Mortgage Guaranty Insurance Corporation of Australia Ltd v Australian Mortgage Insurance Corporation Ltd
[1984] ATPT 2
•28 Sep 1984
CATCHWORDS
Trade Practices Tribunal - review of determination of Trade Practices Commission - authorization qranted by Commission in respect of proposed conduct pursuant to sub-s.88(8) Trade Practices Act - Tribunal's role in reviewing a determination of the Commision - the role of "onus" in proceedings.
Trade Practices Act 1974
| - | MORTGAGE GUARANTY INSURANCE CORPORATION OF AUSTRALIA LIMITED and |
| AmTRALIAN MORTGAGE INSURANCE CORPORATION LIMITED |
L.
NSW 3 of 1984
Lockhart J. President, Professor M. Brunt, Mr. R.L. Wilson
28 September 1984
Sydney
COMMONWEALTH OF AUSTRALIA
TRADE PRACTICES ACT 1974
IN THE TRADE PRACTICES
TRIBUNAL
MORTGAGE GUARANTY INSURANCE CORPORATION OF AUSTRALIA LIMITED
AND
AUSTRALIAN MORTGAGE INSURANCE
CORPORATION LIMITED
Applicant
File No. NSW 3 of 1984
RE: An application by Mortqage Guaranty Insurance Corporation of Australia Limited and Australian Mortgage Insurance Corporation Limited for a review of a determination made
by the Trade Practices
Commission dated 29 June 1984
(Commission File No. A 81/4)
ORDERS
| LJ | Lockhart J. President, Professor M. Brunt. Mr. R.L. Wilson | |
|
COMMONWEALTH OF AUSTRALIA
TRADE PRACTICES ACT 1974
| I | IN THE TRADE PRACTICES TRIBUNAL |
| MORTGAGE | GUARANTY | INSURANCE |
CORPORATION OF AUSTRALIA LIMITED
AND
AUSTRALIAN MORTGAGE INSURANCE
CORPORATION LIMITED
Applicant
File No. NSW 3 of 1984
RE: An application by Mortgage Guaranty Insurance Corporation of Australia Limited and Australian Mortgage Insurance Corporation Limited for a review of a determination made by the Trade Practices Commission dated 29 June 1984 (Commission File No. A 8114)
Trade Practices Tribunal
Lockhart J. President, Professor M. Brunt, Mr. R.L. Wilson
28 September 1984
ii
REASONS FOR DECISION
THE TRIBUNAL
On 20 July 1984 Mortgage Guaranty Insurance Corporation of Australia Limited and Australian Mortgage Insurance Corporation Limited ("the applicants") applied, pursuant to sub-s. 101(1) of the Trade Practices Act 1974 ("the Act"), for a review of a determination
by the Trade Practices Commission of 29 June 1984. By that
determination the Commission granted authorization to J. Henry Schroder Wagg & Co. Limited, The Bank of Nova Scotia Asia Limited, Standard Chartered Australia Limited and Credit Lyonnais ("the banks") and Bank of New South Wales Nominees Pty. Limited ("the trustee") in respect of an arrangement between them which formed the basis of a scheme designed to make housing loan funds available to the public. That scheme is described by the Commission in its final determination in these terms:
