PERROTTET And AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

[2011] AATA 498

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 498

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2010/4946

GENERAL ADMINISTRATIVE DIVISION		)
Re		TERENCE PERROTTET

Applicant

And AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

Respondent

DECISION

Tribunal Ms G Ettinger, Senior Member

Date20 July 2011

PlaceSydney

Decision The Tribunal affirms the decision under review.

......................[sgd]........................

Ms G Ettinger     
  Senior Member

CATCHWORDS

Freedom of Information – Applicant has complaints about financial advisor – dissatisfied with investigations into his complaint by FOS – Applicant wants access to documents ASIC holds with regard to Premium Wealth Management – ASIC claiming documents exempt – decision under review affirmed.

Corporations Act 2001 s 912D

Freedom of Information Act 1982 ss 11(1), 40(1)(d), 43(1)(c)(ii)

Regulatory Guide 78: Breach Reporting by AFS Licensees

Regulatory Guide 175: Licensing: Financial product advisers – Conduct and Disclosure

Attorney-General’s Department v Cockcroft (1986) 10 FCR 180

Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409

Electronic Frontiers Australia Inc and Australian Broadcasting Authority [2002] AATA 449

Harris v Australian Broadcasting Corporation (1983) 50 ALR 551

Harris v Australian Broadcasting Corporation (1984) 5 ALD 56

Jorgensen v Australian Securities and Investments Commission (2004) 208 ALR 73

Matthews and Australian Securities and Investments Commission (2010) 118 ALD 23

McKinnon and Commissioner of Taxation (2001) 48 ATR 1114

Meschino v Centrelink [2002] AATA 627

O’Sullivan and Australian Federal Police [2011] AATA 188

Public Interest Advocacy Centre and Department of Community Services and Health (1991) 23 ALD 714

Rees and Australian Federal Police (1999) 57 ALD 686

Searle Australia Pty Ltd v Public Interest Advocacy Centre (1992) 36 FCR 111

Vasta and Civil Aviation Safety Authority (2010) 116 ALD 356

Wallace and Australian Federal Police (2004) 83 ALD 679

Williams and Registrar of the Federal Court of Australia (1985) 8 ALD 219

Wong and Minister for Immigration, Multicultural and Indigenous Affairs (2006) 90 ALD 154

REASONS FOR DECISION

20 July 2011	Ms G Ettinger, Senior Member
SUMMARY

1.Mr Terence Perrottet wants access to documents held by the Australian Securities & Investments Commission, (ASIC) over which it claims exemption under the Freedom of Information Act 1982 (the FOI Act). The documents relate to breach reports and correspondence in connection with Premium Wealth Management Ltd, (Premium Wealth Management) between December 2004 and September 2007.

2.Mr Perrottet’s requests arise out of his dissatisfaction with the service he says he received from his financial advisor/authorised representative at Premium Wealth Management. He claims he has lost a lot of money as a result of her actions. He also says there are many breaches of what he terms the regulations, which I understand to be the Corporations Act 2001 (the Act), and  ASIC’s Regulatory Guide 78: Breach reporting by AFS licensees, (RG78), including the non-issue of Statements of Advice, and other documentation evidencing transactions, which he says is mandatory as between authorised representatives and their clients.

3.ASIC decided on 12 August 2010, not to release the breach report requested by Mr Perrottet to him. That decision was affirmed on 12 November 2010 after internal review, upon a request made by Mr Perrottet. Mr Perrottet then exercised his right to appeal to this Tribunal.

4.Mr Perrottet has had his complaint heard by the Financial Ombudsman Service (FOS). The complaint was dismissed. Mr Perrottet is dissatisfied with that result, and feels that ASIC has colluded with FOS in not publishing the many breaches of the Act which he says occurred in relation to him.

5.I have explained to Mr Perrottet that he may have other means of redress against his financial advisor, and that neither ASIC nor the Tribunal can give him legal advice about that.

6.I have also explained that my task under the FOI Act in regard to his application, is to consider sections 40(1)(d) and 43(1)(c)(ii) of the FOI Act, and make the correct or preferable decision regarding his application for access to documents held by ASIC to be exempt under the FOI Act.

