Polymath Investors Proprietary Limited and Australian Securities and Investments Commission

[2020] AATA 767

Polymath Investors Proprietary Limited and Australian Securities and Investments Commission [2020] AATA 767 (6 April 2020)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2019/1175

Re:Polymath Investors Proprietary Limited

APPLICANT

AndAustralian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal:Mr P W Taylor SC, Senior Member

Date:6 April 2020

Place:Sydney

The reviewable decision, being the decision of the Respondent dated 5 March 2019, is affirmed.

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

Mr P W Taylor SC, Senior Member

CATCHWORDS

CORPORATIONS – ASIC – application for waiver of ASIC Industry Funding Levy – regulatory costs – Australian Financial Services Licence – exceptional circumstances – whether exceptional circumstances justify waiver of levy components – wholesale trustees – custodians – wholesale personal adviser – managed investment scheme – s 258(1) of the Legal Profession Uniform Law (NSW) – decision under review affirmed

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth) s 43
ASIC (Supervisory Cost Recovery Levy – Annual Determination) Instrument 2018 / 1063 s 7
ASIC (Supervisory Cost Recovery Levy—Regulatory Costs) Instrument 2018 / 1062
ASIC Supervisory Cost Recovery Levy (Collection) Act 2017 (Cth) ss 8, 9, 10 11, 13, 14, 15, 16, 21, 22
ASIC Supervisory Cost Recovery Levy Act 2017 (Cth) ss 5A, 7, 8, 9, 10, 11, 13
ASIC Supervisory Cost Recovery Levy Regulations 2017(Cth) ss 4, 6, 7, 9 31, 37, 40, 41 73
Australian Securities and Investments Commission Act 2001 (Cth) s 138
Corporations Act 2001 (Cth) ss 601AB, 761G, 766A, 766E 911A 913B, 915B, 1274B
Corporations Regulations 2001 (Cth) reg 7.1.40.

Legal Profession Uniform Law (NSW) s 258

CASES

Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd (2003) 135 FCR 206
Kent v Wilson [2000] VSC 98
Nikac and Others v Minister for Immigration and Ethnic Affairs (1988) 20 FCR 65
R v Kelly (Edward) [2000] 1 QB 198; [1999] 2 All ER 13
R v Okinikan [1993] 1 WLR 173
San v Rumble (No 2) [2007] NSWCA 259
United Mexican States v Cabal (2001) 209 CLR 165
Ward v Commissioner of Taxation [2016] FCAFC 132

Yacoub v Pilkington (Australia) Ltd [2007] NSWCA 290

REASONS FOR DECISION

Mr P W Taylor SC, Senior Member

6 April 2020

INTRODUCTION

1. Since 22 September 2010 Polymath Investors Pty Ltd has held an Australian Financial Services Licence (“AFSL”) (issued under the Corporations Act 2001 (Cth) (the “Corporations Act”) s 913B). During the whole of that period Mr Peter Dobrijevic has been one of its two directors, its “responsible manager” and, in fact, its only (albeit, unpaid) “employee”. Consistent with that solitude, he appears to have regarded himself as holding all of the company’s executive offices – from chief executive to investment officer. In July 2016 Mr Dobrijevic obtained a solicitor’s practising certificate, limited to his role as a “corporate legal practitioner” providing services to “Polymath” (as I shall refer to as the applicant).

2. The AFSL licence authorises Polymath to undertake various activities for wholesale clients[1]. Those activities are (i) providing general financial advice in relation to four classes of financial products[2], (ii) dealing in those products and, (iii) providing custodial or depository services. The licence itself is subject to various conditions. Those material to the present review proceedings are to the following effect:-

   (a)Key person notification:- If Mr Dobrijevic ceased to be a company officer, or perform his duties relating to the company’s financial services business, Polymath must notify ASIC, and provide information, about either (i) his replacement or, (ii) (if he had not been replaced) its capacity to comply with its financial services business obligations.

   (b)Financial requirements for custody services:- Where Polymath had custody of client assets, other than incidentally to the provision of another financial service, it was required to have a $5m net tangible asset backing.[3]

   (c)Custodian records:- As a custodial or depository service provider, Polymath must ensure that the holder of any financial property maintained proper records of the property held.

   (d)Agreements relating to custodial or depository services:- Where Polymath arranged for financial products to be held by a third party (either for Polymath or for its clients), the arrangement must be the subject of a complying written agreement.

   [1]The default position under the Corporations Act is that a person is taken to have been provided with a financial product or service as a “retail client”, in the absence of a contrary statutory provision. If the recipient is not a “retail client” they are a “wholesale client”: see Corporations Act s 761G(3).

   [2]Specifically – (i) basic deposit products, (ii) derivatives, (iii) its own managed investment scheme, and (iv) securities.

   [3]Polymath’s 2010 AFSL licence application indicated that its net asset backing was less than $5m (as it has remained) and that it intended to provide custodian services only incidentally to its other authorised activities.

3. At the time of its AFSL licence application Polymath anticipated it would initially operate by offering “individually managed accounts”, and then expand to include a “managed investment scheme”. It projected that by June 2012 it would have under management funds totalling $185m, comprised predominantly of “individually managed accounts” but also including a unit trust “managed investment scheme”. Its actual activities have been significantly more limited. It has generated little income from its licensed activities. In both of the financial years ended June 2018 and 2019, it conducted no activities, and generated no income, in its capacity as the holder of an AFSL. Its balance sheet position at the latter date was modest, to say the least:- see paragraph 63 below.

   THE ASIC FUNDING LEVY INVOICE AND DISPUTE

4. On 30 January 2019 ASIC rendered a $7,275 “Industry Funding Levy” invoice to Polymath. The invoice related to the financial year ended June 2018 and was issued pursuant to the legislative scheme contained in the ASIC Supervisory Cost Recovery Levy Act 2017 (Cth) (the “Levy Act”), the ASIC Supervisory Cost Recovery Levy (Collection) Act 2017 (Cth) (the “Collection Act”) and the ASIC Supervisory Cost Recovery Levy Regulations 2017 (Cth) (the “2017 Levy Regulations” // “LevReg”). I outline the relevant details of the legislative scheme, and the legislative instruments critical to its operation (to the extent they are material to the present matter) later in these reasons:- see paragraphs 8 to 18 below. Based on that outline, the invoice components, and the integers in the calculation of their corresponding amounts, can be indicated in the following Table:-

AFSL authorisation / sub-sector	ASIC costs	Metrics		Levy
{a}	{b}	{c}	{a*(b/c)}
entity	sub-sector
$	"n"	"n"	$
Wholesale trustees	9,379,608	365	570,254	6,004
Custodians	740,788	1	1,023	724
Wholesale personal adviser	826,123	1	1,511	547
Total - 30/01/2019 ASIC Invoice			7,275

1. In February 2019 Polymath asked ASIC to waive the “wholesale trustees” and “custodians” invoice components. In response to that request, on 28 February 2019 ASIC notified Polymath of its decision to decline the waiver request. Polymath immediately requested ASIC review its decision. In so doing Polymath (i) repeated its reliance on its previously asserted grounds and, (ii) complained that ASIC had neither specifically addressed those grounds nor provided sufficient reasons for its decision.

