Zivanovic v Australian Securities and Investments Commission
[2017] FCA 1633
•20 December 2017
FEDERAL COURT OF AUSTRALIA
Zivanovic v Australian Securities and Investments Commission [2017] FCA 1633
Appeal from: LZ15 v Australian Securities and Investments Commission [2016] AATA 247 File number: NSD 1442 of 2017 Judge: GLEESON J Date of judgment: 20 December 2017 Date of publication of reasons: 5 February 2018 Catchwords: PRACTICE AND PROCEDURE – application pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) for suppression and non-publication of appellant’s identity on the grounds that it is necessary to prevent prejudice to the administration of justice – application refused
PRACTICE AND PROCEDURE – application pursuant to s43(5C) of the Administrative Appeals Tribunal Act 1975 (Cth) to vary a stay of the operation or implementation of an order made by the Administrative Appeals Tribunal to disqualify the applicant from acting as a director of a company in order to allow the respondent to make a media release in relation to the disqualification order – application made in circumstances where respondent accepts that it ought not to be allowed to make a record of the disqualification order in the register maintained pursuant to s 1274AA of the Corporations Act 2001 (Cth) – application refused
Legislation: Administrative Appeals Tribunal Act 1975 (Cth) ss 35, 41, 43, 44
Corporations Act 2001 (Cth) ss 206F, 1274AA
Federal Court of Australia Act 1976 (Cth) ss 37AE, 37AF, 37AG
Cases cited: A v Commissioner of Taxation [2016] FCA 1307
Applicant Y v Australian Prudential and Regulatory Authority [2005] FCAFC 222
Australian Competition and Consumer Commission v Air New Zealand Ltd (No 4) [2012] FCA 1439
Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185; 181 FCR 130
Herald and Weekly Times Ltd v Gregory D Williams (formerly identified as VAI) [2003] FCAFC 217; (2003) 130 FCR 435
Hogan v Australian Crime Commission [2010] HCA 21; (2010) 240 CLR 651
LHRC v Deputy Commissioner of Taxation (No 4) [2015] FCA 70; (2015) 326 ALR 150
Rinehart v Rinehart [2014] FCA 1241; (2014) 320 ALR 195
Date of hearing: 20 December 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 54 Counsel for the Applicant: Mr IS Coleman SC Solicitor for the Applicant: Brown & Partners Counsel for the Respondent: Mr S Free Solicitor for the Respondent: Australian Securities and Investments Commission
Table of Corrections 6 February 2018 On the cover page, the date of publication of reasons has been amended to read “5 February 2018”. ORDERS
NSD 1442 of 2017 BETWEEN: LUBO ZIVANOVIC
Applicant
AND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Respondent
JUDGE:
GLEESON J
DATE OF ORDER:
20 DECEMBER 2017
THE COURT ORDERS THAT:
1.The applicant’s interlocutory application dated 4 October 2017 is dismissed with costs.
2.The respondent’s interlocutory application dated 13 December 2017 is dismissed with costs.
3.No request for third party access to the Court file is to be granted without giving the parties an opportunity to be heard on the request for access.
4.The applicant is to file and serve an amended notice of appeal by 12 January 2018.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
GLEESON J:
On 20 December 2017, I dismissed the parties’ respective interlocutory applications concerning the publication of information tending to reveal the identity of the applicant, and made ancillary orders. These are my reasons for those decisions.
BACKGROUND
The substantive proceeding is an appeal to this Court, pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”), from a decision of the Administrative Appeals Tribunal (“AAT”) dated 8 August 2017. In that decision, the AAT affirmed a decision of a delegate of the respondent (“ASIC”) made in February 2016 pursuant to s 206F of the Corporations Act 2001 (Cth) that the applicant be disqualified from managing corporations for a period of three years (“disqualification decision”).
The applicant has lengthy experience in the building and construction industry and has been the driving force, typically as the sole shareholder and director, of a group of companies whose primary activity has been the provision of scaffolding equipment and services.
Between October 2008 and November 2014, 18 group companies were wound up in insolvency, in each instance the applicant having been a director until at least a few months prior to the winding up. In each instance, the liquidator reported that unsecured creditors were unlikely to be paid any dividend. The disqualification decision was consequent upon the insolvency of the 18 group companies.
