Winter, G.R. v Australian Securities Commission

[1995] FCA 74

CATCHWORDS

CORPORATIONS LAW - hearing by ASC to decide whether it is appropriate to serve a notice prohibiting a person from managing a corporation - natural justice - whether ASC or its delegate disqualified for perceived bias - delegate reading papers proposed to be relied on by ASC in advance of the hearing - delegate in response to an enquiry by Counsel expressed a preliminary and tentative view on the merits before the hearing commenced - matters relevant to be taken into account at the hearing - whether delegate likely to have regard to irrelevant material - application for order of review dismissed.

Companies (South Australia) Code  s 418, 562A
Corporations Law ss 2, 230, 533, 597, 599, 600
ASC Law  ss 1, 51, 59, 102

No. SG42 of 1994

GEOFFREY ROBERT WINTER v AUSTRALIAN SECURITIES COMMISSION and CASANDRA FRANCAS

Coram: von Doussa J.
Place: Adelaide
Date : 27 February 1995

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
SOUTH AUSTRALIAN DISTRICT REGISTRY )
  )
GENERAL DIVISION                  )  No. SG42 of 1994

BETWEEN:

GEOFFREY ROBERT WINTER

Applicant

AND:

AUSTRALIAN SECURITIES
  COMMISSION and CASANDRA
  FRANCAS

Respondents

MINUTES OF ORDER

JUDGE MAKING ORDER : von Doussa J.
WHERE MADE        : Adelaide
DATE OF ORDER     : 27 February 1995

THE COURT ORDERS THAT:

1. The application for an order of review be dismissed.

1. The applicant pay the respondents costs to be taxed.

NOTE:     Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
SOUTH AUSTRALIAN DISTRICT REGISTRY )
  )
GENERAL DIVISION                  )  No. SG42 of 1994

BETWEEN:

GEOFFREY ROBERT WINTER

Applicant

AND:

AUSTRALIAN SECURITIES
  COMMISSION and CASANDRA
  FRANCAS

Respondents

REASONS FOR JUDGMENT

Coram: von Doussa J.
Place: Adelaide
Date : 27 February 1995

The applicant seeks an order of review of conduct in which the first respondent, the Australian Securities Commission ("the ASC") by its delegate, the second respondent Ms Francas, proposes to engage, namely to conduct a hearing pursuant to the ASC Law for the purpose of making a decision whether the applicant should be prohibited from managing a corporation pursuant to s.600(3) of the Corporations Law ("the Law"). The grounds of the application are that if the proposed hearing is conducted a breach of the rules of natural justice is likely to occur on the ground of perceived bias, and that matters not relevant to a decision pursuant to s.600(3) are likely to be taken into account.

The issues raised by the application concern the procedures which the ASC or its delegate are by law required to follow to ensure that a director who has been served with a notice to show cause under s.600(2), and who desires to be heard, receives a fair hearing which meets the requirements of Division 6 of Part 3 of the ASC Law.

Section 600 of the Law provides:

"600(1) For the purposes of this section:

(b)a relevant body is a section 600 body at a particular time if, and only if, within the period of 7 years ending at that time, a liquidator of the body has, under:

(i)subsection 533(1); or

(ii)a previous law corresponding to subsection 533(1);

reported, or lodged a report with respect to, a matter relating to the ability of the body to pay its unsecured creditors; and

(c)a person shall be taken to be a relevant person in relation to a relevant body that is or was a section 600 body if, and only if, the person was a director of the body at any time during the period of 12 months ending on the day of the beginning of the winding up of the body.

600(2) The Commission may give to a person who is a relevant person in relation to 2 or more relevant bodies that are, at the time of service, section 600 bodies a notice in writing requiring the person to show cause why the Commission should not serve on the person a notice under subsection (3).

600(3) Where the Commission:

(a)has served on a person a notice under subsection (2); and

(b)has given the person an opportunity of being heard in relation to the matter;

the Commission shall, unless it is satisfied that it is not appropriate to do so, serve on the person a notice in writing prohibiting the person, for such period not exceeding 5 years as is specified in the notice, from managing a corporation.