2. ASIC’s 5 March 2019 review decision again refused Polymath’s waiver request. On the same day Polymath lodged with the Tribunal its application to review ASIC’s decision.

3. As the promptness of Polymath’s responses to ASIC’s decisions perhaps foreshadowed, Mr Dobrijevic (who represented the company in the present proceedings) has pursued the review application with considerable perseverance. Regrettably, his perseverance was not disciplined by the objectivity necessary to a proper appreciation of the purpose and effect of the legislative scheme, the discrimination such an appreciation would have produced, nor by the brevity of expression required for a proportionate approach to the relatively modest amount in issue.

   THE LEGISLATIVE BACKGROUND

4. The stated objectives of the ASIC Supervisory Cost Recovery legislative scheme are to have “leviable entities” make annual contributions totalling the amount of ASIC’s “regulatory costs” for a financial year. A more specific subsidiary objective is to have the contributions made by those entities correspond with the “regulatory costs” for the particular industry sub-sectors to which they belong:- Levy Act s 9(2).

5. The principal features of the Levy Act itself are to the following effect:-

   (a)The imposition of an annual levy on all “leviable entities”:- Levy Act s 8.

   (b)A definition of “leviable entity” (to the extent presently relevant) as any entity that held an AFSL “at any time” during the financial year:- Levy Act s 7 (by virtue of the definitions of “leviable”, “regulated” and “financial services” entities).

   (c)A declaration that “ASIC’s regulatory costs” for a financial year are those determined by ASIC (subject to various permissive inclusions and specific exclusions) and published in an annual legislative instrument. The permissible inclusions extend to (i) “costs directly or indirectly related to the regulation of leviable entities” (specifically permitted costs are those relating to surveillance, guidance, education and policy advice), (ii) in the case of the 2018 financial year, costs incurred prior to 1 July 2017, and (iii) adjustments for collection excesses or shortfalls from a previous financial year (other than shortfalls attributable to exercise of the waiver discretion in the Collection Act):- Levy Act s 10(1), 10(4), 10(5) and 10(6); LevReg s 5A.

   (d)A requirement that ASIC’s annual “regulatory costs” determination must (i) specify the amount to be used as its total regulatory costs, (ii) specify the number of “leviable entities” in each industry sector or sub-sector and, (iii) take into account the extent to which indirect regulatory costs should be apportioned to a particular industry sector or sub-sector:- Levy Act ss 10(2)(b) & 10(7).

   (e)A provision that ASIC’s legislative instrument is subject to Parliamentary disallowance:- Levy Act s 11.

   (f)A provision that the annual levy amount payable by a “leviable entity” is “the amount worked out in accordance with the regulations”:- Levy Act ss 9 & 10(6).

   (g)A provision authorising the Governor General to make regulations prescribing any matters required or permitted by, or necessary or convenient for the purpose of giving effect to, the Act:- Levy Act s 13.

6. The principal features of the Collection Act are to the following effect:-

   (a)A requirement for leviable entities to provide ASIC with annual returns in an approved form (i.e. containing levy related information), and a corresponding penalty sanction where misinformation results in a levy calculation shortfall error:- Collection Act ss 11 & 13.

   (b)A stipulation that the levy amount is payable on a date notified by ASIC (but no earlier than 30 days after receipt of ASIC’s annual levy notice), and attracts a late payment penalty of 20% per month:- Collection Act ss 9(1) & 10.

   (c)A declaration that the annual levy payment liability (and any related penalty) is a recoverable Commonwealth debt:- Collection Act ss 8, 14 & 16.

7. Where a costs recovery levy or penalty amount has not been paid in full within 12 months of becoming due and payable, ASIC can deregister the corporate licence holder or cancel or suspend the entity’s AFSL:- Corporations Act ss 601AB(1B) & 915B(3)(e). However, ASIC can also waive payment of “the whole or part” of the levy (or penalty) amount where it is satisfied there are “exceptional circumstances justifying the waiver”: – Collection Act s 15.

8. A person who is dissatisfied with ASIC’s decision about waiving a levy or penalty amount can request ASIC to reconsider its decision. That request must be in the approved form and set out the reasons for the request. It must also be made, unless ASIC allows a further period, within 21 days after the person has been given notice of the decision:- Collection Act s 21. If the person remains dissatisfied with the reconsidered decision, they can apply for its review by this Tribunal:- Collection Act s 22.

   THE MECHANISM FOR DETERMINING THE FUNDING LEVIES

9. Consistent with the Levy Act objectives, ASIC must determine its “regulatory costs” for a financial year, and publish that determination both on its website and in a legislative instrument:- Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”) s 138(1); Levy Act ss 10(1) & (2). That determination provides one of the essential integers for calculating the levy amount payable by a leviable entity. Other integers are provided by the regulations contemplated by the Levy Act, and by another kind of annual determination instrument they authorise ASIC to make.

10. The two legislative instrument determinations, authorised respectively by Levy Act s 10(2) and LevReg s 73, are:

    (a)ASIC (Supervisory Cost Recovery Levy—Regulatory Costs) Instrument 2018 / 1062 (“the 2018 Regulatory Costs Determination”) and

    (b)ASIC (Supervisory Cost Recovery Levy – Annual Determination) Instrument 2018 / 1063 (“the 2018 Sub-sector Determination”).

11. The 2017 Levy Regulations contain the following, principally relevant, provisions:-

    (a)A declaration that the levy amount is the sum of each leviable entity’s “levy components” for the financial year:- LevReg s 6.

    (b)A declaration that an entity has a “levy component” for each “sub-sector” of which it forms part “at any time in the financial year”:- LevReg s 7(1).

    (c)Various declarations determining that an entity forms part of a particular sub-sector where it held a corresponding AFSL authorisation “at any time in the financial year” – and in particular (relevant to the present matter) declarations that result in Polymath forming part of the following sub-sectors:-

    (i)“wholesale trustees” - because its AFSL authorised Polymath to issue interests in a managed investment scheme:- LevReg s 37,

    (ii)“custodians” - because its AFSL authorised Polymath to provide a custodial service:- LevReg s 31, and

    (iii)“licensees that provide personal advice to only wholesale clients” (“wholesale personal adviser”) - because its AFSL authorised Polymath to provide financial product advice to wholesale clients:- LevReg s 41[4].

    (d)A declaration that the levy component is either a “basic levy component” or a calculated component:- LevReg s 7(2)(b).

