Re Scott and Australian Securities and Investments Commission

[2009] AATA 798

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 798

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2009/4223

GENERAL ADMINISTRATIVE DIVISION        )

Re      ANTHONY SCOTT

Applicant

AndAUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Respondent

DECISION

TribunalJustice Downes, President

Date13 October 2009

PlaceMelbourne

DecisionStay application refused.

..............................................

Garry Downes
  President

CATCHWORDS

GENERAL ADMINISTRATIVE – application to stay decision of Australian Securities and Investments Commission – decision prohibited applicant from managing a corporation for a period of 18 months – prospects of success, public interest, consequences for parties and consequences on application for review considered by Tribunal – stay application refused.

RELEVANT ACT/S:

Administrative Appeals Tribunal Act 1975

Corporations Act 2001

CITATIONS

Australian Securities and Investments Commission v PTLZ [2008] FCAFC 164; 48 AAR 559

REASONS FOR DECISION

13 October 2009	Justice Downes, President
Summary

1.      Anthony James Scott has sought review in the tribunal of a decision of a delegate of the Australian Securities and Investments Commission prohibiting him from managing a corporation for a period of 18 months.  The decision was made and communicated on 10 August 2009.  Mr Scott today applies to the tribunal for a stay of the operation or implementation of the decision to permit him to continue to manage corporations pending the hearing of the application for review. 

2.      At the beginning of the hearing today, I offered the parties hearing dates in this matter as early as 4 November, which is a little more than two weeks away.  The parties, I think understandably, were unable to agree to a hearing that early, because the interlocutory steps for preparation of the matter for hearing have not taken place.  However, the parties did agree to dates for hearing of the matter on 26 November and if the matter does not conclude on that day, 27 November. 

3.      Since the making of the banning order on 10 August 2009, Mr Scott has been unable to engage in the management of a corporation.  It follows that he has been so disentitled now for a period of more than two months.  The hearing of the application for review will be less than two months from now.  Indeed, I think something more like six weeks away. 

4. Application having been made for a stay of proceedings under s 41 of the Administrative Appeals Tribunal Act 1975, it is nevertheless incumbent upon me now to consider whether a stay is appropriate.  In considering the application, it is appropriate for me to consider a range of matters, including:

1.        The prospects of success.

2.        The consequence for the applicant of the refusal of a stay.

3.        The public interest.

4The consequences for the respondent in carrying out its functions depending upon whether a stay is granted or not. 

5.Whether the application for review would be rendered nugatory if a stay were not granted. 

6.Other matters that are relevant, amongst which I would include the length of time that the ban has already been in place and the gap between today and the hearing of the application.

5.      So far as the prospects of success are concerned, I will proceed on the basis that there are reasonable prospects of success in the application to set aside the banning order altogether.  To the extent to which there may be a case that the banning order should be reduced, either because it is too severe, or because the facts upon which it was based were not well founded, so that there might be a banning order of something of the order of four months or more, that prospect of success would not seem to justify a stay.  Nevertheless, I am prepared to make a positive finding on the first matter, namely the prospects of complete success. 

6. There are a number of matters which lie behind this argument, but a significant matter which arises is a claim that the decision was based on wrong findings relating to the solvency of the three identified companies, which led to the jurisdiction arising for the potential making of a banning order. There is no doubt that that part of the provision which confers jurisdiction on ASIC and which requires the lodging of a report under s 533(1) of the Corporations Act 2001 by liquidators relating to the corporation’s inability to pay its debts, was satisfied, but even if events did arise which satisfied the jurisdiction of ASIC to consider a banning order, the argument is that, subsequently, events showed that the companies were either not insolvent at all, or certainly not insolvent to the extent which is necessary before a liquidator lodges a report under s 533.  There are other matters raised, but I need not go into them now. 

7.      I am also prepared to find that the continuation of the ban pending the hearing, will have serious consequences for the applicant.  I note, however, that those consequences have already been in existence for two months.  I also note that it seems that the applicant is not actively engaged and does not wish actively to be engaged, in the management of an Australian corporation at present.  What he is concerned to do, is to engage in the management of three foreign corporations. 

8. It is suggested by ASIC that there may be no prohibition on that conduct because of the effect of s 206H of the Corporations Act. Nevertheless, Mr Scott has filed an affidavit showing that he wishes to be actively involved with these companies and I have been informed from the bar table, and I am prepared to proceed on this basis, that some of the conduct, at least, in which he would seek to engage in the period between now and the hearing, is conduct which would fall within s 206H.

9.      I think it is very important to take into account the public interest in matters such as this, even although, in the present case, it may not be that there are particular persons, in Australia in any event, who may wish to deal, particularly in financial circumstances, with Mr Scott on behalf of a corporation. 

10. Nevertheless, I think it is important to note that the regulator which has supervisory control, at any event subject to appeal to the Administrative Appeals Tribunal, over the conduct of directors and managers, has made an adverse decision and all other things being equal, the public is entitled to the protection of such a decision. I note that the public interest is a substantial concept lying behind the whole of the Corporations Act and its provisions and, as well, I note that s 41 of the Administrative Appeals Tribunal Act requires the interests of persons who may be affected to be taken into account, which, in principle, directs attention to the interests of the public.

