FEDERAL COURT OF AUSTRALIA
XY v Companies Auditors Disciplinary Board [2022] FCA 1583
File number: VID 240 of 2022 Judgment of: BEACH J Date of judgment: 22 December 2022 Catchwords: CORPORATIONS – auditors – disciplinary proceeding against auditor – s 1292 of the Corporations Act 2001 (Cth) – role and function of the Companies Auditors Disciplinary Board – ss 213, 216 to 219 of the Australian Securities and Investments Commission Act 2001 (Cth) – stay of disciplinary proceeding – refusal of stay – judicial review of decision not to stay – invocation of jurisdiction under s 39B of the Judiciary Act 1903 (Cth) – invocation of jurisdiction under ss 5 and 6 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) – administrative law – over-lapping criminal prosecution – substantially same subject matter – prejudice to auditor in disciplinary proceeding not being stayed – prejudice to public interest in disciplinary proceeding being stayed – relevance of undertaking given by auditor not to practise in the interim – orders sought quashing decision – declarations and injunction – judicial review of ancillary decision refusing extension of time under s 79(3) of the ASIC Act – ancillary orders Legislation: Administrative Decisions (Judicial Review) Act 1977 (Cth) ss 3, 5, 6, 15, 16
Australian Securities and Investments Commission Act 2001 (Cth) ss 1, 11, 19, 21, 49, 63, 68, 79, 127, 213, 216, 217, 218, 219
Companies Act 1981 (Cth) s 27
Corporations Act 2001 (Cth) ss 9, 307, 1274(2)(a)(iii), 1285, 1292, 1294, 1294A, 1311(1), 1315, 1337A(2)(b), 1337B, 1349(4)(g)
Federal Court of Australia Act 1976 (Cth) ss 19(1), 21, 22, 23
Judiciary Act 1903 (Cth) s 39BCases cited: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Australian Securities and Investments Commission v Craigside Company Ltd (2013) 93 ACSR 176
Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46
Construction, Forestry, Mining and Energy Union v Australian Competition and Consumer Commission (2016) 242 FCR 153
Crespin v Francis [2016] VSC 277
Edelsten v Richmond (1987) 11 NSWLR 51
FUD18 v Minister for Home Affairs (2021) 285 FCR 505
Goodman v Australian Securities and Investments Commission (2004) 50 ACSR 1
Griffith University v Tang (2005) 221 CLR 99
Hamilton v Oades (1989) 166 CLR 486
Impiombato v BHP Group Ltd (2020) 143 ACSR 301
Lee v NSW Crime Commission (2013) 251 CLR 196
Lucciano v The Queen (2021) 287 A Crim R 529
McMahon v Gould (1982) 7 ACLR 202
ML v Australian Securities and Investments Commission (2013) 276 FLR 14
Onley v Commissioner of the Australian Federal Police (2019) 345 FLR 241
Panganiban v Australian Securities and Investments Commission (2016) 338 ALR 119
R v Independent Broad-based Anti-corruption Commissioner (2016) 256 CLR 459
Strickland v Commonwealth Director of Public Prosecutions (2018) 266 CLR 325
X7 v Australian Crime Commission (2013) 248 CLR 92Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 213 Date of last submissions: 18 August 2022
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- AGLC
- XY v Companies Auditors Disciplinary Board [2022] FCA 1583
- Case
- [2022] FCA 1583
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CaseChat Overview and Summary
In the matter of XY v Companies Auditors Disciplinary Board, the applicant, an auditor, sought a judicial review of decisions made by the Companies Auditors Disciplinary Board (the Board), a statutory disciplinary body established under the Australian Securities and Investments Commission Act 2001 (Cth). The applicant challenged the Board's refusal to stay a disciplinary proceeding against him pending the conclusion of a criminal prosecution brought by the Australian Securities and Investments Commission (ASIC). ASIC sought the cancellation or suspension of the applicant's registration as an auditor for alleged failures in conducting an audit. The applicant argued that the disciplinary proceeding should be stayed to prevent prejudice, given that the criminal charges related to the same subject matter.
The primary legal issue before the court was whether the Board's decision to refuse a stay of the disciplinary proceeding was legally sound. The court examined the principles governing the stay of administrative proceedings in light of overlapping criminal prosecutions, focusing on whether the applicant faced a plausible apprehension of injustice. The court also considered the public interest in the disciplinary proceeding proceeding and the relevance of the applicant's undertaking not to practise as an auditor in the interim. Additionally, the court reviewed the Board's ancillary decision to refuse an extension of time for the applicant to lodge his application for judicial review.
