Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Sargent Security (Aus) Pty Ltd v Commissioner of Police, NSW Police [2014] NSWCATAD 204 Hearing dates: 24 April 2014, 30 June 2014 Decision date: 24 November 2014 Jurisdiction: Administrative and Equal Opportunity Division Before: S Montgomery, Senior Member Decision: The decision under review is affirmed Catchwords: security licence - revoking - controller Legislation Cited: Administrative Decisions Tribunal Act 1997 Civil and Administrative Tribunal Act 2013 Security Industry Act 1997 Security Industry Regulation 2007 Corporations Act 2001 (Cth) Category: Principal judgment Parties: Sargent Security (Aus) Pty Ltd (Applicant) Commissioner of Police, NSW Police (Respondent) Representation: Adams & Partners Lawyers (Applicant) G Di Carlo (Respondent) File Number(s): 1420116 reasons for decision 1The Applicant, Sargent Security (Aus) Pty Ltd, has applied to the Tribunal seeking a review of a decision of the delegate of the NSW Commissioner of Police ("the Commissioner" or "the Respondent") dated 28 February 2014 revoking the security licence held by the Applicant under the Security Industry Act 1997 ("the Act"). 2The decision was made pursuant to section 26(1A) of the Act that the licence be revoked on the basis that a controller was appointed during the period beginning on 7 February 2014 and ending on 18 February 2014. 3The delegate was satisfied that if the Applicant were applying for a new licence, the application would be required to be refused under section 15(4) of the Act and clause 16(2)(b) of the Regulation as, in the 3 years immediately preceding the application for the licence, the Applicant was a corporation for which a controller was appointed. Therefore, the delegate adopted the view that the Respondent was required to revoke the Applicant's licence under section 26(1 A) of the Act. The delegate noted that the power to revoke a licence under section 26(1 A) of the Act is mandatory rather than discretionary. Background 4The Applicant was granted a master licence to operate as a security business under the Act in 2007. In 2009 the Applicant entered into a finance agreement with Bibby Financial Services Australia Pty Ltd ("Bibby"), an invoice discounting facility provider. The agreement was entitled "Factoring Partnership Agreement" and is in evidence before the Tribunal. 5Pursuant to that agreement, the Applicant granted to Bibby a fixed and floating charge over the 'Mortgaged Property' of the Applicant, being the undertaking of the Applicant in 'all real and personal property of the company held now or in the future'. The Charge was fixed by reference to a long list of the Applicant's property, and it floated over the remainder of the Mortgaged Property. The Charge allowed Bibby to secure payment of all monies that would be owed by the Applicant and its related entities to Bibby and its related entitles. 6The charge sets out a number of matters that amount to "Events of Default" and the powers granted to Bibby if an Event of Default occurs. Bibby was entitled to appoint a receiver of Mortgaged Property "or any part of it". 7The consequence of a default was that: (a)the secured money would become due and payable immediately without the need for a demand, the floating charge would crystallise, and the Applicant would cease to be able to deal with the Mortgaged Property; (b)Bibby would be able to exercise a long list of powers over the Applicant and the entirety of the Mortgaged property. This included the right to enter into the rights and obligations of the Applicant and to commence or defend proceedings in the name of the Applicant; and (c)Bibby could appoint a receiver to the Mortgaged Property. 8Bibby also had the right to appoint a receiver to any part of the Mortgaged Property which appeared to be 'in jeopardy', whether from a creditor or any legal process. 9In December 2013, the Applicant and Bibby entered into an agreement, entitled 'Consulting Framework and Forbearance Deed'. Under the Forbearance Deed Bibby promised to forbear taking any enforcement action provided that the Applicant addressed its financial difficulties. It was required to ensure that milestones set out in an' Action Turnaround Plan' were achieved by specified due dates, time being of the essence. Any breach of the Forbearance Deed (including the Action Turnaround Plan) constituted an event of default. 10On 6 February 2014, Bibby issued a demand on the Applicant, based on alleged breaches of the Action Turnaround Plan. 11On 7 February 2014, Bibby executed a Deed of Appointment of Receivers. In the purported exercise of its rights under the fixed and floating charge, based on an alleged event of default, it appointed Andrew Thomas Sallway and Trevor Mark Pogroske of Grant Thornton Australia as Receivers of "that property of Sargent as referred to in Schedule 1 to" the deed. 12ASIC was notified of the appointment of 'controllers'/'receivers' on 10 February 2014. The Receivers could exercise all the powers conferred by the Charge. These powers included: (a)'all the powers and authorities vested by the Corporations Act'; (b)The powers of mortgagees and charges under the Conveyancing Act 1919 e.g. the power of sale; (c)all the powers vested in Bibby under the Charge. 13The Applicant disputed the validity of that appointment. However, it did not take any action to set aside the demand or any action to have the demand and the appointment of the receivers declared invalid under section 418A of the Corporations Act. 14On 18 February 2014, Mr Sallway wrote an open letter to parties with whom the Applicant had dealings advising of the appointment. In the letter he wrote: "Notwithstanding this appointment, day to day control of the operations of the Company remains with the Director and the Company is continuing to trade. As the Receivers and Managers are not trading the business, they will not be adopting any contracts nor will they accept any liability for the continuation of services to the Company after their appointment. 15The Appointment of Mr Sallway and Mr Pogroske ceased on 18 February 2014. 