Williams and Members of the Companies Auditors and Liquidators Disciplinary Board
[2019] AATA 504
•19 March 2019
Williams and Members of the Companies Auditors and Liquidators Disciplinary Board [2019] AATA 504 (19 March 2019)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2018/7129
Re:Reginald Williams
APPLICANT
AndMembers of the Companies Auditors and Liquidators Disciplinary Board
RESPONDENT
AndAustralian Securities and Investments Commission
OTHER PARTY
DECISION
Tribunal:Deputy President Bernard J McCabe
Date:19 March 2019
Place:Sydney
The Tribunal ORDERS:
1.Subject to Order [2], the Tribunal refuses to make an order under s 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act).
2.Pursuant to s 41 (2) of the AAT Act, the operation and implementation of the reviewable decision dated 5 December 2018 is stayed for a period of seven days from the date of this decision.
3.The Tribunal refuses to make an order under s 35 of the AAT Act.
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Deputy President Bernard J McCabe
CATCHWORDS
PRACTICE AND PROCEDURE – application to stay decision of Companies Auditors and Liquidators Disciplinary Board – decision cancelled applicant's registration as an auditor – applicant currently not working as an auditor – securing the effectiveness of the hearing and determination of the application for review – preventing respondent from publishing press releases – effect current and potential clients – financial consequences – prospects of success – consequences for the applicant if stay refused – public interest – consequences for the respondent – whether application would for review would be rendered nugatory if stay were not granted – stay refused
PRACTICE AND PROCEDURE – application for a confidentiality order – private hearing and non-publication orders – presumption that Tribunal proceedings are held in public – Tribunal's commitment to openness – legislative policy preference for openness -weighing protection of the applicant against information being provided to the public – confidentiality order refused
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) ss 35, 41
CASES
Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185
Scott and Australian Securities and Investments Commission [2009] AATA 798
REASONS FOR DECISION
Deputy President Bernard J McCabe
19 March 2019
The applicant in these proceedings is a registered auditor. On 5 December 2018, the Companies Auditors and Liquidators Disciplinary Board (the Board) decided to cancel the applicant’s registration as an auditor after the Board made findings of fact about his conduct. The applicant has asked the Tribunal to review that decision. That process will take some time. In the meantime, the applicant has asked the Tribunal for:
·orders under s 41(2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) staying the operation or implementation of the reviewable decision, and
·confidentiality orders under s 35(2), s 35(3) and s 35(4) of the AAT Act that would permit the review to proceed without naming the applicant while suppressing the publication of any evidence.
The Board made a submitting appearance. It does not propose to take an active role in the review. The Australian Securities and Investments Commission (ASIC) is acting as the contradictor in these proceedings.
With ASIC’s consent, the Tribunal made interim under s 41(2) that stayed the operation and implementation of the reviewable decision pending an interlocutory hearing. ASIC and the Board also agreed they would not publish news of the decision pending the outcome of the interlocutory hearing. That hearing was listed before me on 20 February 2019. After accepting the affidavit evidence and hearing the submissions of the parties, I adjourned so I could consider the matter.
THE STAY APPLICATION UNDER S 41(2) OF THE AAT ACT
Material filed on behalf of the applicant made clear the applicant has not been acting as an auditor for some time. He has been acting as a consultant to a firm of auditors since 2016. (The applicant had a beneficial interest in the entity which conducts the firm but that is not relevant for present purposes.) In his role as a consultant, the applicant has focused on attracting new business to the firm but there is no suggestion he was personally undertaking the audit work that was secured as a result of his efforts. It follows the reviewable decision to deregister him as an auditor does not of itself inconvenience the applicant or prevent him from continuing to undertake his role, and it does not prevent him from progressing his review application.
Those observations call into question the utility of a stay order. If the applicant is not working as an auditor, why does he need a stay on the cancellation of his registration while the review proceeds? I quizzed the applicant’s counsel on that issue at the start of the hearing. I noted the words of s 41(2) say the stay power is available “for the purpose of securing the effectiveness of the hearing and determination of the application for review”. Mr Lynch, for the applicant, acknowledged the applicant was really after a partial stay – specifically, the applicant wanted the Tribunal to restrain the Board and ASIC from noting the decision in the Gazette and on their websites. The applicant also wanted the Board and ASIC to be prevented from publishing press releases containing that news.
It seems the applicant’s real concern is that news of his predicament would put off potential clients of the firm. They might be less inclined to accept his approaches or credit his recommendation of the firm. If he is impaired in his ability to generate new business for the firm, he expects his income to be reduced.