7.I was not satisfied that the requested documents should be released to him. My reasons follow.

ISSUE BEFORE THE TRIBUNAL

8.The issue I must decide is whether Mr Perrottet can have access to a breach report he wants regarding Premium Wealth Management which has been lodged with ASIC, and correspondence between ASIC and a third party.

RELEVANT LEGISLATION

9.Section 912D of the Corporations Act 2001 deals with obligations and breaches of the Act by persons who hold an Australian Financial Services Licence (licensees).

10.The FOI Act underwent significant reform with the passage of the Freedom of Information Amendment (Reform) Act 2010. The amendments made by that Act took effect on 1 November 2010. As Mr Perrottet’s application preceded that date, his application is subject to the FOI Act as it stood before that date.

11.Section 11(1) of the FOI Act states that every person has a legally enforceable right to obtain access… to… a document of an agency, subject to any exemptions.

12.Sections 40(1)(d) and 43(1)(c)(ii) of the FOI Act, as they stood at the relevant time, are as follows:

40 Documents concerning certain operations of agencies

(1)Subject to subsection (2), a document is an exempt document if its disclosure under this Act would, or could reasonably be expected to:

…

(d) have a substantial adverse effect on the proper and efficient conduct of the operations of an agency…

43 Documents relating to business affairs etc.

(1)A document is an exempt document if its disclosure under this Act would disclose:

…

(c)  information (other than trade secrets or information to which paragraph (b) applies) concerning a person in respect of his or her business or professional affairs or concerning the business, commercial or financial affairs of an organization or undertaking, being information:
…

(ii) the disclosure of which under this Act could reasonably be expected to prejudice the future supply of information to the Commonwealth or an agency for the purpose of the administration of a law of the Commonwealth or of a Territory or the administration of matters administered by an agency.

MR PERROTTET’S EVIDENCE & SUBMISSIONS

13.Mr Perrottet lodged a large number of documents regarding financial transactions handled for him by Premium Wealth Management, and his financial advisor. They were Exhibits A1 and A2 before the Tribunal.  He also gave oral evidence telling me about his dissatisfactions with his advisor and Premium Wealth Management. Mr Perrottet said that he had lost a large amount of money due to the fact his investments were poorly handled by his advisor.

14.An example of Mr Perrottet’s dissatisfaction which he gave, was that his advisor refused to roll-over his superannuation to his self-managed fund unless he signed an authority (with which he did not agree). Mr Perrottet also submitted that the advisor had breached many of the regulations by which she was bound, including not issuing him with Statements of Advice in a timely way, or at all, on various occasions. He said conservatively he had lost at least $180,000 as a result. Mr Perrottet described the transactions and losses in detailed documents he tendered, and which were before me at Tabs 1, 13, 14, and throughout Exhibit A1. 

15.Mr Perrottet told me that on every occasion when one of these breaches by the advisor took place, Premium Wealth Management should have submitted a report to ASIC. However, he knew of only one such report which had been submitted, and was convinced Premium Wealth Management did not report every breach which occurred. Amongst the many documents relied on by Mr Perrottet, was one filed on 15 November 2010 (Tab 14 of Exhibit 1). In it he stated, and according to him, illustrated, that there were six clear cases where Premium Wealth Management did not supply Statements of Advice. Mr Perrottet said that he did not agree with the excuses given by Premium Wealth Management for the problems which occurred in regard to his accounts and documentation, which included that he could not be contacted because he was travelling, and because he often lived on a yacht. He submitted that by refusing to release even the one breach report it had, to him, ASIC was aiding and abetting corruption in the financial world.

16.Mr Perrottet was also dissatisfied because his appeal to the FOS had been dismissed. A letter from Mr Bill Shorten, Assistant Treasurer Minister for Financial Services and Superannuation to Mr Robert Oakeshott MP dated 10 November 2000 (Exhibit A2, Tab AAT411-5), indicated that ASIC had also found that there were no breaches incurred in relation to him by Premium Wealth Management. Mr Shorten wrote as follows:

In making this determination, ASIC has advised that their specialist Financial Advisers division conducted an exhaustive examination of the facts presented to ASIC. This includes reviewing of Mr Perrottet’s initial correspondence; consideration of a personal intervention of ASIC’s Northern Territory regional Commissioner, Mr Duncan Poulstan; reviewing supplementary documentation provided by Mr Perrottet; as well as a comprehensive review of FOS’ determination. Based on this examination, ASIC concluded that there was no breach of the Licensees responsibilities, including the non-giving of statements of advice by the adviser in the circumstances.

