Sahai and Australian Securities and Investments Commission

[2021] AATA 590

Sahai and Australian Securities and Investments Commission [2021] AATA 590 (18 March 2021)

Division:Taxation and Commercial Division

File Number(s):       2021/0628

Re: Chandar Sahai

APPLICANT

AndAustralian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal:Deputy President Bernard J McCabe

Date:18 March 2021

Place:Sydney

1. The applications for a stay and confidentiality orders, under ss 41 and 35 of the Administrative Appeals Tribunal Act 1975 (Cth), are dismissed.

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Bernard J McCabe, Deputy President

Catchwords

PRACTICE & PROCEDURE – where the applicant seeks stay and confidentiality orders under ss 41 and 35 of the Administrative Appeals Tribunal Act 1975 (Cth) – whereas a presumption exists as to openness and transparency of proceedings – whether discretion of the Tribunal is enlivened – whether a stay is necessary to ensure the efficacy of review or hearing is not rendered nugatory – whether grounds for confidentiality orders made out - whereas reputational damage or financial hardship alone is not sufficient – stay and confidentiality orders not granted – applications dismissed.

Legislation

Administrative Appeals Tribunal Act 1975 (Cth)

National Consumer Credit Protection Act 2009 (Cth)

Cases

Australian Securities and Investments Commission v Administrative Appeals Tribunal (2009) 181 FCR 130
Daly and Australian Securities and Investments Commission [2020] AATA 1516

Scott and Australian Securities and Investments Commission [2009] AATA 798

REASONS FOR DECISION

1. The applicant in these proceedings was the director of a company that acted as a credit representative. On 28 January 2021, the Australian Securities and Investments Commission (ASIC) – the regulator under the National Consumer Credit Protection Act 2009 (Cth) - made a decision to ban the applicant from engaging in any credit activities for a period of seven years. ASIC also banned the applicant from performing a function involved with credit activities, which includes acting as an officer of an organisation that provided credit. The applicant has sought review of the banning decision in the Tribunal. While that review proceeds, the applicant has asked the Tribunal for orders under s 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) staying the operation of the banning order and restraining ASIC from publishing the banning decision in the usual way. The applicant has also asked for confidentiality orders under s 35 of the AAT Act to provide what amounts to a private hearing, and to protect his identity.

2. I conducted an interlocutory hearing on 25 February 2021 to deal with the applications. The banning decision had already taken effect and the applicant had ceased trading by that point. But ASIC had not published news of the banning decision and undertook not to do so until I made a decision on the interlocutory applications.

3. I am not satisfied it is desirable to make orders under s 41(2), or that it is appropriate to make orders under s 35. I explain my reasons below.

   The reviewable decision

4. The applicant’s brother was permanently banned from engaging in credit activities, and providing financial services, by ASIC in September 2015. In 2020, the brother pleaded guilty to two charges of engaging in conduct contrary to that banning order. ASIC says the applicant had allowed his brother to operate out of the applicant’s business while banned. On 30 October 2020, ASIC served a notice on the applicant requiring him to attend a hearing before a delegate who would consider whether the applicant should also be banned from engaging in credit activities. The delegate decided to impose a ban following the hearing. In the reasons for decision dated 28 January 2021, the delegate recorded a finding that the applicant had been involved in his brother’s contraventions of the banning order that applied to him. The delegate also found:

   ·the applicant was not adequately trained or competent to engage in credit activities;

   ·the applicant was not a fit and proper person to engage in credit activities or related functions; and

   ·there was reason to believe the applicant is likely to contravene credit legislation in the future.

5. In written submissions, the applicant claimed he had a clean record apart from the principal finding against him – which he disputed in any event. He added the principal finding mainly related to his brother’s conduct, rather than his own. The applicant said there was no suggestion his clients experienced loss or damage as a result of the impugned conduct. He also pointed to what he claimed were shortcomings in the reasoning of the delegate: for example, he doubted whether the delegate had demonstrated the applicant had actual knowledge that his brother was subject to a banning order, or that the applicant knew the brother’s work (which was undertaken with the applicant’s assistance) was in contravention of an order. The applicant said the delegate’s decision was obviously intended to make a public example of the applicant with a view to general deterrence and to promote confidence in the credit licensing regime. The applicant did not dispute that was a legitimate objective if the facts alleged against him were made out, but he insisted there was no reason to suppose there would be any risk to clients if he were allowed to continue in business while the review proceeded to its conclusion several months hence.

