CATCHWORDS Administrative Law - Judicial Review - decision of the Australian Securities Commission to cause proceedings to be begun and carried on in the name of a company against the applicant - whether decision and improper exercise of power - whether decision involved a failure to take into account relevant considerations - failure to take into account whether exceptional circumstances existed warranting the Commission's launching proceedings in the company's name when its directors had not consented - legislative background of s 50 of Australian Securities Commission Act 1989. Words and Phrases - "decision" - "public interest". Australian Securities Commission Act 1989 (Cth) s 50. DELOITTE TOUCHE TOHMATSU (formerly known as DELOITTE HASKINS & SELLS and DELOITTE ROSS TOHMATSU) v AUSTRALIAN SECURITIES COMMISSION No NG 286 of 1994 Lindgren J Sydney 4 April 1996 IN THE FEDERAL COURT OF AUSTRALIA) NEW SOUTH WALES DISTRICT REGISTRY) No NG 286 of 1994 GENERAL DIVISION ) BETWEEN: DELOITTE TOUCHE TOHMATSU (formerly known as DELOITTE HASKINS & SELLS and DELOITTE ROSS TOHMATSU) Applicant AND: AUSTRALIAN SECURITIES COMMISSION Respondent CORAM: Lindgren J PLACE: Sydney DATE: 4 April 1996 MINUTE OF ORDERS THE COURT: 1. ORDERS that the decision of the respondent made on or about 29 March 1994 to cause proceedings to be begun and carried on in the name of The Adelaide Steamship Company Limited against Deloitte Ross Tohmatsu, formerly Deloitte Haskins & Sells, for the recovery of damages and ancillary relief in respect of matters arising out of the 1990 accounts and payment of dividends by the said company for the 1990 year, be set aside. 2. ORDERS the respondent pay the applicant's costs of the proceedings not the subject of previous orders. 3. RESERVES liberty to either party to apply on three days' notice for further relief arising out of the Reasons of Lindgren J published on 4 April 1996. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA) NEW SOUTH WALES DISTRICT REGISTRY) No NG 286 of 1994 GENERAL DIVISION ) BETWEEN: DELOITTE TOUCHE TOHMATSU (formerly known as DELOITTE HASKINS & SELLS and DELOITTE ROSS TOHMATSU) Applicant AND: AUSTRALIAN SECURITIES COMMISSION Respondent CORAM: Lindgren J PLACE: Sydney DATE: 4 April 1996 REASONS FOR JUDGMENT (No 4) INTRODUCTION: These are the fourth Reasons for Judgment ("Judgments") in this proceeding. The applicant (DTT) applies for an order of review under s 5 of the Administrative Decisions (Judicial Review) Act 1977 (the "ADJR Act"). The respondent ("ASC") has caused proceedings to be begun and carried on in the name of Adelaide Steamship Company Limited ("the Company") No SG 3036 of 1994 in the South Australian Registry of the Court ("the Proceedings") against five former directors of the company and its former auditors Deloitte Haskins & Sells ("DHS") and Deloitte Ross Tohmatsu ("DRT"), purportedly pursuant to s 50 of the Australian Securities Commission Act 1989. The case has proceeded on the basis that DHS, DRT and DTT are, in substance, the same firm. I will use the abbreviation "DTT" to refer to the firm as constituted from time to time. By this present proceeding, DTT seeks to bring down ASC's decision by the authority of which the Proceedings have been begun and carried on. In the first Judgment, delivered on 21 October 1994 and reported at (1994) 54 FCR 284, I granted DTT leave to amend by filing a Further Further Re-amended Application for an Order of Review. That judgment is not of present relevance. I heard DTT's application, including an objection to competency by ASC, on 27 and 28 October 1994. At that time DTT sought review of the following: "the decision of the Respondent made on or about 29 March 1994 ('the Decision') and announced by Press Release dated 21 April 1994 that it was in the public interest to cause proceedings to be begun and carried on by the Adelaide-Steamship Company Limited ('the Company') against Deloitte Haskins & Sells ('DHS') and Deloitte Ross Tohmatsu ('DRT') in the Federal Court, South Australian Registry (Matter No: SG 3036 of 1994 ('the Proceedings') pursuant to section 50 of the Australian Securities Commission Act 1989 ('the Act')." (I will use the forms of abbreviated reference adopted by DTT in this passage but will also call the Decision "the public interest decision".) In the second Judgment, delivered on 16 January 1995 and reported at (1995) 54 FCR 562, I upheld ASC's objection to competency on the ground that the Decision was not a decision under an enactment for the purposes of the ADJR Act because it was not final, operative and determinative and DTT was not "aggrieved by" it. I said that the decision which was final operative and determinative and by which DTT was aggrieved, was the actual decision to begin and carry on the Proceedings ("the decision to litigate"). DTT had pressed three grounds for review provided for in sub-s 5 (1) of the ADJR Act, namely, improper exercise of power (s 5 (1) (e)), error of law (s 5 (1) (f)) and lack of jurisdiction (s 5 (1) (c)). The grounds were particularised. I reached a concluded view in respect of one of them only, namely ground 1 (a) (iii) which was as follows: "The making of the Decision was an improper exercise by the Respondent of the power conferred by section 50 of the Act in that: (a) There was a failure to take into account relevant considerations; Particulars of relevant considerations (i) ... (ii) ... (iii) The Company is a publicly listed company which is able to pay its debts as and when they fall due and is actively engaged in the pursuit of its businesses under the control and direction of its board of directors who were opposed to the commencement of the Proceedings against inter alia the Applicant." I said that if I had not upheld ASC's objection to competency or if DTT had attacked the decision to litigate rather than the public interest decision, I would have granted the relief sought in the application on this ground. The proceeding was stood over to a date for the making of orders. DTT filed a notice of motion seeking leave to amend to include an attack on the decision to litigate. ASC opposed the motion, contending that if the hearing had taken place on the basis that DTT was attacking the decision to litigate, it would have conducted its case differently by leading additional evidence and making different submissions. I directed ASC to support its contention by providing a copy of the further affidavit evidence in draft and a copy of the submissions. It did so. In the third Judgment, dated 20 April 1995 and reported at (1995) 13 ACLC 783, I granted DTT leave to amend subject to ASC's right to re-open by leading the further evidence and to make the further submissions, subject to DTT's right to lead evidence in reply to that further evidence and to make submissions in reply. For that purpose the hearing resumed on 4 August and continued on 2 and 3 November 1995. The last submission was received on 10 November 1995 and the last document from the parties was received on 15 December 1995. SECOND FURTHER FURTHER RE-AMENDED APPLICATION FOR AN ORDER OF REVIEW DTT now seeks review of: "1. the decision of the Respondent made on or about 29 March 1994 and announced by Press Release dated 21 April 1994 that it was in the public interest to cause proceedings to be begun and carried on by The Adelaide Steamship Company Limited ('the Company') against Deloitte Haskins & Sells ('DHS') and Deloitte Ross Tohmatsu ('DRT') in the Federal Court, South Australian Registry (Matter No: SG3036 of 1994) ('the Proceedings') pursuant to section 50 of the Australian Securities Commission Act 1989 ('the Act') ('the Decision'); and in the alternative, 2. (a) The decision of the Respondent made on or about 29 March 1994 that it was in the public interest for the Company to begin and carry on the Proceedings pursuant to section 50 of the Act ('the First Decision'); and (b) The decision of the Respondent made on or about 29 March 1994 to cause the Proceedings to be begun and carried on by the Company pursuant to section 50 of the Act ('the Second Decision')." Clearly, the expressions "the Decision", "the First Decision" and "the public interest decision" all refer to the same thing. Similarly, the expressions "the Second Decision" and "the decision to litigate" both refer to the same thing. In its Second Further Further Re-amended Application, DTT added, where appropriate, after references to "the Decision" the words "and/or the First Decision and/or the Second Decision". Accordingly, while reserving its position that it had appropriately attacked the public interest decision originally, it now attacks the public interest decision and/or the decision to litigate. Apart from consequential amendments, the grounds on which relief was sought remain unaltered. DTT claims declarations that "the Decision and/or the First Decision and/or the Second Decision are/is invalid and contrary to law" and orders "setting aside or quashing the Decision and/or the First Decision and/or the Second Decision." As previously, it also seeks an order that ASC refrain from pursuing or further conducting the Proceedings. THE SECOND JUDGMENT I assume that the second and third Judgments have been read. The present one is to be read as an addition to them. But certain matters bear repeating. Section 50 of the ASC Law is as follows: "Where, as a result of an investigation or from a record of an examination (being an investigation or examination conducted under this Part or a corresponding law), it appears to the Commission to be in the public interest for a person to begin and carry on a proceeding for: (a) the recovery of damages for fraud, negligence, default, breach of duty, or other misconduct, committed in connection with a matter to which the investigation or examination related; or (b) recovery of property of the person; the Commission: (c) if the person is a company - may cause; or (d) otherwise - may, with the person's written consent, cause; such a proceeding to be begun and carried on in the person's name." I tried to make plain in the second Judgment that the terms of s 50 prompt questions. Why is written consent of a company not required while written consent of any other person is required? Does the answer reveal a legislative intention as to any consideration which ASC must take into account when deciding whether to litigate in the name of a company? I said this: "The terms of the section raise the question, why should the position be different where the wronged person is a company? Why should the public interest prevail over the private interests and wishes of the wronged person where that wronged person is a company? Subject to the exception noted earlier and again below, there is no reason why this should be. In other words, subject to that exception, there is no reason why the 'public interest' which the section contemplates should have a different potential according to whether the wronged person is a natural person or a company. The exception made in the case of a wronged company suggests that there is some special feature of corporate existence which may cause consent to be withheld