The court found that the Board's decision to refuse the stay was flawed as it did not adequately consider the prejudice to the applicant in the context of the overlapping criminal prosecution. The court determined that the Board's refusal was not supported by the evidence and that the applicant had a plausible apprehension of injustice. Furthermore, the court held that the Board's ancillary decision to refuse the extension of time was also invalid due to the same flawed reasoning. The court quashed both the primary and ancillary decisions and ordered the parties to file and serve minutes of proposed orders to give effect to the court's reasons. Costs were reserved, and liberty to apply was granted.
The primary legal issue before the court was whether the Board's decision to refuse a stay of the disciplinary proceeding was legally sound. The court examined the principles governing the stay of administrative proceedings in light of overlapping criminal prosecutions, focusing on whether the applicant faced a plausible apprehension of injustice. The court also considered the public interest in the disciplinary proceeding proceeding and the relevance of the applicant's undertaking not to practise as an auditor in the interim. Additionally, the court reviewed the Board's ancillary decision to refuse an extension of time for the applicant to lodge his application for judicial review.
The court found that the Board's decision to refuse the stay was flawed as it did not adequately consider the prejudice to the applicant in the context of the overlapping criminal prosecution. The court determined that the Board's refusal was not supported by the evidence and that the applicant had a plausible apprehension of injustice. Furthermore, the court held that the Board's ancillary decision to refuse the extension of time was also invalid due to the same flawed reasoning. The court quashed both the primary and ancillary decisions and ordered the parties to file and serve minutes of proposed orders to give effect to the court's reasons. Costs were reserved, and liberty to apply was granted.
Orders
Orders of the court
1. The parties file and serve minutes of proposed orders to give effect to these reasons on a date to be agreed or failing agreement on a date to be determined by the Court.
2. Costs reserved.
3. Liberty to apply.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Let me turn then to the main areas of challenge and for this purpose set the scene.Factual background The applicant audited the accounts of an ASX-listed company for the year ended 30 June 2018. In 2019 the applicant was examined under s 19 of the ASIC Act in relation to an investigation into suspected contraventions by the company of its continuous disclosure obligations. In November 2020, ASIC commenced a disciplinary proceeding against the applicant in the Board under s 1292(1)(d) of the Corporations Act. The Board is a statutory disciplinary body established under Part 11 of the ASIC Act, which may cancel or suspend the registration of an auditor if it is satisfied that the auditor has failed to perform his duties. ASIC, as the moving party in the disciplinary proceeding before the Board, seeks the cancellation or three years suspension of the applicant’s registration. It says that he failed to carry out or perform his duties in respect of the relevant audit for the 2018 financial year. I should say though that ASIC makes no allegation of dishonesty. Now whilst the disciplinary proceeding before the Board was progressing, in June 2021 ASIC invited the applicant to attend a formal interview for the purpose of responding to allegations of suspected contraventions of s 307A of the Corporations Act, which imposes strict criminal liability on auditors for failing to conduct an audit in accordance with the auditing standards. Further, at around that time, ASIC referred a brief to the CDPP in relation to the applicant. In August 2021, the applicant applied to the Board for a temporary stay of the disciplinary proceeding pending the conclusion of any criminal prosecution against him. On 25 October 2021, the chairperson dismissed that application and provided written reasons (first stay reasons). The chairperson stated that there was no plausible apprehension of injustice occurring in circumstances where the commencement of criminal proceedings was not then a foregone conclusion. It was noted that “[s]hould that in future occur and there are at that time circumstances that the Respondent apprehends would cause injustice should the [Board] proceedings continue, it would be open for the respondent to re-apply to the Board for a stay of these proceedings to be considered” (at [48(f)]). In November 2021, the disciplinary proceeding was listed for a hearing commencing 16 May 2022. Thereafter, the applicant sought to ascertain from ASIC and the CDPP as to whether, and if so when, criminal charges would be laid. On 14 April 2022 the CDPP confirmed that it was in the process of issuing charges which would be served on the applicant. It was well understood at this time that any proposed charges would concern the same subject-matter as the disciplinary proceeding, being the applicant’s alleged failure to ensure that the audit of the relevant company for the 2018 financial year was conducted in accordance with the auditing standards. The CDPP subsequently informed the applicant that criminal proceedings against him would be made returnable in the Magistrates Court in July 2022, and that accordingly the relevant charges would be served in about June 2022.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
Now for completeness, I should say that I have considered ASIC’s submissions defending this ancillary decision, but most of them proceed on a flawed foundation given my difficulties with the principal decision concerning the refusal of the stay.Conclusion In my view, the applicant has successfully impugned the validity of both the primary decision and the ancillary decision of the Board. I will hear further from the parties as to the appropriate form of relief to be granted to accord with my reasons.
Ratio Decidendi
Legal Principle Established
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