Van Dieren and Australian Securities and Investments Commission
[2019] AATA 4777
•15 November 2019
Van Dieren and Australian Securities and Investments Commission [2019] AATA 4777 (15 November 2019)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2019/3946
Re:John Van Dieren
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal:Deputy President Boyle
Date:15 November 2019
Place:Perth
The application for a stay of the operation of the Banning Order is refused.
............[sgd]............................................................
Deputy President Boyle
CATCHWORDS
PRACTICE AND PROCEDURE – application for stay of decision under s 41(2) of the Administrative Appeals Tribunal Act 1975 – relevant considerations – prospects of success – consequences for the Applicant of a refusal of stay – public interest – consequences for the Respondent in carrying out its functions – whether the application for review would be rendered nugatory – stay application refused – Tribunal does not have power to order any stay on publication by way of a media release where there has not been a stay granted – order that the hearing of the application be expedited
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) – ss 41, 41(2)
Australian Securities and Investments Commission Act 2001 (Cth) – s 1(2)
Corporations Act 2001 (Cth) – ss 670A(1), 760A, 920A, 920A(1), 1041H(1)CASES
Atkins and Australian Securities and Investments Commission [2018] AATA 3223
Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80
Australian Securities and Investments Commission v Administrative Appeals Tribunal (2009) 181 FCR 130
Australian Securities and Investments Commission v Beekink [2007] FCAFC 7
Australian Securities and Investments Commission v Forge [2007] NSWSC 1489
Australian Securities Commission v Kippe (1996) 67 FCR 499
Australian Securities and Investments Commission v McCormack [2017] FCA 672
Australian Securities and Investments Commission v PTLZ (2008) 48 AAR 559; [2008] FCAFC 164
Batros and Australian Securities and Investments Commission [2016] AATA 519
Bundy and Australian Securities and Investments Commission [2013] AATA 59
Civil Aviation Safety Authority v Hotop (2005) 145 FCR 232
Construction Industry Training Australia Pty Ltd and Australian Skills Quality Authority [2019] AATA 2219
Dart and Director-General of Social Services (1982) 4 ALD 553
Dimitropoulos and Australian Securities and Investments Commission [2017] AATA 1513
Gillespie and Australian Securities and Investments Commission [2012] AATA 779
Gurkhas Institute of Technology Pty Ltd trading as Royal Gurkhas Institute of Technology and Australian Skills Quality Authority [2017] AATA 1018
Howarth and Australian Securities and Investments Commission [2008] AATA 278
Jeffers and Australian Securities and Investments Commission [2015] AATA 537
Liu and Australian Securities and Investments Commission [2013] AATA 117
McCormack and Australian Securities and Investments Commission [2016] AATA 1021
McLean and Australian Securities and Investments Commission [2016] AATA 22
McLean and Australian Securities and Investments Commission [2017] AATA 1416
Menzies Institute of Technology and Australian Skills Quality Authority [2019] AATA 343
Nguyen and Australian Securities and Investments Commission [2011] AATA 398
Oaklands and Australian Securities and Investments Commission [2011] AATA 199
Panganiban and Australian Securities and Investments Commission [2016] AATA 703
Phosphate Co-operative of Australia Ltd v Shears (No 3) (1988) 14 ACLR 323
Poidevin and Australian Securities and Investments Commission [2018] AATA 124
Re Commonwealth of Australia and Quirke (1986) 9 ALD 92
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) [1979] AATA 179; (1979) 2 ALD 634
Re YFFM and Australian Securities and Investment Commission [2009] AATA 409
Scott and Australian Securities and Investments Commission [2009] AATA 798
Stirling Skills Training (Inc) and Australian Skills Quality Authority [2019] AATA 1721
Tarrant and Australian Securities and Investments Commission [2013] AATA 926
Technical Education Australia Pty Ltd and Australian Skills Quality Authority [2018] AATA 3047SECONDARY MATERIALS
Australian Securities and Investments Commission, ASIC: A guide to our regulatory documents, June 2007
Australian Securities and Investments Commission, Regulatory Guide 98 – ASIC’s powers to suspend, cancel and vary AFS licences and make banning orders, September 2018
Australian Securities and Investments Commission, Regulatory Guide 112 – Independence of experts, March 2011REASONS FOR DECISION
Deputy President Boyle
15 November 2019
THE APPLICATION
This is an application to stay the operation of a banning order made by a delegate of the Respondent on 19 June 2019 (Banning Order) pursuant to s 920A(1) of the Corporations Act 2001(Cth) (Corporations Act). The Banning Order bans the Applicant from providing financial services for a period of three years.
On 3 July 2019 the Applicant applied to the Tribunal for a review of the Banning Order and on the same day made an application for a stay of the Banning Order pursuant to s 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act).
BACKGROUND
The Applicant is a chartered accountant employed by Stantons International Securities Pty Ltd (Stantons). He has over 45 years of experience in the accounting profession. Over that period the Applicant has prepared numerous independent expert reports.
In late 2017 the Respondent undertook an investigation into various expert reports prepared by Stantons.
The Respondent identifies four reports prepared by the Applicant, or in the preparation of which the Applicant was involved, as being of concern. They are:
(a)Lincoln Minerals Ltd (report dated 26 May 2017; revised report dated 4 August 2017);
(b)Strategic Minerals Corporation NL (report dated 18 December 2017; revised report dated 25 May 2018);
(c)Kula Gold Ltd (report dated 9 June 2017); and
(d)Eumeralla Resources Ltd (report dated 13 February 2017).
The Respondent in its submissions dated 15 August 2019 opposing the stay order identifies its concerns in relation to each of the reports as follows:
Lincoln Minerals Ltd report
11. In relation to this report, ASIC had four main concerns.
12. The first concern was that the Applicant was not independent. This concern was based on the Applicant engaging a technical specialist, Al Maynard and Associates (AMA) which was not independent, and on the involvement of the Applicant and the client, Lincoln Minerals Ltd, in the production of AMA’s report. AMA’s report was incorporated into the Applicant’s report. ASIC was concerned that the Applicant’s and the client’s involvement in AMA’s report comprised more than assisting with facts and involved AMA requesting and receiving information about AMA’s valuation calculations and methodology.