600(4) Where:

(a)the Commission has served a notice under subsection (2) on a person who is a relevant person in relation to 2 or more relevant bodies that were, at the time of service, section 600 bodies; and

(b)those 2 bodies have at any time been related to each other, or any of those bodies has at any time been related to any other of those bodies, as the case may be;

the Commission shall have regard to that fact in considering whether or not it is appropriate to serve on the person a notice under subsection (3).

600(5) A person who is subject to a section 600 notice (whether served before or after the commencement of this section) must not, without the leave of the Court, manage a corporation.

(600(6) Section 91A defines what, for the purposes of this section, constitutes managing a corporation."

The applicant was a director of The Motor Works Pty Ltd (in liquidation) and Le Lounges Pty Ltd (in liquidation) ("the companies") during the period of 12 months ending on the day of the beginning of the winding up of each of the companies. The dates of commencement of the winding up were respectively 14 June 1989 and 7 November 1991. As at 25 May 1993 each of the companies was a relevant body as defined in s.600(1)(b) of the Law. In the case of the first of the companies the relevant report by the liquidator was lodged pursuant to s.418 of the Companies (South Australia) Code, a "previous law corresponding to subsection 533(1)", and was dated 27 November 1989 (together with an addendum dated 17 January 1994).  In the case of the second company the report was lodged pursuant
to s.533(1) of the Law, and was dated 29 March 1993.

On 25 May 1993 the applicant was served with a notice pursuant to s.600(2) of the Law. The notice included a summary of "the circumstances giving rise to this Notice to Show Cause ...". Particulars of the companies, the applicant's directorships, the dates of winding up, and the liquidators' reports which rendered the applicant "a relevant person" for the purpose of s.600(1)(c) were set out. The notice said that the companies were relevant companies because a liquidator of each had reported within a seven year period that the companies may be unable to pay their unsecured creditors more than 50 cents in the dollar.

The notice was signed "Paul Dugan a delegate for the Australian Securities Commission".

The applicant, through his solicitors, informed the ASC that he desired an opportunity to be heard.

On 1 March 1994 the ASC, under cover of a letter signed by a senior investigator, Mr C McCartney, forwarded to the applicant's solicitors notice of a preliminary conference issued by Ms Francas as delegate of the ASC.  The letter also enclosed "copies of principal documents upon which the Commission will rely at the ultimate hearing and a Statement of Areas of Concern".  The letter went on to explain in detail the purpose of the hearing, the right of the applicant to appear in person or by counsel and to call witnesses, and  outlined the procedure that would be followed at the hearing. 
Ms Francas is a solicitor employed by the ASC. The undisputed evidence is that she was allocated the role of being the ASC's delegate for the purposes of conducting the hearing under s.600(3) on about 1 March 1994. Prior to that time she had no knowledge of the applicant or of the matters which led to the giving of the notice under s.600(2). That notice had been given by another delegate. Furthermore, Ms Francas had not played any part in the preparation of the book of "principal documents" upon which the ASC intended to rely at the hearing or in the preparation of the statement of areas of concern. These were provided to her on about 1 March 1994 when she was asked to conduct the hearing.

The principal documents consisted of copies of documents from the public files of the ASC relating to the incorporation, directors and winding up of each company, Court documents leading up to and including the orders to wind up the companies, and reports lodged with the ASC by the liquidators. In the case of Le Lounges one of the liquidator's reports annexed a lengthy transcript of examinations of three people conducted under s.597 of the Law. A separate statement of areas of concern had been prepared for each company. It is sufficient just to set out the statement concerning Le Lounges to indicate the nature of the statements:

"1.That the company under your management was unable to pay its unsecured creditors more than fifty cents in the dollar.

1. That the preliminary report of the liquidator reveals that at the date of liquidation the company had a net deficiency of $983,960.

1. That the liquidator has reported that excessive advertising contributed to the failure of the company.  It is noted that Advice Advertising is shown in the Report as to Affairs as being a creditor in the amount of $230,000.

1. That it is alleged that you as a director of the company failed to exercise due care and diligence in the discharge of your duties in that you allowed the company to take deposits from customers for lounges in the amount of $85,768 contrary to section 232(4) of the Corporations Law.

1. That the company under your management failed to remit tax instalments to the Australian Taxation Office in the amount of $81,653.32.

