Nicholas Guy Birdseye v Companies Auditors & Liquidators Disciplinary Board and Australian Securities & Investment Commission
[2001] AATA 783
•27 August 2001
CATCHWORDS – CORPORATIONS LAW – auditor – cancellation of registration – application for adjournment of hearing – whether proceedings in the Supreme Court for leave to manage a corporation could affect the outcome of the review – whether Tribunal has discretion to refuse to cancel registration where auditor bankrupt – whether merits of decision are to be considered at the time of the original decision or at the time the Tribunal reviews decision – distinction between decision to cancel registration and decision to refuse to register – whether Board's decision to refuse adjournment is reviewable by the Tribunal – decision affirmed.
Administrative Appeals Tribunal Act 1975 – ss 25, 37
Administrative Decisions (Judicial Review) Act 1977 – s3
Corporate Law Economic Reform Program Act 1999 – Clause 2(1) of Schedule 3
Corporations Law – ss 9, 206A, 206B, 206C-206E, 206F, 206G, 229, 324, 1202, 1280, 1290-1298, 1317B, 1317C, 1466, 1469, Parts 2D.6, 2D.6E, 9.2,
Income Tax Assessment Act 1936
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Freeman v Secretary, Department of Social Security (1988) 19 FCR 342
Griffiths and Migration Agents Registration Authority [2001] AATA 240 (unreported, S A Forgie (Deputy President) 27 March, 2001)
Jebb v Repatriation Commission (1988) 80 ALR 329
Project Blue Sky Inc and Others v Australian Broadcasting Commission [1998] HCA 28; 194 CLR 355
Re Easton and Repatriation Commission (1987) 12 ALD 777
Re Harts Pty Limited and Tax Agents' Board of Queensland (1997) 97 ATC 2148; (1997) 37 ATR 1075
Re McGourty and Repatriation Commission (1988) 9 AAR 87
Re Tiknaz and Director-General of Social Services (1981) 4 ALN N44
Re Webb and Tax Agents' Board of Queensland (1992) 28 ALD 464
DECISIONS AND REASONS FOR DECISION [2001] AATA 783
ADMINISTRATIVE APPEALS TRIBUNAL )
) S2001/154
GENERAL ADMINISTRATIVE DIVISION )
Re NICHOLAS GUY BIRDSEYE
Applicant
And COMPANIES AUDITORS & LIQUIDATORS DISCIPLINARY BOARD
Respondent
AndAUSTRALIAN SECURITIES & INVESTMENT COMMISSION
Third Party
Tribunal Miss S A Forgie (Deputy President)
Date 27 August 2001
Place Adelaide
DecisionThe Tribunal affirms the decision of the respondent dated 3 May, 2001.
S A FORGIE
Deputy President
REASONS FOR DECISION
On 3 May, 2001, the applicant, Mr Nicholas Guy Birdseye, applied for review of a decision of the respondent, the Companies Auditors and Liquidators Disciplinary Board ("the Board") made on the same day. That decision was to order that Mr Birdseye's registration as an Auditor under the Corporations Law ("the Law") be cancelled. On 10 May, 2001, the Australian Companies and Securities Commission ("ASIC") was joined as a party. Also on that day, an order was made staying the operation or implementation of the decision to cancel Mr Birdseye's registration until a decision was made by the Tribunal regarding his application or until further order.
The hearing was set down for 14 and 15 August, 2001. After directions hearings regarding procedural matters, the matter came on for hearing. At the commencement of that hearing, Mr Keith, who represented Mr Birdseye, applied for an adjournment of the hearing. He did so on the basis that Mr Birdseye's application in the Supreme Court for leave to manage a corporation had yet to be determined and would affect the outcome of his application in the Tribunal. His application for an adjournment was opposed by the Board, which was represented by Ms Bean, and also by ASIC, which was represented by Ms Francas.
Regard was had at the hearing of the application for an adjournment to an affidavit of Mr Birdseye sworn on 14 August, 2001, written submissions lodged on behalf of ASIC, the documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 ("T documents") and oral submissions made on behalf of each party. At the conclusion of the submissions, I indicated my view of the interpretation of s. 1292(7) of the Law and the powers of the Board. Having adopted that view, the parties agreed that its inevitable consequence on the facts in so far as they were agreed between them would be that I would affirm the decision under review. It was agreed that I should take that course rather than simply refusing the application for an adjournment.
THE ISSUES
The issue at the heart of the application for an adjournment was whether proceedings taken in the Supreme Court by Mr Birdseye could affect the outcome of the review of the Board's decision. That requires a consideration of whether the merits of the decision are considered at the time that the decision was made or at the time the Tribunal makes its decision on the review. It also requires a consideration of whether the Board, and so the Tribunal, has any discretion to make a decision other than that which the Board made. A further issue raised by Mr Keith requires a consideration of whether the Board's refusal to grant Mr Birdseye an adjournment is relevant in the consideration of his application in this Tribunal.
BACKGROUND
There was no dispute between the parties regarding the facts in this matter. In light of that and on the basis of the material lodged in this matter, I have made findings of fact that I will now set out.
On 9 November, 1998, a sequestration order was made against Mr Birdseye's estate and he became a bankrupt. He continues to be an undischarged bankrupt. On 24 November, 1998, Mr Birdseye wrote to ASIC advising it of his bankruptcy and stating that he did not believe that the circumstances of his bankruptcy would affect his being a fit and proper person to be an auditor and that he had not been convicted of any offence. He asked whether the Board would "not activate S1292(7)" were he to make a successful application under s. 229(1) of the Law as it was then in force (T documents, page 25). He was advised that, although he might be granted leave to manage a corporation, he was still subject to a s. 229 order and the matter would be referred to the Board (T documents, page 26).