3. The scheme is that Forward Mortgages Ltd.
| ("FML") a mortgage lending qroup will raise funds the funds being used in lending upon the security of first mortgaqes over residential property. The holders of the Promissory Notes are partially secured by the promise of FML to honour the | by the issue of Certified Mortgage Promisory Notes; security of the holders' funds the following additional security is thought crucial by the parties if funds are to be raised at competitive rates: |
| (a) | The Trustee is to have charge over all mortgages given by borrowers of funds from FML. This charge is to be held for the benefit of holders of Promissory Notes, and the banks which will provide and in the case of Standard Chartered Australia Ltd. procure. Letters of Credit in favour of the Trustee pursuant to Letters of Credit Agreements. |
| (b) | If FML defaults in payment of any Promissory Note on its due date, the Trustee is to be able to draw down under Letters of Credit issued in favour of the Trustee and held by the Trustee upon trust for the holders of Promissory Notes. |
| (c) | Payment of principal and interest and the timely payment of all other moneys payable under mortgages given by borrowers is to be insured in a manner specified in a Deed relating to Mortgage Promissory Notes (PN Deed). |
| 4. All Promissory Notes which are issued would be amount available to the Trustee under Letters of Credit issued by the Banks and the aggregate of principal amounts then secured by Deposited Mortgaqes and Certified Insured Mortgages (plus interest receivables and investments held by the Trustee) exceed the face value of Mortgage Promissory Notes outstanding. A mortgage cannot be included in this calculation unless it is a mortgage in respect of which HLIC Insurance is subsisting. "HLIC Insurance" is defined in the PN Deed and it stipulates that the obligations of such mortgage insurer must be guaranteed by the Commonwealth of Australia and that such mortgaae insurer must be owned by the Commonwealth of Australia. The only mortqage insurer which currently fulfils these requirements is the Housing Loans Insurance Corporation (HLIC). certified by the Trustee and under a clause of the | PM Deed the Trustee is not required to certify a | |
| ||
| guarantee repayment of loans made by lenders under mortgages. Basically a claim is made against the mortgage insurer where there has been default by the borrower, the lender has entered into possession and sold, and there is a shortfall from such sales. Under mortqage insurance a mortgage only protects his own interest and there is no protection for the borrower. It is distinct from property insurance where a mortaagee and a mortgagor may both have an interest in the property insured - the mortgagee to the amount of the debt secured on it and the mortgagor for the difference between the insurable value and the amount of the debt outstanding." |
The applicants for review of the Commission's determination were not the applicants for authorization. The application to the Tribunal for review is on the basis that the applicants have "a sufficient interest" for the purposes of sub-s. 101(1) of the Act.
The Tribunal is satisfied that each of the applicants clearly has such an interest. Indeed, no submission to the contrary was made on behalf of the other parties represented before the Tribunal.
On 1 August 1984 the Tribunal held a preliminary conference to consider appropriate directions for the future conduct of the proceedings. The applicants were represented by counsel. The Commission was also represented by counsel. The banks were represented by a solicitor. Housing Loans Insurance Corporation ("HLIC") was also represented by a solicitor. The solicitor for the banks told the Tribunal:
| "My instructions are tentatively to appear. | Those |
instructions however were qiven on the basis that
my clients really did not appreciate the full
consequences of being a party to these proceedings.
My client's position is this, under the original
... Forward Mortgages have indicated they do not wish to fund the banks in running these proceedings. The banks have taken the view that given the course of conduct of the authorization application before the Commission and what has now occurred, they no longer take the view that they will lend money to FML only on condition
arrangement because they are effectively the original authorization.
lenders of moneys to Forward Mortgages, Forward
that HLIC is the insurer. In other words, they
have effectively abandoned the third line forcing
i. conduct and are willing to proceed now on a lesser
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| that they would propose to do no more than sav to the Tribunal, "We believe the Commission's decision | ||
| ||
| to have authority to engage in this conduct but we do not wish to take any active role in supporting the argument for that proposition, (a) because we | ||
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| the borrower has indicated they do not wish to pay our legal fees for doing so." I can only say that is the position I am in and that is my client's | ||
| would affect what position, for instance, the | ||
| view. I am not 100 per cent sure on whether that Perhaps formally I should say to your Honour the best thing I could think of to do from my client's point of view is to foreshadow that I may soon seek leave to formally appear as a party but at the |
present time it may be better if I did not. ... The
conduct for which authorization was souuht plainly
had never been engaged in but the banks wanted to
engage in it. The relevant documentation that has
since been drafted in substitution for what was
before the Commission simply has a provision to the
effect that until such time as the authorization is
effective and has reached the point, as it were, of
being beyond a challenqe, the banks do not purport
to engage in such conduct."
The solicitor for HLIC said:
"It CHLICI was not a party to the original scheme.
It was not actively involved in the start. It was
consulted but did nothing to bring about this
scheme. It was not, of course, involved in the
application for authorization. In light of the
fact that the applicants for authorization seemed
not to be taking an active part in upholdina the
decision, I am not entirely sure that my client
would want to be front runner, as it were. They
would also like to have the benefit of the
authorization remaininq in place and what flows
from that. They do not see themselves as being the
moving force or the contender for the authorization
in any very strong sense."