1. That the company under your management failed to have in place adequate procedures to recover outstanding debts which, at the time of liquidation, amounted to $612,136.80.

1. That while you were a director of the company it may have continued to trade and debts were incurred when there were reasonable grounds to expect that the company would not be able to pay all its debts as and when they fell due.

1. That it has been alleged that as a company director you made improper use of your position to gain an advantage for yourself to the detriment of the company contrary to the provisions of section 232(6) of the Corporations Law."

On 30 March 1994, a few days before the date set for the preliminary conference, the applicant's counsel, Mr Lane, endeavoured to telephone Ms Francas.  As she was not available Mr Lane spoke with Mr Malinaric the Regional General Counsel of the South Australian Regional Office of the ASC.  The undisputed evidence of Mr Malinaric about their conversation is as follows:

"Mr. Lane said to me that he was acting for Geoffrey Winter in relation to the action commenced against his client under section 600 of the Corporations Law. Mr. Lane said that the ASC had not sufficiently particularised the matters alleged against his client and that he would be seeking further particulars. Mr. Lane went on to express concern about the costs that his client would incur in the hearing of the matter. He asked whether there might not be some way of settling this matter by, for example, his client's undertaking not to manage any companies for an agreed period of say 12 months. I replied by saying that one of the difficulties I foresaw with his proposal was that the ASC could not enforce his client's undertaking. Mr. Lane replied that in the event his client did not abide by the undertaking, the ASC could recommence its section 600 action against him. I told Simon Lane that we would consider what he had proposed and that I would get Ms. Francas or Sally Lock, another solicitor employed by the ASC, to call him back."

On 31 March 1994 Mr Malinaric informed Ms Francas of his conversation with Mr Lane. 

Ms Francas, in an affidavit filed in these proceedings  deposes as follows:

"8.As a result of my conversation with Mr Malinaric I read the documents [i.e. the principal documents and the statement of areas of concern] for the purpose of forming a tentative view on what period of disqualification might be appropriate.  On the assumption that the information in the documents was established and in the absence of any explanation or other material from the applicant which qualified that information, I formed the view that a period of disqualification between two and three years would be appropriate.

1. I telephoned Mr Lane on 31 March 1994.  I said to him that I would not agree to an undertaking from his client and that the formal hearing would proceed.  I suggested to him that if he was concerned about costs, written submissions could be made rather than a personal attendance.  I also said to him that if I had to make a decision solely on the papers, I was minded to ban his client for no more than 3 years ... "

Mr Francas and Mr Lane then discussed his request for particulars, and the preliminary conference was adjourned to 28 April 1994.

On the occasion of the preliminary conference Mr Lane and the applicant's solicitor appeared on his behalf.  Ms Francas sat as the delegate of the ASC, and Mr Ruciak, a solicitor employed by the ASC appeared as counsel assisting the ASC.  Mr Lane submitted that the ASC should not continue with the hearing.  Ms Francas, after hearing the arguments of counsel, rejected the submission but did not proceed further with the preliminary hearing to enable the applicant to bring these proceedings.  The arguments advanced on the applicant's behalf before Ms Francas have been repeated before this Court in support of the two grounds on which the application for the order of review is sought.

Under the first ground it has been argued that a breach of natural justice would occur if the hearing proceeded because the applicant had an apprehension and reasonable and fair minded members of the public might have a reasonable apprehension that the ASC might not bring an impartial and unprejudiced mind to the issue of whether the applicant should be prohibited, and if so, for how long, from managing a corporation.  It is said that a reasonable apprehension of bias exists because Ms Francas, before the hearing, read the principal documents and the statement of areas of concern and expressed a view, albeit a preliminary and tentative one, about an appropriate period of disqualification before hearing from the applicant.  It is common ground that the oral statement by Ms Francas to Mr Lane on which this submission is based was to the following effect:

"On the basis of the material in the Statement of Areas of Concern and the documents provided in the letter of 1 March 1994, I have a preliminary and tentative view that a disqualification period of not more than three years would be appropriate unless Mr. Winter can persuade me otherwise."