13. The second concern was that the Applicant had engaged a technical specialist, AMA, which was not independent. Again this concern was based on the involvement of the Applicant and the client in the production of AMA’s report.
14. The third concern was that the Applicant had engaged a technical specialist, AMA, which was not competent, and that the Applicant did not review the technical specialist’s work. This concern was based on AMA’s report being based on superseded codes and ASIC Regulatory Guides, and using a methodology and language which were outside the applicable code. This was not detected by the Applicant.
15. The fourth concern was that the Applicant’s report made representations that were erroneous. In particular, given the above, ASIC was concerned that the report erroneously represented that the Applicant was independent.
Strategic Minerals Corporation NL report
16. In relation to this report, ASIC again had four main concerns.
17.The first concern was that the Applicant was not independent. This concern was based on the Applicant engaging a technical specialist, Ravensgate International Pty Ltd (Ravensgate) which was not independent. Ravensgate’s report was incorporated into the Applicant’s report. The concern was also based on the fact that the representative of the client, Strategic Minerals Corporation NL, who engaged the Applicant was not independent.
18.The second concern was that the Applicant had engaged a technical specialist, Ravensgate, which was not independent. This concern was based on Ravensgate not having an independent relationship with the client, and the client’s involvement in the preparation of Ravensgate’s report.
19.The third concern was that the Applicant had engaged a technical specialist, Ravensgate, which was not competent, and that the Applicant did not review the technical specialist’s work. This concern was based on material errors in Ravensgate’s report, which the Applicant did not detect.
20.The fourth concern was that the Applicant’s report made representations that were erroneous. In particular, given the above, ASIC was concerned that the report erroneously represented that the Applicant was independent. ASIC was also concerned that the report erroneously represented that it had been prepared at the request of an independent person, and that the Ravensgate report had been prepared at the request of the Applicant.
Kula Gold Ltd report
21. In relation to this report, ASIC had three main concerns.
22.The first concern was that the Applicant was not independent. This concern was based on the Applicant engaging a technical specialist, Dunbar Resource Management (Dunbar) which was not independent. Dunbar’s report was incorporated into the Applicant’s report. The concern was also based on the Applicant receiving, without objection, unsolicited information from the client, Kula Gold Ltd, during the preparation of his report.
23.The second concern was that the Applicant had engaged a technical specialist, Dunbar, which was not independent. This concern was based on the client having engaged Dunbar, on the involvement of the client in the preparation of Dunbar’s report, and on the Applicant’s involvement in the preparation of Dunbar’s report.
24.The third concern was that the Applicant’s report made representations that were erroneous. In particular, given the above, ASIC was concerned that the report erroneously represented that the Applicant was independent. ASIC was also concerned that the report erroneously represented that Dunbar’s report had been prepared at the request of the Applicant.
Eumeralla Resources Ltd report
25. In relation to this report, ASIC had four main concerns.
26. The first concern was that the Applicant was not independent. This concern was based on the Applicant engaging technical specialists, Minnelex Pty Ltd (Minnelex) and Lunda LLC (Lunda) which were not independent. The technical specialists’ reports were incorporated into the Applicant’s report. The concern was also based on the involvement of the client, Eumeralla Resources Ltd, in the production of the Applicant’s report.
27. The second concern was that the Applicant had engaged a technical specialist, Minnelex, which was not independent of the client, having been engaged by a party related to the client and not having an independent relationship with the client. The concern was also based on the Applicant having engaged a technical specialist, Lunda, which was not independent of the client, having been engaged by the client and not having an independent relationship with the client. Lunda was also not independent of the Applicant, the Applicant having been involved in the preparation of Lunda’s report.
28. The third concern was that the Applicant had engaged technical specialists, Minnelex and Lunda, which were not competent, and that the Applicant did not review the technical specialists’ work. This concern was based on Minnelex’s and Lunda’s reports containing material errors which the Applicant did not detect.
29. The fourth concern was that the Applicant’s report made representations that were erroneous. In particular, given the above, ASIC was concerned that the report erroneously represented that the Applicant was independent. ASIC was also concerned that the report erroneously represented that the Minnelex and Lunda reports had been prepared at the request of the Applicant. There was also concern about the backdating of a letter of engagement.
(Footnotes omitted.)
LEGISLATIVE FRAMEWORK
Section 920A(1) of the Corporations Act relevantly provides:
ASIC’s power to make a banning order
(1) ASIC may make a banning order against a person, by giving written notice to the person, if:
…
(da)ASIC has reason to believe that the person is not adequately trained, or is not competent, to provide a financial service or financial services; or
…
(e) the person has not complied with a financial services law (other than section 921E (relevant providers to comply with the Code of Ethics));
Section 670A(1) of the Corporations Act provides:
Misstatements in, or omissions from, takeover and compulsory acquisition and buy-out documents
(1)A person must not give:
(a)a bidder’s statement;
(b)a takeover offer document;
(c)a notice of variation of a takeover offer;
(d)a target’s statement;
(e)a compulsory acquisition notice under section 661B or 664C;
(f)a compulsory buy-out notice under section 662B, 663B or 665B;
(g)a report that is included in, or accompanies, a statement or notice referred to in paragraphs (a) to (f);
if there is:
(h)for all documents-a misleading or deceptive statement in the document; or
(i)for a bidder’s statement or target’s statement-an omission from the document of material required by section 636 or 638; or
(j)for a bidder’s statement or a target’s statement-a new circumstance that:
(i) has arisen since the document was lodged; and
(ii) would have been required by section 636 or 638 to be included in the document if it had arisen before the document was lodged; or
(k)for an expert’s report under subsection 636(2) or section 640, 663B, 664C or 665B-an omission from the report of material required by subsection 648A(3) or 667B(2).
Section 1041H(1) of the Corporations Act provides:
Misleading or deceptive conduct (civil liability only)
(1)A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive.
Section 41 of the AAT Act relevantly provides:
(1) Subject to this section, the making of an application to the Tribunal for a review of a decision does not affect the operation of the decision or prevent the taking of action to implement the decision.
