Michael O'Sullivan and Australian Securities and Investments Commission Professor R Deutsch, Deputy President 30 March 2015 28 April 2015 Sydney
[2015] AATA 265
•30 March 2015
[2015] AATA 265
Division GENERAL ADMINISTRATIVE DIVISION File Numbers
2015/0837-8
Re
Michael O'Sullivan
APPLICANT
And
Australian Securities and Investments Commission
RESPONDENT
Tribunal Professor R Deutsch, Deputy President
Date 30 March 2015 Date of written reasons 28 April 2015 Place Sydney The Tribunal grants the Applicant’s request for a stay pursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975. The operation and implementation of the Disqualification Order is stayed until the parties have had the opportunity to make submissions after the Tribunal has heard and determined the applications for review.
The Tribunal refuses the Applicant’s request for a suppression order pursuant to section 35(2) of the Administrative Appeals Tribunal Act 1975.
......................[sgd]..................................................
Professor R Deutsch, Deputy President
CATCHWORDS
PRACTICE AND PROCEDURE – application for stay of decision –relevant considerations – prospects of success – public interest – stay granted
PRACTICE AND PROCEDURE – confidentiality orders – suppression orders – proceedings generally held in public – open administration of justice – prejudice to Applicant’s reputation – prejudice to concurrent civil proceedings – request for suppression orders refused
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) ss 35(2), 35(3), 41(2)
CASES
ASIC v AAT (2009) 181 FCR 130
Levi v Companies and Liquidator’s Disciplinary Board [2013] FCA 719
Pochi v Minister for Immigration and Ethnic Affairs (1979) 36 FLR 482
Re Commonwealth of Australia and Quirke (1986) 9 ALD 92
Re Dart and Director-General of Social Services (1982) 4 ALD 553
Re Repatriation Commission and Dealt to (1985) 8 ALD 454
Re YFFM and Australian Securities and Investments Commission (2009) AATA 409
Re Scott and ASIC [2009] AATA 789
REASONS FOR DECISION
Professor R Deutsch, Deputy President
28 April 2015
INTRODUCTION
On 23 February 2015, the Applicant submitted applications for a review of:
(a)the disqualification order made by the Respondent on 16 February 2015 pursuant to s 206F of the Corporations Act 2001 (Cth) (the Corporations Act) (the Disqualification Order); and
(b)the order made by the Respondent on 16 February 2015 that the Applicant be banned from holding a Financial Services Licence for a period of seven years pursuant to s 920A of the Corporations Act (the Banning Order).
On 4 March 2015, the Applicant submitted an application pursuant to s 41(2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) for orders:
(a)in the nature of a stay in respect of the Disqualification Order (stay); and
(b)in the nature of confidentiality or suppression orders in respect of the Disqualification Order and the Banning Order (suppression orders).
The Applicant also requested the proceedings be expedited.
THE STAY APPLICATION
General
The Tribunal’s power to make orders affecting the operation of a decision under review is found in s 41(2) of the AAT Act which provides 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 agreed by the parties that the principles outlined by Downes J in Re Scott and ASIC [2009] AATA 789 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 Applicant:
(a)The prospects of success.
(b)The consequence for the applicant 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.
(f)Other matters that are relevant, amongst which I would include the length of time that the ban has already been in place and the gap between today and the hearing of the application.
Prospects of Success
Arguments relating to prospects of success are fraught with danger in circumstances where little or no evidence has been provided in relation to the matters in dispute. Clearly, in considering prospects of success of a review application for the purposes of an interlocutory application, it is not the role of this Tribunal to conduct a preliminary hearing: Re Dart and Director-General of Social Services (1982) 4 ALD 553, per Davies J at 555; Re Repatriation Commission and Dealt to (1985) 8 ALD 454, per Hall DP at [32].
It is relevant, however, for the Tribunal to consider whether there are:
(a)facts or circumstances which, if established in the substantive hearing, would provide a basis for success in the review application; or
(b)points of law raised, which, if sustained, would lead to that conclusion: Re Commonwealth of Australia and Quirke (1986) 9 ALD 92, per Williams SM at 95; Re YFFM and Australian Securities and Investments Commission (2009) AATA 409, per Penglis SM at [9]).
In this case the Applicant has raised the following broad matters in relation to the prospects of the application for review:
(a)a point of law as to whether two of the companies, in relation to both of which the Applicant was a director, were related to one another and possibly whether they were engaged in the same enterprise. This issue becomes relevant to the application specifically under section 206F of the the Corporations Act.
(b)a point of law as to whether one of those companies had unsecured creditors at the relevant time so as to justify the making of a Liquidator’s Report and whether that issue is in any event relevant.
(c)a general review by the Tribunal of the Applicant’s conduct in relation to the management, business and property of any of the relevant corporations. This issue becomes relevant to the application specifically under s 206F(20)(b)(i) of the Corporations Act.
Substantial argument was put to the Tribunal regarding the strength of the Applicant’s arguments in relation to these three matters.
As indicated above it is not the role of this Tribunal at this stage of the proceedings to conduct a hearing in relation to these matters. Having heard submissions from both sides it is my considered view that none of these arguments are in any way spurious or frivolous. Further, they raise important questions of law and the application of the law to the facts specific to this matter. The Applicant has some reasonable prospects of success at a substantive hearing in relation to all three arguments.
Public Interest
The Disqualification Order is clearly intended to protect members of the investing public from abuse which would be occasioned by similar conduct being undertaken by the Applicant to that which has led to this order.