On about 19 February 2016, the applicant applied to the AAT for a review of the disqualification decision.
On 1 March 2016, the AAT (Senior Member Dunne) made the following directions having regard to an undertaking given by the applicant (and set out at [8] below):
1. Pursuant to s 41(2) of the [AAT Act]:
a.the further operation and implementation of the decision under review is stayed; and
b.[ASIC’s] obligation pursuant to s 1274AA of the [Corporations Act] is stayed.
2. Pursuant to s 35 of the AAT Act:
a.the Applicant be described by a pseudonym for the purpose of the application;
b.publication of the name of the Applicant and or any material tending to identify him be restricted to the parties, their legal representatives, and the members and officers of the Tribunal in the course of their duties;
c.publication of the evidence given before the Tribunal and of matters contained in documents lodged with the Tribunal be restricted to the parties, their legal representatives, and the members and officers of the Tribunal in the course of their duties; and
d.to the extent necessary, the Respondent remove any reference to the decision under review from any of its publications, alerts and the Public Register.
By s 1274AA of the Corporations Act, ASIC is required to keep a register of persons who have been disqualified from managing corporations.
The applicant’s undertaking was:
1.to refrain from acting as a director of any corporate entity pending the resolution of these proceedings;
2.to arrange for the appointment of two independent co-directors (i.e. directors who are not immediate family members, or related by marriage) in respect of the companies listed in the attached schedule described as Confidential Schedule 1 (which was forwarded to the Tribunal by the Applicant’s solicitors), within 7 days of the making of these orders;
3.to arrange for the filing of documents with the Respondent giving effect to paragraph 2 of this undertaking within 7 days of the making of these orders; and
4.not to use his shareholding(s) to remove an independent director pending further order.
On 8 August 2017, the AAT (Senior Member Taylor SC) affirmed the decision of ASIC’s delegate. By s 43(5C) of the AAT Act, if an appeal is brought, “unless … the Federal Court of Australia … otherwise orders, the operation or implementation of the Tribunal’s decision is stayed” until the appeal is determined. Section 43(5C) therefore creates a statutory stay of the “operation or implementation” of the AAT’s 8 August 2017 decision, unless this Court “otherwise orders”.
On 21 August 2017, the applicant filed his notice of appeal in this Court. The notice of appeal was lodged in the name of “LZ15”. The notice of appeal contends that the AAT erred on a question of law in several respects.
On 4 October 2017, the applicant filed an interlocutory application seeking orders including, in particular, an order pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”):
… on the ground that the order is necessary to prevent prejudice to the administration of justice, the Court grant a suppression and non-publication order prohibiting the publication of any information tending to reveal the identity of or otherwise concerning the applicant.
The applicant has re-affirmed to ASIC and to this Court through his solicitors that he remains bound by the undertaking given by him to the AAT and set out above.
On 13 December 2017, ASIC filed an interlocutory application seeking an order pursuant to s 43(5C) of the AAT Act, seeking a modification to the statutory stay so that ASIC can be at liberty to issue a media release about the disqualification decision made in respect of the applicant. As the orders sought made clear, ASIC proposed to ensure that any such media release would acknowledge that the disqualification decision is presently stayed and the AAT decision is subject to appeal.
ASIC confirmed that it did not seek to make an entry on the register under s 1274AA prior to the disposition of the appeal.
The parties each opposed the orders sought by the other.
EVIDENCE
The applicant swore an affidavit on 4 October 2017. In his affidavit, the applicant expressed his continuing grave concern that the revelation of his identity or details of this proceeding would cause the financiers and creditors of his companies to withdraw credit or refuse to grant ongoing credit or, in the case of trade creditors, deal with his companies, resulting in the failure of the companies and the loss of the jobs of potentially hundreds of people.
Bradley Weston, the company secretary and Chief Financial Officer of the Cabe group of companies, also swore an affidavit verifying the contents of the applicant’s affidavit.