16In an undated letter to the Applicant, the Respondent notified the Applicant that it was proposing to revoke the Applicant's licence, identified the basis for the proposed revocation and invited the Applicant to make written submissions in relation to the proposed action by 27 February 2014. By letter dated 26 February 2014 the Applicant responded that it would challenge the Receivers' appointment. 17On 28 February 2014, a delegate of the Commissioner revoked the Applicant's master licence pursuant to section 26(1A) of the Act. 18The reasons for decision set out the delegate's understanding of the background to the determination as follows: (a)on 10 February 2014, solicitors for Bibby Financial Services Australia Pty Limited (ACN 101 657 041) (Bibby) notified the Australian Securities and Investments Commission (ASIC) that, on 7 February 2014, Bibby, pursuant to a fixed and floating charge dated 28 October 2009, appointed Mr Andrew Thomas Sallway and Mr Trevor Mark Pogroske as joint and several receivers of property of Sargent (see ASIC document number 028756048); (b)on 13 February 2014, Mr Sallway and Mr Pogroske notified the ASIC that, on 7 February 2014, they had been appointed as joint and several receivers of property of Sargent (see ASIC document number 7E5835915). Attached to the notification was an executed copy of an instrument titled "Deed of Appointment of Receivers" which appointed Mr Sallway and Mr Pogroske as joint and several receivers of property of Sargent on 7 February 2014; (c)on 18 February 2014, Mr Sallway and Mr Pogroske notified the ASIC that, on that date, they had ceased to be receivers of property of Sargent,'.(see ASIC document number 7E5850132); and (d)paragraph (a) of the definition of the term controller in section 9 of the Corporations Act 2001 (Cth) provides that a controller, in relation to property of a corporation, means a receiver, or receiver and manager, of that property. The term controller, when used in clause 16(2)(b) of the Regulation, has the same meaning as in section 9 of the Corporations Act 2001 (Cth). 19The Applicant applied to the Tribunal for a review of the Commissioner's decision and sought a stay of the revocation. The Applicant submitted that the Decision to revoke its master licence was invalidly made because: (a)the appointment of the receivers, even if it was effective, was not an appointment of "a controller" within the meaning of clause 16(2)(b) of the Security Industry Regulation 2007 ("the Regulation") such that the bare fact of the appointment alone would have required the Commissioner to refuse an application for a master licence; and, (b)(the purported appointment of the receivers by a deed dated 7 February 2014, which was registered with ASIC on 13 February 2014, was void for uncertainty and had no effect as it failed to identify any property of Sargent Security in respect of which the receivers may have been appointed. 20I granted a stay of the revocation determination on 4 March 2014. 21The matter subsequently came before me for hearing on 24 April 2014 and I reserved my decision. On 13 June 2014 the Commissioner wrote to the Registrar and advised of the appointment of administrators for the Applicant on 5 June 2014 and requested that the matter be relisted as a matter of urgency. That appointment is confirmed in documentation placed before the Tribunal. 22The matter again came before me on 30 June 2014. On that occasion I lifted that stay that had been put in place on 4 March 2014. Applicable Legislation 23The Tribunal's jurisdiction to hear an application for the review of a licence revocation decision is conferred by section 29(l)(c) of the Act. The Tribunal has power to affirm, vary or set aside the decision. Pursuant to section 63 of the Administrative Decisions Review Act 1997 the Tribunal may hear evidence in order to decide 'what the correct and preferable decision is having regard to the material then before it', including 'any relevant factual material' and 'any applicable written or unwritten law'. 24Section 26(1A) of the Act provides: 26 Revocation of a licence ... (1A) The Commissioner must revoke a licence where the Commissioner is satisfied that, if the licensee were applying for a new licence, the application would be required by this Act to be refused. ... 25Grounds for the mandatory refusal of a new licence are stated in section 15(1) - 15(2C) the Act. Sections 15(4) and 48(1) provide for the making regulations. Section 15(4) of the Act provides: 15 Restrictions on granting licence-general suitability criteria ... (4) The regulations may provide additional mandatory or discretionary grounds for refusing the granting of an application for a licence. 26Clause 16(2)(b) of the Regulation provides: 16 Grounds for refusal to grant licence: section 15 (4) ... (2) Mandatory grounds for refusal-corporation For the purposes of section 15 (4) of the Act, the Commissioner must refuse to grant an application for a master licence if the applicant: (a) is a corporation that is the subject of a winding up order or for which a controller or administrator has been appointed, or (b) at any time in the 3 years immediately preceding the application for the licence, was a corporation the subject of a winding up order or for which a controller or administrator was appointed. 27Section 3 of the Act is a definition section. There is no definition of "controller" in section 3 of the Act. Clause 3 of the Regulation is a definition clause. There is no definition of "controller" in clause 3 or in the Regulation generally. The issue for determination 28The issue for determination by the Tribunal is whether the Applicant is a corporation "for which a controller or administrator" has been appointed. Discussion 29Counsel for the Applicant filed detailed submissions in relation to the issue of whether the action taken by Bibby on 7 February 2014 i.e. the appointment of Mr Sallway and Mr Pogroske, brings the matter within the scope of clause 16(2) of the Regulation. The Applicant made no submissions in regard to the appointment of administrators for the Applicant on 5 June 2014. 