but which the draftsperson did not regard as appropriate to stand in the way of the commencement of proceedings. The special feature which suggests itself is one which is revealed by cases decided under the general law, namely, the possibility that the Company's controlling mind might be expected not to decide in its interests because that controlling mind is not independent of the wrongdoers." ((1995) 54 FCR 562 at 582F,G). I reviewed paras 4.45-4.51 of the Report of the Joint Select Committee on Corporations Legislation (April, 1989) which gave the background to the distinction between the treatment of the company and other persons in s 50 and concluded as follows: "It seems to be a fair summary to say that the NCSC [National Corporations and Securities Commission] persuaded the Committee, contrary to the submission of the Attorney-General's Department, to accede to its request that consent to the commencement of proceedings not be required in the case of a wronged company, by reason of its assurance that proceedings would be commenced in a company's name without the Company's consent only where the directors were not independent of the wrongdoers or there existed other 'most exceptional circumstances'." ((1995) 54 FCR 562 at 581D) I described the consideration which ASC had been bound but failed to take into account as follows: " ... the policy of the general law that it is a matter for the directors of a wronged company to determine whether proceedings shall be commenced in its name for the enforcement of its rights, and whether, consistently with the policy underlying and reasons for the exception allowed for in the section, it was in the public interest for proceedings to be begun and carried on in the name of the Company ..." ((1995) 54 FCR 562 at 583B) I called this consideration "the Foss v Harbottle consideration" and found that on the evidence then before me ASC had not taken it into account. The broader expression "the exceptional circumstances consideration" might have been a more apt shorthand way of referring to the consideration in question in view of the passages quoted above but I will, for consistency, continue to use the expression "the Foss v Harbottle consideration". REASONING WHETHER ASC WAS REQUIRED TO TAKE INTO ACCOUNT THE FOSS v HARBOTTLE CONSIDERATION ASC's primary submission ASC's primary submission is that it is impermissible to explore whether s 50's distinction between companies and other persons indicates a legislative intention as to the considerations which ASC is required to take into account in deciding whether to litigate in the name of a company. According to ASC, it must do no more than observe that the requirement of written consent is a prerequisite in one case and not in the other. Notwithstanding the obvious breadth of the expression "it appears to the Commission to be in the public interest for a person to begin and carry on a proceeding ...", I do not agree. The submission approximates that based on Liversidge v Anderson [1942] AC 206 which ASC made previously and which I rejected in the second Judgment (see (1995) 54 FCR 562 at 569-570). In the first passage from the second Judgment quoted above, I sought to draw attention to the fact that the legislative insistence upon consent in only one of the two situations in both of which the public interest otherwise appears to call for the commencement of proceedings, leaps from the page as something demanding exploration. A difference between an individual and a company is that an individual is conclusively presumed by the law to be entitled to decide what is in his or her interests (I disregard cases of legal disability) but the "deciding mind" of a company is not conclusively presumed by the law to be entitled to decide what is in the company's interest and whether or not to pursue that interest. The reason why a company is treated differently in this respect is suggested by the very terms of the section to be something which ASC must take into account when deciding whether to litigate in the name of a company. Background to s 50 ASC next submits that if, contrary to its primary submission, the inquiry to which I referred is to be undertaken, a study of the historical antecedents of s 50 to which I was not previously referred reveals a different picture from that given in the second Judgment which examined only the section's immediate legislative background in the Commonwealth Parliament. ASC's further submissions emphasise the fact that the English and Australian predecessors of s 50 did not require the company's consent. It is convenient to give a summary chronological account of the genesis of s 50, reserving comment until the end. 1943-1945 The Report of the Committee on Company Law Amendment (the Report of "the Cohen Committee"), dated 26 June 1943 and presented to Parliament in June 1945, recommended that the Companies Act 1929 (UK) be amended to empower the Board of Trade, where a report of an inspector indicated a prima facie case of fraud or misfeasance and where the Board considered it to be "in the public interest" to do so, "to bring proceedings in the name of the company to recover money for the benefit of the company from those involved in acts prejudicial to the company" (Cmd 6659, para 157 at pp 99-100). The power was expressed in the formal Recommendation as a power in the Board "if they consider it in the public interest, to bring in the name of [the company] any civil proceedings which such company could bring" (Recommendation II, I (I) (b) at p 102). 1948 The Cohen Committee's recommendation was implemented in sub-s 169 (4) of the Companies Act 1948 (UK) which was as follows: "If from any such report as aforesaid it appears to the Board of Trade that proceedings ought in the public interest to be brought by any body corporate dealt with by the report for the recovery of damages in respect of any fraud, misfeasance or other misconduct in connection with the promotion or formulation of that body corporate or the management of its affairs, or for the recovery of any property of the body corporate which has been misapplied or wrongfully retained, they may themselves bring proceedings for the purpose in the name of the body corporate." It will be noted that there was no reference to any "person" other than a body corporate and that the body corporate's consent was not required. 1961-1962 The "uniform Companies Acts" of the Australian States contained sub-s 169 (7) which was generally similar to the English provision. The Minister rather than the Board of Trade was empowered to bring the proceedings in the company's name. With only minor changes, the provision was subsequently re-numbered sub-s 178 (9). The annotation to sub-s 169 (7) in Wallace and Young's Australian Company Law and Practice (Law Book Co, 1965) at 512 is of interest: "Quaere whether on proceedings brought by the Minister under sub-s. (7) the question whether it appears from the report that proceedings ought in the public interest to be brought by the company is examinable. What the public interest is in the matter is not clear, for any property recovered by the company would belong to the shareholders subject to the rights of creditors. Probably the situation to which the sub-section is directed is one in which the company is owned by those who have defrauded it and in which a number of members of the public are creditors but none of them has sufficient interest or resources to take the necessary proceedings." The annotation was written in respect of a provision which allowed for the bringing of proceedings in the name of the company alone and so did not make the distinction present in s 50. Yet the section was seen to raise the question how it could be in the public interest for a private cause of action to be enforced. The idea of wrongdoer control of the company coupled with an inability of its creditors to mount proceedings was able to suggest itself as the answer. 1969 In August 1967, the Standing Committee of Attorneys-General appointed a Company Law Advisory Committee of three members chaired by Sir Richard Eggleston ("the Eggleston Committee") to inquire into and report on the protection of the investing public under the uniform Companies Acts. In its Third Interim Report dated 2 June 1969, the Eggleston Committee referred to the power given to the Minister by sub-s 169 (7) (para 12, pp 8-9): "So far as we are aware, this power has never been exercised. In our view, it should be regarded as the responsibility of government to take civil proceedings in the name of the company in cases where there are seen to be good prospects of recovery, but in which, by reason of the relative poverty of the shareholders or creditors, the inability of the company itself to finance proceedings, or the practical impossibility of organizing financial support for the litigation, it is improbable that action will be taken without the support of government. ... While we consider it important in the interests of shareholders and creditors that this obligation to take court proceedings should be accepted by the Crown, we do not suggest that any attempt should be made to write such an obligation into the legislation, since it would in our view be impossible to specify in advance the circumstances in which the power should be exercised. Much would depend on the strength of the legal opinion in support of the claim, and on the financial circumstances of the prospective defendant. Accordingly, we do no more than express the view that it would be in accordance with modern views as to the responsibility of the State for enabling under-privileged citizens to enjoy the benefits of the legal system if governments considered themselves as bound to lend them assistance in circumstances of the kind we have described. The fact that circumstances may exist in which it would be proper for them to do so is already recognized by section 169 (7)." The Report did not refer to the overcoming of wrongdoer control. It referred only to the overcoming of difficulties of funding by the company, its shareholders or creditors, and to a universal responsibility of government to come to their aid, or at least to do so in all cases where there were seen to be good prospects of recovery. Perhaps the Report took it for granted that the general law exceptions to the "proper plaintiff" principle of the Foss v Harbottle (1843) 2 Hare 461 (67 ER 189) adequately overcame wrongdoer control. Perhaps no thought was given to the matter and it was assumed that in all cases the company, its shareholders and creditors would welcome the bringing of proceedings for recovery in the company's name by a public authority at public expense. The form of provision which the Eggleston Committee recommended (proposed sub-s 175 (11)) was not materially different for present purposes from the then existing sub-s 169 (7). 