Westpac Banking Corp v Australian Securities Commission [1997] FCA 59 (10 February 1997)

CATCHWORDS

JUDICIAL REVIEW - Notice by Australian Securities Commission to bank to produce documents relating to an investigation by the Commission - refusal to reimburse bank its costs and expenses of compliance - whether statutory entitlement to payment under the Australian Securities Commission Act (1989) (Cth) - whether entitlement to payment at common law - whether any statutory policy against payment.

CORPORATIONS - Discretionary power to pay costs of compliance with requirements of Australian Securities Commission - whether discretion fettered by any legislative policy underlying Part 3 of the Australian Securities Commission Act (1989) (Cth) that compliance costs should ordinarily be borne without reimbursement as burdens of citizenship.

Australian Securities Commission Act 1989 (Cth) Part 3 - s 89, s 90, s 91

Companies Act 1981 (Cth) s 295, s 296, s 309

Futures Industry Act 1986 (Cth) s 25, s 39

National Companies Securities Commission Act 1979 (Cth) s 38

Securities Industry Act 1980 (Cth) s 19, s 33

Acts Interpretation Act 1901 (Cth) s 33(2A)

Parr v Australasian Asiatic Trading and Engineering Co Pty Ltd [1958] VR 198

Attorney-General for New South Wales v Hunter [1983] 1 NSWLR 366

Bank of New South Wales v Withers [1981] FCA 51; (1981) 52 FLR 207

Re John Dee (Export) Pty Limited [1990] ATPR 41-006

Re Equiticorp Finance Ltd Ex parte Brock [No 2] (1992) 27 NSWLR 391

Pell v Daubney [1850] EngR 941; (1850) 5 Ex Ch 955

Willis v Peckham (1820) 1 Brod & Bing 515 at 516; [1820] EngR 227; 129 ER 821

Collins v Godefroy [1831] EWHC J18; (1831) 1 B & Ad 950; 109 ER 1040

In re McMullen (1859) 3 QSCR 205

R v Connell [No 2] (1992) 8 WAR 532

Pyramid Building Society (In Liq) v Farrow Finance Corporation (In Liq) Ex parte Farrow, Clarke and Lawson [1995] 1 VR 464

Deposit & Investment Co Ltd (Receivers Appointed) v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267

Re Kempal Pty Ltd (Receiver and Manager Appointed in liq) (1989) 17 NSWLR 550

General Practitioners Society in Australia v The Commonwealth [1980] HCA 30; (1980) 145 CLR 532

Minister for Aboriginal Affairs v Peko-Wallsend Limited [1986] HCA 40; (1986) 162 CLR 24

R v Tower Hamlets London Borough Council Ex parte Chetnik Developments Ltd [1988] 1 AC 858

Sean Investments v Mackellar (1981) 38 ALR 363

Mathieson v Burton [1971] HCA 4; (1971) 124 CLR 1

Esber v The Commonwealth [1992] HCA 20; (1992) 174 CLR 430

Drake v Minister for Immigration and Ethnic Affairs [1979] AATA 179; (1979) 46 FLR 409

Minister for Immigration v Gray [1994] FCA 1052; (1994) 50 FCR 189

Westpac Banking Corporation v Australian Securities Commission

No QG 203 of 1995

Cooper J

Brisbane

10 February 1997

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

No QG 203 of 1995

BETWEEN:

WESTPAC BANKING CORPORATION

ARBN 007 457 141

Applicant

AND:

AUSTRALIAN SECURITIES COMMISSION

Respondent

JUDGE MAKING ORDER: Cooper J

WHERE MADE: Brisbane

DATE OF ORDER: 10 February 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The decision of the External Running Costs Committee of the Respondent made on 17 October 1995 to reject the application of Westpac Banking Corporation under s 89(3) of the Australian Securities Commission Act 1989 (Cth) for expenses incurred by it in compliance with certain notices issued under s 33 of that Act be set aside.