On 14 December, 1998, Mr Birdseye wrote to ASIC and said, in part:
"Following our discussion of 4th December 1998 when you informed me that the ASIC may not make application to CALDB (although in general you do) if a registered company auditor has been made bankrupt.
The circumstances of my bankruptcy are complex and totally due to fraud committed on me.
…
I will be making a 229(1) application for I am involved in other businesses and I need to be able to provide management services.
My auditing clients are happy and not being registered would have a marked effect on my income earning capacity, being 20% of my practise income. I have not had any negligence claims made against me. I have maintained my fit and proper behaviour. I have not been involved in any behaviour that is referred to in section 229(3) of the Corporations Law and can provide many references as to character.
The reporting services in Butterworths 'Australian Corporations Law' Principles and Practise re 3.2.0115 says the purpose of Section 229 is protective not punitive.
I can fully substantiate all and any claims made above. I was denied justice by 5 weeks by two ATO persons who were interested in the person and not the money. The liquidator had unlimited money and my lawyers, Matt Deller and Martin Keith, would confirm that the liquidator's, as one of his tactics, was to win at whatever cost, even though they knew there was nothing to gain on bankrupting me." (T documents, pages 27-29)
On 20 January, 1999, ASIC wrote to Mr Birdseye in response to his letter of 8 January, 1999. That letter summarised Mr Birdseye's letter as listing the companies he wished to manage, advising that he wished to make an application to the Supreme Court or the Federal Court for leave to do so and advising that he wished to make an application to the Court for "the lifting of a S229(1) prohibition as defined in S1292(7) so that I can continue to be a Registered Company Auditor". ASIC responded in part:
"Without having considered the basis upon which you intend to make your application, I point out that it is unlikely ASIC would consent to an application for leave to manage a corporation so soon after your becoming insolvent. One of the matters which the court will consider in relation to your application is your conduct in the period since the prohibition on your managing a corporation came into effect. It is ASIC's view that this conduct cannot properly be considered until a reasonable time has elapsed following the prohibition. In my experience, is unusual for such an application to be made to the Court until at least 12 months has elapsed.
Finally I note that you refer to an application to the court for 'the lifting of a S229(1) prohibition as defined in S1292(7) so that I can continue to be a Registered Company Auditor.' I am unaware of the basis upon which you intend to make such an application or the basis upon which a court would have the authority to make such an order. I suggest you may wish to obtain some legal advice before proceeding with this aspect of your application. …" (T documents, page 32)
On 30 April, 1999, ASIC applied to the Board pursuant to s. 1292(7) of the Law to have Mr Birdseye dealt with under s. 1292 on the basis that he was subject to a s. 229 prohibition (T documents, pages 16-30). It notified Mr Birdseye of its application in a letter dated the same day.
On 21 May, 1999, Mr Birdseye's solicitor wrote to the Board:
"… My client intends making an application for exemption under Section 229 of the Corporations Law.
If the exemption is granted, he will then argue that he is no longer subject to a Section 229 prohibition for the purposes of Section 1292(7) of the Corporations Law.
Would you please advise if the Board is prepared to wait for my client's application to be heard and determined before proceeding with the application referred to in your letter to my client dated 7 May 1999." (T documents, page 33)
The Board responded in a letter dated 3 June, 1999 reading, in part:
"At this point in time I am unable to advise you when it is likely that the Board will convene in Adelaide in order to hear the application made by the Australian Securities & Investments Commission against Mr Birdseye. Mr Birdseye will be notified at least one month in advance of any proposed hearing. It is unlikely however, that the application will be heard in the next three months.
In the event that the hearing is convened before Mr Birdseye's application for an exemption is determined, it will be incumbent on him to make immediate application to the Board for an adjournment of the hearing of his case. I should add that once a hearing date has been set and the Notice of Hearing has been sent to the Respondents such adjournments are usually only granted in the most extenuating circumstances.
I would therefore counsel your client to make the proposed application for exemption without delay. If you believe that the application will take longer than three months hence, he should also lodge with the Board a formal application for the matter to be delayed pending the outcome of the application for an exemption. The application to the Board should set out the reasons for the application, the likelihood of success (if possible) and an estimate of when it is likely that the application for exemption will be determined." (T documents, page 34)
On 9 March, 2001, ASIC applied to the Board to amend its application by deleting its reference to a s. 229 prohibition and inserting a reference to disqualification under Part 2D.6E of the Law. That amendment was to take account of the repeal of s. 229 of the Law and the substitution of Part 2D.6 by the Corporate Law Economic Reform Program Act 1999 ("CLERP Act").
In a note dated 26 April, 2001, an officer of the Board noted that Mr Birdseye had telephoned to advise that he intended to lodge an application in the Supreme Court under s. 206G of the Law for leave of the Court to manage corporations. The officer advised him of certain matters relating to the Board's view regarding the interpretation of s. 1202(7) and of the reasons he would need to advance in order to be granted an extension.
On 2 May, 2001, Mr Birdseye lodged an application for an adjournment of the hearing by the Board. The Board heard the application on 3 May, 2001 and, after hearing submissions made by Mr Birdseye and on behalf of ASIC, refused the adjournment (T documents, page 65). It then considered ASIC's application and ordered that Mr Birdseye's registration as an auditor be cancelled (T documents, page 65).