The applicant’s affidavit sets out four particular matters that provided the basis for the applicant’s concern. These matters may be summarised as follows:
(1)One of the applicant’s companies paid $2.2 million in development costs in relation to a proposed development and was required to pay $6.12 million to complete acquisition of the land in October 2017. The applicant was concerned that disclosure of the appeal may have prevented the October 2017 acquisition. The development is estimated to take five years to complete and will generate, directly and indirectly, 200-300 jobs. The applicant was concerned that disclosure of the appeal would be likely to result in the group’s lead financier withdrawing existing finance facilities or imposing onerous additional obligations to reduce or repay such facilities which, I infer, may affect the financial capacity of the applicant’s company to complete the development. The applicant does not suggest that the landowner would not find another developer.
(2)The applicant has been negotiating to purchase shares in a business and the infrastructure through which the business is operated, to complement his existing scaffolding business. The proposed acquisition would generate an estimated 40-60 jobs over the next 12 months. Concerning the prospect of concluding the purchase, the applicant said:
… I am confident that I can secure the bank’s support of the proposed acquisition, provided that the arrangements which have operated with respect to my companies since March 2016 continue. If those arrangements do not continue, I believe that the [bank] would not support the acquisition, and would be likely to tighten the terms and conditions of my group’s existing facilities, threatening their continued existence. The proposed acquisition also involves dealing with financiers with whom I have no established relationship. Based on my knowledge and experience of the equipment hiring industry, I do not believe that these companies would deal with my companies if they were aware of the current proceedings.
(3)The applicant is negotiating what would be the largest scaffolding contract his companies have ever undertaken. The contract would generate 70 jobs for three years. The applicant believes, in effect, that the suppression order is necessary to enable the applicant’s company to be awarded the contract. The applicant says opportunities of this kind are rare and other companies in the industry would be quick to seek to secure the contract.
(4)The applicant is negotiating to acquire land to construct apartments and commercial spaces. The applicant said:
If the current orders remain in force and effect, I believe that my company will be offered the site. If the orders remain in force, I believe that the [bank] will finance the project. If the orders do not remain in force, I have no doubt that the owner of the land will not be able to sell it to me, or any company associated with me. Even if the owner remained willing to sell to a company of mine, I do not believe that the [bank] would finance the purchase of the land, or fund the proposed development on it if the current orders did not remain in force.
ASIC submitted, and I accepted, that this evidence does not provide a basis for concluding that there are hundreds of existing jobs at risk if a suppression order is not made. Further, it is not obvious that, if the applicant’s companies are unable to provide the potential jobs identified in his affidavit, those jobs would not be created by a competitor of the applicant’s companies.
The applicant raised a further concern, concerning his current efforts to sell his former matrimonial home. The concern was that, absent a suppression order, prospective purchasers will conclude that the sale is a “fire sale” reducing the price which might otherwise be achieved.
APPLICATION FOR SUPPRESSION ORDERS
Legal framework
Section 37AF of the Federal Court Act provides:
(1)The Court may, by making a suppression order or non-publication order on grounds permitted by this Part, prohibit or restrict the publication or other disclosure of:
(a)information tending to reveal the identity of or otherwise concerning any party to or witness in a proceeding before the Court or any person who is related to or otherwise associated with any party to or witness in a proceeding before the Court; or
(b) information that relates to a proceeding before the Court and is:
(i)information that comprises evidence or information about evidence; or
(ii)information obtained by the process of discovery; or
(iii)information produced under a subpoena; or
(iv)information lodged with or filed in the Court.
(2)The Court may make such orders as it thinks appropriate to give effect to an order under subsection (1).
Section 37AG provides:
(1)The Court may make a suppression order or non-publication order on one or more of the following grounds:
(a)the order is necessary to prevent prejudice to the proper administration of justice;
(b)the order is necessary to prevent prejudice to the interests of the Commonwealth or a State or Territory in relation to national or international security;
(c)the order is necessary to protect the safety of any person;
(d)the order is necessary to avoid causing undue distress or embarrassment to a party to or witness in a criminal proceeding involving an offence of a sexual nature (including an act of indecency).
(2)A suppression order or non-publication order must specify the ground or grounds on which the order is made.
Section 37AE provides:
In deciding whether to make a suppression order or non-publication order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice.