This raises the key issue of whether, if a stay were granted, there is any real likelihood that the Applicant would use the benefit of that stay so as to inflict on the public the very same conduct which led to the Disqualification Order being implemented at first instance.
In my view the risk of harm to the public in the manner suggested is very low. There are two factors in particular which encourage me to reach this conclusion. First, the Applicant has, in admissions made as part of the receivers’ examination, already indicated that he admits to certain failings. He also expressed contrition in relation to those failings. Secondly, the alleged conduct occurred over three years ago. It appears to be the unchallenged position that since that time the Applicant has performed services as a director of a number of other companies without incident and, most importantly, without any complaints having been made against him in relation to his conduct of the management of those companies.
There was also a strong reference provided in support of the Applicant by the managing director of a financial services firm. Notwithstanding all that has happened, this referee believes the Applicant is a person of good character with integrity and honesty, and is a responsible, diligent company director. This is important but of less significance than the two factors mentioned above.
Consequences for the Applicant if the stay is not granted
There would appear to be little doubt that the Disqualification Order has caused and will continue to cause significant hardship to the Applicant.
The Respondent has pointed out that there are others who could manage the various companies that are in question if the stay is refused and that is a relevant consideration which I take into account.
Whether the application for review would be rendered nugatory if the stay was not granted
The Applicant asserts that if the stay was not granted the damage to his business activities may be so extensive that there will be no benefit in him being restored to his former directorships or undertaking new directorships.
I accept to some extent the validity of this assertion. However, I would imagine most of the damage has already been done.
Nonetheless, this again is a factor which I will take into account in reaching a decision on the stay.
Conditions which could be imposed and which would ameliorate any consequences of either granting or refusing the stay
In consultation with the parties at the interlocutory hearing, a tight timetable was set for the filing of further documents with a hearing date confirmed for late May 2015. This would ensure that the timeframe between the interlocutory application and the finalisation of substantive issues following a hearing would be minimised.
Any other relevant matters
I do not believe there are any other matters of relevance raised by the parties and I do not believe there to be any other such matters to consider.
Concluding remarks on stay
I consider the prospects of success and public interest arguments here to be particularly important and both weigh in favour of the Applicant. The other matters are only of marginal weight in favour of one party or the other.
THE SUPRESSION ORDERS
Section 35 of the AAT Act gives effect to the basic principle that proceedings before this Tribunal are to be open and documents and other material lodged with the Tribunal in the course of a proceeding should also be available to the public. This is the starting point in any analysis as to whether confidentiality or suppression orders should be made.
Having said that, s 35(2) enables the Tribunal, where satisfied that it is desirable to do so by reason of the confidential nature of any evidence or matter or for any other reason, to order a hearing or part thereof take place in private and to give directions restricting the publication of the names of witnesses or evidence which is given before the Tribunal.
Section 35(3) provides as follows:
In considering:
(a) whether the hearing of the 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.
The relevance of these provisions has been considered in detail in a number of decisions – most significantly by the Full Federal Court in ASIC v AAT (2009) 181 FCR 130 where the following key points were made:
(a)the norm is that proceedings before the Tribunal shall be in public and this norm is reinforced by the requirements of s 35(3) which expressly confirms the principle that it is desirable that hearings be held in public;
(b)the power to depart from that norm is conferred by s 35(2) and is one that is to be exercised sparingly: see also Pochi v Minister for Immigration and Ethnic Affairs (1979) 36 FLR 482 at 510;
(c)the reason matters are not kept secret is the overriding importance of justice being administered openly and in public. This applies equally to persons who are in business even when, for example, employees may be disadvantaged; and
(d)the Tribunal 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 a banning order would be a sufficiently cogent reason.
The Applicant asserts that this case is exceptional primarily because the legal conclusions that were made by the Respondent are extremely prejudicial to the Applicant’s professional and personal reputation in a manner that is disproportionate to the alleged conduct. On the evidence currently available this conclusion is not established and the Respondent is clearly of a different view. Having regard to the evidence currently available to me, I cannot conclude that this case is any more exceptional than other cases which have come before the Tribunal in circumstances where the Respondent has taken similar action.
The Applicant also contends that publication of the contents of the Disqualification Order and the Banning Order would materially prejudice the Applicant’s defence of proceedings currently in the Supreme Court brought by the Receiver of one of the companies mentioned earlier.
This does not, however, give rise to a basis for a suppression order of the kind sought. The authorities clearly recognise that where there are parallel criminal proceedings, such orders may be required in some cases as a protection for the accused: Levi v Companies and Liquidator’s Disciplinary Board [2013] FCA 719. That reasoning does not extend to concurrent civil proceedings.
The overriding interests of justice require the proceedings in this case be conducted in public.
DECISION
For the reasons given above the application pursuant to s 41(2) of the AAT Act for a stay of the Disqualification Order is granted. The operation and implementation of the Disqualification Order is stayed until the parties have had the opportunity to make submissions after the Tribunal has heard and determined the applications for review.
The application for the suppression orders is refused.
I certify that the preceding 33 (thirty -three) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President ...........................[sgd].............................................
Associate
Dated 28 April 2015
Dates of hearing 27 and 30 March 2015 Counsel for the Applicant Mr I Jackman SC Solicitors for the Applicant Gilbert + Tobin Counsel for the Respondent Ms K Stern SC and Ms T Phillips Solicitors for the Respondent Australian Securities & Investments Commission
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