   The principles relating to stay applications and requests for confidentiality orders

6. A reviewable decision ordinarily comes into effect according to its terms unless the Tribunal orders that the operation or implementation of the decision be stayed pursuant to s 41(2) of the AAT Act. A stay order may be directed to all or part of the reviewable decision, and orders may be made on condition. The stay power extends to actions by the decision-maker that ordinarily follow from the reviewable decision – such as making entries in registers or making public pronouncements in the course of the decision-maker’s work. Those matters are properly regarded as part of the decision-maker’s implementation of the decision, and they can be enjoined in appropriate cases.

7. The statutory language of the stay power in s 41(2) makes clear the power to order a stay is available “for the purpose of securing the effectiveness of hearing and determination of the application for review”. Those words in the sub-section are sometimes overlooked: many applicants assume the power is available to avoid hardship. While hardship is a relevant consideration, as we shall see, the Tribunal must be satisfied the statutory purpose is present before the discretion is enlivened. To that end, I would ordinarily expect to be provided with evidence suggesting the hearing would be rendered nugatory or that the review would otherwise be compromised if the stay were not granted.

8. Once the discretion is enlivened, the sub-section contemplates the Tribunal deciding whether the exercise of power is desirable having regard to “the interests of any persons who may be affected by the review”.

9. The principles guiding the exercise of the discretion are well known. Many parties refer to a convenient summary of the matters that may be relevant which is found in the decision of Downes J in Scott and Australian Securities and Investments Commission [2009] AATA 798 at [4] ff. Those matters include:

   ·the applicant’s prospects of success;

   ·the consequences for the applicant if the stay is refused;

   ·the public interest;

   ·the consequences for the respondent in carrying out its functions whether the stay is granted or not; and

   ·the length of time before a final hearing can be held.

10. The oft-cited list of considerations should not be regarded as a rigid checklist. The Tribunal is required to deal with each case on its merits, and there is no substitute for focusing on the words of the statute which require the Tribunal to be satisfied the stay is desirable after taking into account relevant interests. But I accept the decision in Scott provides a useful framework for dealing with the question.

11. Where the applicant wants the stay to extend to publication activities that ordinarily occur in the course of implementing the reviewable decision, the Tribunal must have regard to its obligation to conduct hearings in the open as far as possible. That obligation is discussed in s 35(5) of the AAT Act, which says the Tribunal must accept open hearings as a starting assumption when asked to make orders under s 35. While s 35(5) is addressed to applications for confidentiality orders, the principle of open justice referred to in that sub-section is also relevant to applications for a stay where the practical effect of the stay order would be to suppress information about the case. As I explained in Daly and Australian Securities and Investments Commission [2020] AATA 1516 (at [17]-[18]):

    The Tribunal will look carefully at requests to suppress news of a reviewable decision even where the Tribunal is otherwise prepared to issue a stay under s 41(2). The reasons for that caution are obvious enough. The Tribunal’s review mechanism is intended to operate in a transparent way. But the Tribunal is also conscious that others who continue to deal with an applicant will be understandably angry if they later discover they were kept in the dark about a reviewable decision that might have influenced their choices as consumers of the applicant’s services.

    …

    While the Tribunal will consider the reputational damage and economic loss that an applicant might experience if the reviewable decision is published while the review proceeds, it might not give those concerns much weight. Requests for suppression orders – for that is what they are, in substance – will be scrutinised very carefully where the reviewable decision in question relates to a person’s right to participate in a regulated occupation. Participation in a regulated occupation brings many benefits, including (in many cases) economic advantages that accrue to licence holders. Those economic advantages flow from the establishment of barriers to entry that incidentally reduce competition between the favoured few. The licence necessarily carries with it a requirement that the licensee conform to the rules and participate in regulatory processes according to law. Most of those regulatory regimes … place a premium on transparency. It follows that a risk of bad publicity accompanying adverse regulatory action will often be regarded as an incident of a licensee’s participation in a regulated occupation.

