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X v Australian Prudential Regulation Authority

X v Australian Prudential Regulation Authority

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HIGH COURT OF AUSTRALIA
GLEESON CJ,
GUMMOW, KIRBY, HAYNE, CALLINAN, HEYDON AND CRENNAN JJ
X & ORS APPELLANTS
AND
AUSTRALIAN PRUDENTIAL REGULATION
AUTHORITY & ANOR RESPONDENTS
X v Australian Prudential Regulation Authority [2007] HCA 4
21 February 2007
S284/2006
ORDER
1.Set aside Paragraph 1 of the orders of the Full Court of the Federal Court of Australia made on 22 March 2006 in each of matters numbered NSD 1793 of 2005 and NSD 1794 of 2005 and in its place order that:

(a)Paragraph 2 of the orders made by Lindgren J on 16 September 2005 is varied to the extent necessary to provide that

Question B: "Does the use by the first or second respondent of the evidence of the first applicant before the HIH Royal Commission contravene ss 6DD or 6M of the Royal Commissions Act 1902 (Cth)?"

is answered

"The answer to the question is governed by the construction of s 6M alone, and so understood is 'No'."

(b) The appeal is otherwise dismissed.

2. Otherwise, appeal dismissed with costs.
On appeal from the Federal Court of Australia
Representation
D F Jackson QC with D Hogan-Doran for the appellants (instructed by Minter Ellison)
D M J Bennett QC, Solicitor-General of the Commonwealth with J W J Stevenson SC, M N Allars and V E Whittaker for the respondents (instructed by Sparke Helmore)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

GLEESON CJ, GUMMOW, HAYNE, CALLINAN, HEYDON AND CRENNAN JJ. By Letters Patent dated 29 August 2001 which were expressed to be issued by the Governor-General pursuant to the Constitution, the Royal Commissions Act 1902 (Cth) ("the Royal Commissions Act") and what were described as "other enabling powers", a Commissioner was appointed to inquire into the reasons for and circumstances surrounding the failure of the HIH Insurance Group ("HIH") prior to the appointment of provisional liquidators on 15 March 2001 ("the HIH Royal Commission")[1]. This litigation arises from steps taken by a federal regulatory body in reliance upon documentary and oral evidence presented to the HIH Royal Commission.
[1]The terms of reference were amended on 6 February 2002, 2 May 2002 and 23 January 2003, but nothing for present purposes turns upon those amendments.
The parties
The second appellant ("Z") is a foreign corporation incorporated in Germany. Z conducts an international reinsurance business. It is authorised to carry on insurance business in Australia by the first respondent, the Australian Prudential Regulation Authority ("APRA"), pursuant to s 12(2) of the Insurance Act 1973 (Cth) ("the Insurance Act") and does so as a "foreign general insurer" within the meaning of s 3 of the Insurance Act. A foreign general insurer which, like Z, is a body corporate not incorporated in Australia is required by s 118 of the Insurance Act to be represented in Australia by an individual resident here and appointed as its agent for the purposes of that Act. However, this does…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] HCA 4
Decision Date: 21 February 2007

CaseChat Overview and Summary

The case of X v Australian Prudential Regulation Authority (APRA) concerned a judicial review application brought by X and another appellant (referred to as "Y") against APRA. The appellants sought to restrain APRA from acting on a "preliminary view" formed by its Senior Manager that X and Y were not "fit and proper" to hold senior management positions within a foreign general insurer. The dispute centred on whether APRA could use evidence previously given by the appellants before the HIH Royal Commission in its decision-making process, and whether such use would contravene section 6M of the *Royal Commissions Act 1902* (Cth). The matter was heard by the High Court of Australia.

The central legal issues before the High Court were: (1) whether section 6M of the *Royal Commissions Act 1902* (Cth) prevented APRA from using evidence given by the appellants before the HIH Royal Commission when determining their fitness and propriety to act as senior managers under section 25A of the *Insurance Act 1973* (Cth); and (2) whether any potential disqualification of the appellants by APRA would constitute a "disadvantage" arising "for or on account of" their evidence to the Royal Commission. The Court was required to interpret the meaning of "disadvantage" and the phrase "for or on account of" within the context of section 6M.