On 1 June, 2001, Mr Birdseye lodged in the Supreme Court his application under s. 206G of the Law.
LEGISLATIVE BACKGROUND
Registration of an auditor
An individual person must not consent to be appointed as an auditor of a company unless he or she is a registered company auditor (s. 324). Part 9.2 of the Law is concerned with the registration of auditors and liquidators. Registration of auditors is within the province of ASIC. Except in limited circumstances, ASIC must register a person if he or she possesses the qualifications or experience specified in s. 1280(2)(a), the prescribed practical experience in auditing and is both capable of performing the duties of an auditor and is otherwise a fit and proper person to be registered as an auditor (s. 1280). Section 1280(3), however, provides that ASIC "… shall not register as an auditor a person who is disqualified from managing corporations under Part 2D.6". ASIC "… may refuse to register as an auditor a person who is not resident in Australia" (s. 1280(4)).
Powers to cancel or suspend registration of an auditor or otherwise deal with a registered auditor
Where a person who is registered as an auditor requests the Board to cancel his or her registration, ASIC "may cancel the registration" and its decision comes into effect as soon as practicable (s. 1290). Cancellation, or suspension, of an auditor's registration may also occur in the circumstances specified in s. 1292. That section also provides for the suspension of an auditor's registration and for other measures. Under s. 1292, ASIC may apply to the Board for a person, who is registered as an auditor, to be dealt with under that section. Putting to one side the situation of an auditor, who is also registered as a liquidator, the Board must consider ASIC's application under s. 1292 under two specific heads of power in that section and exercise its powers accordingly.
The first specific head of power is found in s. 1292(1) and it provides that:
"The Board may, if it is satisfied … that, before, at or after the commencement of this section:
(a)the person has:
(i)contravened section 1288 or a corresponding previous law; or
(ii)ceased to be a resident in Australia;
(b)a registration of the person under a previous law corresponding to Division 2 has been cancelled or suspended;
(c)the person has been dealt with under a previous law corresponding to subsection (9) of this section; or
(d)the person has failed, whether within or outside Australia, to carry out or perform adequately and properly:
(i)the duties of an auditor; or
(ii)any duties or functions required by an Australian law to be carried out or performed by a registered company auditor;
or is otherwise not a fit and proper person to remain registered as an auditor." (s. 1292(1)(d))
Where the Board is satisfied that the person has failed to carry out or perform adequately and properly any of the duties or functions mentioned in s. 1292(1)(d) or is satisfied that the person is not a fit and proper person to remain registered as an auditor:
"… the Board may deal with the person in one or more of the following ways:
(a)by admonishing or reprimanding the person;
(b)by requiring the person to give an undertaking to engage in, or to refrain from engaging in, specific conduct;
(c)by requiring the person to give an undertaking to refrain from engaging in specified conduct except on specific conditions;
and, if a person fails to give an undertaking when required to do so under paragraph (b) or (c), or contravenes an undertaking given pursuant to a requirement under that paragraph, the Board may, by order, cancel, or suspend for a specified period, the registration of the person as an auditor, as a liquidator or as a liquidator of a specified body corporate, as the case may be." (s. 1292(9))
The Board is given these powers in addition to, or instead of, its powers to cancel or suspend the person's registration as an auditor (s. 1292(10).
Where the registration of a person is suspended, the Board may, on the application of a person or on its own motion, terminate the suspension. It does that by making an order (s. 1295).
The second specific head of power is found in s. 1292(7) which, since it was amended by the CLERP Act, provides that:
"The Board shall, if it is satisfied …
(a)that the person is disqualified from managing corporations under Part 2D.6; or
(b)that the person is incapable of, because of mental infirmity, of managing his or her affairs;
by order, cancel each prescribed registration of the person."
A "prescribed person" includes a person who is registered as an auditor and a "prescribed registration" in relation to a prescribed person means, among others, a person who is registered as an auditor (s. 1292(8)).
Part 2D.6 is headed "Disqualification from managing corporations". It came into operation on 13 March, 2000 after the enactment of the CLERP Act. A person is automatically disqualified from managing a corporation if he or she is convicted of certain types of offences specified in s. 206B(1), is an undischarged bankrupt under the laws of Australia, its external territories or another country (s. 206B(3)), has executed a deed of arrangement under Part X of the Bankruptcy Act 1966 and it has not been fully complied with or his or her creditors have accepted a composition under Part X (or a similar law) and final payment has not been made under that composition (s. 206B(4)). The Court may disqualify a person in the circumstances specified under ss. 206C to 206E. In each case, an application must first be made by ASIC. ASIC may itself disqualify a person for up to five years in the circumstances specified in s. 206F.
A person who is disqualified from managing a corporation under Part 2D.6 commits an offence if he or she takes certain specified steps in relation to the business or management of a corporation (s. 206A(1)). It is a defence, however, if the person had permission to manage a corporation under either s. 206F or 206G and his or her conduct was within the terms of that permission. Permission under s. 206F is granted by ASIC (s. 206F(5)) and permission under s. 206G is granted by the Court. Where a person wishes to apply to the Court, he or she must first give notice to ASIC and must do so 21 days before commencing the proceedings (s. 206G(2)). Once granted by a Court, ASIC may apply to it to revoke the leave (s. 206G(5)).