30The Applicant contends that the circumstances of the 7 February 2014 appointment were such that it was invalid. However, as noted above, no steps were taken to have the appointment declared invalid. 31It will be a question of fact whether or not the circumstances fall within the scope of clause 16(2). The Respondent says that receivers are 'controllers' for this purpose; the Applicant says they are not. 32The Respondent relied on the ASIC Form 504 and 505 notifications that a 'controller' and 'external administrator' (respectively) had been appointed to the property of the Applicant between 7 and 18 February 2014, and relied on the Corporations Act definition of 'controller'. The Dictionary to the Corporations Act provides: "controller" , in relation to property of a corporation, means: (a) a receiver, or receiver and manager, of that property; or (b) anyone else who (whether or not as agent for the corporation) is in possession, or has control, of that property for the purpose of enforcing a security interest; and has a meaning affected by paragraph 434F(b) (which deals with 2 or more persons appointed as controllers). 33In my view it was reasonable for the Respondent to adopt that approach. The ASIC documentation provides an official record of action taken in relation to the Applicant. A mechanism exists for a corporation to challenge any appointment that it considers invalid. The Applicant could have taken action to set aside the 7 February 2014 appointment and didn't do so at the time or at any time afterwards. The Respondent was therefore entitled to consider that material as part of its decision making process. 34The apparent object of clause 16(2) is to ensure that licences not be held by corporations undergoing external administration. This is to be understood in the context of other provisions in the Act and Regulations that are clearly intended to ensure that only persons of utmost integrity are granted or hold a licence. 35Before a licence is granted the Respondent must be satisfied that the criteria set out in section 15 of the Act are satisfied. For the purpose of determining whether an applicant is a fit and proper person to hold the class of licence sought, the Commissioner may have regard to any criminal intelligence report or other criminal information held in relation to the applicant. The Commissioner must also be satisfied as to the integrity of any close associate of the applicant. These provisions are clearly intended to limit licences to those who are regarded as fit and proper persons and to also remove the possibility that an associate who is not regarded as a fit and proper person to hold a licence will be in a position to influence the licensee. 36The term "close associate" is defined in section 5 of the Act as: 5 Meaning of "close associate" (1) For the purposes of this Act, a person is a "close associate" of an applicant for, or the holder of, a licence if the person: (a) holds or will hold any relevant financial interest, or is or will be entitled to exercise any relevant power (whether in his or her own right or on behalf of any other person), in the business of the licence applicant or holder, and by virtue of that interest or power is or will be able (in the opinion of the Commissioner) to exercise a significant influence over or with respect to the conduct of that business, or (b) holds or will hold any relevant position, whether in his or her own right or on behalf of any other person, in the business of the licence applicant or holder. (2) In this section: "relevant financial interest" in relation to a business means: (a) any share in the capital of the business, or (b) any entitlement to receive any income derived from the business, whether the entitlement arises at law or in equity or otherwise. "relevant position" means the position of director, manager, and other executive positions and secretary, however those positions are designated, and such other positions as may be prescribed by the regulations for the purposes of this definition. "relevant power" means any power, whether exercisable by voting or otherwise and whether exercisable alone or in association with others: (a) to participate in any directorial, managerial or executive decision, or (b) to elect or appoint any person to any relevant position. 37It is probable that a controller will be captured by this definition of "close associate". 38Where a controller is appointed to a corporation that is the holder of a master licence, the Commissioner will not have had the opportunity to carry out an assessment of that controller. That being the case, the Commissioner could not be satisfied that the criteria necessary for the grant of the licence will have been satisfied. 39As noted above, section 26(1A) of the Act provides that the Commissioner must revoke a licence where the Commissioner is satisfied that, if the licensee were applying for a new licence, the application would be required by this Act to be refused. In my view, if the Applicant were applying for a licence in the period 7 to 18 February 2014, the application would have to have been refused because the criteria necessary for the grant of the licence had not been satisfied. 40This is not to suggest that the integrity of the controller is in doubt. It simply has not been considered and the Commissioner was not in the position to undertake that consideration. 41In any event, the correctness or otherwise of the determination taken by the Respondent is no longer in doubt because of the appointment of administrators for the Applicant on 5 June 2014. 42In my view, there is no doubt that the appointment of those administrators is within the scope of clause 16(2). The administrators are 'controllers' for this purpose. 43Accordingly, the Respondent had no discretion. Mandatory grounds for refusal of the Applicant's licence exist and therefore the licence must be revoked. 44It follows that on the material before me, the determination under review is the correct and preferable one and should be affirmed. Order The decision under review is affirmed. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 November 2014