McLean and Australian Securities and Investments Commission
[2017] AATA 1416
•5 September 2017
McLean and Australian Securities and Investments Commission [2017] AATA 1416 (5 September 2017)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2017/4722
Re:Travis Byron McLean
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal:Senior Member T. Tavoularis
Date:5 September 2017
Place:Brisbane
The application to stay the implementation of the decision under review dated 4 August 2017 is refused.
................................[sgd]........................................
Senior Member T. Tavoularis
CATCHWORDS
INTERLOCUTORY PROCEEDING – Stay Application – ASIC banning order - whether desirable or appropriate in the circumstances to stay decision under review – refusal to stay the operation or implementation of the decision under review
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) s 41(2)
Australian Securities and Investments Commission Act 2001 (Cth) s 1(2)
Corporations Act 2001 (Cth) ss 920A, 920B, 920E, 920F, 922A, 945A, 947C, 947D, 961B, 961G
CASES
Australian Securities and Investment Commission v Administrative Appeals Tribunal v Anor [2009] FCAFC 185
Re Repatriation Commission and Delkou (1985) 8 ALD 454
Roy Frederick Griffiths, Grif-Air Helicopters Pty Ltd and Civil Aviation Authority [1993] AATA 274
Wildlife Protection Association of Australia Inc. and Minister for the Environment and Heritage and Ors [2006] AATA 29
WorldAudio Limited and AusCoast Broadcasting Pty Limited and Australian Communications and Media Authority [2006] AATA 177
XTWK and Australian Securities and Investments Commission [2007] AATA 1890
REASONS FOR DECISION
Senior Member T. Tavoularis
5 September 2017
INTRODUCTION
On 4 August 2017, a delegate of the Australian Securities and Investments Commission (“ASIC”) delivered a decision, prohibiting Mr Travis McLean (“the Applicant”) from providing any financial services for a period of 5 years. A consequential order was made pursuant to ss 920A and 920B of the Corporations Act 2001 (Cth) (“the Act”).
On 8 August 2017, the Applicant filed an Application for Review of a Decision, specifically the abovementioned decision (“decision under review”).[1]
[1] Exhibit 5.
On 18 August 2017, the Applicant lodged an application for a stay of the decision under review with the Tribunal.[2] Filed contemporaneously with this application for a stay were certain submissions prepared by counsel who appeared for him at this application.
[2] Exhibit 1.
ISSUE
The primary issue before the Tribunal in determining this application for a stay is whether it is desirable in the circumstances to make an order affecting the operation or implementation of the decision under review.
Section 41(2) of the Administrative Appeals Tribunal Act 1975 (“the AAT Act”) provides that:
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), if the Tribunal is of the opinion that is desirable to do so after taking into account the interests of any such 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.
The main factors to be considered when deciding whether to stay the operation of a decision under review were collectively discussed in the following decisions: Wildlife Protection Association of Australia Inc. and Minister for the Environment and Heritage and Ors [2006] AATA 29, WorldAudio Limited and AusCoast Broadcasting Pty Limited and Australian Communications and Media Authority [2006] AATA 177 and Re Repatriation Commission and Delkou (1985) 8 ALD 454. Stated cumulatively, those factors inform a decision-maker that s 41(2) of the AAT Act invites consideration of issues such as:
·the prospects of success or otherwise of the substantive application;
·any prejudice to a party if the stay is granted or not granted;
·the public interest; and
·whether the substantive application will be rendered nugatory if the stay is not granted.
During the hearing of this application, it was contended on behalf of the Applicant that the factors most relevant to the present application related to (1) the Applicant’s prospects of success in the substantive application for review of a decision and (2) the prejudice to the Applicant if the stay is not granted.
Senior Counsel for the Respondent took the Tribunal through each of the four abovementioned factors, with particular reference to the public interest.
