Meenakshi Callychurn and and Australian Securities & Investments Commission
[2015] AATA 567
•18 June 2015
[2015] AATA 567
Division TAXATION & COMMERCIAL DIVISION File Number
2015/1419
Re
Meenakshi Callychurn
APPLICANT
And
Australian Securities and Investments Commission
RESPONDENT
File Number
2015/1420
Re
Unique Mortgage Services Pty Ltd
APPLICANT
And
Australian Securities & Investments Commission
RESPONDENT
DECISION
Tribunal Professor R Deutsch, Deputy President
Date 18 June 2015 Date of written reasons 5 August 2015 Place Sydney The Tribunal refuses the Applicants request under section 41(2) of the Administrative Appeals Tribunal Act 1975 for an order staying or otherwise affecting the operation or implementation of this review.
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Professor R Deutsch, Deputy President
CATCHWORDS
PRACTICE AND PROCEDURE – application for stay of decisions – decision to impose banning order – decision to cancel credit license – relevant principles – prospects of success - consequences for Applicants – consequences for Respondent in carrying out its functions – applications refused
LEGISLATION
National Consumer Credit Protection Act 2009 (Cth) ss 55, 80, 81
Administrative Appeals Tribunal Act 1975 (Cth) s 41(2)
CASES
Re Scott and ASIC [2009] AATA 798
REASONS FOR DECISION
Professor R Deutsch, Deputy President
5 August 2015
Under sections 80 and 81 of the National Consumer Credit Protection Act 2009 (Cth) (“the Act”) the Respondent made a banning order prohibiting Mrs Meenakshi Callychurn (the Applicant in proceeding 2015/1419) from engaging in credit activities for a period of five years.
Under section 55 of the Act, the Respondent cancelled the Australian credit licence held by a related company, Unique Mortgage Services Pty Ltd (the Applicant in proceeding 2015/1420) (“UMS”).
Mrs Callychurn and UMS have applied under section 41(2) of the Administrative Appeals Tribunal Act1975 (Cth) (“the AAT Act”) for a stay of the decisions.
On 18 June 2015, after hearing submissions from the parties, the Tribunal delivered an oral decision refusing to grant the stay applications. Shortly after, the Applicant requested written reasons for this decision.
The following are the reasons for the Tribunal’s decision on the stay applications only.
THE LEGISLATION AND RELEVANT PRINCIPLES
At the time of the oral decision made in this application, the Tribunal’s power to make orders affecting the operation of a decision under review was found in section 41(2) of the AAT Act (prior to its amendment on 1 July 2015) which provided as follows:
“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.”
This section makes clear that the overall assessment in relation to whether to exercise this power needs to be made in the context of securing “the effectiveness of the hearing and determination of the application for review”.
In making that assessment, it is generally accepted that the principles outlined by Downes J in Re Scott and ASIC [2009] AATA 798 at [4] are applicable and accordingly the following factors are relevant to the question of whether the Tribunal ought to grant the stay which is sought by the Applicants:
(a)The prospects of success;
(b)The consequence for the Applicants of the refusal of a stay;
(c)The public interest;
(d)The consequences for the Respondent in carrying out its functions depending upon whether a stay is granted or not;
(e)Whether the application for review would be rendered nugatory if a stay were not granted; and
(f)Other matters that are relevant.
Prospects of Success
Arguments relating to prospects of success are normally fraught with danger in circumstances where little or no evidence has been provided in relation to the matters in dispute.
In this case however the stay application and the substantive hearing were run on the same day and accordingly I have the benefit of having all the available evidence before me.
Without seeking to conclude the matter at this stage, it is my firm belief that the case for a banning order of some duration in respect of Mrs Callychurn and the cancellation of the licence held by UMS is substantial. In the case of Mrs Callychurn there are, at the very least, substantial grounds for believing that she failed to be forthright in her interactions with the Respondent.
