Prasad and Australian Securities and Investments Commission

[2016] AATA 547

Prasad and Australian Securities and Investments Commission [2016] AATA 547 (29 July 2016)

Division	Taxation & Commercial Division
File Number(s)	2016/1785
Re	Raghwa Prasad
Applicant
And	Australian Securities and Investments Commission
Respondent

DECISION

Tribunal	Professor R Deutsch, Deputy President
Date	29 July 2016
Place	Sydney

The application for an extension of time for lodging an application for review is refused.

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

Professor R Deutsch, Deputy President

Catchwords

PRACTICE AND PROCEDURE – application for extension of time to lodge application for review – application for review lodged almost seven months after expiration of prescribed time – applicant did not give satisfactory explanation for delay – applicant rested on rights – apparent lack of merit of applicant’s application for review – Tribunal not satisfied that reasonable in all the circumstances to grant extension of time – application for extension of time refused

Legislation

Administrative Appeals Tribunal Act 1975 (Cth), s 29

Australian Securities and Investments Commission Act 2001 (Cth), s 12DA

Corporations Act 2001 (Cth), ss 79, 180, 1041F

National Consumer Credit Protection Act 2009(Cth), ss 5, 160D

National Credit Code, s 154

Cases

Australian Securities and Investments Commission v ActiveSuper Pty Ltd (In Liq) [2015] FCA 342

Comcare v A’Hearn (1993) 45 FCR 441

Duong v Australian Postal Corporation (2005) 41 AAR 288

Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344

Jason Zou v Minister for Immigration and Border Protection [2016] AATA 16

Re Mulheron and Australian Telecom Corporation (1991) 23 ALD 309

Re Webb v Department of Employment and Workplace Relations [2010] AATA 232

El Dirani v Secretary, Department of Social Services [2014] AATA 893

Wijaya and Minister for Immigration and Multicultural and Indigenous Affairs [2005] AATA 720

Wyong-Gosford Progressive Community Radio Inc v Australian Communications Media Authority (2006) 93 ALD 784

Secondary Materials

Australian Securities and Investments Commission Regulatory Guide, no. 98 & 218

REASONS FOR DECISION

Professor R Deutsch, Deputy President

29 July 2016

What this case is about

1. This case concerns an application made by Mr Prasad (the Applicant) seeking an extension of time within which to lodge an application for review of two Banning Decisions (the Banning Decisions) made by the Australian Securities and Investments Commission (the Respondent) on 14 July 2015.

2. The Banning Decisions were served on the Applicant on 19 August 2015. The review period provided for under s 29(2)(a) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) is 28 days after service on the Applicant.

3. Accordingly, the last day to file an application for review was 16 September 2015.

4. The application was in fact lodged on 7 April 2016, almost 7 months late.

5. The question to resolve in these proceedings is whether the Applicant should be granted the required extension of time to bring the application for review under s 29(7) of the AAT Act which provides:

   (7)the Tribunal may, upon application in writing by a person, extend the time for the making by that person of an application to the Tribunal for a review of the decision (including a decision made before the commencement of this section) if the Tribunal is satisfied that it is reasonable in all the circumstances to do so.

The Principles

1. The principles applicable to the Tribunal’s determination of whether or not to grant an extension of time application under this subsection are summarised by Edmonds J in Duong v Australian Postal Corporation (2005) 41 AAR 288 where His Honour said by reference to the decisions in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348–349 and Re Mulheron and Australian Telecom Corporation (1991) 23 ALD 309:

   (1) Prima facie, proceedings should be commenced within the prescribed period and an applicant for extension must show “an acceptable explanation of the delay” and that it is “fair and equitable in the circumstances” to extend time;

   (2) Any action taken by the applicant, other than by making an application for review, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished. A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision-maker aware that he contests the finality of the decision (who has not “rested on his rights”) and a case where the decision-maker was allowed to believe that the matter was finally concluded.

   (3) Any prejudice to the respondent including any prejudice in defending the proceedings occasioned by the delay is a material factor militating against the grant of an extension.

   (4) However, the mere absence of prejudice is not enough to justify the grant of an extension. In this context, public considerations often intrude. A delay which may result, if the application is successful, in the unsettling of other people or of established practices is likely to prove fatal to the application.

   (5) The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted.

   (6) Considerations of fairness as between the applicants and other persons otherwise in a like position are relevant to the manner of exercise of the court’s discretion.