THE APPLICANT’S GROUNDS FOR SEEKING A STAY ORDER
There are two grounds upon which the Applicant seeks a stay order. First, the Applicant says that his case before the delegate of ASIC was not conducted in either an adequate or competent manner by his legal representatives at that hearing. The Applicant contends that he was somehow misled into believing that the individual who had primary carriage of his legal representation in the earlier hearing had a current practicing certificate as a qualified legal practitioner when, according to the Applicant, this was not the case. The resulting contention is that shortfalls and inadequacies are now apparent when one has regard to the way his case was presented to the ASIC delegate. This, in turn, says the Applicant, has compromised his interests and has resulted in the adverse outcome reflected in the decision under review.
Secondly, the Applicant says a refusal to stay the operative effect of the decision under review will place significant financial burden and hardship on his business and its capacity to continue servicing its clients and engaging its employees.
EVALUATION OF THE GROUNDS BEHIND THE REQUESTED STAY
1. Issues with the Applicant’s Legal Representative
A reference to certain paragraphs of the decision under review,[3] to my mind, resolves this point. Notice of the hearing was duly served upon the Applicant pursuant to s 920A of the Corporations Act 2001 (Cth). In particular, s 920A(2) prevents ASIC from making any banning order against a person unless that person is first given an opportunity:
(a)to appear, or be represented, at a hearing before ASIC that takes place in private; and
(b)to make submissions to ASIC on the matter.
[3] See [6]-[9] inclusive of the decision under review.
The relevant notice delivered to the Applicant clearly afforded him the opportunity to appear at the hearing, with or without representation, and to otherwise properly respond to ASIC’s allegations about his conduct as a financial services provider. The Applicant so elected, and on 8 February 2017 attended the hearing with his then-adviser. Written submissions were tendered and presumably ventilated at the hearing.
The net effect is that ASIC did comply with its statutory obligations such that procedural fairness and natural justice were afforded to the Applicant. I note that it was not a requirement that the Applicant have legal representation. Rather, the significant point was that the Applicant was afforded the opportunity to present, and press his case. It is clear that he did so, albeit through a representative who did not hold a current legal practitioner’s practicing certificate.
Any issues or difficulties the Applicant may now apprehend with regard to his representation at the hearing cannot be matters mitigating in favour of a stay. They are matters strictly between him and those representing him. The resolution of those issues cannot be ventilated or otherwise utilised to condition a decision-maker’s thinking on whether or not to stay the decision under review.
Viewed from a different perspective, there is no statutory or other compulsion on a decision-maker (or the institution they work for) to make enquiries to ascertain the professional registration status (or otherwise) of those appearing before it.
Accordingly, any displeasure or dissatisfaction now expressed by the Applicant with his legal representation at the hearing cannot ground a stay of the operative effect of the decision arising from that hearing. Similarly, any misconception about the qualifications or competence of those who represented him cannot be utilised by the Applicant as the basis of a stay.
In any event, I am not satisfied that the words of s 920A(2) of the Corporations Act 2001 (Cth) require that a person’s representative be a legal representative, that is, that they be legally qualified. Just as ASIC’s natural justice obligations would be discharged if a person with no legal training were to represent themselves at the hearing, so too it seems that they would be discharged if a non-legal representative were to act for them.[4]
2. The Implementation of the Decision Under Review Will Impose Significant Financial Hardship on the Applicant
[4] Exhibit 2, [21(d)].
The distinct possibility of hardship being caused to the Applicant as a result of the making of a banning order was recognised by ASIC’s delegate.[5] However, the delegate was satisfied that public interest considerations outweighed issues of financial hardship and, on that basis, a banning order was warranted. The delegate was satisfied that a banning order would promote “confident and informed decision making by consumers of financial products and services” and “fairness, honesty and professionalism by those who provide financial services”. The delegate thought these public interest considerations outweighed the consequences of any banning order for the Applicant.
[5] See [164]-[166] of the decision under review.