    [4]ASIC’s written submissions drew attention to an apparent infelicity in the drafting of LevReg s 41. The context in which it appears in Subdivision 4.2 of the Regulations, and the actual “sub-sector” title allocated in LevReg s 41, suggests that the sub-sector should only include AFSL holders authorised to provide “personal advice”. However, the actual description of the AFSL holders declared to be included refers generally to authorisations to provide “financial product advice’ – without differentiating between “general” and “personal” advice. A purposive contextual construction of LevReg ss 40 & 41 would result in Polymath forming part of the “general advice” sub-sector (see LevReg s 40) and being subject to a higher levy. Recognising the difficulty / obscurity involved in the wording of LevReg s 41, ASIC did not seek to revise its invoice components, or the levy amounts.

12. An entity’s “basic levy component” for any sub-sector is, in essence, a proportion of the total “sub-sector regulatory costs”[5]. That proportion is determined by the entity’s “basic rate entity metric” as a proportion of the “sub-sector metric”[6]:- LevReg s 9(1).

    [5]These are defined as the amount specified by ASIC in a determination made under Levy Act s 10(2):- LevReg s 4.

    [6]The “sub-sector metric” is the value determined by ASIC in a determination. Relevant to the present matter the applicable determination was the ASIC (Supervisory Cost Recovery Levy – Annual Determination) Instrument 2018 / 1063 s 7.

13. The effect of the regulations[7] is to determine that the following “metrics” applied for the purposes of determining, or calculating, Polymath’s levy components for the financial year ended June 2018:-

    (a)“wholesale trustees” sub-sector:- basic rate entity metric = 365[8]; sub-sector metric = 570,254:- LevReg ss 9(1), 37(2), 37(3).

    (b)“custodians” sub-sector:- basic rate entity metric = 1; sub-sector metric = 1,023:- LevReg s 9(1).

    (c)“wholesale personal adviser” sub-sector:- basic rate entity metric = 1; sub-sector metric = 1,511:- LevReg ss 9(1) & 41.

    [7]Together with the ASIC (Supervisory Cost Recovery Levy – Annual Determination) Instrument 2018 / 1063 s 7 (made under LevReg s 73).

    [8]           That metric value was the number of Polymath’s AFSL licence days for the sub-sector activity.

14. The regulations also provided that both a $1,000 minimum levy component and an additional, but different, entity metric would apply to the “wholesale trustees” sub-sector in the financial years after 1 July 2018. That entity metric would depend on the total, end of year, value of the assets in any managed investment scheme issued by the entity, and the number of days on which the entity held a relevant licence authority during the year. Consequently, if an entity had not issued any managed investment scheme, only the minimum levy component would apply:- LevReg ss 37(4)-(7).

    THE “WHOLESALE PERSONAL ADVISER” INVOICE COMPONENT

15. Polymath’s objection to this $547 invoice component was first articulated in the course of its submissions in the review proceedings. As lodged, Polymath’s review application was limited to the “wholesale trustees” and “custodians” invoice components of the 30 January 2019 levy invoice. This limitation was consistent with the specific contents of Polymath’s initial (February 2019) waiver request and with its internal review application of 28 February 2019 Despite the specificity of the content of those applications, Polymath’s submissions of 15 November 2019 also sought a waiver of the “wholesale personal adviser” invoice component.

16. ASIC contended that the Tribunal had no jurisdiction to entertain Polymath’s waiver request relating to the “wholesale personal adviser” component of the invoice. That contention involved characterising Polymath’s February 2019 waiver application as one to waive only part of the levy. According to ASIC’s contention, it followed that ASIC’s refusal decision, the subsequent internal review request, and the “reviewable decision” of 5 March 2019 all related only to waiver of the “wholesale trustees” and “custodians” components of the January 2019 levy invoice. It followed, according to ASIC, that the reviewable decision of 5 March 2019 could only be characterised as a “decision” refusing to waive the two levy components specifically requested by Polymath, rather than a simple (overarching) decision refusing to waive the levy.

17. ASIC’s contention raises a point of some nicety. On the one hand, both Polymath’s original waiver application and its internal review request were very specific in disputing only the “wholesale trustees” and “custodians” components of the levy. On the other hand, ASIC’s power to waive payment “of the whole or part” of a levy amount is not limited to (or by) the content of a licence holder’s application. ASIC can act on its own initiative:- Collection Act s 15(2). In the permissible internal review process relating to any waiver application decision, the ASIC delegate must “confirm, revoke or vary the decision as the person thinks fit” (emphasis added):- Collection Act s 21(4). It is not readily apparent that the latter subjective discretion should, or could, be regarded as limited by either the content of the waiver request or by the reasons for, or content of, the original waiver decision. And, since the Tribunal can exercise all of the reviewable decision maker’s powers (see Administrative Appeals Tribunal Act 1975 (Cth) s 43(1) (“AAT Act”)) it is not readily apparent that the Tribunal’s review jurisdiction, or the scope of the discretion exercisable by it, should be limited in a way that the reviewable decision maker was not. Furthermore, it is arguably important to recognise that the power conferred by s 15 of the Collection Act is to waive “the whole or a part” of the amount of the levy. The levy itself is the “amount worked out in accordance with the regulations”: Levy Act s 9 and is the sum of the entity’s “levy component(s)”: LevReg ss 6 & 7. The power therefore primarily applies to the total levy amount, and is exercisable in relation to any part of it. It is not limited to, or by, the “component(s)” that make up the levy amount.

1. It may be implied from what I have said in the preceding paragraph that I doubt the Tribunal lacks jurisdiction to entertain Polymath’s review application, in relation to its belated extension to include waiver of the “wholesale personal adviser” invoice component. It is, however, unnecessary to reach a concluded view on that question. This is because I am far from satisfied that Polymath has made out any basis for its belated challenge to that component of the 30 January 2019 invoice.

2. Polymath’s principal submission was that this particular invoice component (in common with the other components) was “tainted with errors”, but its submissions and evidence never clearly articulated the matters relied on to substantiate that assertion. At one point Polymath made a general criticism that ASIC had not properly or reasonably determined its “regulatory costs”. The overall criticism was that ASIC had perhaps failed to distinguish between fixed and variable costs and had (apparently, therefore) likely erred in its apportionment of costs between the “sub-sectors” identified in the LevReg. An additional, but overlapping criticism was Polymath’s assertion that ASIC had not correctly determined the applicable sub-sector population and had, for that reason, misstated the value of the costs that should properly have been apportioned to the sub-sector. Polymath also contended that this asserted population error affected the entity metric / sub-sector metric levy calculation required by the LevReg.

3. Polymath’s overall criticism of ASIC’s “regulatory costs” determination (both in relation to total costs and their sub-sector allocation) faced considerable conceptual difficulties – given the legislative basis for those matters in the 2018 Regulatory Costs Determination:- see paragraph 14 above. But, in any event, the criticism never descended to any degree of particularity. It was essentially suppositious and consequently unsubstantiated.