As ASIC’s submissions observed, the suppression and pseudonym orders made by the AAT under s 35 operated in their own terms only for the purposes of the AAT proceedings. Those proceedings are now complete. Neither s 43(5C) of the AAT Act, nor any other provision, has the effect of preserving the effect of the AAT’s suppression and pseudonym orders in this Court. The position was stated in Herald and Weekly Times Ltd v Gregory D Williams (formerly identified as VAI) [2003] FCAFC 217; (2003) 130 FCR 435 at [26]-[28]) by Merkel J (Finn and Stone JJ agreeing), as follows:
26.Williams’ entitlement to maintain the privacy and confidentiality of the application for administrative review in the AAT, which arises under s 14ZZE of the Taxation Administration Act and ss 35(2) and 63(d) of the AAT Act, relates to the application for administrative review in the AAT. Upon a proceeding being commenced in the Federal Court an entirely discrete and different statutory regime applies in respect of court documents, evidence and submissions. Under that regime, subject to certain exceptions, the jurisdiction of the Court “shall be exercised in open court”: see s 17(1) of the FCA Act. The exception that is relevant to the present case is s 50 of the FCA Act [the predecessor to ss 37AF and 37AG] which, unlike s 35 of the AAT Act (which empowers the AAT to make a suppression order if it is “desirable to do so”), only empowers the Court to exercise its discretion to make such an order where the order appears to the Court to be “necessary in order to prevent prejudice to the administration of justice”. Williams applied to the primary judge for, and was granted, a suppression order, not in respect of material before the AAT but, rather, in respect of material before the Court. The fact that some of the material before the Court reproduced material before the AAT is not to the point. Once the material was filed in or was otherwise before the Court, subject to any specific statutory exceptions, the Court’s, and not the AAT’s, statutory regime applied to it.
…
28.Save for the “public interest” provisions set out above there is nothing in the Taxation Administration Act or the AAT Act which evidences a legislative intention that the privacy or confidentiality that might prevail when a matter is before the AAT should continue once a proceeding, which arises out of or relates to the matter in the AAT, is commenced in the Court.
In written submissions filed on behalf of the applicant, various submissions were made in support of the proposition that the Court should decline to discharge the suppression orders. As appears from the legal framework above, the Court is not concerned with the question whether the direction of the AAT should be discharged but rather, whether an order should be made under s 37AF of the Federal Court Act. Thus, it is not relevant to consider, for example, whether the AAT’s findings provided “no foundation for finding that the failure to discharge the suppression order would expose the public to any, or any acceptable risk”.
In Rinehart v Rinehart [2014] FCA 1241; (2014) 320 ALR 195, Jacobson J summarised the governing principles as follows:
21.The key principles stated by Bathurst CJ and McColl JA in Rinehart v Welker were drawn from a long line of authoritative decisions including Hogan v Australian Crime Commission (2010) 240 CLR 651; Hogan v Hinch (2011) 85 ALJR 398; John Fairfax and Sons Ltd v Police Tribunal (NSW) (1986) 5 NSWLR 465 and John Fairfax Publications Pty Ltd v District Court of NSW (2004) 61 NSWLR 344.
22. Those principles may be summarised in the following way.
23.First, the operative condition for making a suppression order under s 37AG of the FCA (and its analogue in s 8 of the Court Suppression and Non-publication Orders Act 2010 (NSW) (the CSPO Act) is that the order be “necessary” to prevent prejudice to the administration of justice. This is a strong word which reinforces the legislative intention that suppression orders should only be made in exceptional circumstances: Rinehart v Welker at [27].
24.Second, the principle of open justice is one of the most fundamental aspects of the system of justice in Australia. Departure from it may only be justified where its observance would frustrate the administration of justice or some other public interest for whose protection Parliament has modified the open justice rule: Rinehart v Welker at [29], [32].
25.Third, the necessity principle is reinforced by the requirement stated in s 37AE of the FCA (and s 6 of the CSPO Act) that the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice: Rinehart v Welker at [32].
26.Fourth, the necessity principle encapsulates as its final and paramount consideration the need to do justice. Publication is a means to that end and can only be avoided where necessity compels departure from the open justice principle: Rinehart v Welker at [30].
27.Fifth, the entitlement of the media to report on court proceedings is a corollary of the right of access to the court by all members of the public: Rinehart v Welker at [33].