ASIC’s findings are in line with that of FOS, which noted that ‘There appears to be no dispute between the parties that the majority of advice and/or instructions were initiated by telephone or email. In order to comply with her statutory obligations in this regard, the member was required to provide a Statement of Advice either when the advice was provided, or as soon as practicable after … The panel is satisfied that the Member fulfilled such obligations’.

17.Mr Perrottet felt there was collusion between FOS and ASIC.  I noted however that Mr Perrottet understood FOS is an independent external dispute resolution scheme approved by ASIC, and that, as advised in Mr Shorten’s letter, he could not appeal his FOS decision to ASIC. Dr Allars, who appeared for ASIC, submitted that there was no evidence of corrupt conduct by FOS or ASIC.

18.Ultimately Mr Perrottet reiterated that he wanted access to the breach report to which ASIC claimed exemption under various sections of the FOI Act.

ASIC’S EVIDENCE & SUBMISSIONS

19.Ms L K Coughlan, Senior Manager, NSW-AQCT, Misconduct and Breach Reporting of ASIC, swore an affidavit (Exhibit R4), which was before the Tribunal. She was also called to give oral evidence, and was cross-examined by Mr Perrottet.

20.Dr Allars prepared written submissions and addressed those orally in making ASIC’s case. She addressed in detail both sections 40(1)(d) and 43(1)(c)(ii) of the Act upon which ASIC relies to deny Mr Perrottet access to the documents he has requested. I have summarised the submissions below.

21.Dr Allars first addressed section 40(1)(d) of the Act. She submitted that the exemption under section 40(1)(d) was established where:

(a)Disclosure would, or could reasonably be expected to, have a substantial adverse effect;

(b)That effect would be on the proper and efficient conduct of the operations of the agency; and

(c)Disclosure of the document would not, on balance be, in the public interest.

22.In regard to where disclosure would, or could reasonably be expected to, have a substantial adverse effect, Dr Allars submitted that the expression required a judgment as to whether the disclosure was reasonable as distinct from irrational, absurd or ridiculous (Attorney-General’s Department v Cockcroft (1986) 10 FCR 180).

23.Dr Allars submitted in relation to section 43(1)(c)(ii) that adverse effect could reasonably be expected to result from disclosure. She submitted that could reasonably be expected should be given its ordinary meaning consistent with Cockcroft. She also submitted that the word unreasonable in section 43(1)(c)(ii) should be given its ordinary meaning.

24.Dr Allars submitted that to establish substantial adverse effect, requires an effect that is real or of substance, and not insubstantial or nominal. In support of that argument, Dr Allars cited various cases. Not insubstantial or nominal meant, she submitted, that it had a degree of gravity in its effect on the operations of the agency, (Harris vAustralian Broadcasting Corporation (1983) 50 ALR 551; Harris v Australian Broadcasting Corporation (1984) 5 ALD 564).

25.Dr Allars referred to further case law illustrating where it was held disclosure would hamper the proper and efficient conduct of the operations of the agency (Wong and Minister for Immigration and Multicultural Affairs (2006) 90 ALD 154).  She submitted this was not restricted to matters relating to the internal operations of an agency, but included the way in which an agency discharges or performs any of its functions (Matthews and Australian Securities and Investments Commission (2010) 118 ALD 23,  Electronic Frontiers Australia Inc v Australian Broadcasting Authority [2002] AATA 449). Dr Allars submitted that in a similar manner to securing the effective operation of the police force which was the subject of Rees and Australian Federal Police (1999) 57 ALD 686 and O’Sullivan and Australian Federal Police [2011] AATA 188, ASIC needed to maintain the confidentiality of breach reports that licensees made to it.