(2) The Tribunal may, on request being made by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
Regulatory Guides
The Respondent refers to various regulatory guides. The Respondent describes the purpose of regulatory guides as giving “guidance to regulated entities by: explaining when and how ASIC will exercise specific powers under legislation (Primarily the Corporations Act 2001), how ASIC interprets the law, describing the principles underlying ASIC’s approach, and/or giving practical guidance”.[1] Senior Member Dr M Evans in Atkins and Australian Securities and Investments Commission [2018] AATA 3223 reviewed the legal status of ASIC regulatory guides. Having cited passages from Tarrant and Australian Securities and Investments Commission [2013] AATA 926, which in turn cited Re Drake and Minister for Immigration and Ethnic Affairs (No 2) [1979] AATA 179; (1979) 2 ALD 634, Senior Member Dr M Evans at [63] concluded that it was appropriate for the Tribunal to “have regard to” the regulatory guides. While the Tribunal is to have regard to the regulatory guides, it should be noted that they are not determinative nor do they have the status of legislation or regulation.
[1] Australian Securities and Investments Commission, ASIC: A guide to our regulatory documents, June 2007.
THE HEARING AND THE EVIDENCE
The application for the stay was heard on 22 August 2019. The Applicant was represented by Mr Sanders and the Respondent was represented by Ms Maher. Both parties provided detailed submissions and the Applicant provided the following:
(a)Statement from the Applicant dated 1 August 2019;
(b)Letter from Steinepreis Paganin dated 17 April 2019;
(c)Letter from Duncan Calder of Contour Capital dated 24 April 2019;
(d)Letter from Jonathan Murray of Steinepreis Paganin dated 30 April 2019;
(e)Statement of Jamie Ogilvie dated 13 May 2019;
(f)Letter from Ranko Matic of Consilium Corporate dated 30 April 2019;
(g)Statement of Mark Foster dated 13 May 2019;
(h)Statement of David Sanders dated 13 May 2019;
(i)Statement of Martin Michalik of Stantons dated 20 August 2019;
(j)Supplementary submissions to hearing under s 920A of the Corporations Act (undated);
(k)Expert Report of Guy Le Page of RM Corporate Finance dated 13 May 2019;
(l)Expert Report of Guy Le Page dated 5 June 2019; and
(m)Bundle of correspondence between the Respondent and Stantons including schedule of responses to requests from the Respondent for comments.
The Respondent also lodged four files of T-documents comprising 2580 pages and a file of relevant authorities referred to in the Respondent’s submissions.
THE LAW
Both parties identified the relevant considerations for the grant of a stay as being those identified by President Downes J in Scott and Australian Securities and Investments Commission [2009] AATA 798 (Scott). As I noted in Stirling Skills Training (Inc) and Australian Skills Quality Authority [2019] AATA 1721 at [35]-[36] and in Construction Industry Training Australia Pty Ltd and Australian Skills Quality Authority [2019] AATA 2219 at [35], a useful restatement of those considerations appears in Member Parker’s decision in Menzies Institute of Technology and Australian Skills Quality Authority [2019] AATA 343 (Menzies) (at [16]):
President Downes J, in Re Scott and Australian Securities and Investments Commission [2009] AATA 798 (Re Scott) set out a number of factors to be considered in determining whether to grant a stay under subsection 41(2) of the AAT Act, as follows:
1. The prospects of success;
2.The consequence for the applicant of the refusal of the stay;
3.The public interest;
4.The consequences for the respondent in carrying out its functions, depending on whether a stay is granted or not;
5.Whether the application for review would be rendered nugatory if a stay were not granted;…
The parties’ respective submissions addressed the considerations identified in Scott.
The Applicant’s submissions
Prospects of success
The Applicant’s submissions in relation to his prospects of success were to the following effect:
(a)The concerns identified by the Respondent related to four reports prepared by the Applicant. The Applicant has prepared over 200 independent expert reports over his career.
(b)The concerns raised by the Respondent did not relate to the Applicant’s reports, but rather related to the reports prepared by technical specialists engaged by Stantons to prepare valuations of mining assets.
(c)In each case when the concern/error was identified, the specialist reports were updated or replaced. In all but one case, the updating of the relevant specialist report had no impact on the conclusion made in the Stantons report.
(d)In the one case where the correction of the specialist report affected the Stantons report, Stantons withdrew their report and issued a new one. All of the shareholders who had accepted the takeover bid on the basis of the prior report were given the option of unwinding their acceptance. The error in the specialist report was a mathematical error that had not been picked up by a number of parties.
(e)The Applicant’s prospects of success are therefore good as none of the concerns raised by the Respondent justify the finding that the Applicant is lacking in competence or training or had breached the Corporations Act.
Consequences for the Applicant of a refusal of stay
The Applicant’s submissions on the consequences of the refusal of a stay were that the refusal of a stay would result in a loss of income and, in effect, prematurely end the Applicant’s career. This consideration was also addressed in the consideration of whether the refusal of a stay would render the substantive hearing nugatory.
Public interest
The Applicant’s submissions on the consideration of public interest were that for the reasons put forward elsewhere by the Applicant on the other considerations there is no public interest to be served by not staying the operation of the Banning Order.
Consequences for the Respondent in carrying out its functions
The Applicant’s submissions under this consideration were to the following effect:
(a)The Respondent’s relevant function is to protect Australian consumers, investors and creditors by enforcing laws that apply to the provision of financial services.
(b)Those objectives are achieved by a range of general and specific deterrence.
(c)In the present case there is no need for a specific deterrence because the Applicant does not pose any risk to any consumers, investors or creditors.
(d)The Applicant has prepared over 100 independent expert reports relating to mergers and acquisitions and over 140 investigating accountant’s reports relating to initial public offerings with no complaint to the Respondent.
(e)The Respondent examined six other reports prepared by the Applicant since December 2017 with no issues being identified.
(f)The Applicant is of impeccable character and professional competence as attested to by those who provided statements and letters (see [12] above).
(g)The only consequence for general deterrence in granting a stay is delay to the publication of the Banning Order until after the substantive hearing. The conduct in relation to which the Banning Order was made occurred in 2016 and 2017 so there is no prejudice in delaying the operation of the Banning Order.
Will the application for review be rendered nugatory?