The amendment effected by the CLERP Act to s. 1292(7) was to repeal and substitute paragraph (a) with effect from 13 March, 2000. Previously, the reference in paragraph (a) had not been to a person who is disqualified from managing corporations under Part 2D.6 but to a person who is subject to, among others, a s. 229 prohibition. A "section 229 prohibition" was defined in s. 91(1) (s. 9) in the following terms:
"For the purposes of this Law, a person shall be taken to be or become subject to a section 229 prohibition if, and only if, the person is or becomes, as the case may be, by virtue of section 229 or a corresponding previous law, prohibited as mentioned in that section or corresponding previous law."
Section 229(1) provided that "An insolvent under administration must not, without the leave of the Court, manage a corporation". The expression "an insolvent under administration" was defined to mean a person who:
"(a) under the Bankruptcy Act 1966 or the law of an external Territory, is a bankrupt in respect of a bankruptcy from which the person has not been discharged; or
(b)under the law of a country other than Australia or the law of an external Territory, has the status of an undischarged bankrupt;
and includes:
(c)a person who has executed a deed of arrangement under Part X of the Bankruptcy Act 1966 or the corresponding provisions of the law of an external territory or of the law of a country other than Australia, where the terms of the deed have not been fully complied with; and
(d)a person whose creditors have accepted a composition under Part X of the Bankruptcy Act 1966 or the corresponding provisions of the law of an external Territory or of the law of a country other than Australia where a final payment has not been made under that composition." (s. 9)
Clause 2(1) of Schedule 3 of the CLERP Act (and see also s. 1466 of the Law) provides that:
"A reference in any law of the Commonwealth or of a State or Territory, or in any document, to a provision of the old Law [i.e. prior to the Law's amendment by the CLERP Act] is to be read after commencement as a reference to the corresponding provision of the new Law [i.e. after the Law's amendment by the CLERP Act] except so far as the contrary intention appears in the law or document."
Both the repealed s. 229 and Part 2D.6 are concerned with disqualification of persons from managing corporations. They are corresponding provisions. Item 14 of s. 1469, inserted by the CLERP Act, provides for the length of a person's disqualification where he or she was an insolvent under administration on the commencement of s. 206B, which was also inserted in the Law by that amending legislation. It provides that:
"• if the person has been an insolvent under administration for 3 years – the person is no longer disqualified from managing corporations.
•if the person has been an insolvent under administration for less than 3 years – unless the person obtained the leave of the Court under subsection 229(5) of the old Law or obtains the leave of the Court under section 206G of the new Law, the person is disqualified from managing corporations for the shorter of the period that they will be an insolvent under administration or the period of 3 years starting from when they first became an insolvent under administration."
Other powers and procedures of the Board
In so far as it is relevant, s. 1294(1) of the Law provides that the Board shall not cancel or suspend the registration of a person as an auditor or deal with a person under s. 1292(9) unless the Board has given the person an opportunity to appear at a hearing, make submissions and adduce evidence to the Board in relation to the matter. In such a case, the Board must give the same opportunity to ASIC (s. 1294(2)).
Section 1296 requires the Board to give notice should it decide either to exercise its powers or not to exercise those powers. It provides:
"(1) Where the Board decides to exercise any of its powers under section 1292 in relation to a person, or decides that it is required to make an order under subsection 1292(7) in relation to a person, the Board, shall, within 14 days after the decision:
(a)give to the person a notice in writing setting out the decision and the reasons for it;
(b)lodge a copy of the notice referred to in paragraph (a); and
(c)cause to be published in the Gazette a notice in writing setting out the decision.
(2) Where the Board decides to refuse to exercise its powers under section 1292 in relation to a person, or decides that it is not required to make an order under subsection 1292(7) in relation to a person, the Board shall, within 14 days after the decision:
(a)give to the person a notice in writing setting out the decision and the reasons for it; and
(b)lodge a copy of the notice referred to in paragraph (a).
(3) The validity of a decision of the Board is not affected by failure of the Board to comply with subsection (1) or (2), as the case requires, in relation to the decision."
In general terms, a decision of the Board to cancel or suspend a person's registration as an auditor comes into effect at the end of the day on which that person is given a notice in terms of s. 1296(1)(a) (s. 1297(1)). The Board may postpone the effect of its order in order for an application to be made to the Tribunal for review of its decision and may vary or revoke any determination to do so (ss. 1297(2) and (3)).
CONSIDERATION
When are the merits of the decision to be considered?
Mr Keith submitted that the hearing of the application be adjourned so that the outcome of proceedings in the Supreme Court under s. 206G of the Law could become known. Quite apart from the question as to whether that decision could have any effect on the outcome of the review, there is an initial question as to whether it is relevant to consider any change that the decision may bring to Mr Birdseye's entitlement to manage a corporation.
The Board's decision was to order that Mr Birdseye's registration as an auditor be cancelled. It was not a decision refusing to register him as an auditor. While the substantive outcome of a cancellation decision and a decision to refuse registration is the same in that a person is not registered as an auditor, there is a distinction to be drawn between the two. One is the cancellation of an ongoing entitlement and the other is a refusal to give an entitlement. The distinction has been made in a number of cases, some of which were brought together by Davies J in Freeman v Secretary, Department of Social Security (1988) 19 FCR 342. His Honour was concerned with a decision to cancel a widow's pension and he reviewed the earlier decisions of Re Tiknaz and Director-General of Social Services (1981) 4 ALN N44 (Davies J, President, Senior Member Ballard and Dr Garlick, Member), Jebb v Repatriation Commission (1988) 80 ALR 329 (Davies J), Re Easton and Repatriation Commission (1987) 12 ALD 777 (Davies J) and Re McGourty and Repatriation Commission (1988) 9 AAR 87 (Davies J). He said:
"The jurisdiction of the Tribunal arose from the application made to it to review the decision of the delegate who, on 18 August 1987, affirmed the decision of the officer made on 19 May 1987. The function of the Tribunal was therefore to reconsider the decision of 19 May 1987 and to determine whether the decision to cancel Mrs Freeman's widow's pension at that time was the correct or preferable decision to have been made. In coming to its decision, the Tribunal was entitled to take into account all the facts proved before it. But the issue was whether, having regard to those facts, the decision to cancel made on 19 May 1987 was the correct or preferable decision, not whether Mrs Freeman had an entitlement to a widow's pension as at the date of the Tribunal's decision.