26.A particular aspect of adverse effect within the terms of section 40(1)(d) was, Dr Allars submitted, the cessation or diminution of the future flow of information (Jorgensen v Australian Securities and Investments Commission (2004) 208 ALR 73).Dr Allars also referred in this context to section 43(1)(c)(ii) of the Act, relying on Public Interest Advocacy Centre and Department of Community Services and Health Services (1991) 23 ALD 714 and Vasta and Civil Aviation Authority (2010) 116 ALD 356.

27.Dr Allars acknowledged, but did not agree with Mr Perrottet’s position, which was that release of breach reports would encourage the truth from a particular licensee, and encourage that licensee not to commit the breach in the first place knowing it was less likely to get away with it. The Respondent’s position in that regard was that Mr Perrottet’s contention failed to acknowledge the statutory framework within which breaches are reported, and the modus operandi of the scheme. In that regard Dr Allars referred to section 912D(1B) of the Act, (elucidated by RG78), which prescribes the manner and timing of reporting a breach by a financial services licensee. Dr Allars also submitted that the scheme, whilst imposing a mandatory reporting duty, relied for its effective operation, on the cooperation of licensees.

28.Dr Allars submitted that balancing disclosure of documents versus the public interest involves balancing of competing public interests, bearing in mind that release of documents on FOI is access to the world at large, (Searle Australia Pty Ltd v Public Interest Advocacy Centre (1992) 36 FCR 111).Dr Allars also submitted that Mr Perrottet’s disagreement with the determination of FOS, and with ASIC’s response did not constitute a public interest argument for release of the breach report.

29.I noted that in his response dated 6 April 2011, Mr Perrottet expressed the view that by not releasing the breach report to him, ASIC was preventing him, the victim of the breach, from commenting upon it. Dr Allars’ submissions in that regard were that the Applicant’s motives for seeking such access, and the use to which he wanted to put them were irrelevant to the question of public interest. In support of her submission, Dr Allars referred to section 11(2)(a) of the FOI Act, which indicates that the test of public interest in section 40(1)(d) does not take into account the Applicant’s motives, (Electronic Frontiers Australia Inc and Australian Broadcasting Authority). In Electronic Frontiers Australia Inc, the Tribunal had, at [96], in refusing access to information, in fact held that the motives were for a legitimate and worthy purpose. Mr Perrottet had, in any case, exercised his right to comment, she submitted.

30.Dr Allars submitted that ASIC also relies on the exemption in section 43(1)(c)(ii) of the FOI Act, which requires consideration of whether:

(i) the information in a document concerns business or professional affairs of a person;

(ii) disclosure could reasonably be expected to have an unreasonable adverse effect;

(iii) …on those affairs or to prejudice future supply of such information to the government or an agency.

31.As to business or professional affairs of a person, Dr Allars submitted that the Federal Court had held that information about a person which was business or professional, could be exempt pursuant to section 43(1)(c)(ii), (Williams and Registrar of the Federal Court (1985) 8 ALD 219).

32.Dr Allars submitted in summary in regard to section 43(1)(c)(ii) of the FOI Act, that a breach report should be exempted because it concerns the business affairs of the licensee, and business and professional affairs of the authorised representative who is the subject of the allegation of contravention of the Act. She submitted that disclosure of material in a breach report could reasonably be expected to have a serious effect on the supply of information by the relevant persons and licensees, and prejudice the future supply of information to ASIC.

33.Dr Allars submitted in regard to section 40(1)(d), that just as maintaining confidentiality of communications between police forces, made for the effective operation of those forces, so the effective operation of ASIC’s scheme for the supervision of Australian financial services licensees depends upon maintaining the confidentiality of breach reports made to it.

THE TRIBUNAL’S DELIBERATIONS AND CONCLUSIONS

34.In deciding whether the correct or preferable decision is that correspondence at Exhibits R2 and R3 should be released to Mr Perrottet, I am mindful that section 40(1)(d) of the Act is concerned with the operations of an agency such as ASIC, and section 43(1)(c)(ii), with an agency such as ASIC as regulator, in its relationships with the parties it regulates, and the lawful business affairs of a person within that client. I am mindful that in determining whether the disclosure of documents could reasonably be expected to have the consequences referred to in section 43(1)(c) of the Act, I am required to make a judgment as to whether it is reasonable, (as distinct from something that is irrational, absurd or ridiculous), to expect that those consequences would follows disclosure (Cockcroft).