There was discussion between the Tribunal and counsel and
solicitors present about the course the proceedings should take before
| L | the Tribunal, especially if the banks and HLIC took no active role. The Tribunal decided to give no directions that day and adjourned the proceedings to 17 August 1984. |
| On 17 Auqust 1984 the solicitor for the banks informed the Tribunal that the banks did not propose to appear in the proceedings. The solicitor for HLIC appeared as a matter of courtesy to the Tribunal and souqht leave to be excused from further attendance. Counsel appeared. as before, for the applicants and for the Commission. |
Counsel for the applicants asked the Tribunal to determine that the determination of the Commission dated 29 June 1984 (Commission file No. A8414) be set aside. Counsel for the Commission supported this application. The Tribunal then determined that the determination of the Commission dated 29 June 1984 (Commission file No. A84/4) be set aside. The Tribunal said that the reasons for its decision would be published later. These are those reasons; as they
bconcern questions of law they are those of the President.
The Tribunal's charter is to "review" the determination of the Commission. The "review" is a re-hearina of the whole matter. It is the determination of the Commission, not the reasons for that determination, which the Tribunal is required to "review".
It is useful to consider how previous decisions of the
Tribunal have approached the question of the Tribunal's role in
reviewina a determination of the Commission. In Re..J-ld & W w
| ii | T s L i m m (the Media Council Case) (1978) TPRS 204.137 the Tribunal (Deane J., Mr. Shipton and Mr. Walker) said at 203.149 and 203.150: |
"The determination of the Commission is an basis: without such a determination, there is nothina for the Tribunal "to review". In one sense, however, the use of the word "review" in relation to the function performed by the Tribunal in a matter such as the present is somewhat inappropriate. It is no part of the function of
essential part of "the record" of the Tribunal
since the makins of a determination of the
| the Tribunal to "review" what 'he | Commission had |
determined in the sense of considerinu whether the before the Commission. The Tribunal must make its own findings of fact and reach its own co,nclusions on the questions which arise before it and aive effect to those conclusions. It must make its own assessment of both benefit and detriment. It must ultimately decide for itself whether authorization should be uranted either at all or subiect to conditions. It is only after, and in the light of, the Tribunal's ultimate decision on that essential question that it will come to perform its statutory function of decidina whether the determination of the Commission should be affirmed, varied or set aside.
| The Tribunal is an administrative body. | It is, |
however, under a duty to act iudicially, that is to say, with iudicial fairness and detachment. It has no investiqative staff. Indeed, apart from those
who constitute it and the personal staff of the
presidential member who happens to be sittina, it
has no staff at all which it can properlv call its
own. Fairness, detachment and necessity combine to
require that it determines an application for
review tapon the material placed before it durincr
the hearins. Fairness and common sense combine to
require that it determines such an application
within the context of matters which can properlv be
seen to be in issue between the parties or which
the Tribunal itself raises in the course of the
hearina as matters which it considers should be
dealt with, on the material placed before it, to
enable it properlv to perform its function.
The findinus or conclusions which the Commission has made or expressed in its published reasons for determination are not. in themselves, ordinarily of probative value on the hearina by the Tribunal of an application for review. As has been said, however. fairness and common sense combine to require that the Tribunal determine an application for review within the context of matters which can properly be seen to be in issue between the parties or which the Tribunal itself raises or indicates it reuards as beins at larqe. The published reasons for determination of the Commission may, in an appropriate case, prove a convenient reference point for defining the matters which are truly in dispute between all or any of the Commission, the applicant, and other parties represented, or interested, in the proceedings. In a case where there is a consensus amoncr the Commission and all
parties participating in the proceedings that some of the findinqs and factual matters set out in the Commission's published reasons for determination
should be treated by the Tribunal as common qround,
the Tribunal miqht well be persuaded to treat such
findings or factual matters as significantly
limiting the area of primarv fact which the
Tribunal is itself required to examine in detail."