28.Sixth, in general parties have to accept the embarrassment and damage to their reputation, and the possibility of consequential loss, which may be inherent in being involved in litigation. It is the price of open justice that allegations about parties are aired in open court. Those parties can make their response in the same forum and if the media publishes the allegations it would ordinarily be obliged to publish the response: Rinehart v Walker at [54].
29.Seventh, there are a number of recognised exceptions to the principles of open justice. They include cases where the openness of the proceedings would destroy the attainment of justice by vindicating the activities of a blackmailer and cases where disclosure of the information would seriously affect the commercial value of the subject matter by revealing secret processes or confidential business information to competitors: Rinehart v Welker at [34]-[37].
30.Reference should also be made to the observation of Spigelman CJ in John Fairfax Publications v District Court at [99] that in a free society public access to the conduct of the courts and the results of deliberations in the courts is a human right:
“ ... as well as a mechanism for ensuring the integrity and efficacy of the institutions of the administration of justice.”
31.It should also be observed that, in this Court, the open justice principle is ordinarily engaged when proceedings are commenced: see rule 2.32(2)(a) of the Federal Court Rules 2011. See also Llewellyn v Nine Network Australia Pty Ltd (2006) 154 FCR 293 at [23]. The only exception to this is that a non-party (including the media) is not entitled to inspect a document listed in rule 2.32 that the Court has ordered to be confidential: see rule 2.32(3) of the Federal Court Rules.
In LHRC v Deputy Commissioner of Taxation (No 4) [2015] FCA 70; (2015) 326 ALR 150, Perry J stated at [10] and [11]:
10.Section 37AE provides that, in deciding whether to make a suppression or non-publication order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice. As, for example, Hill J observed in SRD v Australian Securities Commission (1994) 52 FCR 187 at 189:
It will ordinarily be essential in order to maintain confidence in the integrity and independence of the Court that its proceedings be open to scrutiny by the general public and it will only be in exceptional cases where the interest of justice would override the ordinary requirement of open justice.
11.Consistently with this primary objective, s 37AG provides that the Court may make a suppression or non-publication order on the grounds that the order is “necessary” relevantly to prevent prejudice to the proper administration of justice. As such, the section imposes a high threshold for the making of such an order consistently with the principle that open justice is a fundamental tenet of the rule of the law. As the High Court said in Hogan v Australian Crime Commission (2010) 240 CLR 651; [2010] HCA 21 at [30], “‘necessary’ is a strong word.” However, as the Court also said in Hogan at [33], once the court has reached that state of satisfaction, it would be a misreading of s 50 of the Federal Court Act (and, by analogy, its successor provisions, ss 37AF and 37AG) to then refuse to make the order. Furthermore, under s 37AJ, in deciding the period for which an order is to operate, the Court is to ensure that the order operates for no longer than is reasonably necessary to achieve the purpose for which it is made.
Contrary to the submission made by senior counsel for the applicant, Mr Coleman SC, that the applicant’s application requires a balancing exercise between the interests of open justice on the one hand and, on the other, preventing prejudice to the proper administration of justice by preserving the subject matter of the dispute, s 37AF is relevantly enlivened because it is necessary to avoid prejudice to the administration of justice. As Perram J observed in Australian Competition and Consumer Commission v Air New Zealand Ltd (No 4) [2012] FCA 1439 at [4], in relation to former s 50, “Once the necessity appears, there is no balancing exercise to be engaged in; the order is simply to be made. This is because the word “may” in former s 50 does not disclose the presence of a discretion”, citing Hogan v Australian Crime Commission [201] HCA 21; (2010) 240 CLR 651 at [31]–[32].
Embarrassment to a party (except in criminal cases of a sexual nature) is not a matter that can be characterised as a form of prejudice to the proper administrative of justice that needs to be prevented: A v Commissioner of Taxation [2016] FCA 1307 at [11].
In Applicant Y v Australian Prudential and Regulatory Authority [2005] FCAFC 222 (“Applicant Y”), a Full Court made orders protecting the identity of the two applicants but, as counsel for ASIC, Mr Free observed, that matter had the following important distinguishing features:
(1)The applicants were foreign nationals who were challenging the jurisdiction of APRA to embark on a process of disqualifying them from holding senior roles within insurance companies. They had been served with show cause notices but had not been disqualified.