35.I note for the sake of completeness that when considering appeals under the FOI Act, this Tribunal is entitled to consider the applicability of exemption provisions which were not relied upon by the primary decision maker (Cockcroft). Further, I am mindful that in Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409 it was held that the function of the Tribunal is to hear matters de novo and to reach a view for itself, unrestricted by the view taken by the primary decision-maker.

36.I can understand Mr Perrottet’s wish to see a breach report if he feels he has been badly served and financially disadvantaged by Premium Wealth Management and its representative. However as submitted by Dr Allars, Mr Perrottet’s wishes and his motives in wanting access to the breach report and other documents is not relevant to the decision I must make. I am mindful also that the question whether disclosure should occur is not concerned with whether there is a reasonable claim by the Applicant, but rather an assessment of the effect of the disclosure (Electronic Frontiers Australia Inc v Australian Broadcasting Authority). The considerations I must take into account are enunciated in sections 40(1)(d) and section 43(1)(c)(ii) of the Act.

37.There is some overlap between those sections of the Act in the sense that both sections 40(1)(d) and 43(1)(c)(ii) are concerned with what is reasonable in relation to the disclosure of documents, and what may result in substantial adverse effect (section 40(1)(d)), and unreasonable adverse effect, (43(1)(c)(ii)).   

38.In section 40(1)(d), the adverse effect is the effect disclosure of a particular document would have on the proper and efficient conduct of an agency’s operations. In Electronic Frontiers Australia Inc v Australian Broadcasting Authority, the Tribunal exempted documents pursuant to section 40(1)(d) of the Act which would reveal Universal Resource Locators (URLs) and Internet Providers (IPs) of Internet content that was prohibited or potentially prohibited under the Broadcasting Services Act 1992. The Tribunal held that the disclosure would, or could reasonably be expected to have a substantial adverse effect on the ABA’s ability to administer the scheme, and would, or could reasonably be expected to, have a substantial adverse effect on the proper and efficient conduct of its operations.

39.In Meschino v Centrelink [2002] AATA 627 the Tribunal considered a computer system used for monitoring the use made of social security information maintained on Centrelink’s computers to ensure information was protected from misuse. The Tribunal held that disclosure of the reports from the system would lead to a substantial adverse effect on Centrelink’s proper and efficient monitoring of the manner in which it operated, and hence on its operations. The Tribunal considered that persons with the information would be able to ascertain how Centrelink carried out its monitoring, and modify their behaviour accordingly. The value of the information held by Centrelink could then be substantially compromised, and there would be a substantial adverse effect on the proper and efficient monitoring of the manner in which Centrelink carried out its functions. This is similarly applicable in the present case where, if it became known that breach reports would be available to third parties, could reasonably be expected to have a substantial adverse effect on ASIC’S ability to administer the breach reporting regime between it and financial institutions, and would, or could reasonably be expected to, have a substantial adverse effect on the proper and efficient conduct of its operations. Behaviour and reporting could as a result be modified, and the cooperation required for regulatory schemes to be conducted effectively, compromised.

40.There is also a line of police cases (Rees, Wallace and Australian Federal Police (2004) 83 ALD 679 and O’Sullivan), where it was held that communications between police departments, if released, could reasonably be expected to have a substantial adverse effect on the proper and efficient conduct of the particular police operations. I consider that would be similarly so between the regulator ASIC, and organisations such as Premium Wealth Management which are licensed by ASIC. Disclosure of the requested documents in Mr Perrottet’s case could lead to a diminution of ASIC’s ability to obtain advice from financial institutions it supervises, and thus amount to the relevant adverse effect.  

41.In that regard, I am mindful that in Searle Australia Ltd v PIAC, the Full Federal Court noted that the issue before the Tribunal was whether the disclosure of the names of external evaluators who had reported to the Department on Searle’s applications under the Therapeutic Goods Act 1996 would have a substantial adverse effect on the proper and efficient conduct of the operations of the Department. The Tribunal held that disclosure would do so, and would not, on balance be in the public interest. I mention public interest again in relation to the present matter, below.

