Tarrant and Australian Securities and Investments Commission

[2011] AATA 945

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 945

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2011/5133

GENERAL ADMINISTRATIVE DIVISION		)
Re		Mervyn Tarrant

Applicant

And Australian Securities & Investments Commission

Respondent

DECISION

Tribunal M D Allen, Senior Member

Date7 December 2011

PlaceSydney

Decision

For the reasons given orally at the conclusion of the interlocutory hearing of this matter, the Tribunal DIRECTS:

1. The Respondent is stayed from making any entry in the Australian Securities and Investments Commission Gazette or issuing any media release notifying that orders have been made against the Applicant pursuant to sections 920A and 920B of the Corporations Act 2001.

2. The request for confidentiality, pursuant to section 35 of the Administrative Appeals Tribunal Act 1975, is REFUSED.  

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

M D Allen
  Senior Member

CATCHWORDS

PRACTICE AND PROCEDURE – Stay application – banning order made pursuant to Corporations Act 2001 – publication of banning order – relevant factors - application granted

PRACTICE AND PROCEDURE – Confidentiality application - application refused

REASONS FOR DECISION

23 December 2011 M D Allen, Senior Member

1. At the conclusion of the hearing of this matter, the terms of the decision intended to be made and the reasons therefore were stated orally. After service upon the Applicant and Respondent of a copy of the decision that was in fact made, the Respondent, pursuant to subsection 43(2A) of the Administrative Appeals Tribunal Act 1975, requested that the Tribunal furnish to them a statement in writing of the reasons of the Tribunal for the decision.

2.      The oral reasons for decision have been transcribed by Auscript, the Commonwealth Reporting Service.  Whereas those oral reasons may reflect the inelegance of an extempore decision, they are in fact the reasons for the said decision.

3.      The said transcript is annexed hereunto and furnished to the Applicant and to the Respondent as it is the reason for the Tribunal’s decision.

I certify that this and the following paragraphs are a true copy of the reasons for the decision herein of Senior Member M D Allen.

Signed:         ......[sgd]............................
  Associate

Date of Hearing  5 December 2011
Date of Decision  7 December 2011
Date of Written Reasons  23 December 2011
Counsel for the Applicant  Ms D Hogan-Doran
Solicitor for the Applicant  Nexus Legal
Counsel for the Respondent                  Mr A Lo Surdo

EXTRACT OF TRANSCRIPT OF PROCEEDINGS

MR ALLEN: On 25 November 2011 the respondent made an order under sections 920A and 920B of the Corporations Act 2001, prohibiting the applicant, Mervyn Ross Tarrant, from providing financial services for a period of seven years.  Pursuant to an application lodged on 30 November 2011, the applicant seeks review of that decision.  The applicant has also sought from the Tribunal, pursuant to subsections 41(2) and 35(2) of the Administrative Appeals Tribunal Act 1975 the following directions, namely, that the operation and implementation of the decision under review, including entry of the decision in any register maintained by the respondent, publication of the decision in the Gazette, and disclosure of the decision in any media releases issued by the respondent, and, pending ultimate determination of the substantive application, or any further order of the tribunal that:

(a)the applicant be described by a pseudonym for the purpose of protecting his identity; and

(b)the hearing shall take place in private, and that only the parties and their representatives and witnesses, the tribunal and its staff, and the staff of Auscript may be present; and

(c)the publication or disclosure of evidence, or the content of documents lodged with, or received in evidence by the Tribunal, is restricted to the parties, and their representatives, and witnesses, the Tribunal and its staff, and the staff of Auscript, except insofar as the respondent may need to disclose evidence of the contents of documents lodged with, or received in evidence by the Tribunal to a court, for the purpose of any application made to a court in relation to this decision.

As pointed out by Senior Member Penglis in YFFM v Australian Securities and Investment Commission (2009) AATA 409, the principles which are relevant to an application for an order pursuant to subsection 41(2) of the AAT Act are well established, namely:

1.the prospects of success on the merits of the applicant’s substantive case on review;

2.whether there would be prejudice to the applicant, or anyone else, if the stay were not granted;

3.the public interest;

4.whether the review application is successful would be rendered nugatory or pointless if the stay were not granted.

At the outset I can state that factor 4 above is not relevant in this matter.  The banning order is for seven years, and if the parties are diligent this matter should be listed for the substantive hearing early in the New Year.  It is trite law that in considering the success or the merits of the applicant’s case I should not in these proceedings embark upon any determination of the issues that will ultimately be before the Tribunal.  The applicant’s solicitor in an affidavit that became exhibit A1 in these proceedings proffered an opinion as to the strength of the applicant’s case.  I doubt the admissibility of that opinion, but, in any event, I am not persuaded by it.