2. Notwithstanding Edmonds J’s comment that an applicant for extension must show an acceptable explanation of the delay, it is clear from other cases that an acceptable explanation for the delay is not a precondition for the grant of an extension of time. It is however, normally an expectation of the Tribunal or Court considering the matter that such an explanation would be given: Comcare v A’Hearn (1993) 45 FCR 441 at 444; Wijaya and Minister for Immigration and Multicultural and Indigenous Affairs [2005] AATA 720 at [10] and [17]. Accordingly this Tribunal will proceed on the basis that an acceptable explanation for the delay, whilst not a precondition, is highly relevant in the overall assessment of whether an extension should be granted. Clearly in this regard, the longer the period of delay, the more substantial one would expect the explanation to be and the explanation would need to cover the entire period of the delay. Thus, for example if the delay is a period of five months and a medical certificate is presented establishing that the Applicant was unwell during two months of that five month period, this may well not be adequate in giving a satisfactory explanation in relation to the entire period in question.

3. Having regard to these authorities in determining the extension of time application, the Tribunal will consider the following important matters:

   i.    whether there is an acceptable explanation for the delay;

   ii.    whether the Applicant has rested on his rights;

   iii.    whether there is merit in the substantive application;

   iv.    whether there is any prejudice to the Respondent if an extension of time were granted.

Was there an acceptable explanation for the delay?

1. Both at the hearing and partly in submissions put before the Tribunal prior to the hearing, the Applicant provided two possible explanations for the delay, namely:

• that he was under extreme stress and this was affecting his mental health which prevented him from proceeding expeditiously with his review application. More specifically, he states:

  “the banning orders severely interrupted and impacted my business and personal life. I went through major financial crisis [sic] and health issues as a result. I was not able to think straight, however, I now would like the Tribunal to review the findings of the ASIC Delegate”;

  and

• that he was under the mistaken belief that he could only proceed with a review application if he had legal representation, which he could not afford. In this regard, he advised the Tribunal that he only became aware of his right to pursue the review application without legal representation when he was informed of that fact late in 2015.

10.  Significantly, neither in relation to the medical ground nor in relation to the financial ground has the Applicant provided any tangible or cogent evidence to the Tribunal or the Respondent. For example, there are no tendered medical certificates, no statements of financial position and no statements from the person who is alleged to have given the Applicant information or advice in relation to pursuing the review application without legal representation.

11.  Put more narrowly, it is also relevant that the Applicant could have limited his immediate costs by paying the then Tribunal application fee of $861 and the legal costs in having the grounds of the application drafted professionally and lodging within time so as to preserve his rights to pursue his case in the Tribunal at some later point in time. No evidence was provided to suggest that the Applicant had even considered such steps and whether he could have paid even these limited costs.

12.  In the absence of such evidence the Tribunal can give little weight to these asserted reasons for the delay in commencing the review proceedings: Wyong-Gosford Progressive Community Radio Inc v Australian Communications Media Authority (2006) 93 ALD 784 at [24].

13.  Furthermore, the Applicant seems to be jumping between these two explanations and sought finally at the hearing of the extension of time application to suggest that the delay was caused by both matters, even though at various stages he has sought to explain the delay by reference to one of these matters to the exclusion it would seem of the other matter. In this regard, the Tribunal notes the following decisions which are of direct relevance to this case:

Jason Zou v Minister for Immigration and Border Protection [2016] AATA 160 at [49] - this Tribunal refused an application for an extension of time in circumstances where an applicant had given contradictory or inconsistent accounts in relation to why they had delayed in lodging the review application; and

El Dirani v Secretary, Department of Social Services [2014] AATA 893 at [8] - this Tribunal refused an application for an extension of time in circumstances where an applicant had placed reliance on medical issues but no substantiating medical evidence was provided.

14.  In the circumstances, it is concluded that the Applicant in this case has not demonstrated, to the satisfaction of this Tribunal, that he had an acceptable explanation for the lengthy delay which occurred in making his application for review. I emphasise however that whilst this is a relevant matter to take into account this in and of itself is not enough to dismiss the application as the view which I take is that while an acceptable explanation for delay is normally expected to be given, it is not a precondition for the grant of an extension of time.

Did the Applicant rest on his rights?

15.  The first thing that needs to be established in considering this question is the extent to which the Applicant knew of his rights during the period of the delay.