Under the second ground it has been argued that where a director served with a notice to show cause under s.600(2) seeks an opportunity to be heard, the delegate who conducts the hearing should receive no papers or other information in advance of the hearing other than the bare notice to show cause. It is submitted that because Ms Francas received and read the principal documents and statement of areas of concern, she, and through her the ASC, became aware of information that was prejudicial to the applicant but not relevant to the matters which the ASC was lawfully permitted to take into account in the performance and exercise of the functions and powers of the ASC under s.600(3). It is submitted that the proper procedure, which should have been followed, requires counsel assisting the ASC to gather the information to be relied upon at the hearing, and to provide a copy to the director and his advisers in advance of the hearing, but not to the delegate. This course would give the director and his advisers an opportunity to assess the information and to decide whether they wish to challenge any of it before it is placed before the decision-maker.

These arguments must be considered in the context of the statutory provisions which create the functions and powers which fall to be performed and exercised under s.600(3).

Subject to the ASC Law, the ASC has the general administration of the Law: Corporations Law, s.2. In carrying out its functions and exercising its powers, including the administration of the Law, the ASC must strive to maintain, facilitate, and improve the performance of companies, and of the securities markets and future markets, in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy: ASC Law, s.1(2)(a). The ASC must also administer national scheme laws (which include the Law) effectively but with a minimum of procedural requirements: ASC Law, s.1(2)(d).

The precursor to s.600 of the Law was introduced into the Companies Codes as from 1986 as s.562A. The object of that section, and now s.600, is to facilitate and improve the performance of companies, and in the interests of commercial certainty to protect the interests of the public dealing with companies by preventing people, who by reason of past conduct, are unfit from directing, promoting or managing the affairs of corporations: Nicholas v Commission of Corporate Affairs (Vic) (1987) 11 ACLR 801 at 809. Sections 230 and 599 of the Law have similar objects. It will be noted in s.600(2) that the power of the ASC to give a notice to show cause is discretionary. Notwithstanding that a person is a relevant person in relation to two or more relevant bodies, the ASC is not compelled to give a notice to show cause. Section 600 gives no guidance as to when it is either appropriate to serve a notice to show cause or when it becomes not appropriate under s.600(3) to serve a notice prohibiting a person from managing a corporation. In Blunt v Corporate Affairs Commission (NSW) (No.2) (1988) 14 ACLR 270 at 273 Young J observed, in connection with s.562A (which was in substantially similar terms to s.600) that:

"It is a situation where the Commission and later the delegate and later the court must turn their minds to the factors of each particular case and ask themselves questions such as whether there has been a breach of the standards of commercial morality;  whether there has been recklessness; whether there has been gross incompetence; whether the public interest requires that the person concerned should not take part in the management of a company."

See also Dywer v National Companies and Securities Commission (1989) 15 ACLR 386 at 388. The nature of these considerations reflects the broad objects of the legislation.

It is a precondition to the exercise of the power in the ASC to prohibit a person from managing a corporation that the person is a relevant person in relation to two or more relevant bodies. A relevant body is one in respect of which a liquidator has reported under s.533(1) or under a corresponding provision of a previous law, with respect to a matter relating to the ability of the body to pay its unsecured creditors. In the performance of its functions and in the exercise of its powers under s.600(2) the ASC must obviously have regard to the reports of liquidators which fulfil that precondition. However where and when the precondition is fulfilled, the considerations relevant to be taken into account in deciding to give a notice to show cause under s.600(2) and on a hearing for the purpose of s.600(3) are not narrowly confined to the particular subject matter relating to the ability of the body to pay its unsecured creditors which has been reported upon by the liquidator (in this case the possibility that the companies may be unable to pay their unsecured creditors more than 50 cents in the dollar). Once the precondition is fulfilled the considerations are broad, being all matters which touch on the reasons why the companies failed, and which throw light on questions of the kind posed by Young J in Blunt v Corporate Affairs Commission.

When considering whether to give a notice to show cause under s.600(2) the ASC will be in possession of other information, besides the liquidators' reports, contained within its files relating to the companies to which reference will be necessary to confirm the commencement of the dates of winding up, the identity of directors, and so on. It is also within the function and powers of the ASC to enquire into other facts relevant to be considered when deciding whether to exercise the discretion under s.600(2): see ASC Law, s.11(4) and cf Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 81. In my opinion the legislation contemplates that the decision-maker under s.600(2) will have regard to all the information in possession of the ASC including information gathered by its own enquiries which it considers to be relevant.