In particular, in two consecutive years (namely 2011 and 2012), Annual Compliance Certificates were lodged with the Respondent which contained information which was, at best from Mrs Callychurn’s perspective, misleading. It now transpires that there were problems with the 2012 Certificate and the software relating to it which were not the fault of Mrs Callychurn. Nonetheless, the way in which the Certificates were completed raises serious questions regarding the willingness of Mrs Callychurn to explain the complete and honest picture to the Respondent in its mandatory filings.
In my view, these matters alone are sufficient to ensure that a banning order of some duration should be imposed and accordingly a stay of the Respondent’s decision to impose a banning order would be inappropriate.
I emphasise however there are other grounds in relation to the banning order which have been advanced by the Respondent and I will consider those other grounds in more detail in my final decision.
As Mrs Callychurn is the sole director of UMS, the sole key person under the licence and the sole fit and proper person, the prospects of success for UMS in overturning the cancellation decision would appear to be limited.
This factor weighs heavily in favour of refusing the stay applications.
The consequence for the Applicants of the refusal of a stay
Mrs Callychurn has indicated that she is employed by a large financial institution and her employment would be terminated if the decision were to stand.
However, it appears that this basis for the grant of the stay is illusory as it is apparent that the financial institution in question has already terminated her employment following the media release which was published by the Respondent on 20 March 2015 regarding the relevant banning order.
A further argument advanced by both Mrs Callychurn and UMS is that UMS “has professional liability insurance in place and compensation arrangements in place under the Credit Ombudsman Service Ltd scheme”. This seems to suggest that it is acceptable for consumers to deal with UMS and be exposed to loss pending the reviews because there are schemes available to compensate for such losses.
This would seem to be a very unsatisfactory basis upon which to grant a stay. Clearly, the preferable course is to ensure that consumers are not exposed to the risk of loss by dealing with a company whose licence has been cancelled but is the subject of review before this Tribunal rather than leaving them to rely on insurance as a back-up in the event of losses being incurred.
Mrs Callychurn and UMS also raised the matter that UMS derives certain trailing income in the form of commissions which would cease to be payable if UMS is not permitted to continue. However, there seems to be evidence that that trailing commission arrangement ceased some time ago when the relevant entity that provided those trailing commissions terminated its agreement with UMS. In any event, even if such trailing commissions were under threat it would hardly be relevant in the sense that the profitability and financial viability of UMS could not be preferred to the need to protect the public from credit providers which have failed in a number of respects in their legal obligations under the Act.
This factor weighs in favour of refusing the stay applications.
The public interest
Clearly, having regard to all the matters discussed above it would seem to be the case that the public interest is best served by the banning order in respect of Mrs Callychurn and the cancellation of the licence in respect of UMS remaining in place pending the final determination in this matter.
The consequences for the Respondent in carrying out its functions
The consequences of a stay of the operation of the banning and cancellation orders being granted are that Mrs Callychurn would be permitted to continue as the sole fit and proper person and representative of UMS and UMS’s licence would continue to operate.
This would be in circumstances where a delegate of the Respondent has, after consideration of submissions from both Applicants, made serious and adverse findings against them.
Further, it is in circumstances where those serious and adverse findings will at the very least result in a banning order of some duration in respect of Mrs Callychurn.
This factor weighs in favour of refusing the stay applications.
Whether the application for review would be rendered nugatory if a stay were not granted
No argument was put to me regarding this factor and I see no relevance in the facts at hand.
Any other matters that might be relevant
The substantive hearing in this matter has now been held and the Tribunal’s decision is reserved. Accordingly the timeframe until the final determination is made is likely to be relatively short.
DECISION
The Tribunal refuses the applicant's request under section 41(2) of the AAT Act for an order staying or otherwise affecting the operation or implementation of this review.
I certify that the preceding 30 (thirty) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President ..........................[sgd]..............................................
Associate
Dated 5 August 2015
Dates of hearing 2 and 18 June 2015 Applicant In person Counsel for the Respondent Mr P Herzseld Solicitors for the Respondent In house
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