(2)If the suppression order had not been made the relevant insurance company would not have authorised the continuation of the proceeding in the Federal Court because of the potential damage from publication of the findings. The Court found that the applicants would not have commenced the proceedings or continued them, if the suppression order had not been made.
Applicant’s submissions
Senior Member Dunne’s reasons for decision for his directions included the following passage, upon which Mr Coleman SC relied:
[7]Since 1980, the applicant has been in the scaffolding erection and labour hire business. The business is conducted through a group of companies, either directly or through family trusts. The applicant is described as the owner and operator of the companies and is a director, or director and secretary, of each or most of the companies in the group. The business directly or indirectly employs, or pays fees to approximately 40 sole traders, small companies or partnerships. It has 120 current contracts and/or projects in various stages of development. Some contracts/ projects are due to be completed within months. Some very large contracts/projects are unlikely to be completed in less than four years.
[8]During the past 15 years, he has successfully built, and sold, more than 15 different developments in Queensland and New South Wales. Other than with respect to routine maintenance issues of a minor nature, none of the completed development projects has resulted in successful claims against, or complaints with respect to, the quality of the work performed, or the ethical integrity of the applicant. The overwhelming majority, in number and quantum, of suppliers of goods or providers of services on any project, in number and quantum, have been paid. No actions or suits, against the applicant, or any entity controlled by him has resulted from any of the completed projects.
[9]The applicant’s main trading company in the scaffolding arm of the business has contracts to the value of over $3,000,000 per month, and is on target to produce a net profit from the 2016 financial year of between $3–4,000,000. It currently employs over 150 people and if the applicant is disqualified, that company is unlikely to survive. The applicant’s disqualification would also jeopardise all building contracts, current debt support from the bank and all building contracts currently in place. The entire group’s solvency is also directly dependent on the survival of the scaffolding business and the successful completion of the building projects under control of the applicant. The cash flow generated by the scaffolding business enables the development projects to be undertaken and completed despite the lengthy period during which there is a complete or partial absence of cash flow. Without that financial support, the development projects could not continue. The development projects could possibly survive the applicant’s disqualification, but the scaffolding business could not. The companies in the group will be in default pursuant to the terms of their scaffolding and building contracts. Trade and other unsecured creditors, many of whom are sole traders or small family businesses, will not be paid if the group ceases to carry on business. Approximately 250 full-time employees across the group will lose their jobs.
[10]The applicant has consistently employed from 130 to 250 people at any time over the past 15 years, and has never failed to pay wages or other entitlements to any of his employees. Although companies associated with the applicant have been wound up, with debts to the ATO, those companies have not failed to discharge their obligations to the ATO in accordance with their legal obligations to employees.
Mr Coleman SC submitted that the facts stated in the passage have not materially altered since the time of Senior Member Dunne’s decision and were not materially departed from in the reasons of Senior Member Taylor SC.
Mr Coleman SC submitted that the fruits of a successful appeal could well be nugatory if the order sought was not made. He argued that the consequences of refusing to grant a suppression order are not confined to whatever personal loss the applicant may sustain but, in particular, involved consequences in terms of job losses.
Mr Coleman SC also argued that the disclosure of the applicant’s identity would seriously affect the subject matter of the appeal, which he identified as the corporations with which the applicant is associated.
Mr Coleman SC drew attention to Senior Member Taylor SC’s observation, at [121] of the decision record, that “[i]f the likelihood of future management deficiencies were the only material considerations, [he] would be disinclined to regard [the applicant’s] disqualification as justified”.
Finally, Mr Coleman SC submitted that the suppression order was appropriate where the matter has been listed for hearing of the appeal in March 2018 and there has been no demonstrated harm as a result of the non-publication order that had effectively been in place since March 2016.
ASIC’s submissions
Mr Free submitted that the applicant was seeking to avoid private reputational damages and the risk of consequential losses to him and his company. Mr Free argued that the effect of the applicant’s evidence was that he wishes to pursue business opportunities that may not be available if the suppression order is not made. He argued that prejudice can be no more than a step along the way to demonstrating prejudice to the administration of justice.