In Re Oueensland Co-Operative Millinq Association Limited
(1976) TRPS 204.1 the Tribunal (Woodward J., Mr. Shipton and Professor
Brunt) said at 204.6 and 204.7 (this part of the decision constituted
s the President's reasons for a ruling which he crave on a quest,ion of
| law) | : |
"There is, in my opinion, no presumption that anv Commission is in error. Form 8 requires an applicant to state in which respect it is dissatisfied with the determination by the Commission and this acrain serves to alert the Tribunal to the main issues likely to be raised in the hearinu before it. The particulars qiven at that point are not in the nature of alleaations which an appellant (sic.) must prove.
particular finding by the Commission is correct.
| particular error on the part of the Commission or to criticize the Commission's proceedings in any way. Indeed the Tribunal could have no interest in investiqating any alleged procedural defect in the | It is not necessary for the applicant to alleqe any determine the right answer to the question posed by the applicant's request for authorization, and to do so bv a fresh hearing. |
| The essential purpose of the requirement in Form 8 to state in what respects the applicant for review is dissatisfied is, in mv view, to draw attention | |
| to any situation in which the applicant accepts part of the Commission's finding but disagrees with another part. Thus a company which has a number of different agreements under consideration may wish to review a decision relating to some of them but not others. Another applicant may object to some. but not all. of the conditions which have been |
attached to the srant of an authorization pursuant
to s.91(3). A person obiectins to an authorization
which the Commission has seen fit to urant may wish
to aruue that some condition should have been
attached to it. However, in the typical case all
that need be said is that the Commission refused to
want an authorization which, in all the
circumstances, should have been Granted.
See also Re-melaster Locksmiths' Association of Australia
(1980) TPRS 203.281 at 203.290 and 203.291: and ReRural Trade=
Co-Operative (W.A.) Limited (1979) A.T.P.R. 40-110 at 18. 122.
b
These observations made in previous decisions of the Tribunal do not answer the questions which arise in the present matter: but thev do provide a useful basis for considerinu the proper approach to be taken here.
Sub-s.lOl(2) of the Act provides, so far as relevant for present purposes, that a review by the Tribunal is a re-hearinu of the matter and that sub-s.90(8) applies in relation to the Tribunal in like manner as it applies in relation to the Commission.
i.
Sub-s.90(8) provides, so far as presently relevant, that the Commission shall not make a determination arantinq an authorization under sub-s.88(8) in respect of proposed conduct to which sub-s.47(6) or (7) applies unless it is satisfied in all the circumstances that the proposed conduct would result, or be likely to result, in such a benefit to the public that the proposed conduct should be allowed to take place
The application to the Commission in the present matter was made under sub-s.88(8) of the Act for authorization to enaage in conduct that constitutes or mag constitute the practice of exclusive dealinq and thus contravene sub-s.47(6) or ( 7 ) unless authorized bv the Commission.
Thus the Tribunal is prohibited by the Act from making a
determination affirminu the determination of the Commission unless it
| k i s satisfied in all | the circumstances that the proposed conduct would |
result, or be likelv to result, in such a benefit to the public that
it should be allowed to take place.
In the present matter the applicants objected. unsuccessfully, before the Commission to the grantina of authorization to the proposed conduct. A perusal of the reasons for the Commission's determination shows that the principal issue before the Commission was whether the conduct for which the banks and the Trustee souaht authorization from the Commission namely, the selection of HLIC
Ld
as the sole approved mortaaae insurer, would result, or be likelv to result, in such a benefit to the public that it should be allowed to take place.
The Commission said in its determination:
"23. The statutory test for authorization of
conduct described above, (sub-section 90(8) of the Act), is expressed in terms of public benefit, and there is no express requirement for the Commission to weigh anticompetitive effect aaainst the public benefit, as is the case with the statutory test in
some other authorization procedures. Nevertheless the Commission takes anv anticompetitive detriment into account as part' of "all the circumstances" in which public benefit is assessed."