4. Polymath’s more particular assertion of error in ASIC’s determination of the sub-sector population faced a similar threshold difficulty, given the nature of the determination. Undaunted by that difficulty, Polymath pursued its criticism on the basis of Mr Dobrijevic’s claim to have analysed a publicly accessible ASIC AFSL register, as at 31 July 2019. That analysis was said to have resulted in the derivation of the appropriate number of AFSL licence holders as at 30 June 2018. This was said to have been achieved by a process of field filtering and a “key word, or phrase, search”. That process was said to have produced the results shown in the following Table:-

AFSL authorisation / sub-sector	ASIC	Polymath	Difference
2018 / 1063	submissions	calculated
"n"	"n"	"n"	% of ASIC
Wholesale trustees	1,626	1,900	-274	-17%
Custodians	1,023	995	28	3%
Wholesale personal adviser	1,511	1,476	35	2%

26.     A few moments’ reflection suffices to point to the conclusion that Polymath’s reliance on, and manipulation of, the AFSL register publicly available as at July 2019 is unlikely to be probative of material error in the ASIC determination of the sub-sector populations. First of all, such a publicly accessible register was inherently unlikely to reflect the complexity of the detailed information held by ASIC and to be the completely authoritative version of the relevant ASIC database information. Secondly, the register apparently reflected the current state of affairs 12 months after the period to which the contentious invoice applies. Consequently, the reliability of the exercise that Polymath undertook to derive the total relevant sub-sector populations as at 30 June 2018 depends not only on the detailed steps involved in that exercise, but also on satisfaction about their accuracy and appropriateness. The process was never explained with appropriate detail, and such explanation as was advanced rather tended to highlight the probable unreliability of the exercise.

1. The first point, about the inherent unlikelihood of the publicly accessible ASIC database being a relevant starting point for the analysis, is rather highlighted by the fact that Mr Dobrijevic (apparently) could not derive the sub-sector population from it other than by the word search process he asserted. The available inference is that the public database version did not contain any identifying sub-sector codes, or codes that could be used to determine sub-sector allocations. Yet the likelihood that ASIC had (elsewhere) allocated codes of that kind is inherent (and in fact established by other evidence):- see paragraph 49 below).

2. The point made in the last sentence of paragraph 25 above can be most forcefully made in relation to the minor percentage difference between the sub-sector metrics / population for the “custodians” and “wholesale personal advisers” sub-sectors. In each case, Polymath’s derived total was less than the value determined by ASIC. That was an entirely predictable difference – because the ASIC determination included (consistent with the Levy Act criteria) all entities that held a relevant AFSL “at any time” during the year. On the other hand, Polymath’s analysis apparently derived only the total number of entities that held such an AFSL “as at” 30 June 2018. When the essentially different nature of each analysis is appreciated, not only is the reliability of the Polymath exercise questionable, but the difference it reflects (in relation to the “wholesale personal adviser” sub-sector) is of a minor nature, and far from probative of material error in the determination of the sub-sector population.

3. For all the preceding reasons, there is no substance in Polymath’s criticism of the accuracy of the “wholesale personal adviser” component of the 30 January 2019 invoice.

   THE “CUSTODIAN” INVOICE COMPONENT

4. In relation to the “custodians” invoice component, the principal reasons for Polymath’s waiver request were to the following effect:–

   (a)The levy amount must be incorrect, for substantially the same reasons as those advanced in criticising the regulatory costs allocation for the “wholesale personal adviser” levy component,

   (b)The levy amount must be wrong for the additional reason that the sub-sector population must be wrong (and substantially understated) - because the number of custodian AFSL authorisations ought necessarily correspond with the number of “managed investment scheme” / “wholesale trustee” authorisations, subject to any exceptions authorised by Corporations Regulations 2001 (Cth) (“Corporations Regulations”) reg 7.1.40,

   (c)Polymath had not provided any custodian services, and had no client revenue, during the 2018 financial year, and

   (d)Polymath could not have provided any such custodian services without utilising the services of other licensed / levy liable entities, and ASIC would be “double dipping” if it also recovered a levy from Polymath,

5. Polymath’s criticism of this invoice component in relation to the allocation of “regulatory costs” to the “custodians” sub-sector substantially reflected the similar complaints made in relation to the “wholesale personal adviser” sub-sector. For the reasons I have given earlier, neither of those complaints (relating to cost allocation or the sub-sector population) were made out.

6. Polymath asserted that the Corporations Act mandated the grant of a custodian authorisation to any AFSL applicant who obtained an AFSL authorisation to operate a managed investment scheme. This imprecisely advanced assertion appears to have been based on (i) the basic licence requirement (in Corporations Act ss 766A(1) & 911A(1) for any business dealing in financial products, (ii) an assertion that the operator of a “managed investment scheme” necessarily provided a “custodian” service, (iii) (an apparently alternative contention that) the “wholesale trustees” sub-sector could include an AFSL holder that operated a registered managed investment scheme (if they issued interests to a wholesale client”) and (iii) an observation that such an AFSL holder would be exempted (as a result of the operation of Corporations Act 766E(3) and Corporations Regulations reg 7.1.40) from the requirement to hold a “custodians” authorisation. The implication that Polymath apparently sought to derive from these observations was that the operator of other managed investment schemes, having not been specifically exempted, would require a “custodians” authorisation. According to Polymath, the significant disparity between the “wholesale trustees” and “custodians” sub-sector populations was inexplicable – except on the basis that the “custodians” sub-sector population determined by ASIC was significantly understated.

7. Polymath’s contention is wholly unpersuasive. The starting point for the analysis ought to have been the definition of a “managed investment scheme”, and informed consideration of whether or not, based on the definition, an AFSL entity authorised to operate such a scheme would inevitably hold “a financial product, or a beneficial interest in a financial product” for a client, so as to come within the Corporations Act s 766E(1) definition of a “custodial or depository service” provider. Polymath never advanced such an analysis, and wholly failed to respond to ASIC’s contradiction of the assertion that the operator of a managed investment scheme would necessarily require a custodian authorisation. That contradiction was based on the requisite analysis and was expressed in the evidence of an ASIC officer (Mr Connor) who was a specialist in its licensing team. Mr Connor’s evidence, understood against the background of the “managed investment scheme” and “custodial … service” definitions, convincingly established that whether the operator of a managed investment scheme (ie. a member of the “wholesale trustee” sub-sector) required a “custodians” authorisation depended, amongst other things, on (i) the types of assets involved in the particular scheme, (ii) the application of any statutory exclusion and (iii) the operator’s business structure. Given the disparate range of assets and management that would fall within the “managed investment scheme” definition, Mr Connor’s evidence, and a proper understanding of the statutory provisions, leads convincingly to a conclusion that completely contradicts Polymath’s basic assertion. In reality, the “wholesale trustees” sub-sector population is inherently likely to exceed, rather than correspond with, the “custodians” sub-sector population.

8. Nevertheless, Mr Dobrijevic seized on the magnitude of the sub-sector population differences between the two subsectors as itself indicative of error in the ASIC “custodians” population determination. More specifically he pointed to the population tables Mr Connor had provided in his affidavit, and to the fact that Mr Connor, had recognised only a very limited number of “custodians” exceptions – apparently because of the application of Corporations Act s 766E(3) and Corporations Regulations reg 7.1.40. The point Mr Dobrijevic sought to make was that the trivial number of exceptions that had been recognised (and which had resulted in a reduction of the AFSL “custodians” population acknowledged by ASIC) was inexplicable, and itself indicated the likely understatement of that sub-sector population.

