CATCHWORDS ADMINISTRATIVE LAW - objection to competency of application for review under the Administrative Decisions (Judicial Review) Act - whether a "decision" of the Australian Securities Commission to issue a notice to show cause pursuant to s. 600(2) the Corporations Law is a "reviewable decision" under the Administrative Decisions (Judicial Review) Act - application for review dismissed CORPORATIONS LAW - proper construction of ss 600(2) and (3) considered Administrative Decisions (Judicial Review) Act 1977 (Cth) Corporations Law - ss 533, 600, 600(2), 600(3) Cases Considered Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Deloitte Touche Tohmatsu v Australian Securities Commission (1995) 13 ACLC 161 Dwyer v National Companies and Securities Commission (1988) 6 ACLC 1182 Re Gem Exploration & Minerals NL [1975] 2 NSWLR 584 Salter v National Companies and Securities Commission [1989] WAR 296 David William Neate v Australian Securities Commission VG 734 of 1995 Drummond J Brisbane (Heard in Melbourne) 26 October, 1995 IN THE FEDERAL COURT OF AUSTRALIA) No. VG 734 of 1995 VICTORIA DISTRICT REGISTRY ) GENERAL DIVISION ) BETWEEN: DAVID WILLIAM NEATE Applicant AND: AUSTRALIAN SECURITIES COMMISSION Respondent MINUTES OF ORDERS JUDGE MAKING ORDER: Drummond J DATE OF ORDER: 26 October, 1995 WHERE MADE: Brisbane (Heard in Melbourne) THE COURT ORDERS THAT: 1. The applicant's application for review is dismissed. 2. The applicant pay the respondent's costs of and incidental to the application. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA) No. VG 734 of 1995 VICTORIA DISTRICT REGISTRY ) GENERAL DIVISION ) BETWEEN: DAVID WILLIAM NEATE Applicant AND: AUSTRALIAN SECURITIES COMMISSION Respondent Coram: Drummond J Date: 26 October, 1995 Place: Brisbane (Heard in Melbourne) REASONS FOR JUDGMENT This is an application by the respondent for the summary dismissal of proceedings brought by the applicant under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act") for judicial review of a decision by the respondent. The respondent has also objected to the competency of the proceedings on the ground that the decision challenged is not one that is reviewable under that Act. The applicant, by his originating proceeding, sought relief which was expressed to be limited to the review of "the decision of the Respondent to give a Notice under s. 600(2) of the Corporations Law ... to the Applicant requiring the Applicant to show cause why an order not to manage corporations should not be made against the Applicant under s. 600(3) of the Law ...". Argument at the hearing was confined to whether the applicant's claim to relief, so framed, should be struck out. Apart from its objection to competency, the grounds on which the Australian Securities Commission ("the Commission") relies to justify the dismissal of the proceedings comprise its detailed reasons for saying that the applicant cannot make out any of the grounds of review relied on in his originating application. I do not think that the case advanced by the Commission with respect to all of these matters is so clear as to justify the summary termination of the proceedings now. I am of the opinion, however, that the Commission's objection to competency is well-founded. In broad terms, s. 600 the Corporations Law empowers the Commission to take action to prohibit a person from managing any corporation for a period not exceeding five years, provided that person was a director of at least two companies at any time in the period of 12 months prior to the winding up of each of those companies, and further provided that each is a company in respect of which the liquidator has reported under s. 533 the Corporations Law that it may be unable to pay its unsecured creditors more than $0.50 in the dollar. Section 600 the Corporations Law relevantly provides: "(1)[Interpretation] For the purposes of this section: (b) ... (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. (2) [Giving of notice to show cause] 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). (3) [Order not to manage corporations] 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." The Commission is authorised to issue a notice under s. 600(2) the Corporations Law only to a person who is in truth "a relevant person" with respect to companies which are in truth "relevant bodies". But in order to make a decision to issue that notice, the Commission is not, in my opinion, required to determine to any level of persuasion that those two requirements are satisfied. The notice which s. 600(2) the Corporations Law permits the Commission to issue is a notice which calls on the recipient to show cause why the Commission should not serve on that person a notice under s. 600(3) the Corporations Law prohibiting the person from managing a corporation. There is nothing in any provision of s. 600 which limits the range of matters on which the recipient of a notice under s. 600(2) can rely, in an endeavour to show cause why he or she should not be prohibited from managing a corporation (other than, of course, the restriction arising by implication from the object of the section that such