16.  The available evidence indicates that the Applicant was fully aware of his rights at all times from when he was first notified of the Delegate’s decision in relation to the making of the banning orders.

17.  In this context there are three matters that are particularly relevant:

• First, there was enclosed with each of the Banning Decisions an information sheet titled “ASIC Decisions: Your Rights”. Attention was drawn to that information sheet in the covering letter addressed to the Applicant. The information sheet made reference in some detail to the fact that the Applicant may have a right to seek review of the Banning Decisions in the Tribunal and that he must apply for review at the Tribunal within 28 days of being informed that the decisions had been made. In addition, the information sheet included a reference to the Tribunal’s website and provided contact information.

• Secondly, there is direct tangible evidence available which establishes that the Applicant was fully aware of his rights to seek review of the Banning Decisions. On 1 October 2015, a date which is two weeks into the seven month period of delay, the Applicant wrote to the Professional Conduct Officer with CPA Australia (the accountancy professional body) in relation to a complaint that had been initiated in respect of the Applicant based upon ASIC’s media release regarding the Banning Decisions. In that letter, the Applicant said that he contested the findings of ASIC and that he had:

  “considered seeking the approaching (sic) the AAT to reconsider the investigations on the basis of the conclusions and penalties that they have issued. Unfortunately, purely for the reason (sic) affordability such an appeal, and the legal cots (sic) the solicitors, barristers and independent experts, it is not feasible for me to challenge ASIC findings.”

• Thirdly, the Applicant was represented at the ASIC hearing by counsel and his solicitor was also present. It is not unreasonable to draw the inference that the Applicant’s legal representatives are likely to have informed him of the right to seek a review of any decision subsequently made by ASIC in the Tribunal and that the timeframe in which to do so was also likely to have been discussed. I stress that there is no evidence to confirm that any such conversations ever took place but it is not an unreasonable inference to draw from the presence of substantial legal representation at the ASIC hearing.

18.  In the circumstances, I conclude that the Applicant was at all relevant times aware of his rights to seek review of the Banning Decisions.

19.  Nonetheless, at no time after the expiration of the review period and prior to lodgement of the extension of time applications did the Applicant or anyone on his behalf write to the Respondent so as to indicate in any way that he was contesting or was considering the possibility of testing the finality of the Banning Decisions. For almost 7 months he gave the Respondent no indication that he disagreed with the findings of the Delegate. He only made reference to such disagreement in his communications with CPA Australia but as far as the Tribunal is aware, neither the fact of, nor the basis of, any such disagreement was ever communicated to the Respondent prior to the lodgement of the extension of time application.

20.  The Tribunal finds specifically that the Applicant did rest on his rights such that the Respondent was entitled to regard the matter as having been finalised.

What are the merits of the substantive application?

21.  As mentioned previously, the merits of the substantive application for review need to be taken into account in considering whether an extension of time should be granted: Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 349.

22.  Accordingly it is necessary to briefly outline findings made by the Delegate and to then assess whether there is any real prospect of different findings being made on a review of the substantive matter before this Tribunal.

23.  To do so it is necessary to at least consider in summary form the relevant factual background.

24.  Throughout the period 14 February 2008 to 9 March 2011 (the relevant period) the Applicant was the sole director and shareholder of a company known as Raj Prasad & Co Pty Ltd (Prasad Pty Ltd). At all relevant times it operated under the business name “Premium Financial & Retirement Solutions” (Premium Financial).

25.  In September 2004, Prasad Pty Ltd and the Applicant were appointed as financial services representatives of AMP Financial Planning Pty Ltd (AMP Financial) and in July 2010 they were both appointed as credit representatives by AMP Financial.

26.  In the relevant period a number of loan applications were sent to AMP Bank Ltd (AMP Bank) by Premium Financial. This included seven loan applications (the Loan Applications) which were specifically referred to by the Delegate in the reasons provided for the Banning Decisions.

27.  In each of the loan applications submitted copies of supporting documents purporting to be income tax returns and notices of assessment issued by the Australian Taxation Office in respect of the loan applicants referred to in the loan applications were included.

28.  One of those Loan Applications was referred to in the Delegate’s reasons as ‘Loan Application 6’ and it included copies of documents which were purporting to be payroll advices and PAYG Statement Summaries.