9. Polymath’s reliance on the limited recognition of exceptions is misconceived. The exceptions have the effect that, where they apply, the entity involved is not regarded as providing custodian or depository services, and does not therefore require any AFSL authorisation for its activity. The fact that Mr Connor extracted from the sub-sector population he derived from the ASIC licence holder database, (at most) only two entities that fell within the custodian service exemption is not probative of any error in the sub-sector population determined by ASIC. It is at most (arguably) indicative of the proposition that those two AFSL “custodian” authorisation holders obtained an authorisation they did not (as a matter of law) require. It is not at all probative of the very different propositions that either (i) ASIC had wrongly refused / failed to grant custodian authorisations to wholesale trustees or (ii) that ASIC had in fact granted custodian authorisations to those kinds of trustees, but mis-recorded that fact in its AFSL database records and had failed to include those entities in the “custodians” sub-sector population.

10. Apart from the flawed reasoning involved in Polymath’s criticism of the sub-sector population, ASIC relied on the “prima facie” probative value of its database records or, more particularly information extracted from them:- Corporations Act s 1274B. It may be debatable whether those provisions really advance the matter where, as here, what is in question is not so much the accuracy of the database information or the extract, but the adequacy and accuracy of the interrogation process to which it was subject for the purpose of producing the sub-sector population values contained in ASIC’s 2018 Sub-sector Determination. However, it is not necessary to embark on that debate, because of the absence of any adequate basis to conclude that the sub-sector population was materially erroneous.

11. The population values contained in the 2018 Sub-sector Determination has a legislative force, and ASIC strongly resisted the proposition that it could be disregarded. That resistance extended to include the proposition that even if the population figure in the Determination could be shown to be inaccurate, it would be a wrong exercise of the statutory waiver discretion to rely on such a demonstrated error to conclude that exceptional circumstances had been established for the purpose of the waiver discretion in the Collection Act. Depending on the particular circumstances, that extended part of ASIC’s resistance may be questionable, having regard to the expressly stated objectives of the legislative scheme (notwithstanding the “adjustment” mechanism contemplated by Levy Act s 10(6)) at least in those circumstances where the sub-sector population is a patent integer in the calculation of levy component amount (see eg., the “graduated levy component” formula in LevReg s 10(1)) and there are additional considerations relevant to a particular entity. But it is not necessary to venture upon an attempt to answer that question in the present matter. That is because there is no adequate evidentiary basis to conclude that the sub-sector population values determined by ASIC is materially erroneous or understated.

12. Polymath characterised the custodian component of the levy as an exercise in “double dipping”. This was said to be impermissible in principle and sufficient to either warrant or to contribute to satisfaction that the circumstances were relevantly exceptional. This contention was based on the propositions that (i) in practical terms, Polymath’s licence conditions limited its custodian authorisation to activities that were merely incidental to its provision of another financial service and, (ii) Polymath always intended to contract with other AFSL licence holders to have them perform any significant custodian service. This model for the delivery of custodian services led Polymath to assert that the levy component involved “double dipping” – because a custodian sub-sector levy would apply to both itself and to any AFSL holder with which it contracted to perform custodian services.

13. Allied to its reliance on the “double dipping” complaint, Polymath relied on the fact that it had not provided any custodian services during the financial year ended June 2018. That encouraged it to proffer the pejorative description of this levy component as a “fee for no service”. This forensically colourful description involves a mischaracterisation of the statutory basis for the levy.

14. It is fundamental to the basis of the levy liability that it applies to any AFSL holder who is “at any time” authorised to provide custodian services.  The undisputed facts are that (i) Polymath’s AFSL authorised it to provide custodial or depository services, (ii) because of that AFSL authorisation, Polymath formed part of the “custodians subsector” for the purposes of the 2017 Levy Regulations (specifically s 31) and, (iii) under the terms of those Regulations Polymath had a levy component liability, irrespective of whether or not it actually provided any custodian services.

15. Moreover, it is a misconception to depict the levy as intended to be proportionate to any level of services, whether those provided by Polymath to its clients, or by ASIC to Polymath. There is simply no statutory warrant for either view. The statutory provisions, and specifically the legislative scheme objectives, make it abundantly clear that the purpose of the scheme is to allow ASIC to levy invoices to recover the permissible part of its total costs. That levy is imposed primarily by virtue of an entity’s status as an AFSL holder, and inclusion in a sub-sector, “at any time” during the financial year. The calculation of the levy amount is not necessarily influenced by the number of days in which an entity held such a licence, and is not influenced by the extent of the services or the financial products involved in its activities.

16. Those observations are not intended to exclude the possibility that an AFSL holder’s inactivity could ever warrant consideration as an exceptional circumstance. Indeed, ASIC’s own waiver guidelines implicitly recognise such a possibility, at least where the inactivity is attributable to the incapacity of an individual related to the licence holder, or to extraneous events outside the entity’s control. But an entity’s inactivity is unlikely to merit characterisation as exceptional where (as in the present case) it is apparently the result of either ordinary commercial risks or management decisions taken by a licensee in the exercise of their commercial / business judgment. Where the AFSL holder either chose not to expose itself to the risks involved in embarking on the process of endeavouring to utilise its AFSL authorities, or was simply unable to attract revenue generating clients, the resultant indolence / unprofitability does not merit (nor does it contribute to) characterisation of the circumstances as “exceptional”. That is particularly the case where the considerations that attract the levy, and influence the calculation of the levy component, are the entity’s contemporary status as an AFSL holder “at any time” during the relevant financial year, rather than the extent, profitability or value of the AFSL authorised activities.

17. Polymath’s “double dipping” characterisation is impossible to justify as a material basis for criticism of the “custodians” sub-sector levy component. Since the levy liability depends primarily on the fact of the entities status as a relevant AFSL holder “at any time” in the financial year, it would seem to be perverse to treat the levy liability as in any sense a “fee for no service”. Second, even if the concept of “service” provision were to be recognised as relevant, the relevant “service” is that provided by ASIC in continuing to recognise, maintain and publish (on its register) the status of AFSL holders, and its regulation and supervision of the sub-sector in which the authorised entities operate and compete. In Polymath’s case it received the “service” of continued recognition, and it also received the “service” of continued regulation and supervision of other entities in the sub-sector. Third, since the “custodians” sub-sector levy component applied to every custodian, that application included both principal and sub-ordinate custodians, the statutory levy liability necessarily contemplated the asserted “double dipping”. Fourth, whilst the licence conditions imposed on Polymath permitted it to sub-contract the performance of custodian services, they in no sense absolved Polymath from a primary liability as custodian.

1. For all the preceding reasons, there is no substance in Polymath’s criticism of the accuracy of the “custodians” levy component of the January 2019 invoice. Neither is there any substance in its pejorative characterisations of that component of the levy.