1981 On 1 July 1981 the "uniform Companies Codes" came into force in the Australian States and the Australian Capital Territory (on 1 July 1986 in the case of the Northern Territory). The provision in question was contained in sub-s 306 (11) which gave the relevant power to the National Companies and Securities Commission ("NCSC"). The expression "fraud, misfeasance, or other misconduct" was expanded to "fraud, negligence, default, breach of trust, breach of duty or other misconduct". Again there was no requirement of the company's consent. 1991 As from 1 January 1991 the Corporations Law and cognate legislation, including the Act, have operated. Of the various provisions which we have been concerned to examine, it is s 50 alone which has provided for the bringing of proceedings in the name of persons other than the company and has distinguished between the company and such other persons. Therefore particular attention must be given to the background to the enactment of s 50. Clause 50 of the Bill for the Act as read a first time in the Commonwealth Parliament referred only to "person", did not distinguish between companies and other persons and did not require consent. The condition which had to be satisfied for the discretion to arise was that it must appear to ASC "to be in the public interest for a person to begin and carry on" a proceeding. The accompanying Explanatory Memorandum merely said, relevantly, that cl 50 was based on sub-s 306 (11) of the Companies Code, sub-s 30 (9) of the Securities Industry Codes and sub-s 36 (9) of the Futures Industry Code, and that the provision would permit ASC to commence civil proceedings for the recovery of property or damages where it appeared, as a result of an investigation or from a record of an examination, that it would be in the public interest that they should be brought. Sub-section 30 (9) of the Securities Industry Code and sub-s 36 (9) of the Futures Industry Code referred to "person" and sub-s 306 (11) of the Companies Code referred to "corporation", but none of the three sub-sections required consent. The requirement of consent originated in the House of Representatives. The House wished "to bring it [cl 50 of the Bill] into line with sub-cl 1325 (3) of the Corporations Bill so that the ASC [would] not be able to undertake civil proceedings in a person's name without the person's consent" (Supplementary Explanatory Memorandum to House of Representatives Amendments, paras 16, 17, p 6; and see Com HR Hansard, p 1033, 28 September 1988). (Sub-section 1325 (3) of the cognate Corporations Bill was to empower ASC to apply in certain circumstances on behalf of "persons" who suffered or were likely to suffer loss or damage because of conduct contravening certain provisions of the Law, for a range of orders against the contravener or a person involved in the contravention, but only with the prior written consent of the persons.) Before the requirement, introduced by the House, of consent was considered by the Senate, it was addressed by a Joint Select Committee on Corporations Legislation ("the Joint Committee"). The Joint Committee received submissions. The NCSC opposed the requirement of consent. The Attorney-General's Department supported it. The solution was a compromise: consent was to be required in the case of companies but not in the case of other persons. The Joint Select Committee's discussion and resolution of the competing viewpoints are found in paras 4.45-4.51 of its Report. The full text of those paragraphs is as follows: "Bringing Proceedings in a Person's Name 4.45Clause 50 reduces the ability of the ASC, when compared with the present powers of the NCSC, to bring recovery proceedings in the interests of investors. Clause 50 would require the ASC to obtain the consent of the person in whose name the action is to be brought. 4.46The NCSC's comment to the Committee was that such proceedings often have to be brought in the name of the company since, as a matter of law, it is the company that is regarded as the victim of the misappropriation. The NCSC maintained that the effect of the Clause is that the ASC will be unable to bring proceedings to recover misappropriated money or property when the persons controlling the company are amongst the persons from whom recovery would be sought or are associates of such persons or otherwise under their influence. Where, on the other hand, the controllers of the company are truly independent of the persons against whom civil proceedings would be brought, it would normally be a decision for them as to whether proceedings were worth while in the interests of the members of the company and the ASC would not, except in the most exceptional circumstances, have any reason to believe bringing such proceedings was in the public interest. 4.47The Attorney-General's Department submission to the Committee was that the requirement was written into the Bill following a submission by the Australian Stock Exchange Limited, which pointed out that Clause 1235 [sic 1325] of the Corporations Bill requires the ASC to obtain a person's written consent before applying to the Court for an order to compensate the person for loss suffered as a result of illegal conduct in relation to securities. To maintain consistency, the requirement to obtain the person's consent was inserted in Clause 50. 4.48The Department noted - The policy of the provision is that it is reasonable for the ASC to have to obtain a person's consent before instituting proceedings in his or her name, because it is that person's rights and liabilities which may be affected by the outcome of the proceedings, notwithstanding that the ASC would be bearing the cost of the action. and The Department believes to be misconceived the argument that the ASC will be unable to bring proceedings to recover misappropriated property where the company is the victim, because the persons controlling the company or their associates are amongst the persons against whom recovery would be sought. We understand that the basis of the argument advanced by the NCSC is the rule in Foss v Harbottle ((1843)2 Hare 461). This rule, generally stated, provides that the company is the proper plaintiff for an action to enforce any right of the company to remedy any wrong to it, or to recover its property. 4.49The Department also said that the rule in Foss v. Harbottle does not apply to a fraud on the minority or where directors have exercised their powers mala fide or for an improper purpose. It has long been established that there is an exception to the principle of the company as proper plaintiff where the persons against whom the relief is sought themselves hold and control the majority of shares in the company and will not permit an action to be brought in the name of the company. This has come to be known as the element of `wrong-doer control' and as the concept has been developed by the courts, the failure of a shareholders' meeting to subsequently adopt proceedings instituted by the minority is a factor to be taken into account in determining whether 'wrongdoer control' exists. 4.50The Committee appreciates the distinction which is drawn by the Attorney-General's Department, but nevertheless believes that Clause 50 should be amended. The committee discussed the provisions in Clause 50 at length with the NCSC and with other witnesses. It concludes that an additional provision in the Clause allowing the ASC to proceed against directors without written consent, if necessary, is required. 4.51The committee is conscious that legislation should recognise the law as it has been interpreted by the courts in this matter. Recommendation Clause 50 of the ASC Bill should be re-drafted so as to allow the Commission to commence proceedings in accordance with the Clause without the written consent of a company's directors. Where the Commission considers that such proceedings should be taken in other cases, the Clause should still provide that a person's written consent is required before action is commenced by the Commission." (footnotes omitted) The Government supported the Joint Committee's recommendation. Its Explanatory Memorandum said this: "21.Clause 50 enables the ASC to bring a representative action in a person's name for the recovery of damages or property provided the person's consent is obtained. 22.In evidence before the Joint Select Committee on Corporations Legislation the NCSC argued that the requirement to obtain a person's consent before bringing a representative action would prevent the ASC being able to bring proceedings to recover misappropriated money or property when the persons controlling the company are amongst the persons from whom recovery would be sought or are associates of such persons or are otherwise under their influence. This argument is based on the rule in Foss v Harbottle (1843) 2 Hare 461 which provides that the company is the proper plaintiff for an action to enforce any right of the company to remedy any wrong to it, or to recover its property. However, the rule in Foss v Harbottle does not apply to an illegal act, a fraud on the minority, or where directors have exercised their powers mala fide or for an improper purpose, or where the wrongdoers are in a position to prevent the company recovering its loss. 23.The Joint Select Committee on Corporations Legislation considered that the legislation should recognise the law as it has been interpreted in the courts on this matter. Accordingly it proposed that where the person on whose behalf a representative action was to be brought was a company the ASC should be able to commence the action without the consent of the company's directors. This would still leave open the possibility that shareholders of the company may refuse consent. In other cases, a person's written consent would still be required. 