11.     A similar consideration is the interests of the respondent in carrying out its functions.  The Act provides for publication of its decisions without, in terms, giving an opportunity for application to be made for relief precluding publication and other acts by which decisions of the regulator are made known.  I am conscious of the fact that some decisions of this tribunal indicate that even those activities can be the subject of interference by interlocutory orders, but, nevertheless, they are matters to be taken into account. 

12.     I am also prepared to accept that the review application, if successful, would be rendered less useful, potentially, than if a stay was granted.  However, having said that, it seems to me that it certainly would not be rendered nugatory or pointless and given the length of time that has already passed and the short period of time before the application will be heard, it does not seem to me that the prejudice that will be suffered by failing to grant a stay, would be substantial. 

13.     The final matter for me to consider is the fact that the stay has been in place for approximately two months and that the hearing will take place in approximately a month and a half.  This seems to me to be a very important matter in determining whether there should be a stay.  Indeed, it seems to me to be the definitive matter.  I do have to recognise, particularly because I will not be hearing the application, that there is at least the possibility that the member who hears the matter, will not be in a position to give a decision straight away, although I hope that a decision will be given very quickly.  Nevertheless, at the time that the member who hears the matter reserves decision, if that is the course that that member takes, he will be much more informed about the case than I am now and will be in a position then to consider, if made, an application for a stay of proceedings. 

14.     So for all these reasons, I consider that this is not a case in which it is appropriate for me to grant a stay.  As North J and I said in our decision in Australian Securities and Investments Commission v PTLZ [2008] FCAFC 164; 48 AAR 559 at 565, a speedy hearing, in cases in which it is a possibility, is the preferable option. Where as here, the hearing will be soon, shorter than the time during which the banning order has already been in place, the balance of convenience will be against a stay. That is not to say that it may not be appropriate in some cases to grant a stay. If, for example, this application was being heard the day following the making of the original banning order, the strength of the application for the stay might be much greater. However, in my view the appropriate course is not to grant a stay.

15.     I accordingly decline to grant a stay and, by consent, I make the following directions:

1.That the applicant file an index to any material additional to the s 37 documents upon which it proposes to rely, by 14 October. 

2.That a folder of those documents be filed and served by 21 October. 

3.That a statement of facts, issues and contentions on behalf of the applicants be filed and served by 28 October. 

4.That a statement of facts, issues and contentions be filed and served by the respondent by 11 November. 

5.If the applicant seeks to file any written witness statements and in principle evidence at the hearing should be evidence in respect of which there are witness statements, that they be filed and served by 17 November. 

6.The respondents will have, for statements responding to the applicant’s statements, until 23 November. 

7.If there is any statement in reply to be filed, that will need to be filed and served by 25 November.

8.The matter is fixed for hearing, as I indicated earlier, on 26 November and, if necessary, 27 November as well. 

16.     The timetable is very tight and it will be important for the parties to comply with it to ensure that the hearing takes place on the 26^th and 27^th.  It will be in the interests of both parties to ensure that the hearing does take place on those days because if there were to be default on the part of the respondent, which led to some adjournment, then that would, obviously, have consequences so far as a stay is concerned.  And if there were default on the part of the applicant leading to an adjournment, then its case for a stay because of the longer delay would have to be assessed in the light of that fact. 

17.     In these circumstances, as I usually do in directions I am making, I indicate to the parties that the moment it becomes apparent to either of them that any time in the directions may not be complied with, that they make urgent application by telephone notice or, perhaps, email notice, to Deputy President McDonald or his assistant, with the hope that the problem can be resolved without prejudicing the hearing date. 

18.     I also note, as I am sure counsel on behalf of both parties would know anyway, that it is appropriate for each of them to begin now – through their solicitors and clients – preparation of material required by each of the items in the directions even though they will be responding to a document which has not yet been filed. 

19.     Counsel for the applicant fairly reminds me that although the application is only being heard today, on 13 October, that, in fact, the application, both for review and for a stay, was made some three and a half weeks after the decision was made and notified.  He further reminds me that there is a practice within the tribunal that respondents are given a period of some 14 days to indicate whether they propose to oppose an application for a stay.  Accordingly, it is submitted, and quite fairly too, that a good deal of any delay, between the date of the making of the order and today, is not of the doing of the applicant. 

20.     Although I did not directly address these matters in the short oral reasons I had just given, I did have them in mind, and I say that because it will be noticed that I did not base my reasons on any delay as disqualifying at all but, rather, on the time factors that, in fact, had fallen into place.  I did, at one point, mention the circumstances that might have occurred had an application been made and heard a couple of days after the order had been made, but, again, I did not do that on the basis that delay between then and now, in some way, sounded against the applicant in the way one might say that in an application in the chancery division of a court for an injunction delay in making the application was disentitling.  I simply based my decision on the de facto dates and gaps and not on the question of any disentitling delay and I do not suggest that either the legal advisors or the applicant, himself, should be criticised for any delay in making this application. 

I certify that the 20 preceding paragraphs are a true copy of the reasons for the decision herein of Justice Downes, President

Signed:   ..............................................................................
               Claire Doherty, Associate

Date/s of Hearing:  13 October 2009
Date of Decision:  13 October 2009
Solicitors for the Applicant:                Mr B J McGrath
Counsel for the Applicant:                 Dr P Vout
Solicitors for the Respondent:          Ms J Birch
Counsel for the Respondent:           Mr S Rosewarne