More cogent, in my opinion, is that the applicant is represented by experienced counsel who I can but assume has given the applicant a realistic appraisal of the case he has to meet.  In any event, many of the issues that will be before the Tribunal are issues of fact upon which reasonable minds may differ.  The present matter is not like some in other jurisdictions of this Tribunal, where, on the current state of the law, an applicant’s case is manifestly untenable; I did not understand the respondent to argue otherwise.  There is, therefore, at the least, a serious issue to be tried.

The question of prejudice to the applicant, and the public interest, must be considered in tandem.  For his part, as I understand the applicant, he claims that, whereas he no longer provides financial services, he still maintains an accountancy practice in Wollongong, and maintains his registration as a tax agent.  The accounting practice is his whole source of income, and employs 15 staff.  The applicant’s case for a stay of the decision, and anonymity was succinctly set out in paragraph 12 of exhibit A2 in these proceedings, and can be summarised by stating that, whereas a number of clients had continued to avail themselves of the services of his accountancy practice, publication of the banning order would encourage current clients to desert his practice, and discourage prospective clients.

For its part the respondent points out that the applicant has already been the subject of much adverse publicity, predominantly in the local newspaper, the Illawarra Mercury, but also in a national newspaper, the Financial Review.  As I understand the respondent’s submissions, the applicant’s reputation is already so irreparably damaged publication of the banning order will not have adverse effect; the applicant surmises it will.  I have deliberately used the word “surmised” about as to what effect the publication of the banning order will have upon the applicant’s practice is incapable of being ascertained.

For example, some clients may be inclined to stick with the applicant, notwithstanding adverse findings by the respondent, whereas, for others, suspicion and conjecture regarding the applicant’s probity will be made manifest by the banning order.  Given the prior publicity given to the applicant, and the collapse of the entities to which he directed client funds, I am in no doubt that the banning order will receive publicity in the Illawarra Mercury.  The respondent also submits that the public interest requires the publication of the banning order.  As was pointed out in Australian Securities Commission v Kippe and Another (1996) 67 FCR 499 at 508:

The immediate and direct legal effect intended by a banning order is not to impose a penalty or punishment on the person concerned, but to be preventative, in that it removes a perceived threat to the public interest, and to public confidence in the securities and futures industry by removing that person from participation therein.

The rationale for publication of banning orders is stated by the Full Court of the Federal Court in Australian Securities and Investments Commission v The Administrative Appeals Tribunal and Another (2009) 181 FCR 130 at pages 143 to 4, the majority, with whom Moore J agreed on this point, stated at paragraph 54:

Moreover, information is the key to effective trading in any market.  It takes the place of regulation in ensuring fairness.  A market which is not fully informed is not operating properly.  Is not an investor, who is about to deposit funds with a person providing financial services, entitled to know that a banning order has been made against the person?  If the order has been stayed on substantial ground, the person is also entitled to know that.  The informed investor may continue with the proposal.  If the investor does not, then that is just an example of the operation of the market place.  The critical matter is that the market is fully informed.  If the banning order is not disclosed, but subsequently upheld, is not the investor entitled to complain that all the circumstances should have been made public?

That may as well be, but the current applicant has not provided financial services since August 2010, and currently does not hold an Australian financial services licence.  Were he to engage in the provision of financial services without holding such licence, he would commit an offence.  In weighing matters I have come to the conclusion that, whereas the banning order should remain in place, and if, as he professes, the applicant does not intend to engage in the provision of financial services, no handicap can be said to accrue to him.  The publication of the banning order raises different considerations.  The public are protected by the banning order, whereas publicity may well have an adverse effect upon the applicant’s current accountancy practice, which effect would not necessarily be recovered if the applicant is successful in this tribunal.

I find that the balance of convenience favours a direction that the publication of the decision in the Commonwealth Government Gazette, and any media release referring to the banning order be stayed until the ultimate decision of this Tribunal, or until further order. I do not regard it as appropriate that the respondent be stayed from entry of the decision in any register maintained by it. The register refers to persons licensed to provide financial services, and the ban against the applicant in that regard remains in place. What I am concerned to prevent is gratuitous publicity, which might damage the applicant’s current practice prior to a final determination of this matter. An order pursuant to subsection 35(2) of the Administrative Appeals Tribunal Act re anonymity is on a different footing.  In Australian Securities Investment Commission v Administrative Appeals Tribunal and Another supra at page 148 Downes and Jagot JJ said:

Again, we think it is important to emphasise certain aspects of the statutory provisions.  Although subsection 35(1) is subject to the balance of the section, it establishes a norm.  The norm is that proceedings before the AAT shall be in public.  This norm is reinforced by the requirements of subsection 35(3), which expressly confirm the principle that it is desirable that hearings be held in public.  It follows that when deciding whether it is satisfied that it is desirable to exercise its power under subsection 35(2), the AAT is required to form a state of satisfaction which recognises the existence of the norm, and the values it is intended to protect.