A decision to give a notice to show cause is an administrative one. It is a decision which cannot, of itself, result in any determination of rights or legal liability or any resolution of issues. It merely puts in train a process which may lead to a decision which has consequences of that kind. Procedural fairness does not require that prior notice be given to the director concerned that the issue of a notice to show cause is under consideration, or that the director be given an opportunity to be heard before the decision is made. The contrary was not suggested in this case. The occasion to be heard arises after the notice is given: s.600(3)(b). It is then open to the person served to dispute the existence of the facts which are preconditions to the giving of a notice under s.600(2) as well as the appropriateness of giving a notice under s.600(3): Laws v Australian Broadcasting Tribunal.

The ASC Law in Div. 6 of Part 3 empowers the Commission to hold hearings for the purpose of the performance or exercise of any of its functions and powers under a national scheme law (s.5(1). In the present case it was proposed that the ASC perform and exercise its functions and powers under s.600(3) by its delegate, Ms Francas, duly appointed under s.102 of the ASC Law. It is common ground that when conducting the proposed hearing under s.600(3) Ms Francas would have the powers and be subject to the obligations of the ASC under Div. 6 of Part 3, and in particular would be subject to s.59 of the ASC Law which relevantly provides:

"59(1)  A hearing shall be conducted with as little formality and technicality, and with as much expedition, as the requirements of national scheme laws of this jurisdiction and a proper consideration of the matters before the Commission permit.

(2)At a hearing, the Commission:

(a)is not bound by the rules of evidence;

(b)may, on such conditions as it thinks fit, permit a person to intervene; and

(c)shall observe the rules of natural justice.

......."

The power arising under s.600 to prohibit a person from managing a corporation is akin to a disciplinary power. In Builders' Registration Board of Queensland and Anor v Rauber (1983) 47 ALR 55, at 68 Brennan J, after referring to the test of bias stated by the majority of The High Court in R v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 262, observed:

"Natural justice requires that the exercise by a tribunal of disciplinary power which may have a serious effect on the rights and livelihood of a person whose conduct is called in question be free from bias of that kind unless an intention to exclude the principles of natural justice plainly appears in the statutory or other provisions which confer disciplinary power on the tribunal:  see per Gibbs J in Stollery v Greyhound Racing Control Board [1972-73] ALR 645; 128 CLR 509 at 526-7."

In light of the requirements of s.59(2)(c) of the ASC Law, it cannot be doubted that the test of bias to which Brennan J referred applies in a hearing under s.600(3) even though s.600 by its terms appears to mix the administrative functions involved in the giving of a notice to show cause under s.600(2) with the adjudicative functions arising under s.600(3).

The test of bias stated in R v Watson; Ex parte Armstrong was restated in Livesey v New South Wales Bar Association (1983) 151 CLR 288 at 293-294 in the following terms:

"[The] principle is that a judge should not sit to hear a case if in all the circumstances the parties or the public might entertain a reasonable apprehension that he might not bring an impartial and unprejudiced mind to the resolution of the question involved in it.  ...  Although statements of the principle commonly speak of 'suspicion of bias', we prefer to avoid the use of that phrase because it sometimes conveys unintended nuances of meaning."

In the Minister for Immigration, Local Government and Ethnic Affairs and Anor v Mok Gek Bouy, (Full Court of the Federal Court 22 December 1994) it was held that this passage remains the authoritative statement of principle in Australia notwithstanding passages in Laws v Australian Broadcasting Tribunal in the judgments of Mason CJ and Brennan J at 87 and Gaudron and McHugh JJ at 99-100 which had caused the appellant to contend before the Federal Court that the test was whether a reasonable observer would - not might - conclude that the decision-maker would - not might- bring other than an unprejudiced mind to the resolution of the issues.
Under s.600(2) the decision-maker who decides that a notice to show cause should be given is required to consider the material available to the ASC and form a judgment about it. The decision reflects a prima facie conclusion that in all the circumstances it is appropriate that the director be prohibited from managing a corporation. If the same person were then to conduct the hearing under s.600(3) a fair minded member of the public might entertain a reasonable apprehension of bias: cf. Laws v Australian Broadcasting Tribunal. In the present case, the power of the ASC to delegate the performance and exercise of the different functions and powers under s.600(2) and s.600(3) to different people provides the means of avoiding this consequence.

