Sullivan and Australian Securities and Investment Commission

Case •

[2002] AATA 1331

•

23 December 2002

DECISION AND REASONS FOR DECISION [2002] AATA 1331

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2002/1131

GENERAL ADMINISTRATIVE  DIVISION       )          
           Re      Owen Noel Sullivan         
  Applicant
           And    Australian Securities & Investment Commission   
  Respondent

DECISION

Tribunal       P.J. Lindsay

Date23 December 2002

PlaceSydney

Decision      The Tribunal does not have jurisdiction in this matter. The application is dismissed for want of jurisdiction.            

(sgd) P. J. Lindsay 
  Senior Member

JURISDICTION HEARING – application for review of decisions of the Australian Securities & Investments Commission to register prospectuses and not to investigate a complaint – whether Tribunal has jurisdiction to review such decisions –s 244 of Australian Securities and Investments Commission Act 2001 considered – Chapter 7, Corporations Law considered - Tribunal does not have jurisdiction – application dismissed for want of jurisdiction

Corporations Law ss. 996, 1005, 1006, 1020A, 1021(14)(c), 1317A, 1317B, 1317C, 1317D, Chapter 7, Part 7.11, Part 7.12
Administrative Appeals Act 1975 (Cth) ss. 3(3), 25, 27(1), 43(1)
Australian Securities and Investments Commission Act 2001, s.244

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Hutchins v Deputy Commissioner of Taxation (1996) 65 FCR 269
Hongkong Bank of Australia Limited v Australian Securities Commission (1992) 40 FCR 402
Edwards v Australian Securities Commission (1997) 72 FCR 350
Allan v Transurban City Link Ltd (2001) 183 ALR 380

REASONS FOR DECISION

P.J.Lindsay, Senior Member                    

  1. The background to this matter is that on 25 July 2002 the Applicant, Mr Owen Sullivan, submitted an application for review.  The Registry rejected the application as it was considered to be out of time.  On 7 August 2002, Mr Sullivan submitted an application for an extension of time to lodge his application.  Attached to the application was a description of a decision that he said concerned the role of the Australian Securities & Investments Commission (the Commission) in relation to certain prospectuses.  Mr Sullivan outlined his grievance as follows:

    The complaint concerns two aspects and the role of the Australian Securities and Investments Commission (ASIC) in dealing with specific prospectuses:
    1. (a) In an Act of Negligence ASIC failed to thoroughly analyse the contents of several prospectuses that were deposited with the Commission by Howard Funds Management Limited (Challenger Managed Investments Limited) over a period from December 1997 –2001.
    (b) That by accepting the lodged prospectuses 'as is' and all their contents, it failed to recognise matters at point of law as will be outlined at a AAT hearing.
     (c) That ASIC breached its duty requiring a standard of conduct for protecting all the investors, including myself from the wording in the said prospectuses. 
    2.  ASIC failed to make enquiries with my claim that my personal data in one of the prospectuses was forged. …
    The various prospectuses (three which concern me) of the seven in total, all have extrinsic wording which was approved by ASIC's acceptance.
    I consider the wording in these prospectuses as they stand give no finality to the date when any investor will see the return to them of their investment principal.  …
    I believe that the agency ASIC erred in its decision in accepting the total contents of the prospectuses … This was an Act of Negligence.
    I seek an Order from the Administrative Appeals Tribunal which would be appropriate in correcting the situation where investors would be entitled to having their investment principal being returned to the investor on the first working day after the five year period of their investment expires. …

  2. The Commission, the respondent in this matter, opposed Mr Sullivan's application for an extension of time.  More fundamentally, the Commission's letter to the Tribunal dated 28 August 2002, submitted that the Tribunal does not have jurisdiction to grant the relief sought by Mr Sullivan or to review its decision not to investigate his complaints.  The Commission argued:

    …
    It is ASIC's submission that the AAT does not have jurisdiction to review a decision of ASIC not to investigate such complaints.
    ASIC's power to undertake investigations is provided by 3.13 of the Australian Securities and Investments Commission Act 2001 (the ASIC Act). Section 244 of the ASIC Act sets out the decisions in respect of which the AAT has jurisdiction. Section 244 of the ASIC Act provides that application may be made to the AAT for the review of decisions of ASIC:

    (a)to make an order under s.72, 73 or 74;

    (b)to make an order under subsection 75(1) varying an order in force under Division 8 or Part 3; or

    (c)        to refuse to vary or revoke an order under Division 8 of Part 3.
    As a decision on whether to investigate a complaint is not included in the decisions identified in s.244 of the ASIC Act, the AAT does not have jurisdiction to review such a decision. ASIC accordingly submits that Mr Sullivan's application should be dismissed.