Mr Free also submitted that, even by a measure of private prejudice, the evidence is largely speculative. Mr Free referred to [107] of the decision record of Senior Member Taylor SC, which says:
The concerns expressed by the various witnesses [about the possible impact of the applicant’s disqualification on the group’s development projects] were, as it seems to me, directed at the possibility that [the applicant’s] disqualification as a director might be perceived by others as a diminution of the extent of his commitment to, or of his practical ability to contribute to, the activities and successful operation of the group. It is, of course, difficult to predict confidently whether those who may be concerned to assess the impact of disqualification on their relationship with [the applicant] and the group companies will either take the trouble to inform themselves accurately about the underlying events, or be motivated to portray or react to those events for their own comparative advantage. But there is in fact no objective reason why disqualification should or would detract from [the applicant’s] practical ability to continue to contribute to the successful operation of the group’s activities.
Mr Free submitted that this reasoning is powerful.
Mr Free submitted that, even if the evidence demonstrated the prospect of the loss of hundreds of jobs, that is not a matter that would demonstrate prejudice to the proper administration of justice; it is just another aspect of private commercial prejudice. However, he submitted that the potentially disastrous outcome identified by the applicant was overstated because the evidence was about winning new business. Mr Free submitted, and I accept, that if the applicant does not win new business then it is reasonable to assume that the new business will be undertaken by some other business person who will, themselves, engage workers to undertake the new business.
But the fundamental deficiency, according to Mr Free, was that there is no link between the applicant’s concerns and prejudice to the administration of justice.
Consideration
I did not accept that I should accept the passage from Senior Member Dunne’s reasons as uncontested or incontestable facts, especially to the extent that it expresses conclusions about the financial impacts of the applicant’s possible disqualification. The Senior Member’s reasons state that he did not have the relevant evidence before him but relied on counsel’s submissions. I am not satisfied that the passage records findings of fact by the Senior Member.
In any event, Mr Coleman SC acknowledged that the implications of disqualification upon the applicant are a live issue in the appeal. The first ground of appeal challenges the Senior Member Taylor SC’s conclusion that disqualification would not have any material adverse effect on the operations of any of the group of companies controlled by the applicant and that the applicant’s apprehension that the group’s trading success was dependent on his reputation was not well founded.
I accepted Mr Free’s characterisation of the applicant’s evidence of prejudice as speculative, for the reasons he identified.
Accordingly, I did not accept that there is a strong argument that the fruits of a successful appeal could be nugatory if the proposed suppression and non-publication order is not made.
I also did not accept Mr Coleman SC’s characterisation of the subject matter of the appeal. As Mr Free observed, the subject matter of the appeal is the AAT’s decision to disqualify the applicant from managing corporations and the applicant’s personal capacity to act in that kind of role.
I also accepted that the duration of the non-publication order made by the AAT is of no moment for the purpose of deciding whether to make an order under s 37AF. A suppression order under s 37AF will not be made simply to protect the secrecy that a party was able to obtain in relation to proceedings in the AAT.
I was not persuaded that the proposed order was necessary to prevent prejudice to the administration of justice. The nature of the prejudice identified by the applicant is not a prejudice to the administration of justice but is in the nature of the embarrassment that may be inherent in the conduct of litigation. In particular, in contrast with the position in Applicant Y, the applicant could not avoid publication of the outcome of the AAT decision by foregoing an appeal to this Court.
APPLICATION FOR VARIATION TO STAY TO PERMIT PUBLICATION OF MEDIA RELEASE
Legal framework
Section 43 of the AAT Act provides relevantly:
(5A)Subject to subsection (5B), a decision of the Tribunal comes into operation forthwith upon the giving of the decision.
(5B)The Tribunal may specify in a decision that the decision is not to come into operation until a later date specified in the decision and, where a later date is so specified, the decision comes into operation on that date.
(5C) Despite subsections (5A) and (5B), if:
(a)the Tribunal has made an order under subsection 41(2) staying the operation or implementation of the decision under review; and
(b)the order was in force immediately before the decision given by the Tribunal on the review;
then, unless the Tribunal, the Federal Court of Australia or the Federal Circuit Court of Australia otherwise orders, the operation or implementation of the Tribunal’s decision is stayed until:
(c)subject to paragraph (d), the end of the period within which a party to the proceeding before the Tribunal may appeal from the decision to the Federal Court of Australia under subsection 44(1) (including any further time for bringing the appeal that is allowed by the Federal Court before the end of that period); or
(d)if such an appeal is brought—the appeal is determined.