24.The amendment gives effect to the Committee's recommendation." The Senate agreed to the amendment on 11 May 1989 and the House of Representatives did so on 23 May 1989, noting that the amendment empowered ASC "to commence a representative action in the name of a company without the consent of the company's directors (Com HR Hansard, p 2649, 23 May 1989). In the result, cl 50 was enacted in its present form. Conclusion on s 50 The "recovery" referred to in s 50 and its predecessors is for the benefit of private, not public, interests. The State does not normally accept responsibility to fund litigation, the proceeds of which will go exclusively into private pockets. In principle, it could justifiably do so only if the bringing of the proceeding was seen to be "in the public interest". The provision has always indicated acceptance by the legislature of the apparent anomaly that it might be in the public interest for a public authority to litigate in the private interest. Why should a public authority be empowered to litigate in a private person's name in the private interest in this instance and not in others? The investigations in question take place where it is suspected that some form of wrongdoing has occurred; cf sub-s 13 (1) of the Act. The policy underlying the progenitors of s 50 seems to have been that it might well be in the public interest that persons indicated by an investigator's report (or by the record of an examination) as having engaged in conduct of an appropriately blameworthy kind, should not be allowed to escape paying damages for the benefit of the company, its members and creditors, where, for some untoward reason, the company has not sued. An "acceptable reason" might be the impecuniosity of the company, its shareholders or creditors, or the practical impossibility of organising financial support for the litigation (cf Eggleston Committee's Report, para 12, p 8). The terms of the predecessors of s 50 did not focus attention on the ownership of the right of action, but the apparent anomaly to which I have referred has always been inherent in the provision. It may have been assumed that directors, members and creditors would be pleased to have the relevant authority litigate at public expense to recover damages for the company. There is no reported case in which, because of wrongdoer control, a company financially equipped to sue did not do so and opposed the public authority's doing so in its name. If such a case had occurred the question would have arisen whether wrongdoer control was to be regarded as an "acceptable reason" for the absence of an action at the expense of those standing to profit and favouring the public authority's commencing proceedings, or, on the other hand, as something which should be left to be determined by reference to the exceptions to the principle of company law commonly known as "the rule in Foss v Harbottle". It was the extension of the provision to persons other than the company itself which focused attention on the question, why consent should not be looked for and led to the distinction which now appears in the section. ASC submits that the earlier forms of the provision and the present form of it as it applies to a company constitute an unbroken stream in which any question of consent did not feature. It is true that the way in which the terms of s 50 came to draw attention to the issue of consent was fortuitous, arising as it did, from the Bill's reference to "person" and the House of Representatives' introduction of a general requirement of consent. But the important point is that the question why consent should not be required was always raised by the nature of the provision. Whether as an aspect of the public interest or as relevant to the residual discretion whether to commence proceedings, the relevant authority was always bound to take into account this consideration: that it was, under the general law, a matter for those recognised by that law as being in control of a company to decide whether to enforce its causes of action and that prima facie, exceptional circumstances such as, but not necessarily limited to wrongdoer control, would be expected to be found before their judgment would be overridden. It is, in any event, of limited utility to refer to the earlier history once the form of the section expressly makes the consent of the owner of the chose in action a prerequisite in one class of case and not in the other. The current provision demands that the authority consider how a proceeding can properly be launched at public expense for the benefit of shareholders and creditors when the directors, shareholders and creditors have not embarked upon, or requested or consented to, that course. The terms of s 50 and the immediate legislative background to their adoption are cogent in identifying a consideration required to be taken into account by ASC. I remain of the view expressed in the second Judgment that ASC was required to take into account the consideration described in ground 1 (a) (iii) quoted earlier which I have called "the Foss v Harbottle consideration". DID ASC TAKE INTO ACCOUNT THE FOSS v HARBOTTLE CONSIDERATION? ASC submits that the evidence now before the Court shows that at the meeting of its three members on 29 March 1994, it took into account the Foss v Harbottle consideration. It relies on the Submission Paper which was before the meeting, including the exchange of correspondence between the Company and ASC contained in annexure "B" to that Paper, the affidavit of Timothy Patrick Howes sworn 5 May 1995, and Mr Howes' oral evidence. Chronology It is useful first to set out a brief chronology of events relevant to the present question. By mid-November/December 1990 and thereafter The Company was subject to a "bank workout". Mr Howes said that this meant that the directors "did not act entirely autonomously" and were required "to have regard to the wishes of [the Company's] bankers [which] were the holders of subordinated debt" (T 53). In the Submission Paper a "bank workout" was described as "a de facto receivership controlled by a banking syndicate". April 1992 Mr Howes became employed by ASC. The Company began, pursuant to agreement with ASC, to provide Company documents to it. 29 September 1992 Investigation into the Company under sub-s 13 (1) of the Act was approved and Mr Howes became the principal investigator. April 1993 Mr Howes' investigation terminated when responsibility and "the brief" vested in the Director of Public Prosecutions and/or the Legal Division within ASC's South Australian Regional Office. November 1993 ASC appointed Nicholas Bampton as "Civil Litigation Consultant" and Mr Howes again became involved, this time in answering Mr Bampton's requisitions. 7 December 1993 A meeting took place between Mr Andrew Procter (National Coordinator, Enforcement), Mr Bampton and Mr Fleming of ASC, and Mr Robert Wright (director) and Mr George MacDonald (in-house legal adviser and later company secretary) of the Company. The ASC representatives referred to the possibility that ASC might launch proceedings in the Company's name against those persons who had been its directors and auditors for the year ended 30 June 1990, alleging that in breach of s 565 of the Companies Code dividends had been paid otherwise than out of profits for that year and seeking to recover damages in the amount of the dividend paid plus interest. Mid February 1994 Mr Bampton began working on the Submission Paper for distribution to the three members of ASC. 3 March 1994 (Thursday) A meeting took place at ASC's South Australian Regional Office between Robert Wright, John Hartigan and Peter Cottrell of the Company and Messrs Procter and Bampton of ASC to discuss the proceeding which ASC was considering launching in the Company's name against its former directors. 10 March 1994 (Thursday) The Company (Peter Cottrell, chairman of directors) wrote to Andrew Procter of ASC a letter which, with letters from ASC to the Company dated 15 and 22 March, assumed importance in the case, all of which I discuss in more detail later. The letter of 10 March referred to the meeting on 3 March and outlined "problems from a commercial point of view" which, it asserted, the Company would experience from proceedings in its name against its former directors. The letter concluded by averting that the decision whether or not civil proceedings should be begun in its name was one for the Company in the first instance to be taken "in the light of the company's interests (not the wider public interest ...)". 15 March 1994 (Tuesday) ASC (Bampton) replied to the Company (Cottrell/Wright) seeking further particulars of a certain proposed asset disposal transaction which the Company's letter of 10 March had said might be prejudiced by the proposed litigation, and of a suggestion made in that letter that the proceeding might give rise to an "event of default" under the Company's "refinancing arrangements". The relevant part of the letter began "Before your letter [of 10 March] is considered by Commission members, I invite you by close of business this Friday 18 March 1994 to [supply the particulars requested]". The letter concluded "I look forward to receiving any response to this letter within the stipulated time." 17 March 1994 (Thursday) Apparently ASC wrote to the Company requesting it to supply ASC with copies of directors' and former directors' indemnity insurance policies (the letter was not in evidence). 22 March 1994 (Tuesday) ASC (Bampton) wrote a lengthy letter to the Company (Cottrell/ Wright) noting that there had been no reply to ASC's letter dated 15 March and advising that "all matters raised in [the Company's] letter [of 10 March would] now be put to the commission members". About 22 March 1994 The Submission Paper was distributed to the three members of ASC. 29 March 1994 (Tuesday) The critical meeting of ASC took place in two sessions, one in the morning of about 45 minutes and the second in the afternoon of about 30 minutes or a little longer. The three members met in Sydney. ASC officers in Sydney and Adelaide participated, those in Adelaide (including Messrs Bampton and Howes) by telephone conference link-up. After this meeting Mr Howes' second period of involvement in the case generally ceased. 30 March 1994 (Wednesday) Blake Dawson Waldron (Blakes), solicitors for the Company, wrote a lengthy letter (five pages plus annexures) to ASC (Bampton) in reply to ASC's letters of 15, 17 and 22 March. Blakes supplied lengthy and detailed particulars of the two commercial considerations referred to in ASC's letter of 15 March. Blakes concluded by requesting ASC to reconsider its previous "refusal" to provide to the Company the information which ASC had in its possession so that the Company might form its own opinion on whether proceedings should be begun under s 50. The letter asserted that until this opportunity was afforded, it would be premature and legally objectionable for ASC to decide to begin proceedings. (This letter was admitted into evidence provisionally and subject to an objection on the ground of relevance.) 11 April 1994 (Monday) ASC (Paul Dugan, solicitor) replied to Blakes noting that Blakes' letter dated 30 March would be put to ASC members "for their consideration". (This letter was similarly admitted into evidence provisionally and subject to an objection on the ground of relevance.) 20 April 1994 The Proceedings were begun. 11 January 1995 The second Judgment was delivered. End of January 1995 Mr Howes, upon reading the second Judgment, spontaneously mentioned to colleagues in ASC's South Australian Regional Office that there had been discussion of the Foss v Harbottle consideration by ASC members on 29 March 1994. He was asked, probably by Mr Bampton, to prepare an affidavit, and he proceeded to do so. By the end of January 1995, Mr Howes had become Acting Executive Director, Enforcement, in the South Australian Regional Office of ASC. 20 February 1995 On this date Mr Howes took up a position as Acting Regional Director, New South Wales, of the Trade Practices Commission. 