The application seeks to prohibit altogether the continuation of the s.600(3) hearing on the ground that what has happened disqualifies not only Ms Francas, but also the ASC. Such a result is plainly untenable and would defeat the objects of the Law, and s.600 in particular. If the events which have happened disqualify Ms Francas, the power of the ASC to delegate the performance and exercise of its functions and powers can be used to appoint someone else who will come to the matter afresh.

It is now necessary to consider whether because Ms Francas read the principal documents and statement of areas of concern before the hearing, and expressed a preliminary and tentative view about a period of disqualification of the applicant before the formal hearing commenced, she is disqualified for perceived bias.

To a degree the submissions on the applicant's behalf on this ground of the application became intermingled with the submissions on the second ground which complained that the principle documents and the statement of the areas of concern included irrelevant material.  For reasons which later appear I do not think the second ground is made out, but even if there were irrelevant material contained in the principal documents, or irrelevant issues raised in the statement of areas of concern, I do not think the fact that Ms Francas read those documents would in itself give any ground on which the applicant or fair minded observers might entertain a reasonable apprehension that she might not bring an impartial and unprejudiced mind to the hearing and to the decision-making process.

Ms Francas came to the matter with no knowledge whatsoever about it.  The applicant submits that upon receiving the delegation she should have read only the notice to show cause.  If the director upon service did not seek to be heard, then she could read the other documents and make a decision.  However if the director indicated a wish to be heard, it was submitted that Ms Francas should have read nothing more until the hearing started.  Then as documents were placed before her without objection they could be read.  If objection were taken on the grounds of relevance or otherwise by the applicant to material proffered by counsel assisting the ASC it was conceded on the applicants behalf that Ms Francas might then have to read the material to decide the objection.  There is every likelihood that she would also have to read all the material to which there was no objection before she could reach a fully informed opinion on the objection, as the relationship between material objected to and other material received is often important to a full understanding of the issues and in the determination of relevance.  The principal documents, or at least most of them, would therefore be read by Ms Francas at some stage.  It is an everyday occurrence whether in a court or in an administrative tribunal for the decision-maker to read and to hear material that one side or the other objects to either because it is said to be irrelevant, or on some other ground.  No fair minded party or observer would apprehend bias in the members of a court or tribunal because this occurred in the course of the hearing, any more than they would apprehend bias because members of a court or tribunal heard the allegations and evidence of the opposing side to the dispute.

No fair minded party or observer would apprehend bias because the court or a tribunal has read in advance of the hearing background material which is available to be read on a court or tribunal file.  That this will usually happen is these days to be expected.  If the background papers are not read in advance much time is likely to be wasted once the hearing starts, and there is a real risk that the court or tribunal will be disadvantaged by not understanding the scope of the issues from the outset.

There can be no cause to apprehend bias in this case because Ms Francas read the statement of areas of concern. They are merely allegations which had to be made known to her at some stage to identify the issues which the ASC wished to have considered. The performance of her functions requires her to determine whether those allegations are relevant, if so whether they are established as fact, and then what weight should be given to each of them. It could make no difference whether Ms Francas read them before or after the hearing started. So to with the background information in the principal documents about which there is no dispute. As for the other documents about which the applicant now raises objection, as they are documents which comprise part of the liquidator's reports relied on to fulfil the preconditions in s.600(1) it is, in my view, inevitable that Ms Francas would have to read them once the hearing got underway to understand the objection made to parts of them, and to rule on the use, if any, to be made of them. Given that they would be read at some stage, even if then ruled against, the mere fact that they were read in advance can give rise to no ground to apprehend bias.