Regard must always be had to the nature of the decision which is under review. In Re Tiknaz, in Re Easton, in Jebb's case and in McGourty's case, the decision under review was a decision refusing to grant a pension or benefit that had been applied for. In each case, it was held that there was jurisdiction to consider entitlement not only as from the date of the application but also entitlement up to the date of the Tribunal's decision. This was because the function of the Administrative Appeals Tribunal formed part of an administrative continuum and, in reviewing a refusal to grant a pension or benefit that had been applied for, it was proper for the Tribunal to consider the entitlement to the pension not only as at the date of the application for the pension or benefit or at the date of the decision refusing to grant it but also up to the time of the Tribunal's decision.
However, in the present case, the decision under review was not a decision refusing to grant a pension but a decision cancelling a pension as from 19 May 1987. After the decision in Re Tiknaz was handed down, the Act was amended by the insertion of ss 158(2) and 159(2). Those sections provide that the grant or payment of a pension shall not be made except upon the making of a claim for that benefit or allowance, which claim is to be in writing and lodged in accordance with s 158(1) and s 159(1). One effect of these provisions is that once a pension or benefit has been cancelled, the previous recipient has no entitlement to restoration thereof until he or she has lodged a further claim in accordance with s 158(1) and s 159(1).
The ambit of the jurisdiction of the Administrative Appeals Tribunal in relation to the review of a decision to cancel a pension or benefit is therefore less than would be the jurisdiction of the Tribunal in respect of a refusal to grant a pension or benefit or a decision suspending the payment of a pension or benefit. In the latter cases, there may well be an ongoing entitlement to a pension or benefit which the Tribunal should recognise when formulating its decision. However, if the Tribunal comes to the view that the decision to cancel was the correct or preferable decision, then no further matter remains for the Tribunal's consideration. Any entitlement of the applicant to a pension or benefit at a subsequent time must be the subject of a further claim which, having been made, would only become the subject of review within the Tribunal's jurisdiction once a decision with respect to it had been made by an officer of the Department of Social Security and that decision had been the subject of appeal and reconsideration in accordance with s19." (pages 344-345)
I considered the distinction between registration and cancellation decisions in the context of the provisions relating to tax agents under the Income Tax Assessment Act 1936. I concluded in Re Webb and Tax Agents' Board of Queensland (1992) 28 ALD 464 that:
"From my reading of Freeman's case and Jebb's case as well as the authorities referred to in those cases, it seems to me that the determining consideration in each was whether the decision amounted to the cancellation of an entitlement which a person had been receiving, as in Freeman's case, or a decision that a person was not qualified to receive an entitlement, as in Jebb's case. In the first case, the effect of the decision is to terminate an entitlement from a particular time. In deciding whether that is the correct or preferable decision with regard to the particular date of cancellation, it matters not whether the person might, or might not have, an entitlement at a later date. In the second case there is a decision that there is no entitlement at the outset and the issue is whether there should be an entitlement. It was in relation to such cases that, it seems to me, Davies J said in Jebb's case:
However, the general approach of the tribunal has been to regard the administrative decision making process as a continuum so that, within the limits of a reconsideration of the decision under review, the tribunal considers the applicant's entitlement from the date of application, or other proper commencing date, to the date of the tribunal's decision. That function was enunciated in Re Tiknaz and Director-General of Social Services (1981) 4 ALN No 44 at 333." (pages 467-468)
In the different context of the cancellation of the registration of a migrant agent, I have reached a similar conclusion in Griffiths and Migration Agents Registration Authority [2001] AATA 240 (unreported, 27 March, 2001). That decision considered an earlier decision of Re Harts Pty Limited and Tax Agents' Board of Queensland (1997) 97 ATC 2148; (1997) 37 ATR 1075 in which a submission had been made that regard could be had to a variation in the allotment of shares in Harts Pty Limited ("Harts"). The variation had occurred after the cancellation decision. I said in Griffiths of that decision:
"… As the decision under review was a decision to cancel a tax agent's registration, the Tribunal had to consider whether the decision to cancel was the correct or preferable decision to make. In view of that, it was not relevant to consider whether Harts' registration would have been cancelled had it had a different share allotment. The Harts' share allotment had to be considered on the day of the cancellation decision. It was not relevant to consider whether Harts would be registered in the future with a varied share allotment. The decision under review was to do with cancellation and not with registration.
39. Beyond its facts, the decision in the Harts case, however, should not be read as referring to any general principle that the Tribunal is limited to considering the evidence, as opposed to the facts, as at the date of the cancellation and may not gather evidence beyond that date. Subject to any legislative variation, the general principles are, rather, those enunciated in Drake and Freeman, to which I have referred. Where the decision under consideration is a cancellation decision, the Tribunal must consider whether or not that decision was correctly made at the time it was made. Where the decision under consideration relates to an entitlement (be it a pension or registration), the Tribunal may consider whether that entitlement exists at any time up to the date of the hearing.