For reasons that will follow, I agree with this conclusion.
RELEVANT ISSUES TO THE GRANT OF A STAY
Prospects of success or otherwise of substantive application
I agree with the contention made on behalf of ASIC that the substantive application has only minimal prospects of success.
In making any assessment of the Applicant’s prospects of success in the substantive application, the Tribunal should not conduct a mini-hearing as part of its consideration of whether or not to grant a stay. The Tribunal should, however, look for substantive facts, arguments and evidence which could alert a decision-maker to a genuine possibility that an applicant’s prospects at the final hearing would thereby be improved.[6]
[6] XTWK and Australian Securities and Investments Commission [2007] AATA 1890.
The material submitted by the Applicant does not really assist me in reaching such a conclusion. It is necessary to examine each document now sought to be relied on by the Applicant:
(a)A certain outline was filed contemporaneously with the application for a stay. ASIC contends that this outline only sets out the apparent basis for the application to review the decision. That basis seems to focus on the abovementioned point regarding the Applicant being represented at the hearing by a person without a valid legal practicing certificate. For reasons recounted earlier, I agree with the contention that this cannot be a proper basis on which the decision under review can be set aside. The further point is that there is no evidence of actual prejudice having been occasioned to the Applicant as a result of what he now says are the shortfalls and inadequacies in his representation. The outcome may be adverse to him, but that does not necessarily mean that such outcome can automatically be visited at the door of those who represented him. To repeat, that is an assessment for another decision-maker in another venue.
(b)On the morning of the hearing, the Applicant’s representative tendered a lengthy spreadsheet-derived document.[7] Comprehensive though this document may seem at first blush, it appears to be largely a regurgitation of the allegations put to the Applicant at the ASIC hearing but now with some “legal comment” column at the side of each page. Much of the commentary in the “legal comment” column is simply to the effect that “TBM [the Applicant] has not breached” a given section. A notable number of other “legal comment” columns are blank or otherwise say “ASIC are erroneous in finding any breach under” a given section. Viewed holistically, I cannot reasonably find that this document convincingly demonstrates or articulates the arguments sought to be ventilated by the Applicant in any de novo hearing of this matter. It is commentary, not evidence or analysis and so is of little use to the Tribunal.
(c)Also on the morning of the hearing, the Applicant tendered an affidavit that purports to explain the nature of harm and prejudice occasioned to him as a result of his representative not having a current legal practicing certificate. In my view, the affidavit does no such thing. The affidavit is a compilation and summary of the legal dispute between the Applicant and his former advisers. It is not a dispute about professional competence or professional negligence. Rather, on any objective analysis, it is a dispute about money. Specifically, the former representatives have sued the Applicant to recover the balance of their fees of, and incidental to, their representation of him at the previous hearing. More particularly, a default judgment was obtained by them against the Applicant, and the Applicant now seeks to have that judgment set aside. More telling is the cross‑claim that the Applicant filed in that proceeding. The cross-claim cannot be said to have any primary focus, suggestion or allegation that any conduct of the former representatives has resulted in the adverse outcome before the ASIC delegate. Rather, the cross-claim is squarely aimed at attacking the level of fees rendered by the former representatives.
[7] Exhibit 3.
Despite the best endeavours of his counsel (on the day of this stay hearing) in producing the spreadsheet-derived document,[8] I am not able to glean any identifiable basis or rationale to sustain a contention of convincing prospects on a hearing de novo. I afford little or no weight to the apparent issues between the Applicant and his former advisers. I can only conclude that on the strength of the material before me, his prospects in the substantive application are, at their highest, not convincing but, more likely, poor.
[8] Exhibit 3.