5 May 1995 Mr Howes swore his affidavit. The general nature of Mr Howes' evidence In February and March 1994, Mr Howes assisted in the preparation of the Submission Paper. The Submission Paper was originally to be considered by ASC at a meeting about a fortnight prior to 29 March but was withdrawn from the agenda because attempts were being made to clarify the attitude of the Company's directors to the proposed litigation. (It will be recalled, in that connection, that Messrs Wright, Hartigan and Cottrell of the Company met with Messrs Procter and Bampton of ASC on 3 March, ASC wrote to the Company on 10 March and the Company replied on 15 March.) According to the front page of a minute of the meeting, those "present" at the critical meeting of ASC on 29 March in relation to the Company matter were the three members and five officers of ASC in Sydney, and (by telephone conference) four officers of ASC in Adelaide. The three members were the Chairman, Mr Alan Cameron; the Deputy Chairperson, Ms Lyn Ralph; and "statutory member", Mr Bill Robinson. "Present" in Adelaide by telephone were Mr John Wolters, the Regional Commissioner in the South Australian Regional Office; Mr Nick Bampton, Civil Litigation Consultant; Mr Paul Dugan, solicitor; and Mr Howes. Over the telephone Mr Howes recognised the voices of the three Commissioners as well as the voices of various ASC officers. Mr Howes did not make notes of the conversation. None of the ASC members have given evidence. Mr Howes, who was cross examined at length, impressed me as a person who was attempting to give true, accurate and informative answers to the questions asked of him. Moreover, he seemed to have a good recollection of the events in question. He was prepared to make concessions against ASC's interest. It is true that his affidavit was sworn in response to the second Judgment. I accept, however, his evidence that it was his spontaneous response upon reading that Judgment to recall the discussion in the course of the ASC meeting on 29 March which, he understood, to constitute a taking into account of the Foss v Harbottle consideration. Contrary to a submission of DTT, I accept the general reliability of Mr Howes' evidence and have no hesitation in doing so. "Definition" of the consideration in question There is a difficulty with labels such as "the Foss v Harbottle consideration". Such abbreviated forms of reference can take on a life of their own and conceal or distort the true nature of that to which they refer. Moreover, the terms in which I described the Foss v Harbottle consideration in the second Judgment cannot properly be treated as if they were those of a statute. Another way of posing the question to be resolved is to inquire whether ASC took into account the consideration whether such exceptional circumstances existed that its decision should, consistently with the policy underlying s 50 as it applied to the bringing of a proceeding in the name of a company, prevail over the position being taken by the Company's directors. Another way of posing the question is to ask simply whether ASC took into account "the consideration referred to in ground 1 (a) (iii)." What it means to "take into account" a relevant consideration The question before me is whether ASC "really", "genuinely", "properly" and "effectively" took into account the consideration referred to; cf Brelin v Minister for Immigration and Ethnic Affairs, unreported, Wilcox J, 14 May 1987 at 9-10; Khan v Minister for Immigration and Ethnic Affairs, unreported, Gummow J, 11 December 1987 at 11-12; Hindi v Minister for Immigration and Ethnic Affairs (1988) 20 FCR 1 (Sheppard J) at 12-13; Lek v Minister for Immigration, Local Government and Ethnic Affairs (1993) 117 ALR 455 (FCA/Wilcox J) at 472; Teoh v Minister for Immigration, Local Government and Ethnic Affairs (1994) 49 FCR 409 (FCA/FC) ("Teoh") at 412 (Black CJ); Pattanasri v Minister for Immigration, Local Government and Ethnic Affairs (1993) 34 ALD 169 (FCA/Burchett J) at 178-180. As the cases just cited acknowledge, it is a different matter, and one with which I am not concerned, what weight, either as an absolute or in relation to other considerations, ASC gave to that consideration. It is for an applicant to make out its case of "failure to take into account", but the circumstances may be such that the applicant will be aided in this task by an absence of evidence from the decision-maker on a particular matter, such as an absence of evidence giving rise to an inference of a failure to make further inquiries when a genuine taking into account would have called for them; cf Teoh at 413-414 (Black CJ); C v T (1995) 58 FCR 1 (Burchett J) at 21-22. (The High Court dismissed an appeal in Teoh ((1995) 183 CLR 273) on grounds not presently relevant). The evidence that ASC took into account the Foss v Harbottle consideration - the documentary evidence The documentary material before ASC on 29 March which is particularly relevant to the question whether it took into account the Foss v Harbottle consideration falls into three categories: parts of the Company's annual report for the year ended 30 June 1990 (annexure "A" to the Submission Paper); the three letters passing between the Company and ASC (annexure "B" to the Submission Paper); and paragraphs of the Submission Paper itself. The Company's 1990 annual report was dated 5 October 1990. It informed the Commissioners that as at 30 June 1990 David Jones Limited ("DJ") held 43.6% of the capital of the Company and the Company held 49.73% of the capital of DJ. The course of the composition of the Company's board from 1990 to 1994 as appeared from its annual reports (which constituted part of the papers which had been available to, and considered by, ASC officers although those from 1991-1994 were not before the members at the meeting) was as follows: Report for 1990 NOTES K W Russell, chairman (also chairman of directors of DJ) They had held office throughout 1990. M S Gregg J G Spalvins, managing director (also director and chief executive of DJ) M J Kent, finance director (also director of DJ) N L Branford, group secretary Report for 1991 NOTES K W Russell, chairman (also chairman of directors of DJ) Mr Spalvins resigned on 5 July 1991. Mr Haines was appointed on 10 May 1991. Mr Wright was appointed on 15 August 1991. Mr Kent was due to retire by rotation at the Company's annual general meeting on 25 November 1991 and not to seek re-election. Mr Branford was due to resign on 31 December 1991. M S Gregg G A Haines, managing director (also director & chief executive of DJ) M J Kent, finance director (also director of DJ) N L Branford, group secretary Report for 1992 NOTES P J W Cottrell AO, OBE, chairman (also chairman of directors of DJ and director of National Australia Bank Ltd) Messrs Cottrell, Little and Morokoff were appointed on 16 June 1992 on which date Messrs Russell and Gregg resigned. Mr Branford resigned on 31 December 1991. Mr Kent retired by rotation and did not seek re-election on 25 November 1991. Mr Spalvins resigned on 5 July 1991. G A Haines, managing director (also director and chief executive of DJ) R J Wright, finance director (also group director of finance of DJ) C Little (also director of DJ and of State Bank of SA Ltd) A Morokoff AO (also director of DJ) Report for 1993 NOTES P J W Cottrell AO, OBE, chairman (also chairman of directors of DJ and director of National Australia Bank Ltd) Mr Haines ceased to be a director on 13 October 1993. R J Wright, finance director (also group director of finance of DJ) A I Morokoff AO (also director of DJ) C Little (also director of DJ and of State Bank of SA Ltd) Report for 1994 NOTES P J W Cottrell AO, OBE, chairman (also chairman of directors of DJ and director of National Australia Bank Ltd) Mr Morokoff resigned on 30 September 1994 and so had been a director at the relevant time of March 1994. As noted above Mr G A Haines resigned on 13 October 1993 and so had ceased to be a director prior to the relevant time of March 1994. Sir Ronald Brierley was appointed on 12 October 1994 and therefore was not a director at the relevant time of March 1994. R J Wright, finance director (also group director of finance of DJ) C Little (also director of DJ and of State Bank of SA Ltd) R A Brierley (also director of Advance Bank Australia Ltd) The foregoing table shows that the company's directors in March 1994 were Messrs Cottrell, Wright, Morokoff and Little; that none of them had been directors in 1990; that all of them were also directors of DJ; and that three of them were directors of banks. Annexure "B" to the Submission Paper comprised copies of three letters as follows: 1. a letter dated 10 March 1994 from the Company (P J W Cottrell, Chairman) to ASC (Andrew Procter); 2. a letter in reply dated 15 March 1994 from ASC (Nicholas Bampton) to the Company (P J W Cottrell and R Wright); 3. further letter from ASC (Nicholas Bampton) to ASC (P J W Cottrell and R Wright). In the first letter, Mr Cottrell referred to a meeting on 3 March in ASC's South Australian Regional Office between himself, Robert Wright and John Hartigan of the Company and Nicholas Bampton, "Civil Litigation Consultant", of ASC's South Australian office and Andrew Procter, ASC's "National Coordinator Enforcement", of ASC's Sydney office. According to Mr Cottrell's letter, the meeting was "to discuss civil litigation which the ASC is considering bringing in Adsteam's name against former Directors of the company." The letter continued as follows: "We understand one reason you wanted the meeting was to ask whether such proceedings would cause Adsteam problems from a commercial point of view. Having considered the matter, Adsteam's Directors believe that civil proceedings brought in effect by the ASC against former Directors of the company would cause considerable commercial inconvenience." The letter went on, in six paragraphs, to specify particular aspects of the "commercial inconvenience" referred to. These can be summarised as follows: 1. The Company was engaged in an ongoing programme of asset disposal and one particular transaction under consideration could not proceed if the Company was a party to litigation of the type contemplated by ASC and "difficulties would be even greater if there were associated proceedings such as cross claims." 2. A building and development company which was a subsidiary of the Company had almost failed to win a contract even though its tender was "the best" because of "difficulties" which it was perceived to have flowing from its association with the Company, and involvement in the contemplated litigation would cause such contracts not to be won. 3. The "events of default" in the Company's refinancing arrangements included events related to action by ASC and actions against the Company's directors, and an "event of default" might be triggered by the proceeding contemplated or by "likely cross claims." 4. It was already difficult for the Company to obtain "directors' and officers'" ("D & O") insurance cover because it had little insurance business to offer; the Company's insurance brokers had already advised that the next renewal might be difficult to obtain; and if the Company was involved in litigation of a kind likely to require notification, there would almost certainly be no chance of renewal. 5. The market would probably not differentiate between civil and criminal proceedings or between former directors and present directors and would form the simple, albeit inaccurate, impression that ASC was prosecuting the Company's present directors. 