It is important to remember that the test of bias is concerned not with the decision-maker  having advance knowledge of allegations and evidence touching the issues to be decided but with impartiality and lack of prejudice in the mind of the decision-maker in the resolution of the dispute.  More is required than the mere possession of knowledge.  In the absence of something more, the only reasonable perception which would arise from the fact that Ms Francas read the papers given to her by the ASC in advance of the hearing would be that she wished to be properly informed to embark conscientiously on the hearing.  In an administrative hearing before a tribunal which is directed to conduct its proceeding with as little formality and technicality and with as much expedition as the requirements of the law permit it will usually be highly desirable from the outset of the hearing that the tribunal be fully conversant with the issues and as much of the material as possible which will be considered at the hearing to save time, and to guide the party seeking the hearing to the important issues which should be addressed.  Fair minded parties and observers, who in my opinion are to be attributed with a knowledge of the procedures involved as well as of the facts of the case (cf. Laws v Australian Broadcasting Tribunal at 87), would expect this, and would not perceive bias because it occurred.

This is so even though in the course of reading material tentative views as to what the issues will be, and tentative views about those issues may be formed.  This is probably inevitable, and would be likely to occur during the reading process even if all the material were placed before the tribunal after the formal hearing commenced.  The rules as to bias are not thereby transgressed so long as the views formed are tentative and the mind remains receptive to additional information and argument.  There is no prejudgment or prejudice in an open mind:  see Laws v Australian Broadcasting Tribunal at 100. In R v Commonwealth Conciliation and Arbitration Commission:  Ex parte Angliss Group (1969) 122 CLR 546 at 553-554 the High Court in a joint judgment said:

"Those requirements of natural justice are not infringed by a mere lack of nicety but only when it is firmly established that a suspicion may reasonably be engendered in the minds of those who come before the tribunal or in the minds of the public that the tribunal or a member or members of it may not bring to the resolution of the questions arising before the tribunal fair and unprejudiced minds.  Such a mind is not necessarily a mind which has not given thought to the subject matter or one which, having thought about it, has not formed any views or inclination of mind upon or with respect to it."

In the present case there is however more than the mere reading of material which one side wishes to adduce before the tribunal.  There is the expression of a preliminary and tentative opinion which was expressed to be based only on the information before Ms Francas - a copy of which had already been supplied to the applicant.

The case is unusual because the form in which the enquiry by the applicant's counsel to the ASC was made invited the decision-maker to consider whether some period of prohibition from managing a corporation less than 5 years would be appropriate. Counsel now contends that the enquiry was merely to explore a point of principle - whether the ASC would accept an undertaking, but the period of prohibition suggested took the enquiry one step further. In these circumstances there is a ring of unreality in the allegations in the application that the "applicant has an apprehension ... that the Australian Securities Commission might not bring an impartial and unprejudiced mind to the issue". At the hearing counsel for the applicant disclaimed any allegation of actual bias by Ms Francas but contended that fair minded members of the public might entertain a reasonable suspicion that she might not bring an impartial and unprejudiced mind to the resolution of the questions arise under s.600(3). In light of the circumstances in which Ms Francas came to express the view and in light of the qualifications she stated as to it being "preliminary and tentative" and "based on the material" before her, I am unable to agree that a fair minded person could hold such an apprehension: cf. R v Lusink & Anor; Ex parte Shaw (1980) 32 ALR 47 at 51. Again it is important to note that the expression of a tentative view gives no ground for suspecting that the decision-maker will not fairly consider with an open mind additional material and argument, or put out of mind any material later shown to be wrong or irrelevant.

Having formed the preliminary and tentative view which she did - because she had received an enquiry which reasonably caused her to do so - it is entirely consistent with an open mind being brought to the task at hand that the preliminary and tentative view should be expressed.

A number of decisions concerning preconceived ideas about the issue for decision indicate that the circumstances of the present case fall far short of demonstrating a reasonable apprehension of bias.  In the present case the preliminary and tentative view did not demonstrate a view based on anything but the material before the decision-maker.  There was no preconceived view based on other cases or experience.  In R v Australian Stevedoring Industry Board; Ex Parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 at 116, in R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group at 553-554, and in Vakauta v Kelly (1989) 87 ALR 633 the expression of preconceived ideas by the decision-maker were held to not necessarily justify a reasonable apprehension of bias. A preconceived idea does not necessarily indicate that the decision-maker will not bring an impartial and unprejudiced mind to the case. In Vakauta v Kelly Dawson J pointed out (at 639) that "... to recognise a preconception and alert the parties to it is likely to assist rather than hinder an impartial approach."  If a view expressed at the outset of a hearing is one based on material concerning the case before the decision-maker, rather than on preconceived views otherwise held, there is even less reason to suspect the absence of impartiality or the holding of the view that will be "difficult to eradicate" if the base of material changes:  see Kaycliff Pty Ltd and Others v Australian Broadcasting Tribunal and Anor (1989) 90 ALR 310 at 319.