  3. At the initial hearing on 27 September 2002, Mr Sullivan appeared alone and the Commission was represented by one of its officers, Ms S. Williams. In a letter he provided at the hearing, Mr Sullivan claimed that the Commission had failed to investigate the matters he had raised regarding the prospectuses. In addition he has alleged that his signature to trust unit application forms has been forged. During the hearing the Commission referred, for the first time, to s.1317B of the Corporations Law, a provision of seemingly broad application. The Commission was directed to furnish written submissions addressing s.1317B. Mr Sullivan was directed to provide a submission that clearly set out the nature of his application. He subsequently submitted a document dated 16 October 2002 wherein he referred to three prospectuses raising capital for investment in unit trusts. The prospectuses had been lodged with the Commission in December 1997, March and April 1999. Mr Sullivan invested in each of the three unit trusts that were to invest the capital in commercial buildings. He wrote:

    In this application I claim that when the prospectuses were lodged 'as is' with all their contents, ASIC failed to analyse and recognise matters at point of law as outlined in this application thus it allowed extrinsic evidence to be accepted.  In its simplicity it is a situation where the prospectuses indicate that it has a beginning (ie. the date of acquisition of each property) but according to ASIC reasoning, it would have no definite date ending.  I seek an Order from the Administrative Appeals Tribunal which would be appropriate in correcting the situation where investors would be entitled to have their investment principal being returned to the investor on the first working day after the five year period of their investment expires.

Mr Sullivan's argument was that the content of each prospectus was misleading, in relation to the proposed termination of the trust and consequent return of invested capital and accrued income.  He implied that the Commission should not have registered the prospectuses, since they contained misleading information.

  1. The parties agreed that the applicable dates for the relevant prospectuses were as follows:

Name of Trust   Date Prospectus Lodged        Date registered Date Applicant's investment lodged with Trust    
Howard Property Trust prospectus for ASTOR TERRACE         5 December 1997       5 December 1997       23 December 1997 and later        
Challenger Howard Property Trust prospectus for WICKHAM TERRACE  16 March 1999  16 March 1999  15 April 1999         
Challenger Howard Property Trust prospectus for NORTH SYDNEY      15 April 1999     27 April 1999     24 June 1999 and later        

  1. At this stage it is important to note that, under s.25 of the Administrative Appeals Tribunal Act 1975 (the AAT Act), the Tribunal has jurisdiction to review only certain decisions:

    (1) An enactment may provide that applications may be made to the Tribunal:

    (a) for review of decisions made in the exercise of powers conferred by that enactment; or
    (b) for the review of decisions made in the exercise of powers conferred, or that may be conferred, by another enactment having effect under that enactment.

    (3) Where an enactment makes provision in accordance with subsection (1), that enactment:

    (a) shall specify the person or persons to whose decisions the provision applies;
    (b) may be expressed to apply to all decisions of a person, or to a class of such decisions; and
    (c) may specify conditions subject to which applications may be made. …

    (4) The Tribunal has power to review any decision in respect of which application is made to it under any enactment.

The AAT's powers on review of a decision are contained in s.43(1) of the AAT Act which reads:

For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing:

(a) affirming the decision under review;
(b) varying the decision under review; or
(c) setting aside the decision under review and:

(i) making a decision in substitution for the decision so set aside; or
(ii) remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal. …

  1. On resumption of the hearing on 17 December 2002 Mr Sullivan said he was requesting a review of the Commission's decisions to register the three prospectuses, that is "to let them through as is, in the first place".   Mr Sullivan is also requesting the Tribunal's review of the Commission's decision not to investigate his complaints about the misleading contents of the prospectuses, a matter he had raised in his application of 7 August 2002.

  2. The Tribunal's decision is that it does not have jurisdiction in the matter.  Accordingly, the Tribunal will dismiss Mr Sullivan's application for want of jurisdiction.  There are a number of reasons.

  3. First, it is readily apparent that the Tribunal lacks the power to make an order returning invested capital, as Mr Sullivan seeks. The Commission, itself, takes no responsibility for the content of the prospectuses (s.1021(14)(c) of the Corporations Law). There are remedies available, within the Corporations Law (ss.996 and 1005) and under the general law, to investors who believe that they have been misled by the contents of a prospectus or actions by the promoter. That relief could be pursued in courts of appropriate jurisdiction but not in this Tribunal.