   THE “WHOLESALE TRUSTEE” INVOICE COMPONENT

2. The principal bases of Polymath’s waiver request relating to the “wholesale trustees” invoice component were to the following effect –

   (a)The levy amount must be incorrect, for substantially the same reasons as those advanced in criticising the regulatory costs allocation for the “wholesale personal adviser” levy component,

   (b)The levy amount must be wrong (and significantly overstated) for the additional reason that the “wholesale trustee” sub-sector population determined by ASIC was significantly understated,

   (c)Polymath did not provide wholesale trustee services during the 2018 financial year,

   (d)More specifically, Polymath’s “key person” was an Australian legal practitioner who held a solicitor’s practising certificate and would be precluded (by the terms of the Legal Profession Uniform Law (NSW) s 258(1)) from promoting or operating a managed investment scheme, and

   (e)Polymath could not pay the invoice amount from its own resources (or its anticipated revenue for the 2019 financial year) and would need to raise further capital (or, borrow funds).

3. Polymath’s criticism of this invoice component in relation to the allocation of “regulatory costs” to the “wholesale trustee” sub-sector substantially reflected the similar complaints made in relation to the “wholesale personal adviser” and “custodians” sub-sectors. For the reasons I have given earlier, neither of those complaints (relating to cost allocation or the sub-sector population) were made out.

4. Polymath’s criticism of the sub-sector population was based on the substantial population difference indicated in the table in paragraph 25 above, and the asserted derivation of that difference from analysis of the publicly accessible ASIC database as at July 2019.

5. Earlier in these reasons I outlined the nature of the exercise Mr Dobrijevic had undertaken in relation to that database information. I pointed out that the precise details of the exercise he had carried out had not been sufficiently elucidated to conduce to satisfaction about its accuracy or about the reliability of the conclusions he sought to draw from it. I went further and indicated that such explanation as had been provided tended to highlight the probable unreliability of the exercise. I illustrated that by the extent to which the analysis tended to understate the populations for the “custodians” and “wholesale personal adviser” sub-sector populations;- see paragraph 28 above. That particular illustration does not apply to justify criticism of the “wholesale trustee” sub-sector population conclusion proffered by Polymath. But there are other reasons to question that conclusion. They emerge from the evidence Mr Connor gave, and from the evidence of Mr Povey, the lawyer who acted for ASIC in the review proceedings. Mr Connor’s evidence addressed the search parameters Mr Dobrijevic disclosed he had used, and pointed out that they would likely result in any AFSL licence holder being reported as part of the “wholesale trustee” sub-sector where those parameters appeared in the content of the AFSL wording, even if they were not in the actual authorisations expressly stated in the licence. Mr Connor concluded that the search parameters used by Dobrijevic were, therefore, inherently likely to result in a report that overstated the “wholesale trustees” sub-sector population.

6. Mr Povey’s evidence was to the following effect:-

   (a)He had obtained from other ASIC officers a “data capture” from the ASIC database that had been filtered to capture AFSLs issued, approved or suspended during the 2018 year, and coded (within ASIC’s database system) as containing a “managed investment scheme” authorisation and relating to wholesale client business, and whose status was either approved or suspended as at June 2018.

   (b)He had used that data, with a control sheet identifying the “expected” codes for any form of wholesale “managed investment scheme” authorisation, to produce an apparently reliable listing of the “wholesale trustee” population having regard to the “at any time” sub-sector membership criterion in the 2017 Levy Regulations.

   (c)He had derived from that listing a sub-sector population count of 1,638 (ie., slightly more than the 1,626 population contained in the 2018 Sub-sector Determination).

   (d)He had provided that listing to Mr Dobrijevic.

   (e)He had compared his spreadsheet listing to the list of 1,900 that had been provided to him by Mr Dobrijevic.

   (f)As a result of that comparison he had established that Mr Dobrijevic’s list contained a number of AFSL holders whose authority did not include managed investment schemes and which were not, therefore, part of the “wholesale trustee” sub-sector.

   (g)As a result of that comparison he had also established that Mr Dobrijevic’s list did not include some AFSL holders that were included in Mr Povey’s spreadsheet listing of the “wholesale trustees” sub-sector population.

7. The evidence of Mr Connor and Mr Povey leaves me comfortably satisfied that Mr Dobrijevic’s analysis of the publicly accessible ASIC register as at July 2019, and his attempt to derive from it, the “correct” sub-sector population for the purposes of the required levy calculations, was unreliable. As I have already said, both the questionable sufficiency of that publicly accessible database, and the poverty of detail explaining the analytical process he undertook, detracts from confidence in the accuracy and utility of the exercise. Complementing those reasons for lack of confidence are the anomalies revealed by Mr Povey’s evidence – that Mr Dobrijevic’s listing of 1,900 AFSL holders not only included entities that were not, in truth, “wholesale trustee” sub-sector members, but failed to include AFSL holders that were.

8. Consequently, even if Polymath could otherwise have overcome the conceptual difficulty that the 2018 Sub-sector Determination had a legislative authority for determining the population value ASIC had used, the evidence failed to demonstrate a factual basis for concluding that the population value was, to any material extent, erroneous.

9. I alluded earlier in these reasons to Mr Dobrijevic’s status as Polymath’s principal director, “responsible manager” and (since 2016) a person holding a conditional solicitor’s practising certificate. Mr Dobrijevic relied on his latter status to suggest that he was prohibited from promoting or operating a managed investment scheme, and that in practical terms Polymath was consequently precluded from so doing.

10. Mr Dobrijevic’s reliance on the prohibition expressed in the Legal Profession Uniform Law (NSW) s 258(1)) is problematic. It applies to a “law practice” or a “related entity” of such a practice. The former expression certainly does not include Polymath. It would include Mr Dobrijevic, if he was a “sole practitioner”. But that expression is defined to mean “an Australian legal practitioner (ie., a lawyer with a current practising certificate) who engages in legal practice on his or her own account”. Mr Dobrijevic’s practising certificate is limited to his role as a “corporate legal practitioner”. That expression is defined to mean an Australian legal practitioner “who engages in legal practice only in the capacity of an in-house lawyer for his or her employer or a related entity, but does not include a government legal practitioner”. It would seem to follow that the two concepts of “sole practitioner” and “corporate legal practitioner” are discrete and mutually exclusive. It is consequently unlikely that Mr Dobrijevic, who has expressly described himself as an unpaid employee, and (in substance) disavowed the provision of any legal services other than in that capacity, could be characterised as engaging in legal practice “on his own account”.