The applicant said he had already sustained a great deal of embarrassment as a result of the events which led to the reviewable decision. The applicant claims he expended significant resources defending himself in the course of the processes which followed. I note ASIC has provided copies of media reports which confirm the applicant was subject to a good deal of adverse publicity in the past. The applicant is clearly worried about the financial consequences of re-agitating those issues if the reviewable decision is the subject of fresh reports in the press. He speculated that the financial consequences would be such that he might be unable to afford to progress the review. Worse still, his creditors might lose patience with him. I was provided with correspondence from his bankers indicating they were prepared to accommodate him for now but I was told their patience was limited. The applicant argued he might not make it to a final hearing if the Board and ASIC were allowed to publicise the details of their decision – something they would ordinarily do in the course of implementing the decision. (I note it has been accepted the Tribunal’s power under s 41(2) extends to restraining publication of the decision: see Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185 per Downes and Jagot JJ at [70] – [71] and [80].
If I am satisfied the efficacy of the hearing and the determination of the review are in doubt in the absence of an appropriately crafted stay order, I must next determine whether it is desirable to make such an order. In coming to that view, I am required to have regard to the interests of persons who are affected by the review – although other matters may be relevant as well. The range of considerations that would typically be addressed in cases like this were summarised by Downes J in Scott and Australian Securities and Investments Commission [2009] AATA 798. Those reasons should not be treated like a checklist or template, of course: different considerations may be relevant in different circumstances. But his Honour’s analysis provides a convenient framework for analysis in this case. I will deal with each of the matters below.
Prospects of success on the substantive application
The parties accept it is inappropriate for me to attempt an exhaustive evaluation of the merits of the case at this juncture. A mini-trial is impractical. Nonetheless I would ordinarily expect to be satisfied there was an arguable case that merited a proper hearing. If the merits appeared especially obvious, that might count more heavily in favour of a stay, while a more tenuous case would militate against making a stay order.
The applicant says there are significant doubts about the jurisdiction of the Board and ASIC which turn on questions of statutory construction. It is an interesting argument, although ASIC is sceptical. The applicant also called into question the factual findings of the Board and argued those findings did not in any event compel the conclusion the Board reached. ASIC disagrees with that too. ASIC points out the Board’s report is comprehensive and appears on its face to be the product of careful deliberation by an experienced regulator.
I am satisfied for present purposes that the applicant’s substantive arguments are not obviously devoid of merit. I do not (and cannot) go any further than that. All will be revealed at the hearing.
The consequences for the applicant if the stay is refused
I have already alluded to the applicant’s evidence about his vulnerable financial circumstances and his claim that he will experience significant commercial disadvantage which is unlikely to be undone if he is successful on review. While he is not working as an auditor, there may be an impact on his livelihood.
ASIC pointed out that some of the bad odour which may attach to the applicant as a consequence of earlier publicity is caused by speculation or rumour that the applicant had engaged in some kind of impropriety. The reviewable decision makes clear that there is no suggestion of dishonesty on the applicant’s part. It was suggested that publication of the relevant notices might dispel some of the unfounded allegations against the applicant. That might mitigate some of the damage he anticipates.
I accept news of the reviewable decision might invite the media to rake over the coals of the earlier scandal. I also accept that some potential clients of the applicant’s firm might be put off. I also accept the reputational damage associated with regulatory action might linger even if the applicant is vindicated at the end of the process. That means the applicant may experience irrecoverable loss. I also accept that, to the extent the loss occurs, there may be hardship for the applicant and his family. The applicant’s livelihood is potentially in the balance.
The public interest
The regulatory regime is principally designed to protect the public interest in the quality and integrity of auditing processes. The audit function is a cornerstone of good corporate governance. The investing public in particular needs to have confidence in auditors and their work.
As it happens, the public is not in any danger from the applicant’s behaviour as an auditor because he is not currently working in that role. He has undertaken not to do any auditing work while the review proceeds. His principal concern is that publication of the reviewable decision while the review proceeds will put off clients he is attempting to recruit on behalf of the firm that engaged him.
The implications of that argument need to be scrutinised carefully. If potential clients are likely to regard news of the reviewable decision as something that is relevant to their own decision to engage the applicant’s firm, then the applicant and the firm would presumably be required to disclose it. (The law prohibiting misleading or deceptive conduct comes to mind in this connection.) If a stay of the publication of notices in relation to the decision were to be ordered, the applicant and his firm would be restrained from telling potential clients what those individuals might otherwise expect they would be told. If that is so, the Tribunal is potentially placed in a difficult position. It should hesitate before suppressing information that potential clients might later say should have been disclosed because it was relevant to their decision-making in that capacity.
I note the applicant informed me at the hearing that he had disclosed news of the reviewable decision and the fact of the review application to a potential purchaser of the firm.