2. The matter be remitted back to the Australian Securities Commission for determination of the said application in accordance with law and these reasons.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

No QG 203 of 1995

BETWEEN:

WESTPAC BANKING CORPORATION

ARBN 007 457 141

Applicant

AND:

AUSTRALIAN SECURITIES COMMISSION

Respondent

CORAM: Cooper J

PLACE: Brisbane

DATE: 10 February 1997

REASONS FOR JUDGMENT

Introduction

Westpac Banking Corporation ("Westpac") seeks review of a decision of a delegate of the Australian Securities Commission ("the ASC") rejecting an application by Westpac for the payment of its reasonable expenses incurred in complying with notices issued to it by the ASC pursuant to s 33 of the Australian Securities Commission Act 1989 (Cth) ("the Act").

During October and November 1994 the ASC issued and served eight notices on Westpac. The notices required the production by Westpac of specified books in its possession relating to the affairs of Keradale Pty Ltd (In Provisional Liquidation), D E Clarke and D W Clarke, into which the ASC was conducting an investigation.

In complying with the notices, Westpac incurred expenses in the sum of $3,037.28, comprising $2,557.28 invoiced by and paid to Pickford Records Management for voucher retrieval and $480 staff time costs.

On 17 July 1995 Westpac's solicitors wrote to the ASC seeking payment of those expenses. By letter dated 25 October 1995 the ASC advised that it declined to pay Westpac any amount in respect of the claim. Subsequently, the decision-maker provided a statement of reasons pursuant to s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth).

The Act

Part 3 of the Act is headed "Investigations and Information-Gathering". Division 1 of Part 3 is the source of the ASC's power to conduct investigations and its obligation to provide and distribute reports on investigations. Division 2 is concerned with examination of persons as part of an investigation under Division 1. Section 19 provides :-

"19(1) This section applies where the Commission, on reasonable grounds, suspects or believes that a person can give information relevant to a matter that it is investigating, or is to investigate, under Division 1.

(2) The Commission may, by written notice in the prescribed form given to the person, require the person:

(a) to give to the Commission all reasonable assistance in connection with the investigation; and

(b) to appear before a specified member or staff member for examination on oath and to answer questions.

(3) A notice given under subsection (2) shall:

(a) state the general nature of the matter referred to in subsection (1); and

(b) set out the effect of subsection 23(1) and section 68."

Division 3 gives the ASC, amongst other things, power to inspect and to require production of books, as defined in s 5. The notices the subject of this application were issued pursuant to s 33, which provides :-

"33 The Commission may give to a person a written notice requiring the production to a specified member or staff member, at a specified place and time, of specified books that are in the first- mentioned person's possession and relate to:

(a) affairs of a body corporate; or

(b) a matter referred to in any of paragraphs 31(1)(g) to (m), inclusive, and 32(1)(j) to (p) inclusive."

Division 5 empowers the ASC, after an investigation or examination, to cause to be begun and carried on, prosecutions for offences committed against a national scheme law or relevant previous law (s 49) and civil proceedings for the recovery of damages or property (s 50). Proceedings brought pursuant to s 50 are begun and carried on by the ASC in the name of the person for whom the ASC considers it to be in the public interest to begin and carry on the proceeding.

Division 6 provides for and regulates the holding of hearings by the ASC for the performance of its statutory functions other than an investigation under Division 1. Section 58 relevantly provides :-

"58(1) A member may, by written summons in the prescribed form given to a person:

(a) require the person to appear before the Commission at a hearing to give evidence, to produce specified documents, or to do both; and

(b) require the person to attend from day to day unless excused, or released from further attendance, by a member.

.....

(4) The member presiding at a hearing:

(a) may require a witness at the hearing to answer a question put to the witness; and

(b) may require a person appearing at the hearing pursuant to a summons issued under this section to produce a document specified in the summons."

Section 89, s 90 and s 91 are contained in Division 10 of Part 3 :-

"89(1) A person who, pursuant to a requirement made under section 19, appears for examination is entitled to the prescribed allowances and expenses (if any).

89(2) A person who, pursuant to a summons issued under section 58, appears at a hearing is entitled to be paid:

(a) if the summons was issued at another person's request - by that other person; or

(b) otherwise - by the Commission;

the prescribed allowances and expenses (if any).

89(3) The Commission may pay such amount as it thinks reasonable on account of the costs and expenses (if any) that a person incurs in complying with a requirement made under this Part.