11. Given the nature of Mr Dobrijevic’s practising certificate, which limits him to providing legal services to Polymath, there is no substance whatsoever in his additional contention that, if he were to be actively involved in Polymath’s business affairs, particularly in the operation of a “managed investment scheme” that would involve an ethical conflict, and tend to “compromise the integrity of the profession” – to such an extent as to preclude him (and thus Polymath) from any such activity. The fact is that there is nothing to preclude Mr Dobrijevic from operating Polymath’s activities. He could not lawfully perform legal services for clients or investors dealing with Polymath, and he would not have any obligations or duties to them as legal services clients. The propriety of his conduct in conducting or promoting Polymath’s activities, in terms of his more general ethical obligations (to be of good character – see Corporations Act s 913B(2)&(3)) is a matter for him to address. The implications of those obligations will depend on the particular circumstances that may arise. They are not an insuperable, and it mere supposition to suggest that they constitute any, impediment to Polymath’s conduct of its AFSL authorised activities.

12. Even if the Legal Profession Uniform Law (NSW) prohibition did apply, and relevantly explained Polymath’s inactivity during the 2018 financial year, it would not constitute exceptional circumstances for the purposes of the Collection Act s 15. Polymath, not Mr Dobrijevic, was the licensed entity. It was a matter for Polymath, as the licensed entity, to satisfy itself whether it had the means, including the appropriately qualified personnel, to warrant the continued retention of its “managed investment scheme” authorisation.

    THE “EXCEPTIONAL CIRCUMSTANCES” CRITERION

13. In the preceding parts of these reasons I have addressed Polymath’s specific criticisms of the individual levy components, with particular emphasis on the criticism of the accuracy of those components. Those accuracy related criticisms do not, however, delineate the universe of considerations relevant to Polymath’s reliance on the “exceptional circumstances” waiver discretion. In Nikac and Others v Minister for Immigration and Ethnic Affairs (1988) 20 FCR 65 at 81, in what was obviously a very different context from the present, Wilcox J observed that:

    the term "exceptional circumstances" postulates a criterion which is both vague and subjective. Every case is different, so that there are always some aspects of a case which may be regarded as exceptional. The question inevitably arises: exceptional compared with what? Even if it be conceded that there is nothing very exceptional about drug offences appearing upon a list of convictions, there will always be differences in the circumstances of those offences. … Like beauty, "exceptional circumstances" lies in the eye of the beholder.

14. In another context the view has been expressed that “exceptional circumstances” are simply those considered sufficient to warrant the exercise of the particular statutory discretion:- Hewlett Packard Australia Pty Ltd v GE Capital Finance Pty Ltd (2003) 135 FCR 206 at 217, [28]. That is consistent with the proposition that the word “exceptional” is an “ordinary, familiar English adjective” that “describes a circumstance which is such as to form an exception, which is out of the ordinary course, or unusual, or special, or uncommon”:- per Lord Bingham of Cornhill CJ in R v Kelly (Edward) [2000] 1 QB 198 at 208; [1999] 2 All ER 13 at 20.

15. Notwithstanding the essentially permissive generality of the “exceptional circumstances” criterion, a number of principles tend to discipline, or at least inform, its application. They are to the following effect:-

    (a)the circumstances advanced in any particular case must be taken into account, and examined against the background of the particular legislative purpose and content:- Kent v Wilson [2000] VSC 98 at [22]; R v Okinikan [1993] 1 WLR 173 at 176; Yacoub v Pilkington (Australia) Ltd [2007] NSWCA 290 at [66].

    (b)the particular circumstances relied on need not require characterisation as either unique, or even very rare, but they cannot be circumstances that are regularly, routinely or normally encountered: Yacoub v Pilkington (Australia) Ltd [2007] NSWCA 290 at [66]; San v Rumble (No 2) [2007] NSWCA 259 at [59]-[69].

    (c)circumstances may merit characterisation as exceptional either because of their unusual occurrence, the unusual significance of their impact in the particular case, or because of their unusual combination (of occurrence or significance):- Yacoub v Pilkington (Australia) Ltd [2007] NSWCA 290 at [66]; Ward v Commissioner of Taxation [2016] FCAFC 132 at [43]; United Mexican States v Cabal (2001) 209 CLR 165 at [52].

16. Even within the discipline of those principles, the ultimate assessment as to whether the particular circumstances merit characterisation as exceptional, will necessarily be a matter of impression. This is especially so where, as here, the subject matter involved concerns specialised and heavily regulated areas of activity and there are unlikely to be readily available criteria for determining what circumstances are in truth out of the ordinary, uncommon or unusual. And even where there is a basis for regarding particular circumstances as meriting one or more of those descriptions, there remains a further impressionistic assessment about the weight to be accorded to those descriptions, having regard to the nature of the legislative context and purpose.

17. In the present case, against the background of his complaints about the accuracy of the calculation of the levy components, Polymath advanced a number of other considerations to support its contention that it had satisfied the “exceptional circumstances” criterion. They were (i) its inactivity during the 2018 financial year, (ii) its inactivity as a “wholesale trustee (purportedly because of Mr Dobrijevic’s solicitor status), (iii) its limited financial strength, and (iv) the year to year variations in its AFSL fee / levy.

18. The fact that Polymath conducted no AFSL activities during the 2018 financial year, neither merits, nor contributes to, characterisation of Polymath’s circumstances as exceptional. This is so for the reasons I explained earlier:- see paragraphs 39 to 42 above. Neither does Mr Dobrijevic’s status as a solicitor, again for the reasons I gave earlier:- see paragraphs 52 to 55 above.

19. Mr Dobrijevic contended that the levy amount threatened Polymath’s financial future, and contributed to the existence of “exceptional circumstances”. This proposition cannot be accepted. I have already pointed out that Polymath generated no revenue from its AFSL licence in either of the 2018 and 2019 financial years. Consistent with that inactivity, it has a very modest balance sheet. Its only significant asset is a small total of “cash and equivalents”. The 2019 levy invoice amount is the only significant liability disclosed in its 2019 balance sheet. Having regard to the recognition of that liability, it maintained a (very small) net asset balance as at June 2019, only because of an $8,000 share issue during the 2019 financial year.

20. Modest though it may be, Polymath’s balance sheet shows that it is in a position to fund the levy payment. It also tends to show that its shareholder is willing to support the company, at least to the extent sufficient to meet the 2018 levy liability, and notwithstanding the company’s inactivity during the last two financial years. Whether or not Polymath’s future financial circumstances will enable it to continue to fund future levy amounts is a suppositious exercise on which it is unnecessary to embark.

21. In relation to the asserted fluctuations / variations in the amount of Polymath’s AFSL fee or levy, as part of his review hearing submissions Mr Dobrijevic produced a table setting out the fees and / or levy components related to Polymath’s AFSL in each of the financial years ended June 2017, 2018 and 2019. His contention was that there were significant differences between the 2018 and 2019 amounts, and that their magnitude demonstrated that the 2018 levy components were unreasonable, “grossly unfair” and reflected a governmental recognition to that effect.

22. The version of the table that Mr Dobrijevic first proffered made no attempt to establish either the “regulatory costs” or the sub-sector population values that were essential to understand the significance of the values he attributed to the levy components for the 2019 financial year. After the conclusion of the hearing he proffered a further affidavit, to which he annexed copies of the relevant ASIC annual determinations for the 2019 financial year. He then included in further written submissions another comparison table. That table, with the addition of ASIC’s total regulatory costs, was broadly to the following effect.