6. The prices which the Company and its associated companies had been able to obtain on the sale of assets had depended largely on a perception of stability in management, and an understanding that the Company was in trouble with "the regulators", although a misconception, was likely to have a significant impact on continuing sales of assets. The Company's letter concluded with these two important paragraphs about which I will say more later: "Up to a point these are preliminary reactions because ASC officers were not prepared at last Thursday's meeting to disclose to Adsteam the facts which the ASC investigation has apparently established. Adsteam is therefore unable to form its own view as to whether it is in the company's interest to bring civil proceedings. It is possible that the case against former Directors is strong enough to warrant civil proceedings by Adsteam itself - although this seems highly unlikely, given Adsteam's present position and the company's present interests, and given also that the ASC has apparently concluded that the evidence is not strong enough to initiate criminal proceedings. Adsteam's view is that the decision whether or not civil action should begin in the company's name is a decision for Adsteam in the first instance, and a decision to be taken in the light of the company's interests (not the wider public interest, as you seem to suggest; on our advice it is in the public interest that proceedings should be commenced once it has been determined that it is in the company's interest to commence them)." By his letter in reply dated Tuesday 15 March 1994, Mr Bampton of ASC advised as follows: "Before your letter is considered by the Commission members, I invite you by close of business this Friday 18 March 1994 to;- 1. with respect to the particular proposal referred to in the last paragraph on the first page [para 1 above], advise of the nature, timing, consideration and conditions of the transaction and why you assert that this proposal could not proceed if Adsteam was a party to the litigation of the type you understand the ASC contemplates; and 2. with respect to the refinancing arrangements referred to in the second paragraph on the second page [para 3 above], provide copies of the relevant instruments pointing out such relevant events of default related to action by the ASC and actions against former directors. Further, I invite you to advise whether Adsteam's financiers have indicated that they may withdraw facilities in the event the ASC causes proceedings to be begun and, if so, Mr Procter and I will make ourselves available to discuss with representatives of Adsteam's banking syndicate any matters that may arise. I look forward to receiving any response to this letter within the stipulated time." Apparently this letter allowed the Company three days for reply. The Company did not reply before ASC wrote to it again on the following Tuesday 22 March. Noting that there had still been no reply, ASC advised the Company that all matters raised in its letter dated 10 March would "now be put to the Commission members". The letter expressed concern over the Company's suggestion in its letter of 10 March that that letter conveyed only "preliminary reactions". It referred to what it said was evidence showing that the Company had been aware for some time of the "nature, extent and ramifications of the ASC's investigation into suspected breaches of the Companies Code concerning the management, the affairs and the accounts of Adsteam for the financial year ended 30 June 1990". It referred to various contacts which had taken place between ASC and the Company since April 1992. Of present relevance are the following extracts: "6. in May 1993 Mr MacDonald [secretary of the Company] had several telephone conversations with Mr Fleming [of ASC] where, in a particular conversation on 10 May 1993, Mr MacDonald was advised that:- 6.1 ........................................ 6.2 Adsteam auditors for the 1990 accounts were 'involved' in the investigation;" .................................................. 8. on 7 December 1993 Messrs. Fleming, Procter and I met with your Messrs. Wright and MacDonald and advised, inter alia, that:- 8.1 ....................................... 8.2 the ASC may consider causing an action to be begun pursuant to its powers under section 50 of the ASC Law; and 8.3 any such action would be instituted in the name of Adsteam against Adsteam's former directors and auditors alleging that in breach of section 565 of the Companies Code dividends were paid out of other than profits during the financial year ended 30 June 1990 and seeking damages in the amount of the dividend paid plus interest; 9. by letter dated 10 December 1993 you were advised that the ASC was contacting Mr Lonergan on the question whether it would have been appropriate for the directors' and auditors' of Adsteam to have made any adjustment to the reported profit or the asset revaluation reserves or other reserves in respect of the financial year ended 30 June 1990; and 10. at the meeting of 3 March 1990, Mr Procter and I again confirmed the matters set out in paragraph 8 to your Messrs. Cottrell, Wright and Hartigan. Finally, I note the matters raised in the last paragraph of your letter and advise that your view will be brought to the attention of the Commission members. The members will make any decision having regard to section 50 of the ASC Law in its terms." (emphasis supplied) I turn now to the Submission Paper to which the 1990 Annual Report and the exchange of correspondence referred to above were attached. Within para 52 of the Submission Paper, its authors identified "matters which have been identified in support of the public interest in the proceedings" as including the matters referred to in paras 52.1 to 52.9. Paragraphs 52.8 and 52.9 were as follows: "52.8 Given the nature of the action, the proper plaintiff is the company itself. Absent any proceedings by the company itself, the shareholders and creditors may be without remedy. 52.9 Adsteam has been in a bank workout position since December 1990. It is one of the incidents of this mode of workout that there is no liquidator or other external administrator in place to examine and investigate the conduct of past board members as there would in a formal liquidation. In these circumstances it is all the more important that deleterious conduct identified and investigated by the commission be pursued in the appropriate jurisdiction." Immediately following those paragraphs, under the heading "Action by Adsteam", appears the following: "53. It is apparently unlikely that the current board of Adsteam will bring any proceeding itself in respect of the improper conduct. (Refer paragraph 58 herein and Annexure B). In the absence of action by the Commission, the conduct referred to will escape public attention." Under the heading "The impact of proceedings:" appears the following: "(a) upon Adsteam 58. Since the relevant period, directors of Adsteam were replaced by a new board. The present board of Adsteam has been advised of the proposal to conduct recovery proceedings in the name of Adsteam and has been given the opportunity to make submissions in respect of the proposal. 59. Correspondence with the present board of Adsteam is Annexure B hereto. The board has raised a number of issues to be taken into account by the commission in ariving [sic] at its decision. The members are referred to these matters for full consideration. They are set out in the attached letter dated 10 March, 1994, which forms part of Annexure B. 60. During the course of the investigation Adsteam has been cooperative. There is no reason to expect that this relationship will not continue. 61. In the event that the action is successful, Adsteam, its members and creditors stand to recover a significant amount of money. If the action is not successful, the ASC bears the costs and costs orders in the action. (b) upon others: 62. The broader impact of proceedings upon capital markets will be to encourage full compliance with approved accounting standards, full and fair reporting of a company's affairs independent and critical assessment of a company's reporting practices by auditors and a strengthened certainty of application of the important matters of law and accounting practice to be judicially considered in the course of proceedings." It is convenient to pause to consider what the three ASC members who met on 29 March knew from the documents which had been distributed to them. They knew that on 3 March ASC's officers had met with officers of the Company to inquire whether the contemplated proceedings would cause the Company problems "from a commercial point of view". They knew that the directors were expressing "preliminary reactions" in the Company's letter dated 10 March, that the bringing of proceedings would cause the company "considerable commercial inconvenience" in the six respects mentioned in the letter. They knew that the Company had asserted that it was able to give only "preliminary reactions" because ASC officers had not been willing to disclose to it the facts discovered by ASC in its investigation. They knew that the company was asserting that whether or not a civil proceeding should be begun in the Company's name was a decision yet to be taken by an adequately informed board in the Company's interest "in the first instance" and that any question of the public interest would arise for ASC to consider only after the board had decided that it was in the Company's interest that a proceeding should be issued. They knew that Mr Bampton had replied on Tuesday 15 March requesting particulars of the first and third causes for concern to be supplied by Friday 18 March before the Company's letter was considered by them. Importantly, they knew that Mr Bampton had not responded at all to the last two paragraphs of the Company's letter. They knew that there had been no response from the Company either by Tuesday 22 March when Mr Bampton had written his letter advising it that all matters raised in its letter dated 10 March would "now" be put before them, or by the time of their meeting on 29 March itself, notwithstanding Mr Bampton's intervening letter. They knew that by the letter dated 22 March, Mr Bampton had taken issue with the Company over its statement that it was in a position to give only "preliminary reactions" by asserting that the Company had been kept informed over a long period by ASC officers that they were contemplating the issue of a proceeding in the Company's name under s 50. But they also knew that Mr Bampton had not taken issue with the Company's assertion that ASC officers had not been willing to inform the Company of facts, apparently known to ASC officers, showing that the Company had a cause of action which it would be able to prove according to the civil standard of proof. The course of the correspondence had led to an impasse, at least as between the Company and Mr Bampton. As will be seen, the issue which divided them was never to be resolved and was to be reflected in the debate at the ASC meeting on 29 March and, indeed, in the competing submissions which have been made in this proceeding. The Submission Paper twice referred to the three letters comprised in Annexure B. In para 53 it referred to them as