40. In both cases, regard may be had to all relevant evidence to determine the facts that are relevant in reviewing the particular decision. In the case of a cancellation decision such as was made in relation to Mr Griffiths, that will require findings of fact as to whether he met any of the criteria specified in s. 303(d)-(h) as at the date of cancellation. If he did, there will then follow consideration of whether his registration should be cancelled or suspended or whether he should be cautioned. Had Mr Griffiths been refused registration as a migration agent and consideration were being given to the matters raised by s 289, that would require findings of fact in relation to ss. 290, 290A, 291, 292, 293 or 294. Those facts need to be found to exist at the date of the Tribunal's decision.
41. Whether concerned with an entitlement decision or a cancellation decision, and in the absence of any legislative direction to the contrary, the evidence upon which the relevant facts rest, is that before the Tribunal. In so far as it is pertinent to the facts to be found, the evidence is not limited to that either known to the decision-maker or in existence at the time that the decision under review was made."
Applying the principles set out in cases such as Freeman and Drake to the cancellation decision made by the Board in this case, it seems to me that I must consider whether its decision was the correct or preferable decision on the day that it made it. In the context of this case, that means that I must consider whether it was the correct or preferable decision that, on 3 May, 2001, Mr Birdseye was a person disqualified from managing corporations under Part 2D.6 of the Law.
Does the Board, and so the Tribunal, have a discretion in making a decision under s. 1292(7)?
Mr Keith submitted that the Board does have a discretion under s. 1292(7). If that were not so, he continued, there would be no point in requiring the Board to have a hearing of the application and no point in providing that its decision could be reviewed. Since the judgement of a majority of the High Court in Project Blue Sky Inc and Others v Australian Broadcasting Commission [1998] HCA 28, 194 CLR 355 (McHugh, Gummow, Kirby and Hayne JJ, Brennan CJ dissenting), the distinction between mandatory and directory powers is irrelevant. In support of his submission, Mr Keith referred to a passage from the judgement of Brennan CJ at page. 374 of the report. Although not specifically referring to a passage, I note that
his Honour said on that page:
"… A provision may require the repository or some other person to do or to refrain from doing something (sometimes within a period prescribed by the statute) before the power is exercised but non-compliance with the provision does not invalidate a purported exercise of the power (Osborne v The Commonwealth (1911) 12 CLR 321 at 336-337; Buchanan v The Commonwealth (1913) 16 CLR 315 at 329): the provision does not condition the existence of the power (See, eg, Clayton v Heffron (1960) 105 CLR 214 at 246-248; Simpson v Attorney-General (NZ) [1955] NZLR 271; Wang v Commissioner of Inland Revenue [1994] 1 WLR 1286; [1995] 1 All ER 367). Such a provision has often been called directory, in contradistinction to mandatory, because it simply directs the doing of a particular act (sometimes within a prescribed period) without invalidating an exercise of power when the act is not done or not done within the prescribed period. The description of provisions as either mandatory or directory provides no test by which the consequences of non-compliance can be determined; rather, the consequences must be determined before a provision can be described as either mandatory or directory." (page 374)
Brennan CJ had distinguished this type of provision from two other types of provision, which he compared in the following passage:
"A provision which directs the manner of the exercise of a power is quite different from a provision which prescribes an act or the occurrence of an event as a condition on the power – that is, a provision which denies the availability of the power unless the prescribed act is done or the prescribed event occurs. In one case, power is available for exercise by the repository but the power available is no wider than the direction as to the manner of its exercise permits; in the other case, no power is available for exercise by the repository unless the condition is satisfied (See, eg, Spicer v Holt [1977] AC 987). A provision which prescribes such a condition has traditionally been described as mandatory because non-compliance is attended with invalidity. A purported exercise of a power when a condition has not been satisfied is not a valid exercise of the power." (page 373)
This approach is consistent with that adopted by the majority when they said:
"In our opinion, the Court of Appeal of New South Wales was correct in Tasker v Fullwood ([1978] 1 NSWLR 20 at 23-24. See also Victoria v The Commonwealth and Connor (1975) 134 CLR 81 at 161-162, per Gibbs J.) in criticising the continued use of the 'elusive distinction between directory and mandatory requirements' (Australian Capital Television Pty Ltd v Minister for Transport and Communications (1989) 86 ALR 119 at 146, per Gummow J.) and the division of directory acts into those which have substantially complied with a statutory command and those which have not. They are classifications that have outlived their usefulness because they deflect attention from the real issue which is whether an act done in breach of the legislative provision is invalid. The classification of a statutory provision as mandatory or directory records a result which has been reached on other grounds. The classification is the end of the inquiry, not the beginning (McRae v Coulton (1986) 7 NSWLR 644 at 661; Australian Capital Television (1989) 86 ALR 119 at 147). That being so, a court, determining the validity of an act done in breach of a statutory provision, may easily focus on the wrong factors if it asks itself whether compliance with the provision is mandatory or directory and, if directory, whether there has been substantial