The Applicant’s submissions under this consideration were to the following effect:
(a)The Applicant is 70 years old and has worked part-time for Stantons since July 2017 in a largely consultative role.
(b)Until the Banning Order was made, the Applicant had intended to work for another three to five years.
(c)If a stay is not granted the Applicant will not be able to work until the review of the Banning Order is concluded.
(d)If the stay is not granted the application will be futile because:
(i)If the review is successful the Applicant will not be able to return because his work will have been absorbed by other employees; and
(ii)The Applicant would be unable to find an equivalent role in another firm because of his age.
Application for stay of publication of media release
The Applicant also applies for an order banning the Respondent from making a media release until after the resolution of the application. The Applicant claims that such a publication would cause irreparable damage to his “significant and unblemished professional reputation at a time when [the Applicant] is close to retirement”.
The Respondent’s submissions
Prospects of success
The Respondent’s submissions are:
(a)In assessing whether a stay should be granted under s 41(2) of the AAT Act, it is not the role of the Tribunal to conduct a preliminary hearing, or “mini-trial”, of the application for review of the decision (Re Dart and Director-General of Social Services (1982) 4 ALD 553, 555).
(b)Given the potentially incomplete awareness of all material issues, the state and quality of the evidence available at the hearing of the stay application, and the prospect of additional relevant material becoming available later, the Tribunal must exercise caution in evaluating an applicant’s prospects of success in the review application (Panganiban and Australian Securities and Investments Commission [2016] AATA 703, [8] (Panganiban)).
(c)It is reasonably settled that the proper approach on an application for a stay is for the Tribunal to consider whether there are any:
(i)facts or circumstances which, if established at the review hearing, would provide a basis for the applicant’s success in the review application; or
(ii)points of law raised which, if sustained at the review hearing, would lead to that conclusion (ReCommonwealth of Australia and Quirke (1986) 9 ALD 92, 95; Re YFFM and Australian Securities and Investment Commission [2009] AATA 409, [9]).
(d)It is also appropriate for the Tribunal to consider the extent to which the material available at the stay hearing is apparently:
(i)unlikely to lead to a favourable variation of the decision under review; or
(ii)sufficient to provide grounds for real confidence that such a variation may be appropriate.
(Panganiban, [8]).
(e)The approach to be taken was summarised by Deputy President Redfern in Poidevin and Australian Securities and Investments Commission [2018] AATA 124 (Poidevin) at [39]-[40]:
39.… Clearly, it is not the role of the Tribunal in an interlocutory application of this nature to conduct a review of the merits or strength of the arguments, even on a preliminary basis, because such an undertaking would not only be lengthy but it would be unlikely to take into account the possibility of further evidence and submissions that may be more appropriately advanced at the substantive hearing…
40.The Tribunal is, however, at least obliged to determine whether there are facts or circumstances or points of law that may be argued at a substantive hearing which may lead to a different result (see Zarfati v Australian and Securities Investments Commission [2008] AATA 989; (2008) 106 ALD 225). The Tribunal is not bound by the findings of the delegate but the decision nonetheless provides a sound basis for this assessment, particularly, as in this case, where the decision is detailed and discloses the evidence relied on, the findings of fact made and the reasoning process that led to the conclusions reached by the delegate. If the reviewable decision discloses findings and reasoning that an applicant cannot or does not challenge, this would be critical to the issue of prospects and would be a significant factor that would weigh against the granting of a stay. It is incumbent on the applicant for a stay to establish the existence of such facts and circumstances or the possibility of legal error that may lead to a different result, through new evidence or submissions that were not raised before the delegate or by contesting findings of fact or conclusions of law (or a combination of both) that are open to challenge.
(f)The Applicant’s prospects of success is merely one of the factors which the Tribunal must consider on a stay application.
(g)The Tribunal should not stay the Banning Order on the ground that there is no real threat that the conduct of the Applicant the subject of the banning order, or similar conduct, is likely to arise again in future, or on the ground that no person has suffered any detriment as a result of the conduct. The Tribunal took this approach in McCormack and Australian Securities and Investments Commission [2016] AATA 1021, [82]-[83], [89]. On appeal, the Federal Court described that approach as “startling” and “quite wrong”, because it failed to take into account the need for general deterrence and the need to maintain public confidence in the financial services industry (Australian Securities and Investments Commission v McCormack [2017] FCA 672, [38], [1]-[44], [45]-[50], [60]-[67], [68]-[73]).
(h)The Federal Court’s decision means that the fact that the conduct the subject of a banning order is isolated, that the Applicant has an otherwise clean record, or that no person has suffered any loss as a result of the conduct, are not proper grounds for making a banning order. It follows that neither are they proper grounds for concluding that an applicant has sufficient prospects of success in an application to review a banning order for that order to be stayed (See also McLean and Australian Securities and Investments Commission [2017] AATA 1416, [26]).
(i)Applying the above principles to the present case, the Respondent submits that the argument that the Banning Order relates to only four reports out of 200 authored by the Applicant over his career and that he has an otherwise blemish-free professional record, are not proper bases for overturning the Banning Order.
(j)In relation to the Applicant’s argument that the Banning Order was the result of faults in specialist reports prepared by others, not the Applicant, the Respondent points out that under Regulatory Guide 112 and the Corporations Act, the Applicant had important obligations in respect of those technical specialists and their reports (e.g. Regulatory Guide 112, para 112.71).
(k)Further, the Applicant was also obliged to ensure that the technical specialists were properly engaged and independent, not only because that is what is required by the relevant regulatory guide (Regulatory Guide 112, para 112.67), but also because the Applicant represented in his own reports that the technical specialists were so engaged and independent.
(l)In response to the Applicant’s assertion that when the errors in the technical reports were discovered they were promptly addressed, the Respondent says that the errors should have been picked up before he incorporated the reports into his report.
(m)The fact that the changes in the reports prepared by the Applicant, necessitated by the discovery of errors in the technical reports, did not result in detriment to anyone is not a basis for overturning the Banning Order or staying its operation.
(n)Insofar as the application for review of the delegate’s decision identifies various claimed legal errors in that decision, it is misconceived as the Tribunal’s review of the decision is a merits review, not a judicial review.