29.  After considerable investigation it became apparent that the supporting documents were not genuine and that the Notices of Assessment overstated the actual taxable income. Further, the PAYG Statement indicated that the loan applicant was employed by a company called e-Mortgage Solutions Pty Ltd, but again upon further investigation it became apparent that this was not in fact the case and no such employment existed.

30.  Thus, it became clear that a number of the documents connected with this loan applicant were falsified documents which misrepresented his true financial position.

31.  The falsified documents were created by Mrs Shashi Prasad, who at that time was married to the Applicant and worked for the Applicant as a broker assistant throughout the relevant period.

32.  In September 2014, Mrs Prasad was convicted of charges under the Crimes Act 1900 (Cth) as a result of her falsification of documents forming part of Loan Application 6 but also in relation to other loan applications made by Premium Financial.

33. The Delegate in making the Banning Decisions found that Mrs Prasad’s conduct in creating the falsified documents and providing them to AMP Bank as part of the Loan Applications contravened s 12DA of the Australian Securities and Investments Commission Act2001 (Cth) (ASIC Act) and s154(1) of the National Credit Code (the Code) which provide as follows:

ASIC Act

12DA   Misleading or deceptive conduct

(1)A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.   

National Credit Code

154     False or misleading representations

(1)A person must not make a false or misleading representation in relation to a matter that is material to entry into a credit contract or a related transaction or in attempting to induce another person to enter into a credit contract or related transaction.

Criminal penalty:        50 penalty units

34. Furthermore the Delegate considered and took the view that the Applicant was involved in a contravention of s 12DA of the ASIC Act by Mrs Prasad and that in relation to two of those applications, the Applicant was involved in a contravention of s 154(1) of the Code by Mrs Prasad.

35. Relevantly, s 79 of the Corporations Act 2001 (Cth) and s 5 of the National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) identify in materially identical terms that a person will be involved in a contravention of a provision if, and only if, the person:

a.    has aided, abetted, counselled or procured the contravention; or

b.    has induced the contravention, whether by threats or promises or otherwise; or

c.    has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

d.    has conspired with others to effect the contravention.  

36.  In Australian Securities and Investments Commission v ActiveSuper Pty Ltd (In Liq) [2015] FCA 342, White J outlined the principles relevant to a determination of whether a person has been “knowingly concerned” in a statutory contravention for the purposes of paragraph (c) above. In doing so he pointed out that the person needs to be knowingly concerned in the sense that he must have been an intentional participant with knowledge of the essential elements constituting the contravention. This however does not extend to a requirement that the person must also know that those elements amount to a contravention. In other words, the person need not know that the conduct was unlawful provided that he had knowledge of the essential elements that made up the contravention. White J also concluded that proof that the person had actual knowledge of each of the essential elements making up the contravention will commonly arise as a matter of inference from all the circumstances, including the failure of a person to make enquiries in respect of matters raising suspicion.

37.  The Delegate found that the Applicant was knowingly concerned in the contraventions by Mrs Prasad for the following reasons:

(a)  the Applicant instructed Mrs Prasad to prepare the Loan Applications on his behalf;

(b)  the Applicant was familiar with the financial situation of most of the relevant loan applicants having acted as their tax agent previously;

(c)  the Applicant knew the amount of the loan that was required having attended the initial client meeting;

(d)  the Applicant signed the relevant Loan Applications without querying whether the loan applicant’s income was sufficient to service the loan;

(e)  the covering letter to the loan application and the attachments contained false information which the Applicant would have seen when he signed the loan application forms. He would have known or should, with minimal enquiry, have discovered that such information was false given his familiarity with the loan applicant’s financial position; and

(f)    the Applicant directed, or at the very least, allowed Mrs Prasad to send the Loan Applications to AMP Bank on the Applicant’s behalf.

38.  There were other allegations made in relation to the Applicant’s involvement but these were more minor matters which the Applicant has sought to dispute on a factual basis.

39.  The Delegate noted that the Applicant’s misconduct had occurred on many occasions over a lengthy period of time.

40.  The Applicant did not accept, and the Delegate did not necessarily assert, that he knew that the relevant documents were false. However, the Applicant accepts responsibility for what he claims were poor procedures which he adopted in supervising the various aspects of the making of the loan applications.