42.In section 43(1)(c)(ii), unreasonable adverse effect relates to the disclosure of information regarding the business or professional affairs of a person such as the Premium Wealth Management advisor who dealt with Mr Perrottet’s affairs. The case of Cockcroft has been cited in regard to the test for the level of what could reasonably be expected in regard to adverse effect. The Court in Cockcroft held that the words of the Act should be given their ordinary meaning and no other test inferred, that is reasonable as distinct from irrational, absurd or ridiculous.

43.Both sections 40(1)(d) and 43(1)(c)(ii), are concerned with the potential that disclosure of certain documents such as the breach report relating to Premium Wealth Management, will compromise the flow of information between agencies and the corporations or persons they supervise, and upon whom they rely for full and frank reporting. Of course in the present case, section 912D imposes a mandatory reporting duty of breaches by Premium Wealth Management to ASIC. I recognise however, that the effective administration of the Act depends on cooperation by licensees. That militates against agreeing to disclosure of the documents sought by Mr Perrottet. In Vasta, a case regarding Qantas’ provision of  defect reports to the Civil Aviation Safety Authority (CASA), the Tribunal held at [124] that:

Qantas’ attitude to its current practices, in relation to providing CASA ‘interim’ and ‘closing’ reports following up ‘major defect reports’, is likely to be at least reviewed if there is a materially increased chance that those reports could be publicly released. Qantas’ current practice of providing CASA with those kinds of reports is useful to CASA, and substantially aids the proper and efficient conduct of its operations. Without that disclosure CASA might have to rely on the investigative powers to which I referred in [50](c) above. For these reasons disclosure of the Qantas SDR documents could reasonably be expected to prejudice the future supply of information to CASA, and could reasonably be expected to have a substantial adverse effect on CASA’s operations.

44.The application of section 40 requires balancing of personal versus public interest. In balancing that interest, I am reminded that disclosure under the FOI Act gives access to the world at large. In Searle Australia Pty Ltd v PIAC, the Tribunal held that although there was a public interest in disclosure (the matter related to the identity of external evaluators of reporting to the Department under the Therapeutic Goods Act 1996, the claim for disclosure failed because the public interest was outweighed by the effect of disclosure on the Department’s ability to obtain advice. In Mr Perrottet’s case, there is in my view a similar consideration which militates against disclosure.

45.Mr Perrottet submitted that on every occasion when a breach of the legislation by a representative occurred, Premium Wealth Management should have submitted a report to ASIC. He says he knows of only one such report, and is convinced that Premium Wealth Management did not report every breach which occurred. He submitted that by refusing to release the breach reports to him, ASIC was aiding and abetting corruption in the financial world.

46.I acknowledge Mr Perrottet’s frustration and note that pursuant to section 912D(1B) of the Act, every breach is required to be reported to ASIC as soon as practicable, and within 10 business days of it occurring. It is not my task here, however, to inquire or establish whether breaches other than the one reported took place in this case. As noted above, it was simply to consider whether the correct or preferable decision is to release documents Exhibits R2 and R3 to Mr Perrottet, and I have decided against that.

47.In regard to Mr Perrottet’s contention that there was collusion between FOS and ASIC. I am mindful that FOS is an independent external dispute resolution scheme approved by ASIC, and I do not have any evidence to support the Applicant’s claim. However, even if, on the merits, FOS’ decision could be held to have been incorrect, my task is not to review it on the merits, but rather to apply sections 40(1)(d) and 43(1)(c)(ii) of the FOI Act, and consider Mr Perrottet’s application for release of the breach report and other documents.

48.In conclusion, based on the facts, submissions of the parties, the case law and the legislation as discussed above, I find that the correct or preferable decision is to decline to release the documents sought by Mr Perrottet. 

DECISION

49.The Tribunal affirms the decision under review.

I certify that the 49 preceding paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger
Senior Member

Signed:         ...................................[sgd].............................
  Associate

Date of Hearing  11 May 2011
Date of Decision  20 July 2011
The Applicant  Self represented
Respondent’s Counsel             Dr M Allars
Respondent’s Solicitor              Ms S Williams, ASIC