(o)For the purposes of the stay application, the Applicant has not presented any new material to the Tribunal with respect to the merits of the Banning Order. The evidence relied upon consists of:
(i)the Applicant’s own statement, which is principally concerned with the effects of the Banning Order, not its merits;
(ii)the statement of David Sanders, the Applicant’s counsel (who represented him at the hearing before the delegate) which attaches various documents, all of which were either produced by the Respondent or reviewed by the delegate, or were taken into account by the delegate in making the Banning Order;
(iii)statements from Mark Foster and Jamie Ogilvie, which were taken into account by the delegate; and
(iv)statements from Ranko Matic, Jonathan Murray, Duncan Calder and the partners of Steinepreis Paganin, which are (relatively brief) character references which do not address the Respondent’s particular concerns.
(p)Neither in the submissions, nor by evidence now before the Tribunal, has the Applicant:
(i)identified any facts or circumstances which, if established at the review hearing, would provide a basis for success at that hearing; or
(ii)raised any points of law which, if sustained at the review hearing, would lead to that conclusion.
Consequences for the Applicant of a refusal of stay
The Respondent’s submissions under this consideration are to the following effect:
(a)The Respondent concedes that the Banning Order would present an impost on the Applicant. However, this would be the effect on most, if not all persons the subject of such an order.
(b)Hardship to an applicant is hardly ever a sufficient basis for securing a stay (McLean and Australian Securities and Investments Commission [2016] AATA 22 (McLean), [21]-[22]). Such private considerations do not weigh heavily against the public protective purposes of a banning order (Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80, [80] (Adler)). The public protective purposes of banning orders has been described as “paramount” (Adler, [59]), and “tak[ing] precedence” (Gillespie and Australian Securities and Investments Commission [2012] AATA 779 (Gillespie), [14]). The onus on an applicant for a stay to show that personal considerations outweigh the interests of the public is “heavy” (Poidevin, [67]; Batros and Australian Securities and Investments Commission [2016] AATA 519 (Batros) [23]).
(c)Reputational damage to an applicant if a decision, including a banning order, takes effect is not a sufficiently cogent reason to justify a stay in most cases (Australian Securities and Investments Commission v Administrative Appeals Tribunal (2009) 181FCR 130, 148-149 [76]; Liu and Australian Securities and Investments Commission [2013] AATA 117, [13]). The risk of this type of harm is inherent in a banning order.
(d)To discharge his onus, the Applicant must provide substantive, specific, detailed and rationally probative evidence of hardship (Bundy and Australian Securities and Investments Commission [2013] AATA 59 (Bundy), [15]; Dimitropoulos and Australian Securities and Investments Commission [2017] AATA 1513 (Dimitropoulos), [62]). Imprecise and generally articulated apprehensions will be insufficient.
(e)Where the refusal of a stay may result in hardship to an applicant, the preferable approach is not to stay the decision but to make directions for the review application to be expedited (Australian Securities and Investments Commission v PTLZ (2008) 48 AAR 559; [2008] FCAFC 164 (ASIC v PTLZ) at 565; Scott, [14]).
(f)The Applicant says that a failure to grant a stay will cause him hardship in three ways: loss of income; damage to his career prospects; and reputational damage. The Respondent concedes that the Applicant will suffer financial loss as a result of the Banning Order. The Respondent submits that that is the case in most, if not every, banning order. The Respondent says that the Applicant has failed to demonstrate the loss by appropriate evidence. In closing counsel for the Respondent summarised this as not being “a case in which the loss of income which might result to the Applicant is going to have such consequences for his wellbeing that a stay is demanded” (Transcript at 39). The Respondent says that the evidence is that the Applicant is a person of some 45 years standing in the financial services industry and a former principal of a financial services firm. He is very close to retirement. Quite properly, therefore, he does not suggest that he is of limited financial means, or that the refusal of a stay is essential to his financial well-being or that of his dependants.
(g)The Respondent submits that any loss of income to the Applicant in this case is unlikely to be material. Further any evidence of loss of income must be considered in the context of all the other evidence and the submissions of both parties. By itself, it cannot justify a stay.
(h)In relation to the alleged damage to the Applicant’s career prospects and his inability to work until the application is determined, the Respondent submits that it is likely to be true of many persons subject to a banning order that, unless the order is stayed, they will be unable to continue in their current role until the review application is determined and that, at least for that period, their role will be performed by someone else. The Respondent submits that the Applicant’s view of his future if the Banning Order is not stayed may be too pessimistic. The Applicant’s submissions and evidence disclose that, prior to the Banning Order being made, the Applicant had come to an arrangement with his current employer that he would work part-time, in a largely consultative role. This arrangement has been in place since July 2017 and the Applicant expected it to remain in place for three to five years. Around the time that that arrangement was put in place another employee was taken on and it can be expected that if a stay is refused, then until the application is determined, the other employee will absorb the Applicant’s work. The Respondent asks: if the Applicant succeeds on the review application, why would the arrangement in place prior to the Banning Order not be restored, and continue as all expected?
(i)Further, the Respondent submits that given the Applicant’s long history with his current employer and the high regard in which he is evidently held by that employer, there is good reason to think that he would be welcomed back to see out his career as planned. Further, even if the arrangement in place prior to the Banning Order cannot be restored, there is good reason to think that, should the Applicant succeed in the review application, he will be able to find an equivalent position elsewhere, with another employer or out on his own. Notwithstanding the Applicant’s age – indeed, because of it, and the long experience it entails – the Applicant may be well placed to find another part-time, consultative role for the next few years. The prospects of this are evidenced by the various character references supporting the Applicant’s application for a stay.
(j)In relation to the damage to the Applicant’s reputation, the Respondent submits that the refusal of a stay will have an impact on the Applicant’s reputation only insofar as the Banning Order is made public. The Respondent has an obligation to publish a banning order in the ASIC Register within two business days of giving notice of the decision, and in the ASIC Gazette. Here, these steps were taken on 24 June 2019 and 2 July 2019 respectively. Accordingly, any damage to the Applicant’s reputation from publication of the Banning Order by these means will already have been done. A stay will make no difference. The Respondent notes that it has not issued a media release which it would normally do. A stay could have no impact on any further reputational damage resulting from, for example, media outlets publishing the banning order, having learned of it from the ASIC Gazette or the ASIC Register.