The consequences for the respondent in carrying out its functions if a stay is – or is not – granted
ASIC argued it was desirable for the public to be made aware of the reviewable decision at the earliest opportunity. I was told the public’s confidence in the regulator’s capacity for detecting and dealing with behaviour that falls short of the applicable standards might be enhanced if publication occurred sooner rather than later. I do not think that is a strong argument. I am not persuaded that a delay in publication while the review proceeds would compromise the regulator’s role. The public will find out about the regulatory action soon enough if a stay were ordered and the proceedings were navigated towards a rapid conclusion.
Whether the application for review would be rendered nugatory if a stay were not granted
This consideration goes to the heart of the purpose of the stay power, as I have already explained. I acknowledge the applicant has outlined a scenario in which his ability to see the proceedings though to their conclusion might be compromised if publication occurs. That scenario involves a good deal of speculation. There is no suggestion that the implementation of the decision would otherwise cause problems for the applicant’s participation given he is not working as an auditor in the meantime.
The publication component of the decision-making process is the only aspect of the reviewable decision that could properly be stayed.
CONCLUSION WITH RESPECT TO THE STAY APPLICATION
I have already explained that the stay power is provided for the purpose of securing the effectiveness of the hearing and the determining the application for review. The applicant says that announcing the fact of the reviewable decision would create additional reputational damage that would translate into financial loss that could not be fully recovered, and which might compromise his participation in the process. Of course, that argument could be made by most applicants: being subject to regulatory action is always likely to be costly and embarrassing, and may even prove debilitating. The risk of that occurring is part of the price one pays when one pursues a calling or occupation that is the subject of regulation intended to protect the public.
Even if I accepted the applicant’s participation in the review process is likely to be impacted if the stay order is not made, or that some of the loss might not be recoverable if he were subsequently vindicated, I am not persuaded a stay order is appropriate in this case. There is, generally speaking, a public interest in being informed of regulatory action. The Tribunal should be careful in its exercise of powers to suppress what many in the market for the applicant’s services would regard as relevant information.
THE APPLICATION FOR CONFIDENTIALITY ORDERS UNDER S 35
The applicant has also asked for a private hearing under s 35(2) and non-publication orders under ss 35(3) and (4). His motivation for that application has already been clearly explained. My answer is ultimately the same as it was in relation to the application under s 41(2), but the reasoning process required under s 35 is separate. I will explain that reasoning below.
Section 35(1) effectively establishes a presumption that Tribunal proceedings are held in public. Section 35(5) spells out the commitment to openness. There is good reason for that default rule. Public hearings promote transparency and increase confidence in Tribunal decision-making. Public hearings also enable the Tribunal to play its important systemic role as a tool of good government. That aspect of the role is sometimes forgotten amidst all the discussion about backlogs and case finalisations and other measures of efficiency which are applied to the Tribunal’s work. The Tribunal is assigned a unique role in Australia’s system of administrative law. It is not simply a dispute resolution mechanism. It is also a cultural institution designed to promote a bureaucracy-wide commitment to better decision-making for the benefit of all Australians. The Tribunal does that by modelling good decision-making behaviour in particular cases. Its decision-making creates norms and educates primary decision-makers and other stakeholders dealing with similar issues in the future. The bureaucracy, and ultimately the public, may be denied the full benefit of that normative role when cases are unnecessarily heard in private, or when confidentiality orders are made without good cause.
Section 35(5) acknowledges that orders under s 35 might still be appropriate in the particular circumstances of a case, but the legislative policy preference for openness is there for all to see.
The applicant says there are reasons for making confidentiality orders in this case, at least while the review is underway. I have already discussed those reasons above. I would add that the information in question here is not inherently confidential. (The fact the information is of a ‘confidential nature’ is one of the factors that ought to be carefully considered pursuant to s 35(5).) The reviewable decision is meant to be a public document. A good deal of the behaviour it considers and evaluates is already a matter of public record.
Confidentiality orders might protect the applicant’s reputation in his dealings with prospective clients in the short term, but that is not the only consideration. Confidentiality orders may leave the Tribunal and people dealing with the applicant in an awkward position. Confidentiality orders would prevent members of the public from accessing information they might otherwise be entitled to receive.
I am not satisfied it is appropriate to make orders under s 35 in all the circumstances. Confidentiality orders are exceptional, and the applicant has not identified good and persuasive reasons that justify making an exception in this case. Having said that, I propose leaving the interim orders that have been made in place for a period of 7 days from the date of these reasons to provide the applicant with an opportunity to address this question in another place should he see fit to do so. The interim orders will lapse after that time has elapsed.
I certify that the preceding 29 (twenty -nine) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe
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Associate
Dated: 19 March 2019
Date(s) of hearing: 20 February 2019 Counsel for the Applicant: T. Lynch Solicitors for the Applicant: Small Myers Hughes Lawyers Solicitors for the Respondent: Australian Government Solicitor Counsel for the Other Party: G. P. McNally SC and R. Glover
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