This, no doubt, is why Brennan J in Pochi v Minister for Immigration and Ethnic Affairs (1979) 36 FLR 482 described the power in section 35(2):

To depart from this norm is one to be exercised sparingly.

It also explains the approach in Australian Securities and Investments Commission v PTLZ [2008] FCAFC 164, emphasising that the words of subsection 35(3) require this principle of the desirability of hearings to be in public to be the basis of the AAT’s consideration in adopting a different approach, in contrast, for example, to a base for that consideration. Suppression orders are rarely made in courts, even though publicity undoubtedly disadvantages parties. Criminal proceedings are a good example. In the AAT itself facts which parties would not wish to be published, and which may disadvantage them, are frequently published. Social security applications are a good example.

The reason these matters are not kept secret is the overriding importance of justice being administered openly and in public.  It is not readily apparent why persons in business should be treated differently, even when, for example, employees may be damaged.  When measured against the existence of the norm of a public hearing, and the scheme established by the Corporations Act in respect of banning orders, it is apparent that the AAT would need some cogent reason by reference to the particular case to depart from the ordinary requirement of a public hearing.

It is difficult to accept that harm, even serious harm, to the recipient’s reputation resulting from public awareness of the banning order will be a sufficiently cogent reason to justify the grant of a stay in those cases.  This is because the risk of harm of this type is inherent in the nature of a banning order.  To the above may be added the cogent remarks regarding secrecy provisions by Merkel J in Herald and Weekly Times Limited v Williams and Others (2003) 130 FCR 435 at 444. His Honour said as follows:

It was likely Williams would be the subject of embarrassing and damaging publicity if the suppression order was not made.

However, as was pointed out by President Kirby in John Fairfax Group Pty Limited v Local Court (1991) 26 NSWLR 131:

It has often been acknowledged that an unfortunate incidence of the open administration of justice is that embarrassing, damaging and even dangerous facts occasionally come to light.

Such considerations have never been regarded as a reason for the closure of courts, or the issue of suppression orders in their various alternative forms, or a significant reason for adhering to stringent principles, despite sympathy for those who suffer embarrassment, invasions of privacy, or even damaged by publicity of their proceedings, is that such interests must be sacrificed to the greater public interest in adhering to an open system of justice.  The policy reasons for adhering to an open system of justice were explained in Scott v Scott [1913] AC 417, as Lord Shaw observed:

May not the fear of giving evidence in public on questions of status like the present deter witnesses of delicate feeling from giving testimony, and rather induce the abandonment of their just right by sensitive suitors, and may not that be a sound reason for administering justice in such cases with closed doors, for otherwise justice, it is argued, would thus be, in some cases, defeated.  My Lords, this ground is very dangerous ground.

One’s experience shows that the reluctance to intrude one’s private affairs upon public notice induces many citizens to forego their just claim.  It is no doubt true that many of such cases might have been brought before tribunals, if only the tribunals were secret, but the concession to these feelings would, in my opinion, tend to bring about those very dangers to liberty in general, and to society at large, against which publicity tends to keep up secure.  Lord Atkinson observed:

The hearing of a case in public may be, and often is, no doubt, painful, humiliating, deterrent to both parties and witnesses, but all this is tolerated and endured, because it is felt that in public trial is to be found on the whole the best security for the pure, the impartial and efficient administration of justice, the best means for winning for it public confidence and respect – citation submitted.

I consider that similarly considerations apply here, and there will be no direction pursuant to subsection 35(2) of the Administrative Appeals Tribunal Act. If it is sought that there is some incongruity between my declining to make a direction under subsection 35(2), and yet directing that no notice be placed in the Gazette, or media release be made, it is explained by the different publicity engendered. As stated above, a press release will, in my opinion, invariably result in publicity, no doubt by a by-lined article in the Illawarra Mercury. Daily law lists are, however, in a different category.

To my knowledge, it is only the Sydney Morning Herald, a newspaper that does circulate in Wollongong that publishes the daily law list, and even then on an ad hoc basis.  I do not accept that the good burghers of Wollongong, when they sit down with their morning newspaper, turn to the law list to ascertain which of their neighbours is engaged in litigation that day.  If, somehow, the applicant’s hearing in this Tribunal receives publicity, then that is a price to be paid for the principle of open justice.  That same principle mandates that any decision of this Tribunal, except for very cogent reasons, should be publicly available.

There will be a direction that the respondent not publish notice of the banning order against the applicant in the Commonwealth Government Gazette, nor issue any press release with regard thereto.  Otherwise the applications made by the applicant in these proceedings are refused.