For the sake of completeness, I will address two further contentions proposed by the Applicant, purporting to demonstrate a convincing level of prospects of success in the substantive hearing. First, he says that he has been the subject of regular audits and checks and that he and the business he operates have not previously been the subject of intervention by any statutorily-empowered regulator for the entirety of his seventeen years of work experience in the financial services sector. Secondly, he says that ASIC reviewed some eighty files in his business but, in the end, focused on the specific seven files that were the subject of the complaint and, ultimately, gave rise to the banning order.
These contentions were addressed by the ASIC delegate who gave them due consideration, but ultimately game them no weight. The delegate was clear:
Mr McLean’s submissions do not address to (sic) ASIC’s concerns. Despite the knowledge which Mr McLean submitted he possesses and the training which he contended he has undertaken, as well as the number of years that he had worked in the financial services industry, Mr McLean engaged in conduct which fell well below the standard expected of a financial adviser. The fact that Mr McLean has done so and does not acknowledge his shortcomings, other than with respect to what can be described a (sic) file management (that is, ensure product research is printed and placed on client files, along with contemporaneous file notes), gives rise to a concern that he may in the future contravene a financial services law. Further, while I do not doubt Mr McLean’s evidence and submissions with respect to improvements that he has made in relation to his record keeping practices, those improvements do not negate ASIC’s concerns with respect to the quality of the advice that he provided and the adequacy of information contained in his SOAs. Accordingly, I am satisfied that ASIC may have reason to believe that Mr McLean is likely to contravene a financial services law.
I therefore do not consider that issues such as satisfactory past audits, length of time in the industry, or an initially broad investigation (eighty files) morphing into an apparently smaller investigation (seven files) are factors that mitigate in favour of a finding that the Applicant has good or convincing prospects of success in the substantive application.
Any Prejudice to a Party
The Applicant
I agree with the contention put by ASIC relating to a dearth of evidence as to what prejudice would be suffered by the Applicant, were a stay to be refused. As is also contended by ASIC (with which I agree), although certain assertions appear in the submissions prepared by his representative for this stay application, that in itself cannot constitute evidence of demonstrable hardship.
I have had regard to the Applicant’s affidavit, tendered at the stay hearing.[9] Its only reference to hardship appears in the penultimate paragraph, which reads:
I ask the AAT to stay this banning order, so that while I wait for the De Novo of the matter to be dealt with (sic) I can continue to run my business and engage my staff.
[9] Exhibit 4.
There is no reference to hardship in the Applicant’s primary application for review, nor in his application for a stay. There is, however, reference to difficult circumstances in a document I have seen on the file relating to a “Request for Fee Reduction”. There, in section E, the Applicant says:
I have exhausted all of my life savings dealing with ASIC & feel the 5 year ban is unfair given we have a family business that relies on my Income.
I’m struggling to keep food on the table after this review & I’m asking for a reduction if possible in fees so I can get my case reviewed.
Be that as it may, I make the following three points:
·The Applicant’s assertions and statement of assets and liabilities in a document seeking reduction in a filing fee which neither was tendered or ventilated at the hearing cannot be given the status of evidence.
·As this information was not tested at the contested stay hearing, I cannot give it any weight.
·In any event, any financial harm that the Applicant may be suffering is outweighed by the public interest requirement relating to the maintenance of confidence in the financial services industry.
Consequently, I give little weight to any prejudice the refusal of a stay will have on the Applicant.
ASIC
ASIC has legislatively-mandated duties that it must perform. Were a stay to be granted, the Applicant would presumably continue to provide financial services to the public, pending determination of the de novo hearing. There are clear and obvious misgivings around the Applicant’s continued operation in the financial services industry in circumstances where the ASIC delegate has made certain adverse findings culminating in a five-year banning order. There are two resulting burdens placed on ASIC. First, it is effectively “on notice” that there are defects and problems in the way the Applicant has conducted his financial services activities. It would most likely be compelled to devote resources to the continued supervision and/or auditing of the Applicant’s financial services activities until the conclusion of the de novo hearing. Secondly, ASIC would experience difficulty in maintaining the public interest and confidence in the financial services industry, were the Applicant, with his apparent compliance record, allowed to continue his operations in the financial services industry while awaiting completion of the de novo hearing process.
