that evidence given before the Tribunal and the contents of documents lodged with or received in evidence by the Tribunal should be available to the public and to all parties, it is desirable to make a confidentiality order under s 35(2) of the AAT Act.
SUBMISSIONS
The Applicant’s Submissions
Mr Sutherland, for the Applicant, said the evidence given by Mr Louttit at the Board hearing was fundamental to the Board’s decision. Either Mr Louttit was deceived by Mr Levi as ASIC alleged and the Board found, or Mr Louttit was party to the drawing of the two cheques on Biseja’s funds. Mr Sutherland pointed out that the originals of the two BAS statements for Biseja were not available at the hearing. Had they been available and had there been an opportunity to put these to Mr Louttit, with the benefit of the forensic evidence obtained by ASIC relating to the second cheque indicating that neither whiteout nor some other form of masking had been used to alter the document, Mr Louttit’s evidence might have been different. If Mr Louttit was complicit in the writing of the cheques because he knew a further sum was owing to Mr Levi over and above the BAS amount due, as a result of that sum being owed to Mr Levi under their profit sharing agreement, everything else falls away. Thus, Mr Sutherland submitted, there are issues of procedural fairness in relation to the treatment of the evidence, which, if properly addressed, give rise to the prospect of a different outcome.
Mr Sutherland noted that Mr Levi chose not to give sworn evidence before the Board because of the possibility of criminal proceedings being initiated. As a result, the Board hearing was not a fully-contested hearing of the usual kind.
With regard to prejudice to the Applicant, Mr Sutherland contended that Mr Levi’s professional reputation will be destroyed if stay and confidentiality orders are not made pending the outcome of the hearing of the substantive matter; so too will Mr Levi’s ability to support his family. Moreover, there is a real prospect of prejudice to the Applicant in any criminal proceedings, in anticipation of which the NSW Supreme Court has already made confidentiality orders (ML v Australian Securities and Investments Commission [2013] NSWSC 283; ML v Australian Securities and Investments Commission [2013] NSWCA 109).
With regard to the public interest, Mr Sutherland said that Mr Levi would, if the Tribunal considered it necessary, be prepared to give an undertaking not to practice as a liquidator pending the outcome of the proceedings, not to take any further appointments as liquidator and he would pass the three matters in which he is currently acting as liquidator to others.
The Respondent’s Submissions
Ms Stern, for the Respondent, noted that in the NSW Court of Appeal proceedings, Basten JA, at [18], said that where necessary, the interest in making appropriate orders to protect the public interest may outweigh the possibly significant delay that might attend the commencement, conduct and determination of future criminal charges.
Ms Stern referred the Tribunal to the Full Federal Court decision in Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185 (ASIC v AAT), at [54] and [56], where Downes and Jagot JJ drew attention to the context in which the decision under challenge was made and to the importance of information to the market. Their Honours also said at [57]:
As noted, it is true that s 41 will require consideration of the situation of dependents, associates and employees of the banned person. Employees may lose their employment if knowledge of the ban affects the person's business. However unfortunate this may be, we think it is of lesser significance than the matters to which we have referred.
In relation to the application for confidentiality orders, section 35(1) of the AAT Act establishes what their Honours referred to as a norm: that hearings should be held in public. They stated 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.
Ms Stern noted that Mr Levi is seeking to prevent damage to his reputation. However, it was only in 2009 that he became a registered liquidator and before this he was gainfully employed. Moreover, in his affidavit of 3 July 2013, Mr Levi states that his work as a liquidator presently represents 50% of his business. If, ultimately, the Board decision is set aside, any permanent damage to his reputation is likely to be ameliorated.
With regard to the merits of the application, Ms Stern contended that the Board decision is a strong one, noting that the Briginshaw standard was applied, and the Applicant was represented by both senior and junior counsel. The Board found that Mr Levi’s dishonesty extended from April 2009 to at least 2011, and even if his conduct was not dishonest, Mr Levi should have known that drawing funds for his own purposes was dishonest. Given that Mr Levi was registered as a liquidator on 24 July 2009, after the first transaction and before the second, his obligations as a liquidator should have been in the forefront of his mind.
Ms Stern submitted that to issue stay orders on the basis of undertakings given by Mr Levi was not appropriate given the significant findings of dishonesty made by the Board.
DISCUSSION
The Stay Application
The Applicant seeks a stay of the Board’s decision pending the Tribunal’s determination of the application for review. The ancillary orders sought include a stay on publication of any material consequent on the Board’s decision.
There are four factors generally considered relevant to the Tribunal’s consideration of whether a stay should be granted: Re Griffith Griff-Air Helicopters Pty Ltd and Civil Aviation Authority (1993) 31 ALD 380; see also Scott and Australian Securities and Investments Commission [2009] AATA 798. These are:
(a)the prospects of success or merits of the application for review;
(b)any prejudice to or effect on the parties or on any other person if a stay is not granted;
(c)the public interest; and
(d)whether the review application, if successful, would be rendered nugatory or pointless if a stay is not granted.