evidence of the unlikelihood that the Company's current board would cause proceedings to be brought. In para 59 it referred to the Company's letter as representing the directors' "submissions" as to issues to be taken into account by the ASC members in arriving at their decision. The Submission Paper did not address the issues raised in the last two paragraphs of the Company's letter dated 10 March. The evidence that ASC took into account the Foss v Harbottle consideration - the oral evidence ASC's members questioned its officers about the position taken by the Company's directors in both the morning and afternoon sessions of the meeting on 29 March. Their concern was understandable. They knew from the terms of s 50 that the Company's consent was not required. It would fly in the face of the section for them not to adopt the officers' recommendation to initiate proceedings in the Company's name for no reason other than that the Company had not consented. Yet why, it had to be asked, would the Company's directors, acting with the support of the Company's banks, not be pleased at the prospect of the recovery of substantial damages at no cost to the Company or the banks? There might be "acceptable" or "unacceptable" reasons for their failure to acquiesce in the course proposed. Paragraphs 16, 17 and 18 of Mr Howes' affidavit deal with the debate on the matter in the morning session of the meeting as follows: "16.My most vivid recollection of the discussion was that Commission members enquired about the company's reluctance to commence an action. They enquired about the company's apparent reluctance to pursue the action and although I cannot recall precisely what was said, the Commissioners expressed concern about the views of directors. I recall that reference was made to the correspondence from the Adsteam directors contained in Annexure B to the Submission Paper and the members queried what I and others thought the company's board at that time considered to be commercial inconvenience. I advised that the basis of this claim of commercial inconvenience appeared to be that the company was contemplating an issue of securities or disposal of assets and that for litigation to be commenced in which evidence about the worth of such assets might be introduced may be seen by the then present board as prejudicial to the commercial interests of the Adsteam group. 17.It was pointed out to Commission members that, despite prompting, there had been no response to the Commission's letter of 15 March 1994 and the view was expressed, I believe by Mr Bampton, that the Commission should proceed to make a determination on the basis of the material before it. 18.There was discussion concerning the proposed timetable for commencing the proceedings and that there would be the opportunity for the Commission to keep the matter under review. ASC members hesitated to adopt its officers' recommendation in view of the directors' stance which was understood to be based upon "commercial inconvenience" (para 16). Mr Bampton, Civil Litigation Consultant, pointed out that since there had been no response to his letters dated 15 and 22 March, the members should treat the Company as having put before them all that it wished (para 17). Someone said that any residual misgivings need not delay the taking of a decision since it would be possible, if further facts came to light, for the decision to be reviewed (para 18). As noted earlier, Blakes wrote on behalf of the company the very next day, 30 March, responding to ASC's letters dated 15, 17 and 22 March, supplying the further particulars of the Company's "asset disposal programme" and of the "events of default" in cl 24.1 of the Company's Financing Deed and ASC responded 12 days later on 11 April advising that the Company's letter would be put to ASC's members "for their consideration". DTT submitted that these two letters were relevant to the issue whether ASC took into account the Foss v Harbottle consideration. I reject the submission. I do not think that the receipt by ASC of the Company's letter or ASC's formal response make it more or less likely that the members of ASC had taken that consideration into account on 29 March. In passing I note that Mr Howes could not recall being aware of the letters and that he had ceased to have any responsibility for the for the matter after 29 March. Paragraph 19 of Mr Howes' affidavit was as follows: "19.At the resumption of the conference call [in the afternoon of 29 March] the Commission members expressed concern about commencing the action with the apparent lack of support from the current board. They discussed this issue at length. I was asked if I was aware of any reason why the present board of the company did not support the action. I said that there was at least one current Adsteam director who had been a director of David Jones Ltd, an associate of Adsteam, at the relevant time. I said that David Jones might be joined by the respondents because it had received dividends in the 1990 year. I said the relevant director was apparently in a position of conflict." In his oral evidence, Mr Howes agreed that the director referred to was Mr Wright. He agreed that the "conflict of interest" referred to was a matter of "speculation" by him and that he had thought DJ might be joined by the respondents to the then proposed proceeding as a cross respondent because DJ had received a dividend in the 1990 year. He said that Mr Wright's "interests would not be served by being subject to proceedings for constructive receipt of the dividend." He added: "I was suggesting to the commission that if they wanted to understand or appreciate the reasons why they were curious, they were keen to know and understand the reasons why the board would not commence an action and this was one piece of information amongst others that I put to them in order for them to come to some conclusion." (Tr 87) Paragraph 22 of Mr Howes' affidavit, in so far as it was admitted, was as follows: "22.I recall there was quite some debate about the extent to which the opinions of the current board of directors should be taken into account. I heard Commission members speak on the issue. I do not recall by whom the question was asked but I remember that someone posed a question along the lines:- 'Why had the company's new board of directors, its bankers or lawyers not identified and pursued the cause of action we were advocating'. I said only the ASC had the necessary powers and in particular the ability to inspect the auditor's working papers. ... I cannot recall my precise words but I said that no other party would have been in the position to identify the cause of action and given the company's precarious financial state, the directors were unlikely to devote resources to an investigation and litigation for reasons of public interest. I expressed the opinion that this was a most extraordinary corporate collapse and because a very large number of companies had been involved few 'private' litigants would be able to pursue such a claim. I said that it was an important case for the Commission to run in order to meet its objectives as a regulator, in the interests of promoting good corporate governance and the integrity of financial reporting and the auditing profession." Mr Howes explained that in answering the question put to him at the meeting, he had intended to convey that ASC alone, not the Company's directors, bankers or lawyers, had been in a position, because of its special powers of investigation and examination, to identify any causes of action available to the Company and that this therefore explained why it and not they had been in a position to "identify and pursue" those causes of action. Mr Howes accepted, however, that the Company's bankers were financially able to begin and carry on a proceeding by the Company for recovery of damages. Paragraphs 23 and 24 of Mr Howes' affidavit were as follows: "23.Opinion of both an independent accounting expert and senior counsel had been obtained prior to the Commission meeting." 24.Mr Bampton said with reference to the third paragraph on page 2 of the letter from Adsteam to the ASC dated 10 March 1994, contained in annexure B of the Submission Paper, words to the effect that one reason the current directors appeared not to wish the action to be brought was concern about their ability to obtain directors indemnity insurance in the future. I said that it would be impossible to ascertain that there was not any significant business relationship between the current management of the company and those persons who were identified as likely respondents to the action." Paragraph 24 deals with the two distinct topics. The first, dealt with in the first sentence, is D & O Insurance. In its letter dated 10 March 1994, the Company had referred to difficulty which it had experienced in obtaining D & O Insurance cover and had asserted that if it was involved in litigation of a type likely to require notification under existing policies, "there would almost certainly be no chance of renewal." It was not in issue that there was a respectable body of opinion that the availability of D & O Insurance might be in the interests of a company (DTT cited Finch, "Personal Accountability and Corporate Control: the Role of Directors' and Officers' Liability Insurance" ((1994) 57 (6) MLR 880 at 890-891). However, Mr Howes understood what Mr Bampton had said as having been intended to cast "some sort of cloud, suspicion, on the reasons or motives of the directors" (T 97). Mr Howes elaborated on the second sentence in para 24 in the following passage: "Q. So what are you seeking to say by that particular statement, that it would be impossible to ascertain whether the Adsteam board was an independent board, is that what you were seeking to say? A. I was saying that one could never know, given the scale, size, diversity, the geographic and overseas interests that were involved, you could never be confident that there was an association that coloured the judgment of the relevant people concerned. There was some association or other business interest which was overriding their interest in seeing the company commence an action. Q. I put to you that is an ascertain you have made, educated by what you read of his Honour's judgment in January 1995? A. No, that's the meaning of that expression there and I can explain to you that it had been - in so saying I was thinking of my experience in insolvency practice where you never really appreciated or understood the other person's agenda fully. You could never take on face value that what somebody said to you or the reasons they gave to you for a particular course of action they were embarking on was necessarily what you saw, or what on the face of it was the obvious thing to do. Although that is a clumsy expression, that means precisely that, that you would never be in a position to fully understand what the other person took into account in formulating a decision, because you could not ascertain it would be impossible to prove the purity of their motives. I made that statement in the course of that phone conversation, as