12. Having said all that, there will be cases where confidentiality orders will be appropriate notwithstanding the starting premise identified in s 35(5). The Tribunal has the power to make orders of the kind referred to in ss 35(2), (3) and (4), although it would not ordinarily use s 35 to compel the respondent not to publish news of its reviewable decision where that activity forms part of the implementation process. A request to that effect should ordinarily be dealt with under s 41(2).

    Should the Tribunal stay the reviewable decision so the applicant may remain in business pending the outcome of the review?

13. The applicant did not provide any material in support of his application suggesting the hearing would be rendered nugatory or that the review process would be frustrated or impaired if a stay were not ordered. Mr Wheeldon, the applicant’s counsel, suggested from the (virtual) bar table that it stood to reason the applicant would suffer financial hardship if he could not conduct his credit business. That hardship might be so great that the applicant would not survive to participate (or participate effectively) in the hearing. I was also told he is 61 years of age, and that it would be difficult to find alternative sources of income at this stage in his life.

14. I accept the applicant will suffer financial loss if he cannot operate his business, but it is unclear on the evidence before me whether the loss would be such as to prevent him from participating effectively in the proceedings. At a minimum, I would ordinarily expect to be provided with evidence as to the applicant’s financial circumstances and commitments, which would include references to any other sources of income. That has not occurred here. He did not explain how the hearing would be rendered nugatory, although I acknowledge any loss he experienced as a consequence of reputational damage is unlikely to be recovered quickly if the applicant were successful at the final review. I am not persuaded the applicant has established orders are required “for the purpose of securing the effectiveness of the hearing and determination of the application for review.”

15. Even if the applicant were able to persuade me the discretion to make the orders was engaged, I am not satisfied it is desirable to do so in all the circumstances.

16. The applicant’s counsel focused on the applicant’s prospects of success in the substantive application. Mr Wheeldon said there was a factual dispute over the extent of the applicant’s knowledge of the matters which gave rise to the delegate’s findings. Ms Patterson, counsel for ASIC, defended the delegate’s reasoning and said the Tribunal would likely be persuaded by the evidence. It would be inappropriate to conduct a mini-trial at this point in the proceedings and test the evidence. It is enough for me to conclude it does not appear the applicant’s case is a hopeless one. I accept there is a factual controversy that is unlikely to be resolved without further evidence. This consideration counts in favour of exercising the discretion in the applicant’s favour, but not heavily.

17. I have already commented on the paucity of evidence surrounding the likely impact on the applicant if the stay is refused. I accept he is likely to suffer a loss of income if he is not permitted to continue operating his business, but the extent of that loss – and the impact on the applicant’s financial circumstances more generally – is unclear. I am satisfied the impact is likely to be significant, which counts in favour of the exercise of the discretion, but it is not clear that it is an especially weighty consideration. In saying that I am mindful of the observation of Downes and Jagot JJ in Australian Securities and Investments Commission v Administrative Appeals Tribunal (2009) 181 FCR 130 (at [76]) that reputational damage and the associated financial impact is unlikely to be a compelling reason to order a stay given those consequences are an inevitable consequence of being banned from regulated activity. I should add that I was not provided with evidence about the impact of the reviewable decision upon the applicant’s family and any employees or clients, although I presume the clients in particular might be inconvenienced if they were forced to deal with somebody else. The extent of any disadvantage is unclear, and thus it is difficult to weigh it.

18. I should also add the impact on the applicant is likely to be contained if the matter can be brought on for a hearing relatively quickly. There does not seem to be any obstacle to doing that in this case.