(k)So far as concerns for possible damage to the Applicant’s reputation which has not already been done, there is no evidence of this before the Tribunal. There is simply the assertion in the Applicant’s submissions that the publication of the Banning Order by way of ASIC media release will “inevitably cause significant and irreparable damage to [the Applicant’s] significant and unblemished reputation”. This is not evidence but an imprecise and generally articulated apprehension, which is insufficient for a stay.
Consequences for the Respondent in carrying out its functions and public interest
The Respondent’s submissions under this consideration are to the following effect:
(a)The Respondent has various statutory functions under the Corporations Act and the Australian Securities and Investments Commission Act 2001(Cth) (ASIC Act). These include the functions as set out in s 1(2) of the ASIC Act and s 760A of the Corporations Act.
(b)The Respondent’s powers to ban under s 920A of the Corporations Act must be considered in light of the above provisions.
(c)The purpose of a banning order is to protect the public – specifically, existing and future clients of the person banned, the market and the public generally (Nguyen and Australian Securities and Investments Commission [2011] AATA 398, [19]; Australian Securities Commission v Kippe (1996) 67 FCR 499, 508). The public protective purpose has been described as “paramount” (Adler, [59]; Bundy, [15]; Howarth and Australian Securities and Investments Commission [2008] AATA 278). Banning orders also have a deterrent purpose (Australian Securities and Investments Commission v Forge [2007] NSWSC 1489 (Forge), [103]).
(d)Deterrence has two parts: (i) specific, or personal deterrence, of the person against whom the banning order is made; and (ii) general deterrence, of others in a like position, and the public generally (Forge, [103]. See also Australian Securities and Investments Commission v Beekink [2007] FCAFC 7; Jeffers and Australian Securities and Investments Commission [2015] AATA 537, [33]; Dimitropoulos, [70]).
(e)These matters are critical aspects of the public interest, which must be considered by the Tribunal when deciding whether to exercise its power to stay a banning order (Bundy, [15]; Technical Education Australia Pty Ltd and Australian Skills Quality Authority [2018] AATA 3047 (Technical Education Australia), [61], [113]).
(f)Also relevant to the Tribunal’s power to stay a banning order is the public interest in maintaining the efficacy of a subsisting decision of the Respondent, made after the provision of procedural fairness (Scott at [10]). The public interest in the transparency of the Respondent’s investigation and decision-making processes is also important (Poidevin, [82]).
(g)In deciding whether to order a stay of a banning order the Tribunal should give little weight to the fact that the Respondent did not identify harm, or immediate risk to clients and members of the public (Poidevin, [78]).
(h)The Respondent says that the Applicant’s argument that there is no need for personal deterrence because he poses no risk to the public is not to the point. So long as the delegate’s decision stands, there is a need to specifically deter the Applicant. That need for specific deterrence will not fall away unless and until the delegate’s decision is overturned on the determination of the review application. The Respondent also point to the authorities cited above to the effect that the isolated nature of the conduct and otherwise clean record of the person banned, are not a proper basis for a stay.
(i)So far as general deterrence is concerned, this purpose will plainly be impeded by a stay. The Banning Order is already in the public domain. Those who are aware of it will see that the person the subject of that order can continue to provide financial services without restriction. The perception may be that those who engage in conduct sufficient for the imposition of a banning order can get away with it.
(j)The Respondent disputes the Applicant’s assertion that the conduct which gave rise to the Banning Order occurred in 2016 and 2017 which is some time ago, and says that the relevant conduct was in the period from late 2016 to early 2018 which is relatively recent and that the age of the conduct should not be a ground for a stay any more than its isolated nature or the banned person’s otherwise clean record.
(k)The Respondent says that if a stay is granted the result will be that the Applicant can continue to provide financial services which would prohibit the Respondent from fulfilling its statutory functions because:
(i)it will be unable to maintain public interest and confidence in the financial services industry;
(ii)it will experience difficulty protecting the public because the person, who a delegate determined should be banned, is free to provide financial services; and
(iii)it will be compelled to dedicate resources to monitoring the Applicant.
(l)Public interest concerns are enlivened because the breaches related to the preparation of independent reports. Regulatory Guide 112: provides that “An expert report that is biased frustrates rather than assists informed decision-making. Security holders will assume that an expert report is an independent decision and will be misled if the opinion is not”. The Respondent also notes Brooking J’s observations in Phosphate Co-operative of Australia Ltd v Shears (No 3) (1988) 14 ACLR 323, 339 on the criticality of the integrity of supposed independent expert reports to the financial system.
Will the application for review be rendered nugatory?
The Respondent submits as follows:
(a)This consideration arises on the wording of s 41(2) of the AAT Act which provides for the stay to be “for the purpose of securing the effectiveness of the hearing and determination of the application for review”.
(b)The word “nugatory” does not merely mean that the review application will be rendered “less useful”, it means that it will be rendered “pointless” (Scott, [12]).
(c)In relation to the Applicant’s claim that without a stay his career will be over and the application rendered futile, even if that claim is accepted (which it should not be) it overlooks an important purpose of the review application. If the Applicant succeeds in that application, not only will the Applicant no longer be prohibited from returning to his current role, or commencing an equivalent role, the Applicant will also be vindicated. Any damage to the Applicant’s reputation arising from publication of the Banning Order should be cured by suitable publication of the outcome of the review.
Application for stay of publication of media release
The Respondent’s submissions are:
(a)The Respondent accepts that the Tribunal has power under s 41(2) of the AAT Act to order that publication of a banning order by ASIC by way of media release be stayed, however, only if a stay is granted (Batros, [25]).
(b)Even is a stay is granted, there are strong reasons why there should be no stay of the publication of the banning order citing the principles spelt out in ASIC v AAT. In particular the Full Court’s observations on the criticality of a fully informed market.
(c)The fact of there being a Banning Order has already been published on the ASIC Register. The damage has already been done.
(d)In any event, the risk of reputational damage is inherent in a banning order. As seen, any such harm to the Applicant will not provide a sufficiently cogent reason for a stay of further publication of the Banning Order.
