United Global Capital Pty Ltd and Australian Securities & Investments Commission

[2024] AATA 2864

United Global Capital Pty Ltd and Australian Securities & Investments Commission [2024] AATA 2864 (26 July 2024)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):2024/3741; 2024/3838      

Re:United Global Capital Pty Ltd   (Administrators appointed)

APPLICANT [2024/3741]

and

Joel James Hewish

APPLICANT [2024/3741]

Australian Securities & Investments CommissionAnd  

RESPONDENT

DECISION

Tribunal:Deputy President Damien O'Donovan

Date of decision:     26 July 2024

Date of reasons:     7 August 2024

Place:Canberra

The Tribunal REVOKES Order No. 2 of the Orders made in these two matters on 21 June 2024.

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Deputy President Damien O’Donovan

CATCHWORDS

PRACTICE AND PROCEDURE – Stay application – interim orders made to restrain ASIC from publishing information about banning order and Australian Financial Services Licence cancellation – orders made under section 41 – application for revocation of orders – whether statutory threshold for grant of orders still met in light of subsequent appointment of administrator – whether continued interference with ASIC’s statutory objectives appropriate – order revoked

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth)

Corporations Act 2001 (Cth)

REASONS FOR DECISION

Deputy President Damien O'Donovan

7 August 2024

1. This is an application brought by the Australian Securities and Investments Commission (ASIC) seeking to revoke an order made by Deputy President McCabe on 21 June 2024 under section 41(2) of the Administrative Appeals Tribunal Act 1975 (AAT Act). The order was made following the lodging of applications for review by the applicants in relation to two decisions made by a delegate of ASIC.

2. Those decisions were:

   (a) to cancel the Australian Financial Services Licence (AFSL) of the corporate applicant pursuant to section 915C of the Corporations Act 2001; and

   (b) to ban the individual applicant from providing financial services for a period of 10 years pursuant to sections 920A and 920B of the Corporations Act.

3. The applicants sought orders which would stay the implementation of those decisions.

4. The corporate applicant applied for the following orders ahead of the substantive hearing of the review:

   (a)the Cancellation Order be stayed pending the outcome of a review of the decision made by ASIC;

   (b)a Confidentiality Order be made prohibiting the publication of the decision under review made by ASIC.

5. The Mr Hewish applied for the following orders ahead of the substantive hearing of the review:

   (a)That the banning order be stayed pending the outcome of a review of the decision made by ASIC;

   (b)That a confidentiality order be made prohibiting the publication of the decision pending the outcome of the review of the decision made by ASIC

6. Prior to those applications being heard, ASIC agreed not to update its website with information about its decisions. It did however ask the Tribunal to hear the stay applications urgently. The applicants resisted the urgent hearing of the stay applications, seeking more time to prepare their applications.

7. The matter was brought on reasonably urgently by the Tribunal. The stay applications were listed before Deputy President McCabe on 21 June 2024. Due to the shortened timeframe for the applicants to prepare, the hearing was directed at considering what interim orders should be made pending a better opportunity to consider the stay applications.  It is clear from the reasons for decision published by the Tribunal that the orders made were designed to provide some limited protection to the applicants from the full impact of ASIC’s decisions pending a further opportunity to argue for more expansive orders staying the operation of those decisions.

8. The applicants sought a range of restrictive orders which would have kept the fact of the banning and cancellation decision confidential and allowed the applicants to continue operating as they had prior to ASIC’s decisions being made. Despite the submissions of the applicants, the orders made by the Tribunal were limited in scope. They restricted ASIC’s capacity to publicise its decision, but no other orders which affected the operation of the decisions were made. The banning and cancellation decisions continued to operate and obligations were imposed on the corporate applicant to advise clients of ASICs decisions. No confidentiality orders were made under section 35 of the AAT Act. The orders made were in the following terms:

   1.The application for interim non-publication orders under s35 of the Administrative Appeals Tribunal Act 1975 (Cth) is refused.

   2.Pursuant to s 41(2) of the Administrative Appeals Tribunal Act 1975 and subject to the conditions referred to in (3), the respondent shall not publish news of the reviewable decision on its website or by press release pending the outcome of the stay application or until further order.

   3.The interim stay order referred to in (2) shall be vacated unless the corporate applicant writes to each of its current clients to inform them of the reviewable decision and the fact of the application for review in terms approved by the respondent by 4pm (AEST) on 26 June 2024.

   4.The Tribunal will refrain from publishing these reasons beyond the parties until further order to be considered at the stay hearing.

9. After the orders were made, ASIC took the view that the order prevented it from updating the relevant registers it maintains on the basis that the relevant registers are available to the public via the ASIC website.

10. It is clear from the orders made and the reasons given by the Tribunal that the expectation was that the orders would remain in place for a relatively short period of time. Their purpose was to stop publicity which might bring about the collapse of the corporate applicant before the applications seeking a stay of the implementation of the licence cancellation and banning orders could be heard. The argument that was accepted by the Tribunal was that ‘there is a prospect the applicants will be so damaged by news of the regulatory action that they might not be able to continue with the review. In that sense, I accept the review might prove nugatory’. The Tribunal proceeded on the basis that the ‘stay application is imminent’ and that favoured the granting of interim orders.