In ASIC v AAT, at [49], Downes and Jagot JJ, in a joint judgment, emphasised that “the AAT’s power under s 41(2) of the AAT Act is contingent on the AAT having formed an opinion that the making of an order under s 41(2) of the AAT Act "is desirable ... taking into account the interests of any persons who may be affected by the review". Accordingly, “the AAT must identify for itself and consider the relevant interests” (at [50]), which “are to be identified by reference to the statutory scheme under which the decision under review was made” (at [51]). Whether “the making of an order under s 41(2) of the AAT Act is desirable requires resolving these potentially competing interests” (at [52]). Thus, “the balance between competing interests … must be treated as a fundamental element in the weighing of the competing considerations” (at [53]). This decision was also cited by the President of the Tribunal, Downes J in Klusman and Australian Securities and Investments Commission [2010] AATA 709.
In ASIC v AAT, their Honours, as Ms Stern pointed out, also drew attention to the importance of the context in which the decision under review has been made. In that case, as in this, the context is the scheme established under the Corporations Act for the protection of the public interest, and in this instance for maintaining the integrity of and public confidence in the profession of liquidators.
The Board is required by provisions of the Corporations Act to afford the liquidator and ASIC a hearing of the matter – and that is what happened here over the course of four days, plus a further hearing about two weeks after the Board’s decision, to discuss sanctions. I agree with Ms Stern that the Board’s is a weighty decision, running to 484 paragraphs and 120 pages. In my mind, what was particularly significant was the strength of the Board’s findings as to the Applicant’s dishonesty which are, of course, critical to the Board’s conclusion that he is not a fit and proper person to be a registered liquidator.
I acknowledge Mr Sutherland’s submissions about what he contends were issues of procedural fairness with regard to the presentation and treatment of the evidence. I am not in a position to make a considered judgement about such matters in an urgent interlocutory hearing of this kind. But certainly, the prospects of success of the application is one of the matters to be taken into consideration in the balancing exercise that the Tribunal must take in such proceedings.
With regard to any prejudice to the Applicant if a stay is not granted, I am mindful of the comments made by Downes and Jagot JJ in ASIC v AAT about this consideration when they said, at [57], that the effect on the person’s business and the consequences for the employees of the business and the person’s dependents “may be of lesser significance” to the other matters to which they referred and clearly, in particular, to the public interest.
As Ms Stern pointed out, Mr Levi has stated in his affidavit that his work as a liquidator represents 50% of his business. Notwithstanding this, I accept that publication of the decision to cancel his registration as a liquidator is likely to have a significant effect on his professional reputation at least in the short term. But in the light of the Board’s findings about his dishonesty, over the period April 2009 to at least 2011, there is also a strong public interest in the publication of the decision. In my view, this public interest is not, given the Board’s weighty decision, adequately addressed by issuing a stay subject to conditions – for example that Mr Levi cease acting as a liquidator pending the determination of the application for review.
In my view, the appropriate course is for Mr Levi’s application to be dealt with by way of an expedited hearing, by which I mean, if at all possible, within the course of the next few weeks. The Tribunal will do all it can to facilitate this. If this can be achieved, I would hope that if the Tribunal were to set aside the decision under review and find in favour of Mr Levi, the damage to his reputation would, at least, be ameliorated. Thus, in conclusion, I am not satisfied on a balancing of the competing interests that I should issue a stay as requested by the Applicant.
Application for Confidentiality Orders
The second issue for me to decide is whether to make the confidentiality orders sought by the Applicant. With regard to the application for confidentiality orders, as the Federal Court emphasised, the stated expectation in s 35(1) of the AAT Act is that hearings should be in public.
I note in particular what Downes and Jagot JJ stated at [76], quoted in paragraph 19 above.
Given the scheme established by the Corporations Act with respect to the registration of liquidators, and the public interest in relevant information stemming from the outcome of the Board’s decision, I am not satisfied that the harm to the Applicant’s reputation is sufficient in this case to warrant the making of confidentiality orders under s 35(2) of the Act.
DECISION
The application for orders under sections 41(2) and 35(2) of the Administrative Appeals Tribunal Act 1975 is therefore refused.
I certify that the preceding 35 (thirty -five) paragraphs are a true copy of the reasons for the decision herein of Deputy President RP Handley. .............................[SGD]..................................
Associate
Dated 5 July 2013
Date(s) of hearing 4 and 5 July 2013 Date final submissions received 4 July 2013 Counsel for the Applicant R Sutherland Solicitors for the Applicant J Sutton Counsel for the Respondent K Stern Solicitors for the Respondent R O'Shannessy Counsel for the Joined Party K Stern Solicitors for the Joined Party R Hartmann
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