The form of application to the Tribunal for review. lodsed bv
the applicants, states the principal respects in which the applicants
are dissatisfied with the determination of the Commission in these
| terms | : |
| (a) | The Commission erred in failing to identify with any precision a public benefit arising from the conduct authorized over and above | |
| that which flows from the mortgase insurance which would be available if the conduct | ||
|
there was no identification of any benefit flowing from the element of tyins to HLIC.
| (b) | The Commission erred in concludina that the conduct authorized will promote a secondary mortgage market in such a way as to create a |
public benefit.
| (c) | The Commission erred in concludinu that the "government support" provided by HLIC is vital to the success of the scheme. |
| (d) | The Commission erred in regarding as irrelevant or immaterial on public benefit questions the criticisms made by MGICA and AMIC or particular factual assertions made in support of the scheme. |
| (e) | The Commission erred in failing to discount the public benefit it found to exist by reference to the anti-competitive and other detriments created by the conduct authorized. |
| (f) | The Commission erred (inter alia, in law) relying on the view that because FML was not forced or directed to do business with HLIC in that it chose to deal solely with HLIC before the banks became parties to the scheme. there was no detriment to competition. |
The particulars of the facts and contentions upon which the applicants intended to rely before the Tribunal in support of their application for review were attached to the application and related to questions of public benefit and detriment. It is unnecessary for present purposes to refer to them in detail.
The principal question before the Tribunal in the present
matter is whether the conduct which the banks and the Trustee souaht
L
to enaaae in would result. or be likely to result. in such a benefit to the public that it should be allowed to take place. In considerina that question the Tribunal is required to consider anv detriment to the public constituted by any lesseninu of competition that would result. or be likely to result, if the conduct was allowed to take place. It does not matter whether this requirement arises from the words "in all circumstances" in sub-s.90(8) or as part of the verv notion of "a benefit to the public". The fact is that the question of public benefit cannot be determined in isolation from the related
jiquestion of public detriment.
The applicants for review have no interest in provinq that the requisite public benefit has been established: but thev have an interest in rebuttinq any material placed before the Tribunal for the purpose of establishina public benefit and in adducina material desiqned to establish public detriment. The banks and the trustee and, perhaps, HLIC may be concerned to satisfy the Tribunal that the requisite tests of public benefit have been established. But thev declined to play any role in the matter. Hence the Tribunal is left
in a position where it has no material before it which could positively satisfy it that in all the circumstances the proposed conduct would result, or be likely to result, in such a benefit to the public that the proposed conduct should be allowed to take place. In these circumstances the Tribunal is bound to determine that the Commission's determination srantinq authorization to the proposed conduct be set aside.
| L d | The question that has arisen for determination in the present case does not appear to have arisen in any previous matter before the Tribunal. In most cases the applicant for review was the unsuccessful applicant for authorization before the Commission. The applicant would obviouslv assume in those cases the burden of adducinu material before the Tribunal to establish that the requisite tests of public benefit have been satisfied. It is uenerally inappropriate in proceedinas before administrative tribunals to talk in terms of applicants or persons entitled to participate in the proceedinus as bearinu an onus in any sense. whether ultimate or evidentiary. |
| w | |
| "Onus" is an expression which arose in adversarial litisation between parties in courts and does not lend itself readily to proceedinqs before administrative tribunals. This Tribunal. for example, is required by the Act to conduct its proceediass with as little formality and technicality as possible; is not bound by the rules of evidence: and its procedure is essentially within the discretion of the Tribunal itself (s.103). |
The conclusion of the Tribunal in the present matter that the Commission's authorization be set aside arises not from the failure of anv person before the Tribunal to satisfy any "onus": but from the fact that there is no probitive material before the Tribunal which would justify it in concluding that the requisite elements of public benefit have been established.
This proceedincr before the Tribunal was somewhat unusual.
L T h e banks and the trustee, which had the benefit of the authorization
granted by the Commission, althouqh assertinu that they wished to
retain that benefit, did not seek to adduce anv material in support of
~
their assertion. The Commission supported the applicants ' subdission that this Tribunal should determine that the commission's own determination be set aside, doubtless because the verv conduct which was the subject of the application for authorization beforle the Commission, and before this Tribunal, has become, it seems. no loncter
| a necessarv element in the proposed insurance scheme. | ~ |
These are the reasons which led the Tribunal on 17 fiugust 1984 to determine that the Commission's determination of 29 June 1984 be set aside.
I certify that this and the 13 preceding pages are a true copy of the reasons for decision
Associate
| Dated: 3% -, | g8+. |
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