CONSIDERATION
I accept that the relevant considerations for the grant of a stay under s 41(2) of the AAT Act are those set out by President Downes J in Scott (see [14] above).
Prospects of success
Senior Member Cameron in Technical Education Australia summarises (at [68]) the requirement of this consideration as follows:
As has been observed in several authorities, it is not the role of the Tribunal, in assessing the merits of a stay application under section 41(2), to conduct a preliminary hearing (or sometimes referred to “a mini trial”) of the evidence and issues to be raised subsequently at a final hearing, when evaluating an applicant’s prospect of success. The task of the Tribunal in such an application is to consider whether there exists facts and circumstances which would provide some basis for success.
(Footnotes omitted.)
In making the above observation, Senior Member Cameron cited Senior Member Redfern (as she then was) in Oaklands and Australian Securities and Investments Commission [2011] AATA 199, the tribunal’s decision in Re Commonwealth and Quirke [1986] AATA 57; (1986) 9 ALD 92, 95 and Senior Member Fice in Gurkhas Institute of Technology Pty Ltd trading as Royal Gurkhas Institute of Technology and Australian Skills Quality Authority [2017] AATA 1018. In those cases the tribunals reached similar views to that of Senior Member Cameron.
I am also conscious of President Davies J’s finding in Dart and Director-General of Social Services (1982) 4 ALD 553 at 555:
It is not convenient or appropriate that on this application for a stay there should be any preliminary trial of the issues that will ultimately have to be considered by the Tribunal. For the present, it is sufficient that, if the facts which are put to me are established at the hearing, the applicant will succeed in the review.
I also respectfully agree with and adopt the approach taken by Deputy President Redfern in Poidevin cited at [22(e)] above.
The primary facts do not seem to be largely in dispute. The Applicant points to the fact that in three of the four cases relied on by the Respondent, the errors were in reports which were prepared by other specialist experts. The fault on the part of the Applicant was that he did not detect these errors. While that is the case, the Respondent argues that the Applicant is still responsible. The error by the Applicant was one of omission rather than commission. Whether these are the sorts of errors that someone in the position of the Applicant should have picked up is a matter that will have to be determined at the hearing of the review. It is not a matter on which I can, or should, make a determination at this time, other than to note that I appreciate the arguments raised by the Applicant and Mr Le Page’s evidence on that issue.
The Applicant argues that the Respondent has taken issue with four reports only, noting that the Applicant over his 45 year career has prepared in excess of 200 reports. While that might be the case, I can only consider the claimed breaches that have been identified by the Respondent. I have no way of knowing whether the other 200 reports which the Applicant prepared over his career were free of fault which seems to be the underlying assumption in the Applicant’s submission. I accept, as the Respondent appears to, that as far as can be determined on the material before me, the Applicant has not been found to be in breach of any relevant law.
Similarly it does not appear to be disputed by the Respondent, and I accept, that the Applicant is highly qualified, very experienced and is held in the highest regard by his colleagues and professional peers. That is very evident from the statements made in his support as identified in [12] above. I also accept that in the material before the Tribunal there are, on the face of it at least, arguments as to why the procedures adopted by the Applicant and his clients in providing information and feedback to those consultants did not compromise their independence or contravene the regulatory guide. Again, they are issues which will be fully ventilated at the substantive review of the Banning Order.
The Respondent has argued, and I accept, that the various matters identified by the Applicant are not, in themselves, reason to grant a stay. In particular the Respondent identifies:
(a)the Applicant’s otherwise clean professional record;
(b)the length of the Applicant’s career;
(c)the fact that the breaches appear to be isolated;
(d)the fact that errors were promptly rectified; and
(e)the fact that no-one (at least no-one identified) suffered any loss
as being reasons that do not, of themselves, justify a stay.
While I accept the Respondent’s argument (supported by the authorities cited) that none of these factors would warrant the making of a stay order, they are all factors which are relevant in considering whether it is appropriate to grant a stay. While none of those factors alone would warrant a stay, those authorities do not hold that they are not relevant considerations. In my view they are not only matters to be taken into account in looking at the prospects of success, particularly as to the length of the Banning Order, but they are also relevant in considering the consequences of a stay, particularly considerations relating to the risk to the public.
I am mindful of the fact that the breaches claimed by the Respondent are of a technical and, to a degree, subjective nature. As particularised in [6] above, the “concerns” that the Respondent has go, firstly, to the process that the Applicant and the companies engaged in for the preparation of the reports, and in particular whether the interaction between the parties compromised the independence of the expert reports and, secondly, whether the Applicant should have identified the errors in the reports.
Those issues, as the reports of Mr Le Page indicate, are not clear-cut. They are to a degree matters of interpretation in application in the commercial world. I am satisfied that the Applicant has provided material which raises factual and legal arguments that, if resolved in favour of the Applicant at the substantive hearing, would, or at least may, result in a final decision that overturns or varies the Banning Order. The prospects of success have, in my view, reached the level described by Senior Member Cameron in Technical Education Australia; “whether there exists facts and circumstances which would provide some basis for success”, and the level identified by Deputy President Redfern in Poidevin (see [22(e)] above) that “there are facts or circumstances or points of law that may be argued at a substantive hearing which may lead to a different result”.
Consequences for the Applicant of a refusal of stay
I agree with the Respondent’s submissions. As the Respondent concedes, the continuation of the Banning Order would impose an impost on the Applicant. However, that impost, in my view, would be much less in the case of the Applicant than would be the case for most people the subject of such an order. In particular the Applicant is not financially dependent on his employment with Stantons.
As was noted in McLean at [22], hardship to an applicant is hardly ever a sufficient basis for a stay. Private considerations such as hardship do not weigh heavily against the public protective purposes of a banning order (Adler, [80]). The public protective purposes of banning orders in most cases outweigh the personal effects that the continuation of a banning order would have (Adler, [59]), and Gillespie, [14]). In the present case I am not satisfied that the Applicant has met the onus of establishing that personal considerations outweigh the interests of the public (Poidevin, [67]; Batros, [23]).