  4. Secondly, in relation to the Commission's decision not to investigate Mr Sullivan's complaints, the Tribunal accepts that the relevant enactment is the Australian Securities and Investments Commission Act 2001 (the ASIC Act). Section 244 of the ASIC Act states as follows :

    Review by Administrative Appeals Tribunal of certain decisions
    (1) In this section:
    decision has the same meaning as in the Administrative Appeals Tribunal Act 1975.

    (2) Applications may be made to the Administrative Appeals Tribunal for review of a decision by ASIC:

    (a) to make an order under section 72, 73 or 74; or
    (b) to make an order under subsection 75(1) varying an order in force under DIVISION 8 of PART - 3; or
    (c) to refuse to vary or revoke an order in force under DIVISION 8 of PART - 3

  1. The Tribunal has no jurisdiction to review ASIC's decision whether to investigate Mr Sullivan's complaints, because such a decision is not included in the decisions referred to in s.244.

  2. Lastly, as to Mr Sullivan's complaint regarding the Commission's registering the prospectuses, the relevant decision must first be identified before the Tribunal can determine whether it has jurisdiction. At the time of registering the three prospectuses in question, s.1020A of the Corporations Law dealt with registration as follows:

    (1) Subject to section 102A and to subsection (2) of this section, where a registrable prospectus is lodged together with a written application for the registration of the prospectus, the Commission must register the prospectus as soon as possible and in any event within the prescribed period.
    (2) The Commission shall refuse to register a prospectus if:
    (a) it appears that the prospectus does not comply with the requirements of this Division; or
    (b) the Commission is of the opinion that the prospectus contains a false or misleading statement or there is an omission from the prospectus.

There is no dispute that the Commission registered the prospectuses. There was no evidence as to whether the Commission made any enquires regarding the content of the prospectuses before proceeding with registration. The Tribunal finds that the Commission's registering a prospectus would be covered by the definition of 'decision' in s.3(3) of the AAT Act. It has the "quality of finality" required by the word 'decision' being "final or operative and determinative, at least in a practical sense, of the issue of fact falling for consideration." (Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 337 per Mason CJ).

  1. Then the next step is to identify whether an enactment provides for applications to be brought to the Tribunal for review of the decision. At the initial hearing, the Commission referred to s.1317B of the Corporations Law in this context but the Commission's submission argued that it was inapplicable to the decisions in question. Section 1317B reads:

    (1) Subject to this Part, applications may be made to the Tribunal for review of a decision made under this Act by:

    (a) the Minister; or
    (b) ASIC; or
    (c) the Companies Auditors and Liquidators Disciplinary Board. …

Section 1317A provides that the word 'decision' has the same meaning in s.1317B as in s.3(3) of the AAT Act. Section 1317C excludes a number of decisions from s.1317B's operation but Mr Staehli, counsel appearing for the Commission on the resumed hearing, submitted that no such exclusion was relevant to this matter. The Commission must take such steps as are reasonable in the circumstances to give each person whose interests are affected by a decision, written notice of the decision and their rights of review: s.1317D(2). However, the Commission is not required to give the notice if the Commission considers it unwarranted having regard to the cost and the way in which those interests are affected by the decision: s.1317D(3).

  1. Is a decision to register a prospectus, a decision made by the Commission under the Corporations Law? It is observed that the Commission made no submission to the contrary. Registration of a prospectus was vitally important. Section 1018 prohibited persons from offering securities for subscription or issuing invitations to subscribe for securities, unless the prospectus, if registrable, has been registered by the Commission. Although s.1020A(1) implied that the Commission was obliged to register a registrable prospectus, s.1020A(2) required the Commission to examine some matters before proceeding to register the prospectus. Registration would be refused where, in the Commission's opinion, the prospectus did not comply with the requirements of ss.1021 and 1022 regarding content. The Tribunal is mindful of the following passage from the Full Federal Court's judgment in Hutchins v Deputy Commissioner of Taxation (1996) 65 FCR 269 (Black CJ, at 272)

    If a decision is neither expressly nor impliedly required by an enactment and, although authorised, is authorised by an enactment only in a very general way, it is unlikely to have the character of a decision for which provision is made under an enactment.

but nevertheless is satisfied that registration pursuant to s.1020A is a decision made by the Commission under the Corporations Law. The Tribunal accepts, therefore, that s.1020A is " … expressed as a dispositive provision creating rights or liabilities or reposing powers or functions" (cf. Hongkong Bank of Australia Limited v Australian Securities Commission (1992) 40 FCR 402, at 408) and makes provision for a "substantive determination" (cf. Edwards v Australian Securities Commission (1997) 72 FCR 350, RD Nicholson J at 365). Accordingly an application may be made to the Tribunal for review of the decision to register the prospectuses: s.1317B.