clumsy as it may be, but that was the statement made. Q. Were you seeking to case some shadow over the purity of the motives of the directors of Adsteam in 1994? A. No, I was seeking to explain to the Commissioners that this is a complicated set of facts, it is a large group of companies and they should not necessarily be able to, or expect to be able to understand every intimate or intricate nuance or sub-relationship that might subsist." (T 96-97) Conclusion on the question whether ASC took into account the Foss v Harbottle consideration Although none of them gave evidence, the members of ASC appear to have been troubled by the reluctance of the directors to acquiesce in the launch of proceedings by ASC in the Company's name. The members questioned ASC officers about the matter in both the morning and afternoon sessions. However, I have concluded that both the members and the officers considered the stance being taken by the Company's board from a perspective which disabled them from giving genuine consideration to the Foss v Harbottle consideration. Neither the officers nor the members ever grappled with the issue raised by the Company in the last two paragraphs of its letter dated 10 March. It will be recalled that that letter did two things. First, it gave "preliminary reactions" to the ASC officers' request for the Company's observations on the question whether the proceedings being proposed by ASC officers would cause the Company commercial problems. Secondly, and in my view more significantly, in the last two paragraphs the Company volunteered a statement of its own position which was that ASC should provide it with "the facts which the ASC investigation ha[d] apparently established" so that the directors could form their own view as to whether it was in the Company's interest to bring civil proceedings. The paragraphs made it clear that the Company desired to have that information in order to enable its directors to assess, no doubt with legal and accounting advice, the strength of the Company's case. It would hardly be in the Company's interest to pursue lengthy proceedings against its former directors and auditors, albeit at the cost of ASC, only to fail. Mr Bampton's reply dated 15 March 1994 sought particulars of the first and third ground of objection raised by the Company but did not address at all the last two paragraphs of its letter. Mr Bampton's further letter dated 22 March 1994, in its last paragraph, referred to the last paragraph of the Company's letter, advised that the Company's view would be "brought to the attention of the Commission members" and concluded, "The members will make any decision having regard to s 50 of the ASC law in its terms". While the ASC officers quite properly annexed the three letters to the Submission Paper and invited ASC members to read them, the substance of the Company's view as expressed in the critical two paragraphs was not addressed either in the Submission Paper or orally in the course of the meeting. It is clear that the view taken by ASC was that the view expressed by the Company in the last two paragraphs of its letter dated 10 March were at odds with the terms of s 50 and that the significance of the Company's letter dated 10 March was to be found only in its submissions as to "commercial inconvenience". This approach pays too little regard to the fact that the causes of action referred to in para 50 (a), like the property referred to in para 50 (b), belong to the company or other person referred to in s 50, not to ASC. In the case of a company, the section is intended to enable ASC to ensure that its causes of action of the kind referred to are enforced and its property recovered where the Company fails to enforce them or recover it respectively for some reason which is unacceptable having regard to the public interest. The effect of the evidence is that ASC, but not the Company, had been in a position to identify the causes of action available to the Company. In particular, Mr Howes said that only ASC had had the ability to inspect DTT's audit working papers. According to para 3 of the Submission Paper, formal notices under the Act requiring production of books and records had been served not only on the Company, but on "Westpac, The National Australia Bank, ANZ, Commonwealth Bank, KPMG Peat Marwick, International Pacific Securities and former directors and employees of [the Company]" resulting in the obtaining and examining of "a considerable volume of documents". According to para 4 of the Submission Paper, 16 individuals had been examined pursuant to s 19 of the Act. I infer that ASC at no time gave to the Company an account of the evidence which it had concluded was available from its inspection of the documents and examination of the individuals, enabling the Company to decide whether or not to commence, or consent to the commencement of proceedings. Nor did ASC ever reveal to the Company the nature of the accounting or legal advice which it had obtained. ASC could have waived, subject to appropriate constraints, the legal professional privilege attached to the legal advice which it had obtained, in order to enable the directors to be acquainted with the effect of that advice, particularly as to the strength of the Company's causes of action. In relation to the accounting advice, DTT called for production of it on the hearing but it was not produced for the reason that privilege was claimed in respect of it. The evidence does not reveal any satisfactory explanation as to why ASC did not provide to the Company the information which it requested. If ASC had prepared either an interim report under s 16 or a final report under s 17 of the Act, it would have been enabled by sub-s 18 (3) of the Act to give the Company a copy. The Company was requesting only disclosure to it of "the facts which the ASC investigation ha[d] apparently established." Although it was not requesting that ASC permit it to inspect documents obtained or that ASC provide it with a copy of the record of examinations which it had conducted, reference may be made to sub-s 37 (7) and sub-s 25 (1) of the Act. By not meeting the Company's request referred to in the penultimate paragraph of the Company's letter dated 10 March, ASC deprived itself of the opportunity of giving genuine consideration to the question whether the Company was failing to enforce its causes of action for such a reason that ASC was justified in doing so in its name without its consent. Expressed differently, ASC deprived itself of the opportunity of genuinely considering whether the circumstances were exceptional ones in which, consistently with the policy underlying s 50, it was appropriate for ASC to assume the role of enforcing the Company's causes of action. WHETHER THE DECISION TO LITIGATE IS A DECISION FOR THE PURPOSES OF S 5 OF THE ADJR ACT ASC wishes to elaborate on a submission which I rejected in the second judgment ((1995) 54 FCR 562 at 570) that even the decision to litigate is not a decision susceptible to review under the ADJR Act. DTT submits that ASC's leave to re-open and to make further submissions does not extend to entitle it to make the further submissions which it wishes to make. DTT says that ASC needs leave and that leave should not be granted. In the alternative, it says that if leave is granted, DTT wishes to seek leave to amend further its Second Further Further Re-amended Application to rely not only on the Court's jurisdiction under the ADJR Act but also on the Court's "accrued jurisdiction" (in this connection DTT refers to New South Wales Aboriginal Land Council v ATSIC (1995) 131 ALR 559 (FCA/Hill J) at 573-575 and Post Office Agents Association Limited v Australian Postal Commission (1988) 84 ALR 563 (FCA/Davies J) at 565). In the course of considering these competing submissions it has been necessary for me to consider the substance of the more elaborate form of submission which ASC now wishes to make. It seems sufficient for me to say that I have come to the clear view that the decision to litigate is a decision to which s 5 of the ADJR Act applies. Although s 50 does not expressly provide for ASC to "decide" to cause a proceeding to be begun and carried on in a person's name, it does so by implication. The taking of such a decision is contemplated and authorised by s 50. Without such a provision, ASC's decision to cause a proceeding to be begun and carried on in another person's name and its act of doing so would alike be without legal justification. The power given to ASC by s 50 is an extraordinary one. The section is not concerned with the enforcement of a cause of action of ASC, and so the case is distinguishable from such cases as Strictly Stainless Pty Ltd v Deputy Commission of Taxation, unreported FCA/Davies J, 5 November 1993 and Lindon v Kerr, unreported, FCA/FC, 16 June 1995. In my view, the decision to litigate satisfies the description of a reviewable decision given in the familiar passage in the judgment of Mason CJ in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 337; " ... a reviewable 'decision' 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 calling 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." It is clear that ASC took a decision on 29 March to begin and carry on a proceeding in the name of the Company. In my view that decision satisfies the description of being a decision "of an administrative character made ... under an enactment" for the purposes of the definition of a "decision to which this Act applies" in sub-s 3 (1) of the ADJR Act. I reject ASC's submission that it does not bear that character for the reason that the only "decision" for which s 50 provides is the act of beginning the proceeding (cf para 3 (2) (g) of the ADJR Act) or because the decision to litigate ceased to have effect once the Proceedings were begun. As between DTT and ASC, ASC's decision to litigate was final, operative and determinative because it was the only decision for which the Act provided, and once taken, it deprived DTT of the right to have the Proceedings dismissed as having been brought without the Company's authority. REMAINING GROUNDS OF REVIEW RELIED ON BY DTT I referred to the other grounds of review relied on by DTT in the second Judgment. In view of the conclusion which I have reached on ground 1 (a) (iii), it is not necessary for me to consider those grounds further. CONCLUSION DTT must be granted relief generally as sought, but I will reserve to both parties liberty to apply in case injunctive or other further relief is also required and appropriate. I certify that this and the preceding 58 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren. Associate: Dated: 4 April 1996 Heard: 4 August; 2, 3 November 1995 Last submission received: 10 November 1995 Last document received from parties: 15 December 1995 Place: Sydney Decision: 4 April 1996 Appearances: Mr R A Conti QC with Dr J Griffiths of counsel instructed by Mallesons Stephen Jaques appeared for the applicant. Mr T A Gray QC with Mr R J Whitington and Ms A Moroney of counsel instructed by Australian Securities Commission appeared for the respondent.