compliance with the provision. A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid. This has been the preferred approach of courts in this country in recent years, particularly in New South Wales (Hutton v Beaumont [1977] 2 NSWLR 211 at 213, 226; Attorney-General (NSW); Ex rel Franklins Stores Pty Ltd v Lizelle Pty Ltd [1977] 2 NSWLR 955 at 965; Tasker v Fullwood [1978] 1 NSWLR 20 at 24; National Mutual Fire Insurance Co Ltd v The Commonwealth [1981] 1 NSWLR 400 at 408; TVW Enterprises Ltd v Duffy [No 3] (1985) 8 FCR 93 at 102; McRae v Coulton (1986) 7 NSWLR 644 at 661 and see Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454 at 457-460; Yates Security Services Pty Ltd v Keating (1990) 25 FCR 1 at 24-26. See also two recent decisions of the Court of Appeal of the Supreme Court of the Northern Territory: Johnston v Paspaley Pearls Pty Ltd (1996) 110 NTR 1 at 5; Collins Radio Constructions Inc v Day (1997) 116 NTR 14 at 17; and Wang v Commissioner of Inland Revenue [1994] 1 WLR 1286 at 1294, 1296; [1995] 1 All ER 367 at 375, 377). In determining the question of purpose, regard must be had to 'the language of the relevant provision and the scope and object of the whole statute' Takser v Fullwood [1978] 1 NSWLR 20 at 24." (pages 390-391)
Returning to the Board, it is a creation of statute. Unlike a court, it has no "inherent" powers but finds its power in the relevant legislation. In this case, that is the Law and more particularly, ss. 1290 to 1298. In so far as its powers in relation to auditors are concerned, ss. 1292, 1295 and 1297 set out its powers. Section 1294 sets out the manner in which that power is to be exercised and s. 1296 sets out how advice is to be given that it has been exercised. Looking at s. 1292(7) specifically, it is delineating one of the powers given to the Board. The power that it gives is to cancel the registration of a registered auditor if it is satisfied that the person is disqualified from managing corporations under Part 2D.6. In the absence of being so satisfied, the Board has no power to cancel under that provision of the Law. Even if the distinction were still relevant, it would not be relevant to consider whether the requirement that the Board be satisfied of the person's disqualification be mandatory or directory. That it have the requisite satisfaction is not a direction as to the manner in which the Board should exercise its power but a condition that must be satisfied before the power exists.
That this is so, is apparent from a comparison with the other provisions giving the Board power to cancel or suspend an auditor's registration. Taking s. 1292(1), for example, it is phrased in terms that the Board "may" cancel or suspend a registration if it is satisfied that he or she meets one or other of the criteria specified in ss. 1292(1)(a) to (d). The word "may" is also adopted in the drafting of s. 1292(9), which is relevant to the exercise of powers under s. 1292(1)(d), s. 1295 and s. 1297. That word gives to the Board a discretion. In the context of s. 1292(1)(d), for example, the Board may find that a person has failed to carry out or perform adequately and properly the duties of an auditor. That finding, however, is an insufficient basis upon which to exercise its power to cancel or suspend his or her registration. It only means that the Board "may" do so. It must make a further decision whether it should do so.
The word "shall" used in s. 1292(7) leads to a different conclusion. In the context of this case, the Board must first consider whether a person is disqualified from managing a corporation under Part 2D.6. Having found that he or she is so disqualified, the word "shall" gives it no discretion. It is required to cancel the auditor's registration. This decision is supported when reference is had to ss. 1296(1) and (2) relating to the Board's obligation to give notice of its decision. That section clearly draws a distinction between those instances in which the Board decides to exercise its powers under s. 1292 and those in which it "decides that it is [or is not] required to make an order under subsection 1292(7)" (emphasis added). The distinction is between its exercising a power, which it has a discretion to exercise, on the one hand and, on the other, a power in relation to which it has no discretion.
This conclusion is not affected by the need for the Board to hold a hearing or by the person's right to seek review of the Board's decision. Both a hearing and a right of review are relevant for the Board must hold a hearing and consider all of the evidence on the limited issue as to whether the registered auditor is in fact disqualified under Part 2D.6. The person may seek review in the Tribunal of the Board's decision based on its finding on that limited issue.
Can the proceedings in the Supreme Court affect the outcome of the review?
Given my conclusions that I must consider whether the Board's decision was the correct or preferable decision at the time that it was made and that s. 1292(7) does not give me any discretion once I have concluded that Mr Birdseye is a person disqualified from managing a corporation under Part 2D.6 of the Law, it follows that I do not consider that his application to the Supreme Court under s. 206G will affect the outcome. There was no disagreement between the parties that he was such a person at the time of the Board's decision.
Quite apart from these issues, even if he were successful in the Supreme Court application, Mr Birdseye would continue to be a person who is disqualified from managing corporations under Part 2D.6 of the Law. I accept the submission made by Ms Fracas on behalf of ASIC that an order giving him leave to manage a corporation under s. 206G would simply be a defence to a charge that he had committed an offence under s. 206A. It would not mean that he is not a person who is disqualified from managing corporations under Part 2D.6. He would continue to be a person who is so disqualified but who is permitted to manage a particular corporation, a particular class of corporations or corporations subject to exceptions and conditions determined by the Court.