  1. Whether Mr Sullivan has standing to apply to the Tribunal for review of the Commission's decisions to register the prospectuses depends on whether his interests have been affected by the decisions. Section 27(1) of the AAT Act states:

    (1) Where this Act or any other enactment (other than the Australian Security Intelligence Organisation Act 1979) provides that an application may be made to the Tribunal for a review of a decision, the application may be made by or on behalf of any person or persons (including the Commonwealth or an authority of the Commonwealth) whose interests are affected by the decision.
    …

The Commission submitted that, at the time of registration of each prospectus, Mr Sullivan had no interests in the relevant trusts.  Recently, the High Court in Allan v Transurban City Link Ltd (2001) 183 ALR 380, held that in determining whether a person is affected by a decision, it is necessary to start with the construction of the subject, scope and purpose of the relevant statute. The High Court noted that "What serves to identify a person as one affected by a reviewable decision will vary having regard to the nature of the reviewable decision itself." (at 384).

  1. At material times in 1997 and 1999, Chapter 7 – Securities, Corporations Law, contained a number of provisions aimed at protecting investors.  Among other matters, the Chapter regulated the conduct of participants in the securities industry, such as stock exchanges, investment advisers and dealers.  Part 7.11 – Conduct in Relation to Securities, prohibited misleading or deceptive conduct in connection with dealing in securities and prospectuses.  There were a number of offences created that relate to prospectuses, such as authorising or issuing false or misleading statements or material omissions from prospectuses.   There was a statutory cause of action (s.1005) conferred on persons who suffer loss as a consequence of another's actions in contravening the Part or Part 7.12 – Offering securities for Subscription or Purchase.  The cause of action specifically extended potential liability to promoters, experts and others involved in the preparation of a prospectus where it contained false or misleading statements or omissions (s.1006).   Moreover, the Commission assumed no responsibility for the content of the prospectuses (s.1021(14)(c)).  Section 1317D(3) qualified the Commission's obligation to notify persons and classes of persons affected by a decision, of their rights of review before the Tribunal.  No doubt a requirement to notify would be difficult to administer, as registration occurs prior to an investor's subscription.  Promoters and issuers, however, would be well aware of the Commission's deliberations regarding their application for registration and could thus take appropriate and timely action in their own interests.

  2. After considering the purpose, scope and subject of the legislation under which the decisions to register were made, and noting in particular that the Corporations Law gives investors remedies against those who breach the prospectus provisions in Chapter 7, the Tribunal is satisfied that a subscriber's interests are not affected by the decision to register. The following passage from the judgment of RD Nicholson J in Edwards' case regarding the registration of a foreign company is considered to be equally applicable in the circumstances of the current matter "… the initial consideration of an application to register under s.344 is one which the applicant has an 'interest affected' if registration was refused.  No other party has an interest to be affected by that initial decision to register." (at 368).  In the Tribunal's opinion it is not likely that it was intended that a single subscriber, whose interests may or may not be representative of other subscribers, could at any time during the existence of these trusts, come forward and request a review of the decision to register. The Tribunal therefore accepts the Commission's submission that on a proper construction of the legislation, a subscriber for trust units has no interest in the decision effected by the act of registration.  Rather their interest is in the effect, after registration, of the wording of the offer of the units, the trust deeds and other relevant matters.  Accordingly, the Tribunal finds that Mr Sullivan as a subscriber for trust units, is not a person who might obtain review of the decision to register the prospectuses and the application should be dismissed.
    decision

  1. The Tribunal dismisses the application for want of jurisdiction.

    I certify that the preceding 17 paragraphs are a true copy of the decision and reasons for decision of P.J. Lindsay, Senior Member:

    Signed:         
              ..................................................................................……………………………….

    Associate

    Date of Hearing  17 December 2002
    Date of Decision  23 December 2002

    Applicant  Self-represented
    Counsel for Respondent            Mr D. G. Staehli

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