2017	2018	2019	% Change
ASIC regulatory costs - Total	na	236,582,384	276,711,435	17%
Wholesale trustees
sub-sector costs	na	9,379,608	9,611,781	2%
sub-sector population	na	1,626	1,685	4%
sub-sector metric, basic	na	570,254	na	na
Fee / Levy component	na	6,004	1,000	-83%
Custodians
sub-sector costs	na	740,788	945,073	28%
sub-sector population	na	1,023	1,093	7%
sub-sector metric, basic	na	1,023	1,093	7%
Fee / Levy component	na	724	865	19%
Wholesale personal adviser
sub-sector costs	na	826,123	180,643	-78%
sub-sector population	na	1,511	1,579	5%
sub-sector metric, basic	na	1,511	1,579	5%
Fee / Levy component	na	547	114	-79%
Total fee / levy	608	7,275	1,079	-73%

1. ASIC agreed that the “fee / levy” components identified by Mr Dobrijevic for the 2019 year were likely to be substantially correct. In addition, an objective review of the table does show that there have been some significant changes – both in ASIC’s total regulatory costs and, perhaps more particularly in the costs allocated to the “custodians” and “wholesale personal advisers” sub-sectors. Nevertheless, the comparison Polymath invited the Tribunal to make is of no value. One of the reasons for the inutility of the comparison is the fundamental difficulty arising from the legislative character of the determinations on which the levy component calculations depend. Another reason is that Polymath’s comparison emphasises the percentage changes in the levy components, whereas with one exception, they involve modest amounts, and they also involve increases in the sub-sector populations. The third reason, again subject to the same exception, is that the underlying reasons for the changes are unexplained, and that absence of explanation cannot logically lead to any informed conclusion that the corresponding values relating to the 2018 year were either wrong or excessive. The fourth reason, relates to the exception, namely the significant decrease in the levy component for the “wholesale trustee” sector – despite the (comparatively) minor increases in both of the sub-sector’s regulatory costs and population.

2. In relation to that aspect of the 2019 financial year levy component, Polymath’s post hearing submissions contended that the annual determinations for the 2019 financial year showed that the reason for the change was to reflect a more fair allocation of costs between authorisation holders. That contention failed to take into account the fact that the LevReg explicitly provided for a different method for the calculation of the “wholesale trustee” levy component for the 2019 financial year. (I alluded to the difference earlier in these reasons:- see paragraph 18 above.) It was that different method of calculation, together with Polymath’s inactivity in the 2019 year, which combined to produce the significant reduction in that component of the levy for the 2019 year. It is quite clear that the required levy calculation for the 2019 financial year reflected a different basis for cost allocation amongst the “wholesale trustee” sub-sector population. It may be that this change could be perceived, as Polymath contended, as involving a more proportionate / fair allocation basis that than which applied for the 2018 year. But the fact remains that the allocation basis for each year was specifically authorised in the LevReg provisions.

1. When all of those considerations are taken into account, the comparison Polymath proffered in no sense demonstrates the unreasonableness of the levy components in the January 2019 invoice.

2. For the reasons set out above nothing advanced on Polymath’s behalf either merits characterisation as an exceptional circumstance, or contributes to satisfaction that, taken in combination, the circumstances it relied on could be characterised as exceptional.

   THE RESIDUAL DISCRETION

3. I endeavoured to indicate earlier that the “exceptional circumstances” criterion involves a consideration of both the extent to which the matters relied upon are out of the ordinary, and also the weight properly to be accorded to the non-ordinary character, having regard to the legislative context in which the discretion falls to be exercised. If the emphasis is placed on assessing whether the circumstances are out of the ordinary, it is proper to recognise that the ultimate, and residual question, is whether that assessment is sufficient to justify exercise of the discretion. On the other hand, if the emphasis in the “exceptional circumstances” assessment is on whether the circumstances are “sufficient to warrant the exercise of the particular statutory discretion” (see paragraph 57 above) then that emphasis subsumes the idea of a residual discretion.

4. In the present matter I should be understood as having proceeded with a primary focus on the question of whether the circumstances Polymath relied on were relevantly uncommon and out of the ordinary. In this remaining section of the reasons, I focus as well on assessing those circumstances against the background of the statutory scheme. Viewing Polymath’s contentions from that perspective, even if I had been satisfied that Polymath had demonstrated the circumstances it relied on merited description as relevantly uncommon or out of the ordinary, I would not have regarded them “exceptional” so as to justify “waiver’ of the levy components. This is because the matters it advanced fell broadly into three categories – namely (i) erroneous calculation / determination of the levy amounts, (ii) inactivity during the levy year and, (iii) limited means.

5. As to the first matter, even if the asserted errors in the derivation of the sub-sector levy component integers had been made out, the significance of those errors would have to be evaluated against the overall scheme objectives, the adjustment mechanism contemplated by Levy Act s 10(6), and the prohibition against that adjustment mechanism including amounts that were the subject of a Collection Act waiver. When those matters are taken into account, they tend against the proposition that (absent other material considerations) “errors” of the kind asserted could properly justify exercise of the waiver discretion.

6. As to the second matter, where the levy liability primarily depended on an entity’s status as a relevant AFSL holder “at any time” during the financial year, it would seem rather improper, to regard an entity’s voluntary inaction (which is the proper characterisation of Polymath’s situation) as providing any meaningful contribution to characterisation of its circumstances as sufficiently “exceptional” as to justify “waiver” of the levy components. That is at least the case where, as here, the amount in question is comparatively modest, and the liability demonstrably not determined by reference to the nature and extent of the entity’s activities.

7. As to the third matter, Polymath wholly failed to make out the proposition that it lacked the means to fund the levy payment liability. Moreover, the fee is, in the scheme of things, modest. In criticising ASIC’s waiver guidelines, in so far as they suggested that the “exceptional circumstances” criterion could be satisfied where an entity had been adversely affected by “significant economic events”, Mr Dobrijevic opined that if an entity could not manage its affairs so as to deal with such events then “it should not be managing investor’s money”. It seems apt to apply similar reasoning to conclude that, since Polymath apparently wishes to retain its AFSL, and to participate in management activities of that kind, it intends to ensure that it has the means to do so in a competent, careful and prudent manner. Consequently, the current modesty of its balance sheet, ought not be taken as a significant consideration, and ought not be regarded as one likely to be probative of its inability to meet the essentially modest levy liabilities it currently faces.

   CONCLUSION

8. The decision under review is affirmed.

I certify that the preceding 75 (seventy -five) paragraphs are a true copy of the reasons for the decision herein of Mr P W Taylor SC, Senior Member

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

Associate

Dated: 6 April 2020

Date(s) of hearing:	3, 4 & 5 February 2020
Date final submissions received:	10 February 2020
Advocate for the Applicant:	Mr P Dobrijevic
Counsel for the Respondent:	Dr P Bender
Solicitors for the Respondent:	Australian Securities and Investments Commission