The Public Interest
It is the responsibility of ASIC to “promote the confident and informed participation of investors and consumers in the financial system.”[10] ASIC’s contention is validly made: “the maintenance of public interest and confidence in the financial services industry is a significant consideration.”[11]
[10] Australian Securities and Investments Commission Act 2001, s 1(2)(b).
[11] Respondent’s Outline of Submissions on Stay Application, at [30].
The banning order now sought to be stayed was not lightly made. A decision maker – after hearing the evidence and weighing all relevant considerations – concluded that the Applicant be precluded from participation in the financial services industry for five years. This decision was based on a belief in the ASIC delegate that the Applicant was someone who had engaged in repeated breaches of his obligations as a financial advisor over an extended period. The conduct giving rise to those repeated breaches derives from:
(i)non-compliance with various financial services laws over the period from May 2013 to March 2016;
(ii)a likelihood of future contraventions of financial services laws; and
(iii)a demonstrated lack of understanding of the obligations of a financial advisor.[12]
[12] Ibid, at [31].
The scheme and orientation of the legislation regulating the conduct of financial services providers is clearly aimed at the public who avail themselves of those services. All of the breaches alleged against the Applicant giving rise to the numerous instances of misconduct from May 2013 to March 2016 related to specific members of the public and “consumers” of financial services rendered (or not properly rendered) by the Applicant.[13]
[13] Ibid, at [31]; s 945A of the Act (Requirement to give statement of advice), s 947C (Content of statement of advice), s 947D (Additional requirements when advice records replacement of one product with another), s 961B (Acting in the best interests of the client), and s 961G (Giving of appropriate advice).
As observed by their Honours Downes and Jagot JJ in Australian Securities and Investment Commission v Administrative Appeals Tribunal v Anor [2009] FCAFC 185 at 411:
“Given the nature of a banning order, the persons who may be affected by a review of its making 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.”[14]
[14] Australian Securities and Investment Commission v Administrative Appeals Tribunal v Anor [2009] FCAFC 185 at 411, [51].
Any determination of whether or not to grant a stay order under s 41(2) of the AAT Act therefore requires, on the one hand, a resolution of the competing interests of the Applicant, with the interests of existing and potential clients plus the public at large, on the other. Such a determination is informed by a “fundamental element” embodied in the scheme of the legislation pursuant to which the banning order was made. As was further pointed out by their Honours Downes and Jagot JJ:
“The scheme discloses that a banning order protects the public. It is intended to protect the public from obtaining financial services from a person who (among other things) has not, or ASIC reasonably believes has not, complied with a financial services law or has had their Australian financial services licence suspended or cancelled; s 920A(1).”[15]
[15] Ibid, at [52].
The ultimate resolution of the competing interests of persons who may be affected by a banning order requires a decision maker to be satisfied the subject banning order was (1) made after the proposed recipient was given a right to be heard and to make submissions in private to ASIC (s 920A(2)); (2) accompanied by a statement of reasons (s 920F(1)); and (3) where a banning order is made, that it be made public (ss 920E(2) and 922A). I am satisfied that each of these elements have been met by ASIC.
The Applicant’s contentions have, to my mind, two broad themes. First, he says that although he was allowed to be heard and make submissions in private to ASIC, those submissions were flawed or inadequate and somehow compromised his prospects of successfully resisting the adverse consequence of a banning order. As mentioned above, the adequacy (or otherwise) of his legal representation at the hearing before ASIC is a matter between the Applicant and those whom he instructed (or thought he had instructed) and/or the professional indemnity insurers of those representatives. That submission cannot now be utilised to somehow taint or render erroneous the decision of the ASIC delegate. I reject this submission accordingly.