In the present case nowhere in the material before the court is there the faintest suggestion that Ms Francas at any time had other than an open mind, or that she was likely to adhere to her tentative view if and when she was required to form a view on other information.  The expression of view by her was obviously intended to be a helpful response to an enquiry made on the applicant's behalf.  The applicant was expressing concern about the costs he might incur, and the view expressed would have enabled him to judge what his position would be if he were to take no action.

In my opinion the first ground of the application fails.

The second ground is that an error of law is likely to occur if the hearing proceeds because irrelevant matters are likely to be taken into account. Reference is made to s.600(4) but this does not lay down an exhaustive test of relevance. It provides only that where relevant bodies have at any time been related to each other the ASC shall have regard to that fact in considering whether or not it is appropriate to serve a notice under s.600(3). As stated earlier in these reasons, s.600 gives no guidance as to when it is appropriate or not appropriate to serve notices under s.600(2) or s.600(3). The matters which the decision-maker should consider are wide ranging; they should consider all matters which touch on the reasons why the relevant bodies failed, and which throw light on broad questions such as whether there has been a breach of the standards of commercial morality, whether there has been recklessness, whether there has been gross incompetence, and whether the public interest requires that the person concerned should not take part in the management of a company.

A number of matters were identified by the applicant as ones likely to be taken into account if the hearing proceeds which were said to be irrelevant. They are each referred to in the principal documents which were given to Ms Francas, and to which reference is made in one or other of the paragraphs of the statement of areas of concern. For example it was said that it was not relevant to consider an allegation made by the liquidator of The Motor Works that there may have been a contravention of s.556 of the Companies Code because "the company may have continued to trade at a time when it was unable to meet its debts as to (sic) when they fell due", and a further allegation that the company under the applicant's management may not have kept appropriate books and records. In the case of Le Lounges it was said that it was not relevant to consider the issues raised by paragraphs 4 and 8 of the statement of the areas of concern (i.e. whether the applicant had been guilty of contraventions of s.232(4) and s.236(6) of the Law), or the issue raised in paragraph 5 of the statement which alleged a failure to remit tax instalment to the Australian Tax Office. Each of these topics, in my view, raise matters which could be relevant to the decision to be made under s.600(3); cf. Cullen v Corporate Affairs Commission (NSW) (1988) 14 ACLR 789 at 795-6. Whether each of them is relevant in the circumstances of the case is a matter for the decision-maker in the first instance to consider and decide.

     Complaint was also made that the principle documents, by including attachments to the liquidators' reports, had included correspondence and transcripts which should be excluded from consideration either on grounds of fairness or because they would not constitute admissible evidence in a court of law.  Having regard to the provisions of s.59 of the ASC Law it is difficult to envisage how the reception of the correspondence and transcript could constitute an error of law.  How this might be so was not developed in argument.  The argument concentrated on the more fundamental question whether the decision-maker was confined to considering only matters going directly to the inability of the company upon its liquidation to pay 50 cents in the dollar.  I have rejected the applicants submissions to that effect.

In any event, it would be premature to order that a hearing under s.600(3) not take place merely because the decision-maker might take irrelevant matters into account. There is no reason to suppose that the decision-maker will not fairly and impartially consider all objections made by the applicant to the use of material sought to be relied upon by counsel assisting the ASC, whether made on the grounds of relevance or otherwise, or that the decision-maker will, after due consideration of the arguments of the parties, act on irrelevant material.

In my opinion the application for a order of review should be dismissed.  There will be an order that the applicant pay the respondents costs.

I certify that this and the  26 preceding pages are a true copy of the Reasons for Judgment of Justice von Doussa.

Associate:

Dated:

Counsel for the Applicant        :    Mr F T Lane
Solicitors for the Applicant     :    Adams Kandelaars

Counsel for the Respondents      :    Mr A J Besanko

Solicitors for the Respondents    :    Australian Securities Commission

Hearing Date  :    24 August 1994