matters must be relevant to the task the Commission has to perform under s. 600(3) of deciding whether or not the recipient of the s. 600(2) notice is fit to manage a corporation). In particular, there is no ground for construing s. 600 the Corporations Law as preventing the recipient of a s. 600(2) notice from responding to the notice with material showing that he or she was not in truth "a relevant person". Because the recipient of a s. 600(2) notice is entitled to raise this issue in showing cause why the prohibition notice should not be issued, it follows that the Commission, when it comes to exercise its discretion under s. 600(3) would be bound to consider that material and, if it appeared the recipient of the s. 600(2) notice was not in truth "a relevant person", then the Commission could not issue a prohibition notice. Since the recipient of the notice can avoid the imposition of a prohibition under s. 600(3) the Corporations Law by showing that he or she was not "a relevant person", the Commission, when it has to decide whether to issue the s. 600(2) notice, is neither required nor empowered to make a conclusive determination as to that matter. There is nothing in the wording of s. 600(2) the Corporations Law, read in the context of the whole section, that suggests that it imposes any decisional obligation on the Commission with respect to such a matter. The purpose intended to be served by a s. 600(2) notice is to ensure that a decision to issue a prohibition notice under s. 600(3) will not be made without the person concerned first being accorded natural justice by being given an opportunity to demonstrate why a s. 600(3) prohibition cannot or should not be imposed. A provision intended to confer such a benefit on the person against whom the Commission is considering taking action is unlikely to be the source of an obligation on the Commission to make determinations, even preliminary ones, upon which the power to prohibit depends. These considerations arising from the construction of s. 600 the Corporations Law, in my opinion, show that, before it can lawfully issue a notice under s. 600(2), the Commission does not have to make a decision, in the sense of reaching a positive conclusion, that the intended recipient is "a relevant person". It would have to have some reason for thinking that the person intended to be served with the notice is "a relevant person": if the Commission were to issue a s. 600(2) notice without that, it would be making an improper use of the power conferred by the sub-section. But the Commission does not have to form any more definite view than that it might be the case that the person in question is "a relevant person". The decision of the Commission to issue a notice under s. 600(2) the Corporations Law is determinative of nothing. Such a decision is not a "decision" within the meaning of that term in the ADJR Act. In Australian Broadcasting Tribunal v Bond (1990) 170 C.L.R. 321, in what is accepted as an authoritative statement, Mason CJ said, at 337: "... a reviewable `decision' [within s. 5 the ADJR Act] is one for which provision is made by or under a statute. That will generally, but not always, entail a decision which is final or operative and determinative, at least in a practical sense, of the issue of fact falling for consideration. A conclusion reached as a step along the way in a course of reasoning leading to an ultimate decision would not ordinarily amount to a reviewable decision, unless the statute provided for the making of a finding or ruling on that point so that the decision, though an intermediate decision, might accurately be described as a decision under an enactment." His Honour, at 339, identified an example of an intermediate decision possessing sufficient determinative effect to be a reviewable "decision". Section 88(2) the Broadcasting Act 1942 (Cth) empowered a tribunal to suspend or revoke a licence if that appeared to the tribunal to be advisable in the public interest, "having regard only to the following matters or circumstances", which included the circumstance that the tribunal was satisfied that the licensee was no longer a fit and proper person to hold the licence. The Chief Justice held that the tribunal's decision as to the licensee's unfitness was reviewable, even though the tribunal had not yet gone on to decide whether to suspend or revoke the licence, saying: "... Although that decision was an intermediate determination made on the way to deciding whether to revoke or suspend the licences or to impose conditions on them, it was a decision on a matter of substance for which the statute provided as an essential preliminary to the making of the ultimate decision." Toohey and Gaudron JJ, at 377, identified the characteristics of a reviewable decision as follows: "... They are confined by the requirement in s. 3(1) that they be made `under an enactment'. A decision under an enactment is one required by, or authorised by, an enactment ... If an enactment requires that a particular finding be made as a condition precedent to the exercise of or refusal to exercise a substantive power, a finding to that effect is