Section 41(2) of the AAT Act, pursuant to which the AAT’s first 1 March 2016 direction was made, provides:
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.
Note:This section does not apply in relation to proceedings in the Social Services and Child Support Division, as a result of provisions in the enactments that authorise applications for reviews that will be heard in that Division.
In Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185; 181 FCR 130 (“ASIC v AAT”), a Full Court held (by majority at [81]) that the operation or implementation of a disqualification decision extends to issuing a media release about it.
ASIC made the following written submissions:
32.To date ASIC has refrained from making any public references to the fact that a banning order has been made against LZ15. If the Court rejects LZ15’s application for orders in the Federal Court suppressing his identity, the consequence will be that LZ15 will be conducting the Federal Court appeal in his own name and without any suppression orders in respect of the appeal. The matter would be identified in public Court listings and members of the public and the media would be entitled to observe the proceedings and seek access to Court documents. That could lead to members of the public becoming aware of the appeal proceedings, which in turn would disclose to the public the fact that the banning order has been made. Whether or not the public in fact becomes privy to such information will be a matter of happenstance. It is not appropriate that ASIC, as the responsible regulator, should continue to be precluded from informing the public, in an appropriately qualified and accurate way, about the decision which is under appeal.
33.The importance of the public being properly informed about banning orders and of ASIC’s responsibilities in that regard are well established. In ASIC v AAT the majority emphasised such principles, at [54]:
[I]nformation is the key to effective trading in any market. It takes the place of regulation in ensuring fairness. A market which is not fully informed is not operating properly. Is not an investor who is about to deposit funds with a person providing financial services entitled to know that a banning order has been made against the person? If the order has been stayed on substantial grounds the person is also entitled to know that. The informed investor may continue with the proposal. If the investor does not, then that is just an example of the operation of the market place. The critical matter is that the market is fully informed. If the banning order is not disclosed, but subsequently upheld, is not the investor entitled to complain that all the circumstances should have been made public?
34.The rhetorical question posed in the last sentence would have added force in the circumstances of the present case. A person dealing with LZ15 may be seen to have particular cause to complain if ASIC had not warned the public about the banning order, in circumstances where the matter has not been determined by the Court to be worthy of secrecy, but the question of informing the public has been left up to chance as to whether any interested people happen to become aware of the Court proceedings.
35.There is no substance to LZ15’s submission that ASIC lacks the power to issue a media release. No specific statutory power to take such action is required. In any event, s. 11(4) of the Australian Securities and Investments Commission Act 2001 confers on ASIC the power to do “whatever is necessary for or in connection with, or reasonably incidental to, the performance of its functions”. Publicising a disqualification decision made under s. 206F, with a view to properly informing the market, is at least reasonably incidental to the performance of the function conferred under s. 206F. In ASIC v AAT the Full Court proceeded on the basis that ASIC is empowered to publicise its decisions, over and above making entries on the register.
36.If the Court rejects LZ15’s application for pseudonym orders, it should therefore make the orders sought by ASIC, qualifying the statutory stay that would otherwise operate by virtue of s. 43(5C) of the AAT Act.
Orally, Mr Free submitted that persons seeking to be informed by ASIC have a legitimate expectation that they ought to be properly informed.
I was not satisfied that it would be appropriate to permit ASIC to publish the proposed media release in circumstances where apparently accepts that it should not make an entry on the Register. As Downes and Jagot JJ said in ASIC v AAT at [81] (albeit on the question of power rather than discretion): “It would be an odd result if ASIC could be restrained form a mandated publication, but not from an informal publication”. In my view, the proposed variation to the stay is likely to defeat the purpose of the stay which, by s 43(5C), operates unless the Court “otherwise orders”. I was not satisfied that the legislative policy in favour of a fully informed market provides a justification for variation to permit publication of the proposed media release, which would not be issued pursuant to any specific statutory power, in the light of the continuing stay of ASIC’s obligation under s 1274AA. Further, the publication is not necessary to promote the public interest in open justice: that interest will be promoted by the conduct of the appeal in open court in the usual way.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson. Associate:
Dated: 5 February 2018
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