The High Court reasoned that section 6M of the *Royal Commissions Act* protects witnesses from suffering a disadvantage "for or on account of" giving evidence, meaning the disadvantage must be motivated by the act of giving evidence itself. The Court held that APRA's consideration of the appellants' evidence, in the proper discharge of its statutory functions under the *Insurance Act*, did not constitute a disadvantage arising "for or on account of" the evidence. The Court distinguished between the act of giving evidence and the content of that evidence, finding that while the content of the evidence might inform APRA's decision, any disadvantage flowing from the proper application of regulatory provisions was not "for or on account of" the evidence being given. The Court concluded that APRA was not victimising the appellants in the sense contemplated by section 6M.

The High Court ordered that the appeal be allowed in part, setting aside paragraph 1 of the Federal Court's orders and substituting a variation to a question posed to the primary judge. This variation clarified that the answer to whether APRA's use of the evidence contravened section 6M was governed by the construction of section 6M alone, and that answer was "No". The appeal was otherwise dismissed with costs.

Orders

Orders of the court

1. Set aside Paragraph 1 of the orders of the Full Court of the Federal Court of Australia made on 22 March 2006 in each of matters numbered NSD 1793 of 2005 and NSD 1794 of 2005 and in its place order that:

(a) Paragraph 2 of the orders made by Lindgren J on 16 September 2005 is varied to the extent necessary to provide that Question B: "Does the use by the first or second respondent of the evidence of the first applicant before the HIH Royal Commission contravene ss 6DD or 6M of the Royal Commissions Act 1902 (Cth)?"

is answered "The answer to the question is governed by the construction of s 6M alone, and so understood is 'No'."

(b) The appeal is otherwise dismissed.

2. Otherwise, appeal dismissed with costs.

Background

Background to the litigation

In short, I agree with the general analysis contained in the reasons of the primary judge and of the Full Court. I would therefore simply dismiss the appeal from that Court. Some of my reasons for doing so are similar to those stated in the joint reasons. However, in case the qualification to the orders proposed in those reasons might be read as suggesting that s 6DD of the Royal Commissions Act is irrelevant to the task of construction, I must state my reasons separately.The facts, legislation and litigation The facts: The background facts in this appeal are explained in the joint reasons[61]. The evidence which the first appellant (known by the initial "X") and the third appellant (known by the initial "Y"), officers of a foreign corporation incorporated in Germany (known by the initial "Z"), object to being used by the Australian Prudential Regulation Authority ("APRA") was adduced before a federal Royal Commission ("the HIH Royal Commission") established to inquire into the failure of the HIH Insurance Group ("HIH"). It was formerly a major Australian insurer. [61]Joint reasons at [1]-[8]. As the report of the HIH Royal Commission discloses, the failure of HIH caused huge losses to the investing public in Australia and beyond; substantial losses to those who had been insured by HIH, or who were entitled to the benefits of such insurance; widespread suffering and anxiety for many such persons; and damage to Australian business confidence generally, and to confidence in the insurance industry specifically. The establishment of a federal Royal Commission is not a trifling thing in Australia. A Royal Commission is a major investigatory mechanism that enjoys exceptional powers designed to achieve, outside the ordinary machinery of law enforcement and industry regulation, an inquiry that will reveal facts and permit executive governments to take administrative, criminal and other measures to sanction any demonstrated wrongdoing and to prevent its repetition. The interpretation by this Court of the Royal Commissions Act should be undertaken so as to achieve, and not to frustrate, the provision by the Parliament of such exceptional powers[62]. [62]This is especially so in the case of the HIH Royal Commission because the Royal Commissions and Other Legislation Amendment Act 2001 (Cth) enlarged the powers of the Commission under the Royal Commissions Act. See Explanatory Memorandum issued by the Prime Minister on the Royal Commissions and Other Legislation Amendment Bill 2001 (Cth). The legislation: The issue for decision in this appeal is, primarily, the meaning of s 6M of the Royal Commissions Act. As the joint reasons point out, that Act, in its original form, was one of the first enactments of the Australian Federal Parliament. Its terms were greatly influenced by the legislation enacted in the latter part of the nineteenth century by the Imperial Parliament in the United Kingdom[63]. [63]See joint reasons at [36]-[48], referring to the Witnesses (Public Inquiries) Protection Act 1892 (UK), Trades Union Commission Act 1867 (UK), Belfast Commission Act 1886 (UK), Metropolitan Board (Commission) Act 1888 (UK) and Special Commission Act 1888 (UK).