The Applicant did not put on any evidence, and I do not understand it to be the Applicant’s case, that he needs to continue to work to support himself and/or his family. While he will obviously be denied income, at least from his current employer, I do not accept that that amounts to personal hardship. Insofar as the Applicant’s reputation may suffer further damage if a stay is not granted, I accept the Respondent’s argument that the granting of a stay, or not granting a stay, is unlikely to have any significant impact on the damage that has already been done by the making of the Banning Order and the publication of the order on the ASIC Register.
Looking also at the Applicant’s reputation, it is evident from the statements and letters of support that the Applicant has provided that amongst his peers and professional colleagues his reputation remains high. I cannot see that being impacted by the refusal of a stay of the Banning Order.
Consequences for the Respondent in carrying out its functions and public interest
Again, I agree with the Respondent’s submissions. The courts have made it clear that there is a significant public interest in the general deterrence effect of such orders and in those charged with regulation being seen to be doing their job. I accept that there is a public interest in maintaining the efficacy of a subsisting decision of the Respondent, made after due process (Scott at [10]). As Deputy President Redfern noted in Poidevin at [70]:
The protection of the public and the market is a significant matter that should be given considerable weight in considering whether a stay should be granted. The critical issue … is whether the private interests of Mr Poidevin outweigh the public interest in circumstances of this case and whether there are any other factors which ameliorate any risk.
I do not place any weight on the Respondent’s claim that it will have to dedicate extra resources to monitoring the Applicant if a stay is granted. No detail of or evidence to support that claim was put forward by the Respondent.
Will the application for review be rendered nugatory?
The relevant test is that identified by President Downes J in Scott, at [12], namely;
… 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.
I accept that the Applicant will continue to suffer financial loss, although the evidence on that issue is scant, and that the damage to his reputation will continue until the Banning Order is overturned, assuming that that will be the result. I do not accept that the financial loss that is being suffered by the Applicant is such that he will be financially unable to continue with the substantive application and the Applicant has not claimed that to be the case.
In relation to the ongoing reputational damage that the Applicant claims, I fail to see how the granting of a stay will reduce that damage. The only thing that will restore the Applicant’s reputation is the overturning of the Banning Order. Whether or not a stay is granted is not going to materially impact the level of reputational damage to the Applicant. At most a stay may ameliorate the level of damage to the Applicant’s reputation in the period between now and the hearing of the substantive application. That is hardly a damage that would render the hearing of the substantive application pointless or otherwise nugatory. I have no doubt that the Applicant will want to restore his reputation by overturning the Banning Order. A stay will not achieve that. I do not accept that a stay is necessary in order to secure the effectiveness of the hearing of the substantive application (see Civil Aviation Safety Authority v Hotop (2005) 145 FCR 232 per Siopis J at [40]). The refusal of a stay will not render the application nugatory.
CONCLUSION
I accept that the Applicant is suffering some financial loss as a result of the Banning Order. In his statement of 1 August 2019 the Applicant says that he is unable to continue his part-time work for Stantons. He does not, however, identify the amount of that financial loss. Whatever the loss is, it appears not to be of an extent that would cause the Applicant financial hardship and the Applicant does not claim that to be the case.
I also accept that the likelihood of the Applicant breaching the law as asserted by the Respondent (making no finding as to whether he has breached the law) if he were allowed to continue providing financial services, particularly if he were to do so under supervision and subject to conditions, is minimal. In that regard I note that in his statement dated 20 August 2019 Mr Michalik of Stantons advises that if the Applicant were allowed to continue to provide financial services, “we would require sign-off for any future Independent Expert Reports by a director of the Company and we would also abide by any conditions that the Tribunal chose to impose…in relation to oversight or supervision”.
As noted earlier, I also accept that the Applicant has established that he has some basis for success in the substantive application, sufficient at least to meet the level described by Deputy President Redfern in Poidevin (see [22(e)] above) and Senior Member Cameron in Technical Education Australia (see [28] above).
The consequences to the Applicant if a stay is not granted are, in my view, not sufficient to outweigh those considerations which weigh against the grant of a stay. There is no evidence establishing the extent of the financial loss that the Applicant is suffering and which would stop if a stay were granted and there is no suggestion that the loss would cause financial hardship.
I also do not accept the Applicant’s argument that a refusal of a stay would cause the Applicant to retire two to three years earlier than he intended. The Banning Order may have that effect, but whether or not a stay is granted for the three or four months up to the determination of the application is not going to have that effect. If the Applicant is successful and the Banning Order is overturned, he will be able to return to work. If he is not successful then it will be the Banning Order, not the refusal of a stay, that causes his career to come to what he might consider to be a premature end.
I do not accept that the grant of a stay would significantly, if at all, lessen the reputational damage that the Applicant has suffered as a result of the making of the Banning Order. Restoration of the Applicant’s reputation will only be achieved if the Banning Order is overturned.
Further, I do not accept that the application would be rendered nugatory if a stay were not granted and I do not accept that a stay is appropriate for the purpose of securing the effectiveness of the hearing and the determination of the application (s 41(2) of the AAT Act).
The public interest is served by the general deterrence of the enforcement of banning orders and the Respondent being seen to be able to effectively regulate the provision of financial services in the market. The Banning Order followed the due process and a hearing under s 920A of the Corporations Act. The Applicant has not established any reason sufficient to displace the normal operation of the Corporations Act.
DECISION
The application for a stay of the operation of the Banning Order is refused.
Further, I agree with the Respondent’s position that the Tribunal does not have power to order any stay on publication by way of a media release where there has not been a stay granted (Batros, [25]). As I am not making an order for a stay, it follows that I will not make an order staying the publication by way of media release relating to the Banning Order.
I will, in line with the statements made by the courts in ASIC v PTLZ at 565 and Scott at [14] (see [23(e)] above), make an order that the hearing of the application be expedited.
I certify that the preceding 58 (fifty -eight) paragraphs are a true copy of the reasons for the decision herein of Deputy President Boyle
.....[sgd]...................................................................
Associate
Dated: 15 November 2019
Date of hearing: 22 August 2019 Counsel for the Applicant: Mr D Sanders Solicitors for the Applicant: Bennet & Co Counsel for the Respondent: Ms F Maher
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