Second, the Applicant pointed to certain ameliorating factors that should be taken into account in favour of a stay. He refers to (1) certain improvements in his internal record keeping and file management practices;[16] (2) an awareness and receipt of training in what constitutes appropriate advice and the obligation to record that advice in a Statement of Advice;[17] (3) familiarity with what is required when one product is replaced with another product;[18] (4) participation in the financial services industry for 17 years;[19] and (5) completion of certain mandatory audit compliance reports in October 2015[20] and November 2016[21] by his managing Australian Financial Services Licensee.[22]
[16] Respondent’s Outline of Submissions on Stay Application, at [32].
[17] Decision under review at [145].
[18] Ibid.
[19] Exhibit 4, Affidavit of Applicant sworn 31 August 2017 at [10].
[20] Decision under review at [146].
[21] Exhibit 4, Affidavit of Applicant sworn 31 August 2017 (Exhibit TBM 1).
[22] Total Financial Solutions Australia Limited.
Despite these ameliorating measures, the ASIC delegate considered they did not address ASIC’s concerns. The delegate found that the improvements, in and of themselves, did “… not negate ASIC’s concerns with respect to the quality of the advice that he provided and the adequacy of information in his SOAs. Accordingly, I am satisfied that ASIC may have reason to believe that Mr McLean is likely to contravene a financial services law.”[23] The evidence presently before me does not cause me to cavil with this finding.
[23] Decision under review at [148].
As contended by the Respondent,[24] were it to be found that the Applicant did commit the large number of breaches found by the delegate, then there is a very significant need to protect the public. I agree with that contention. The Applicant’s overall posture, both at the hearing before ASIC and in this stay application, is one of either a rhetorical adoption of ameliorating measures for self-improvement and/or the visiting of responsibility for the banning order upon others, primarily his former representatives and advisors. As observed by the Respondent,[25] “There is little insight into the problems on the part of…” the Applicant giving rise to the circumstances of the breaches upon which the banning order is based. In the absence of such insight and explanation I consider that the interests of the Applicant’s existing and potential clients and the public at large outweigh the interests of the Applicant and/or his dependants, associates and employees.
[24] Respondent’s Outline of Submissions on Stay Application, at [33].
[25] Ibid.
I accordingly consider (and find) that protection of the public mandates that the Applicant should not be permitted to continue to provide financial services and that the operative effect of the decision under review should not be stayed on this public interest basis.
UTILITY OF REVIEW
I do not consider the utility of the substantive application will be rendered nugatory if the stay is not granted. There is no evidence before me to indicate anything to the contrary.
CONCLUSION
I take note of the Tribunal’s comments in Roy Frederick Griffiths, Grif-Air Helicopters Pty Ltd and Civil Aviation Authority [1993] AATA 274 that the word desirable in section 41 of the AAT Act implies a positive aspiration and something more than merely advisable.[26]
[26] Cited in Zoric and Australian Postal Corporation [2013] AATA 594 at [11] (Senior Member Friedman).
I attach little or no weight to the Applicant’s grounds for seeking a stay.
Taking into account - (1) the Applicant’s minimal and unconvincing prospects of success in the substantive application; (2) the necessity to maintain public confidence in the financial services industry and; (3) that in the absence of an overturning of the findings giving rise to the banning order and the very real consequential requirement to protect the Applicant’s existing and potential clients and the public at large - I do not consider a stay order is appropriate for the purpose of securing the effectiveness of the hearing and determination of the substantive application.
DECISION
The application to stay the implementation of the decision under review dated
4 August 2017 is refused.
I certify that the preceding 48 (forty-eight) paragraphs are a true copy of the reasons for the decision herein of Senior Member T. Tavoularis
....................................[sgd]....................................
Associate
Dated: 5 September 2017
Date of hearing: 31 August 2017 Counsel for the Applicant: Mr C Garlick Counsel for the Respondent: Mr M Brady QC Advocate for the Respondent: Ms A Rees
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