41.  Nonetheless it is significant that the remarks on sentencing in relation to Mrs Prasad’s convictions, the sentencing judge made the following comment: –

“…[I]t is perhaps perplexing that this offender (referring to Mrs Prasad) has obtained documents which must have come from the accounting side of her husband’s business. It is difficult to comprehend how her husband…was not aware or at least involved in the activity.’

42.  I also note that on 1 February 2012, the Mortgage Finance Association of Australia (MFAA) found that the Applicant was liable under clause 54 of the MFAA Code of Conduct and imposed upon him a fine of $20,000.

43. While the Applicant has sought to challenge a number of the Delegate’s findings, it does not appear to be the case that the Applicant’s extension of time application is challenging the Delegate’s finding that he was directly engaged in contravention of s 12DA of the ASIC Act in relation to Loan Application 1.

44. Furthermore, regardless of the Applicant’s knowledge of Mrs Prasad’s conduct in deliberately falsifying documents, it is clear that he failed in a material way to exercise diligence and judgement in his role as an authorised representative of AMP and as a director of Prasad Pty Ltd. This conduct is likely to entail contraventions of provisions such as ss 180 and 1041F of the Corporations Act and s 160D of the NCCP Act. ASIC has indicated that they may seek to rely upon those provisions in addition to the breaches found by the Delegate if the matter is to proceed by way of hearing before this Tribunal.

45.  The Applicant contends that the Banning Decisions were wrong primarily because he had no direct or actual knowledge of breaches committed by Mrs Prasad.

46.  Clearly, the Tribunal is not in a position to assess the strength of this contention fully, based on the current state of the evidence. However, the prospects of the Applicant persuading the Tribunal are limited. In this respect it is important to remember that the misleading information was not buried in the attachments at the back of some obscure documents. Rather the misleading information was clearly indicated in the covering letter which the Applicant would have viewed when signing the loan applications in his capacity as a representative of the AMP Bank. Viewed in the context of his relationship with Mrs Prasad, the presence of the Applicant at the initial client meetings and his overall regulatory responsibilities, it is highly implausible that the Applicant did not know that the Loan Applications contained misleading and deceptive information as to the financial position of the relevant loan applicants. His position in this regard is very weak.

47.  I also note that where there are findings of false misleading or deceptive conduct, ASIC’s Regulatory Guide 98 and 218 suggests that an appropriate banning order of 3 to 10 years would be appropriate. The Delegate in this case has decided to impose a ban of four years which is very much at the lower end of the possible range.

48.  This range also applies where there is a high level of carelessness or incompetence and at the very least, even if the Applicant can persuade the Tribunal that he was not knowingly concerned in the falsification of documents, a suggestion of a high level of carelessness on his part would be difficult to contradict having regard to the available evidence.

49.  In the circumstances, I conclude that the prospects of success if this matter went to a hearing would be very weak.

Would there be any prejudice to the Respondent if an extension of time were granted?

50. The Respondent has indicated that it has an interest in its regulatory functions being finalised within a reasonable time and that a grant of considerable extensions of time to challenge decisions may compromise that interest. It also points out that as a practical matter, it relies on the 28 day rule in s 29 of the AAT Act for planning and resourcing purposes.

51.  Those matters are important but they do not in the view of this Tribunal amount to a prejudice arising from this case.

52.  I do not see that there would be any material prejudice to the Respondent if an extension of time were granted.

53.  That however is not enough in itself to justify an extension of time being granted.

Conclusion

54.  The prima facie rule which is to be adopted in relation to matters of this kind is that proceedings which are commenced outside the period allowed for should not ordinarily been entertained.

55.  The length of delay in this case is one of almost seven months which, considering that the timeframe allowed for making the application is 28 days, is a delay of considerable significance.

56.  The Applicant has provided some explanation for the delay but in my view those explanations generally do not adequately address the period of seven months. In addition, the Applicant’s prospects of achieving a successful result in a hearing before the Tribunal are very weak and it is clearly the case that he has rested on his rights for almost the entirety of the seven month delay without giving any hint to the Respondent that he was looking to have the matter reviewed. In these circumstances the extension of time application cannot be entertained.

Decision

57.  The application for an extension of time for lodging an application for review is refused.

I certify that the preceding 57 (fifty-seven) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President

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

Associate

Dated 29 July 2016

Date of hearing	7 July 2016
Applicant	In person
Counsel for the Respondent	Ms T Phillips
Solicitors for the Respondent	Australian Securities and Investments Commission