19. The public interest is of particular importance here. This is a regulated occupation, and for good reason: the public needs to be protected from bad actors, and our markets work better when everyone can have confidence in the integrity and competence of those engaging in credit activities. ASIC did not suggest clients were in imminent danger if the applicant remained in business in the short term: there was no suggestion the applicant’s brother was continuing to nose about the business, for example. But ASIC says the fact the applicant could have let this happen – assuming, of course, that he did – raises important questions over the suitability and competence of the applicant. Those questions suggest the discretion should be exercised against him, although the risk might be mitigated if the applicant were required to refrain from taking on new clients and he were obliged to inform all of his existing clients of the regulatory action so they could make their own decisions.

20. I am persuaded the public interest weighs against the exercise of the discretion in the applicant’s favour although that weight might be lessened if the applicant were subject to conditions of the kind I have identified.

21. I also considered the consequences for ASIC if the stay were ordered, and if it was not. I am not satisfied a stay that permitted the applicant to remain in business would reflect adversely on ASIC: a stay is part of the review process, not a rebuke. I was not made aware of any other adverse impact if a stay was ordered – although the answer would be different if the stay extended to restraining ASIC from publishing news of its reviewable decision in the ordinary course. I will return to this issue below.

22. On balance, I am not satisfied the applicant has established the stay is directed to the purpose of securing the efficacy of the hearing process. But I am not satisfied in all the circumstances that it would be desirable to order that the reviewable decision be stayed so as to permit the applicant to remain in business – although I did encourage the parties at the interlocutory hearing to explore whether a conditional stay might be workable.

    Should the Tribunal use the power in s 41(2) to restrain ASIC from publicising the reviewable decision?

23. I have already explained it is accepted the Tribunal’s stay power extends to restraining the decision-maker from taking steps – like publication – which are taken in the ordinary course of implementing the reviewable decision. There is no longer any doubt that publication is an integral step in that process. ASIC is not just a cop on the beat. It has an important educative function, and publication is part of that. Publication of its regulatory actions also sends a message that should give confidence to consumers and other market participants about the efficacy of regulatory processes.

24. I have already expressed my reservations about the paucity of evidence from the applicant directed to the question of whether a stay would be appropriate for the purpose of securing the efficacy of the review. I am not satisfied the discretion is engaged in those circumstances. But if it were engaged, there is much stronger argument against the exercise of the discretion to enjoin publication.

25. Three additional (or different) factors need to be taken into account. First, the consequences of bad publicity may be damaging to the applicant’s reputation, but they are an inevitable feature of participating in a regulated profession where the regulator has the power to take administrative action. Second, the public – most obviously customers – would be deprived of information they might reasonably expect and require when making a decision whether to deal with the applicant if the stay prevented ASIC from publicising its decision. Third, ASIC would potentially be embarrassed in its regulatory function if it were prevented from responding to questions about the applicant’s status should a consumer or reporter make enquiries.

26. In the circumstances, I will not order a stay that extended to restraining ASIC from publicising its decision in the ordinary course – although I expect ASIC will include a statement in any such publication noting the applicant has made an application for review in the Tribunal.

    Would it be appropriate to make confidentiality orders?

27. I have already referred to the legislative policy evident in s 35 in favour of open hearings and transparency. But I have also acknowledged circumstances may arise which justify a departure from the usual approach.

28. This is not one of those exceptional cases where an exception should be made. The fact the applicant will experience reputational damage (and the fact that reputational damage may result in financial loss) is unfortunate, and I accept it will be difficult for him to quickly recover from that damage if he is successful on review. But as I have already pointed out, the risk of reputational damage consequent upon regulatory action is part-and-parcel of participating in a regulated occupation. Indeed, there is a strong argument that information about regulatory action is exactly the kind of news that should be made freely available in a market like this. There is certainly nothing inherently confidential about the information regarding the banning order which suggests the banning order should not be disclosed.

1. I am not satisfied it would be appropriate to make confidentiality orders at this juncture.

   Conclusion

2. The applications for a stay and confidentiality orders are dismissed.

31.     I certify that the preceding 30 (thirty) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

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Associate

Dated: 18 March 2021

Date(s) of hearing:	25 February 2021
Counsel for the Applicant:	Mr James Wheeldon
Solicitors for the Applicant:	The Criminal Law Specialists
Counsel for the Respondent:	Ms Stephanie Patterson
Solicitors for the Respondent:	Self-Represented