11. After the interim orders were made, there were a number of developments. First, the Federal Court of Australia on 20 June 2024 made an order freezing the assets of the corporate applicant. Following the granting of the freezing order the corporate applicant was placed into voluntary administration on 5 July 2024. Second, clients of the corporate applicant began raising questions about the company with ASIC. Third, the corporate applicant became the subject of media attention following the freezing order.

12. The distractions and burdens arising from these events meant that the stay application has not progressed as quickly as anticipated and it is now unlikely that any applications seeking to stay the implementation of ASIC’s decisions will be heard before the end of August 2024.

13. In these circumstances ASIC has brought an application seeking to have Order 2 revoked.

14. ASIC’s primary submission noted that the purpose of Order 2 was to ensure that by the time the application for a stay came on for hearing the corporate applicant was not so damaged by news of the regulatory action that it could not maintain its application for review. The Tribunal’s reasons accept that if Order 2 was not made, any application for a stay order or any review, might not proceed because some kind of corporate collapse would render any review nugatory.

15. ASIC points out that in light of the fact that an administrator has now been appointed, the damage which Order 2 was designed to guard against has in fact come to pass. The only role Order 2 now plays is to interfere with ASIC discharging important statutory functions. The corporate applicant which has lawyers instructed by the administrators neither supports nor opposes the revocation of Order 2.

16. Mr Hewish however does. He argues that Order 2 should stay in place until the stay application is heard. He does so on three bases.

17. First, because ASIC is in effect appealing to the Tribunal against the interim decision of the Tribunal which is impermissible as a matter of law.

18. Second, his reputation will be harmed if Order 2 is revoked.

19. Third, it is necessary for the interim order to remain in place for the stay application to be heard on its merits.

20. The first argument advanced by Mr Hewish is misconceived. It is clear from the terms of section 41(3) that the Tribunal has capacity to revoke an earlier order made under that provision. No appeal is necessary for the order to be reviewed and ASIC’s application does not have the character of an appeal from the Tribunal’s earlier decision.

21. The second argument is without substance. As advanced by Mr Hewish it directs attention away from the purpose which orders made under section 41 must serve. The purpose of orders under section 41 is not to preserve the reputation of parties to reviews in the Tribunal pending the outcome of those reviews. As has been noted previously by the Tribunal, the risk of bad publicity is an incident of participating in a regulated profession. The purpose of the power granted in section 41 is to secure the effectiveness of the hearing and determination of the application for review. It would be a rare case where a section 41 order was appropriate solely for the purpose of preserving a person’s reputation following an adverse licencing or registration decision by a regulator. Effective review can be achieved in circumstances where the public has knowledge that a regulator has taken an adverse view in relation to a person and that that view is being challenged in a public forum.

22. Mr Hewish has not explained why the effectiveness of the review will be undermined if he loses the protection of Order 2 pending the stay application or the hearing of the substantive review.

23. The third argument advanced by Mr Hewish, that Order 2 has utility in preserving the status quo pending a full hearing of the stay application, does not take account of the fact that the Tribunal’s interim orders were extremely narrow in scope and have been overtaken by events. No section 35 orders were made and the only limitation imposed on the respondent by Order 2 is that it is not to issue a press release or place news of its decisions on its website. ASIC’s decisions continued to operate. The corporate applicant does not have an AFSL under which to operate and Mr Hewish remains banned from providing financial services. Order 2 provides extremely weak protection from adverse publicity. It was granted with a view to providing the applicants with some protection to allow them to operate to some degree without bringing on a structural collapse that imperilled their capacity to proceed with the application for review.

24. To the extent that Order 2 was effective in doing that initially, it has been overtaken by subsequent events. Mr Hewish is no longer in control of his own company as a result of the appointment of an administrator following the freezing of the corporate applicant’s assets. When pressed at the hearing on what material difference Order 2 would make between now and the hearing of a stay application down the track, the applicant was unable to point to anything. I am satisfied that publication of information about the decisions made by ASIC on its website and in the form of a press release will not affect in any significant way the capacity of the company to continue to operate pending any substantive hearing of the section 41 applications or the review of the decisions made by ASIC. In the current circumstances I am not satisfied that it still serves the purpose of securing the effectiveness of the hearing and determination of the application for review.

25. Further, the restrictions on ASIC imposed by Order 2 concerning the release of information about the decisions that it has made, prevents the public in general from understanding the current difficulties facing the company and the current ability of Mr Hewish to participate in the financial services industry. It would not be appropriate to allow this state of affairs to continue when there is no longer a proper basis for persisting with Order 2. In these circumstances it is appropriate to revoke the order.

26. A decision to revoke however does not mean that either applicant cannot continue to pursue the foreshadowed stay application.  I have only dealt here with the revocation of Order 2 and I have done so only on the basis that the particular order granted lacks utility in the current circumstances.

    DECISION

27. The Tribunal REVOKES Order No. 2 of the Orders made in these two matters on 21 June 2024.

I certify that the preceding 27 (twenty-seven) paragraphs are a true copy of the reasons for the decision herein of Deputy President Damien O’Donovan.

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Associate

Dated: 7 August 2024

Date(s) of hearing:

25 July 2024

Solicitor for the Applicant [2024/3741]:

Mr A Murray, Irish Bentley Lawyers

The Applicant [2024/3838]:

Self-represented

Counsel for the Respondent:

Mr E Nekvapil

Solicitors for the Respondent:

Mr R Chiarella, ASIC

Ms S Maneckshana, ASIC