Evidence

Evidence Before The Court

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Decision

Reasons for decision

GLEESON CJ, GUMMOW, HAYNE, CALLINAN, HEYDON AND CRENNAN JJ KIRBY J

An example of the distinction so drawn in Lane is provided by the decision of Eichelbaum CJ in Dentice v Valuers Registration Board[53]. The applicants were valuers who had prepared reports for use in an arbitration. In a subsequent proceeding before a statutory body, the Valuers Registration Board, they were charged with incompetent conduct. The applicants complained in the High Court that the disciplinary proceedings were an attempt to punish them for the evidence given by them at the arbitration and the disciplinary proceedings should be quashed as constituting a contempt of court. Eichelbaum CJ concluded[54]:"Any censure imposed by the board would be for providing evidence that fell below the minimum acceptable standards imposed by the profession and not for the mere fact of giving evidence itself.... There is no evidence that the complaint was motivated by dissatisfaction over the arbitrator's award, but even if it had been, that would not suffice to pre‑empt the statutory investigation which the board must carry out when the complaint procedure has reached this stage, except where satisfied there is no reasonable ground for the complaint."[53][1992] 1 NZLR 720.[54][1992] 1 NZLR 720 at 727.Conclusions Section 6P of the Royal Commissions Act, dealing with the communication of information, postulates the concurrent operation of that statute with the administration by authorities such as APRA of statutes including the Insurance Act. In the present case, on the material on which the question for separate decision was presented to the primary judge, there is no ground to reach any conclusion other than that Mr Godfrey was proceeding in discharge of the statutory powers of a regulatory nature conferred upon APRA by the Insurance Act. Nor was there any footing for a conclusion that a continuation by APRA of that process would be other than for the proper discharge of its statutory functions. The expression in s 6M "for or on account of" involves notions of purpose, motive, object and intention identified in Lane with reference to what had been said in the judgments in Butterworth. It is, as it was in Lane, unnecessary to make any particular choice between these terms. The point is that none of them applies to identify what has happened in this case and what is proposed if the investigations by APRA continue. Once it is accepted, as it must be, that what Mr Godfrey has done, and what APRA proposes to do, are for the proper discharge of APRA's statutory powers and functions, it is then apparent that there is not the connection between the attendance of X and Y at the Commission, or the evidence they gave, with the past or threatened conduct of Mr Godfrey and APRA, that is captured by the expression "for or on account of". The evidence that X and Y gave at the HIH Royal Commission may provide some, or even all, of the material which APRA may consider, and upon which it may rely, in giving effect to the regulatory provisions of the Insurance Act. Any disadvantage suffered by X or Y, as a consequence of the proper application of those regulatory provisions, would not be "for or on account of" his attendance at the Royal Commission or the evidence he gave. Neither Mr Godfrey nor APRA has victimised, and neither proposes to victimise, the appellants in the sense required for the commission of an offence under s 6M of the Royal Commissions Act.

Ratio Decidendi

Legal Principle Established

Established by: GLEESON CJ, GUMMOW, HAYNE, CALLINAN, HEYDON AND CRENNAN JJ, KIRBY J

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