Mr Birdseye's situation can be contrasted to some extent with the situation that he would have been in prior to the CLERP Act. As I have said, s. 1292(7) then referred to a person who was subject to a s. 229 prohibition. A person became subject to a s. 229 prohibition if he or she became prohibited as mentioned in that section (ss. 9 and 91(1)). Therefore, regard must be had to the particular wording of the section. The effect of s. 229(1) was that an insolvent under administration must not, without leave of the Court, manage a corporation. That meant that, once a person had leave of the Court, he or she was not prohibited from managing a corporation. That may be contrasted with the effect of the provisions in Part 2D.6. The effect of s. 206B(1) is that a person is disqualified from managing a company if, among other matters, he or she is an undischarged bankrupt. Although s. 206A(1) provides that his or her having been given permission to manage a corporation under ss. 206F or 206G is a defence to a charge that a person has managed a corporation while disqualified from doing so, it does not alter the fact that the person remains disqualified pursuant to Part 2D.6. Nor does the Court's order under s. 206G alter that fact. He or she remains such a person even though he or she is given leave to manage the particular corporation, class of corporations or corporations named in the order. Although this is a significant difference between the Law as it stood before the CLERP Act and the Law as it stood after, Mr Birdseye would not have been assisted by the earlier Law even if it had applied to him. This follows from the fact that, at the time of the Board's decision, he would have been an insolvent under administration but without the leave of the Court. He would, therefore, have been subject to a s. 229 prohibition.
May the Tribunal have regard to the Board's refusal to adjourn consideration of ASIC's application?
Mr Keith submitted that the Board should have adjourned its hearing of ASIC's application to give his client an opportunity to make his application to the Court under s. 206G. That was so even though he had been bankrupt since 8 November, 1998 and almost two years had passed since ASIC had made its application to the Board on 30 April, 1999.
The Tribunal may only review a decision made by the Commission if it is specifically given the power to do so by either the Administrative Appeals Tribunal Act 1975 ("AAT Act") or another piece of legislation. This is the effect of s. 25 of the AAT Act. Section 25(1) provides that:
"An enactment may provide that applications may be made to the Tribunal:
(1)for review of decisions made in the exercise of powers conferred by that enactment; or
(2)for review of decisions made in the exercise of powers conferred, or that may be conferred, by another enactment having effect under that enactment."
The enactment must specify the person or persons to whose decisions the provision applies and may be expressed to apply to all decisions of a person or to a class of such decisions and may also specify the conditions which must be met before applications for review may be made (sub-section 25(3)).
It is not enough that an enactment provide for review of specified decisions for the Tribunal must also be given power to review specified decisions. That power is given by s. 25(4) which is the necessary corollary to s. 25(1). It provides:
"The Tribunal has power to review any decision in respect of which application is made to it under any enactment."
A reference in the AAT Act to a "decision" includes:
"(a) making, suspending, revoking or refusing to make an order or determination;
(b)giving, suspending, revoking or refusing to give a certificate, direction, approval, consent or permission;
(c)issuing, suspending, revoking or refusing to issue a licence, authority or other instrument,
(d)imposing a condition or restriction;
(e)making a declaration, demand or requirement;
(f)retaining, or refusing to deliver up, an article; or
(g)doing or refusing to do any other act or thing." (s. 3(3))
The practical effect of these provisions is that I have to take two steps to determine whether or not the Tribunal has the power to review a particular decision. The first is to identify precisely the decision of which review is sought and the second is to identify whether there is an enactment providing that an application may be made to the Tribunal for review of that decision or class of decision. In this case, the decision is the cancellation of Mr Birdseye's registration as an auditor. The AAT Act does not provide for review of such a decision in specific terms but s. 1317B(1) of the Law provides that, subject to Part 9.4A, applications may be made to the Tribunal for review of a decision made under the Law by, among others, the Board (s. 1317B(1)(c)). A decision to cancel an auditor's registration is a decision made by the Board and so may be reviewed by the Tribunal. Certain decisions are excluded under s. 1317C but they are not relevant in this case.
A decision whether or not to adjourn an application is not a decision to which reference is made in the Law. The Board's power to make that decision follows from the requirement in s. 1294 of the Law that it conduct a hearing. There is no need to consider whether it is a decision made "in the exercise of powers conferred by that enactment" within the meaning of s. 25(1). It is not a "decision" of the sort contemplated by s. 1317B. It is a procedural, and not a substantive, decision. As Mason CJ said in considering the word "decision" in the context of s. 3(2) of the Administrative Decisions (Judicial Review) Act 1977:
"If 'decision' were to embrace procedural determinations, then there would be little scope for review of 'conduct', a concept which appears to be essentially procedural in character. To take an example, the refusal by a decision-maker of an application for an adjournment in the course of an administrative hearing would not constitute a reviewable decision, being a procedural matter not resolving a substantive issue and lacking the quality of finality. Then it is the 'conduct' of the hearing in refusing an adjournment that is the subject of review. To treat the refusal of the adjournment in this way is more consistent with the concept of 'conduct' than with the notice of 'decision under an enactment'." (Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 337-338)
His Honour had earlier said:
"To interpret 'decision' in a way that would involve a departure from the quality of finality would lead to fragmentation of the processes of administrative decision-making and set at risk the efficiency of the administrative process." (page 337)
In view of these principles, I have concluded that the Board's decision to refuse Mr Birdseye's application for an adjournment is not a decision that may be reviewed by this Tribunal. It is a procedural decision that lacks the necessary quality of finality to bring it within the meaning of a "decision" as referred to in s. 1317B(1) of the Law.
For the reasons I have given, I affirm the decision under review.
I certify that the fifty three preceding paragraphs are a true copy of the reasons for the decision herein of Miss S A Forgie (Deputy President)
Signed: ......................................................
Clancy Riddiford (Associate)Date of Hearing 14 August, 2001
Date of Decision 27 August, 2001
Counsel for the Applicant Mr M Keith
Solicitor for the Applicant Mr M Esau
Solicitor for the Respondent Ms Bean, Australian Government Solicitor
Solicitor for Third Party Ms Francas, ASIC
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