readily characterised as a decision `under an enactment' ..." They reached the same conclusion as Mason CJ on the reviewability of the tribunal's decision on the unfitness of the licensee. The tribunal in Bond could only revoke a licence if it first reached the conclusion that the licensee was not a fit and proper person to hold it. Section 600(2) the Corporations Law does not impose on the Commission any duty to reach a conclusion analogous to that cast by s. 88(2) the Broadcasting Act 1942 (Cth) on the tribunal. Section 600(2) cannot be regarded as requiring a finding to be made as to a person being "a relevant person" as a condition precedent to the exercise of the substantive power conferred by s. 600(3) the Corporations Law to prohibit a person from managing a corporation. It is only at the stage of deciding whether to issue the prohibition under s. 600(3) that the Commissioner has to be satisfied that the person is truly "a relevant person". There is no analogy between the formation of a view that a person might be "a relevant person", made as part of a determination to issue a s. 600(2) notice to a person, and a decision to commence recovery action against a person under s. 50 the Australian Securities Commission Act 1989 (Cth): the latter decision, which Lindgren J suggested in Deloitte Touche Tohmatsu v Australian Securities Commission (1995) 13 A.C.L.C. 161 at 167-8 is reviewable under the ADJR Act, is one which s. 50 of this statutory provision requires the Commission to make before it can institute recovery proceedings: that decision can only be made where the result of an investigation by the Commission causes the Commission to form the opinion that it would be in the public interest for a person to take action to recover damages for fraud and the like. Such a decision requires the Commission to go through a formal process of evaluating a particular body of information available to it and forming a conclusion on a particular issue before the decision can be made. It is a decision that is "determinative, at least in a practical sense, of the issue of fact falling for consideration": Bond, supra, at 337, i.e., determinative of an issue on which the authority was required by the statute in question to reach a conclusion before it could proceed further. The decision of the magistrate on the existence of a prima facie case, which Mason CJ said in Bond, supra, at 338, was a reviewable one under the ADJR Act, was also determinative of an issue on which the magistrate was required by the statute to reach a conclusion, before further proceedings could be taken against the defendant. Section 600(2) the Corporations Law does not require the Commission to reach any conclusion on whether a person is "a relevant person": any decision the Commission may make on that at the s. 600(2) stage is determinative of nothing. The applicant also relied on Dwyer v National Companies and Securities Commission (1988) 6 A.C.L.C. 1182, where the decision to issue a notice to show cause was reviewed on appeal under s. 537 the Companies (New South Wales) Code, a provision that has some similarities to s. 600(2) the Corporations Law. But there is authority that the right conferred by s. 537 the Companies (New South Wales) Code was a right of appeal "given in the widest possible terms" which, because it involved a hearing de novo, did not limit the task of the Court to determining whether the National Companies and Securities Commission had acted in accordance with the law but required the Court to form its own view on whether it was right in all the circumstances to issue the notice in question. See Salter v National Companies and Securities Commission [1989] W.A.R. 296 at 302-303 and Re Gem Exploration & Minerals N.L. [1975] 2 N.S.W.L.R. 584 at 586-588. Review under the ADJR Act is a much more limited remedy than the right to a hearing de novo conferred by s. 537 of the old Code. The application for review is therefore incompetent and must be dismissed. This makes it unnecessary to reach a conclusion on the argument relied upon by the applicant at the hearing that the notice is bad because the grounds set out in the notice, as those on which the Commission determined that the applicant was "a relevant person", are insufficient to justify that conclusion; the Commission's response was that, even accepting what the applicant here contended, he was in truth "a relevant person", so that the notice is valid. Whether s. 600(2) the Corporations Law requires a notice issued under it to set out the facts relied on by the Commission in support of the assertion that the addressee of the notice is a "relevant person" was not touched on in argument, although I think it is a threshold question to that raised by the applicant here, and one not without some difficulty. I certify that this and the preceding nine pages are a true copy of the reasons for judgment herein of the Honourable Justice Drummond. Associate: Date: 26 October, 1995 Counsel for the applicant: Mr. P.G. Cawthorn Solicitors for the applicant: White Cleland Solicitors for the respondent: Australian Securities Commission Date of Hearing: 14 September, 1995