90 Subject to section 91, the Commission shall pay the expenses of an investigation.

91(1) Subject to subsection (1A), where:

(a) a person is convicted of an offence against a law of this jurisdiction in a prosecution; or

(b) a judgment is awarded, or a declaration or other order is made, against a person in a proceeding in a court of this jurisdiction;

begun as a result of an investigation under Division 1 or a corresponding law of another jurisdiction, the Commission may make one of the following orders:

(c) an order that the person pay the whole, or a specified part, of the expenses of the investigation;

(d) an order that the person reimburse the Commission to the extent of a specified amount of such of the expenses of the investigation as the Commission has paid;

(c) an order that the person pay, or reimburse the Commission in respect of, the whole, or a specified part, of the cost to the Commission of making the investigation, including the remuneration of a member or staff member concerned in the investigation.

91(1A) The Commission may not make an order under subsection (1) in respect of expenses or costs that have already been paid, or recovered by the Commission, pursuant to an order made under a provision of a law of another jurisdiction that corresponds to that subsection.

91(2) An order under this section shall be in writing and shall specify when and how the payment or reimbursement is to be made.

91(3) A person shall comply with an order under this section that is applicable to the person.

Penalty: 50 penalty units or imprisonment for 1 year, or both.

91(4) The Commission may recover in a court of competent jurisdiction as a debt due to the Commission so much of the amount payable under an order made under this section or a corresponding law of another jurisdiction as is not paid in accordance with the order.

91(5) A report under Division 1 may include recommendations about the making of orders under this section."

"Expenses" are defined in s 5(1) of the Act as follows :-

"`expenses', in relation to an investigation under Division 1 of Part 3, includes costs and expenses incurred in relation to a proceeding begun under section 50 as a result of the investigation;"

Regulation 8 of the Australian Securities Commission Regulations ("the Regulations") provides that, for the purposes of s 89(1) and s 89(2), a person who appears for examination under s 19 of the Act or pursuant to a summons issued under s 58 of the Act, is entitled to be paid allowances and expenses in accordance with Schedule 2. The prescribed allowances and expenses relate to loss of wages, salary or fees and out-of-pocket expenses for transport, accommodation and meals.

The Decision-maker's Reasons

The decision-maker gave the following reasons for refusing Westpac's application :-

"2. Subsection 89(3) of the ASC Law does not provide for payment of `reasonably' incurred expenses. The subsection confers a broad discretion on the Commission to pay `an amount it thinks reasonable'.

3. Subsection 89(3) envisages that costs and expenses will be incurred in complying with Part 3 requirements. However, unlike subsection 89(1), the legislation confers no prima facie entitlement to payment of those costs and expenses upon establishment that they were incurred. Subsection 89(3) confers upon the Commission a discretion as to whether it will make a payment in a particular instance. This is consistent with the general principle that the obligation to comply with compulsory requirements under Part 3 of the ASC Law, including the production of documents is an incident of being a citizen, including being a corporate citizen. In the usual event the person bears the cost of complying with such requirements although subsection 89(3), allows for the payment of the person's costs in particular instances.

4. The Enforcement Manual provides guidance to staff in respect of claims for payment of discretionary allowances, in particular:

Payments for these expenses will normally only be made where the cost of compliance is incurred by an individual or small company and is relatively high. The ASC would not as a matter of practice make a discretionary payment in favour of an institute such as a bank or in favour of a large company. The ASC will not, of course, fetter its discretion in this area and it is particularly important that each claim must be assessed on its merits.

The above comments in the Enforcement Manual provide general guidance and reflect the ASC's view that payment would not automatically be made by the mere fact that persons incur expenses in complying with requirements under Part 3, but may be met in particular circumstances. Instances of the exercise of the discretion to pay a person's costs would include, for example, where the burden imposed is onerous or there is some unusual circumstance.

5. The ERC Committee did not consider that there was anything in the circumstances of the application that made it appropriate for the ASC to pay the costs and expenses incurred by Westpac, and that the particular costs and expenses should be treated as a normal expense of Westpac's business. It considered that the service of notices under section 33 of the ASC Law should not be an unexpected event for an institution such as a bank, particularly in light of the services bank's [sic] provide. Further, the costs and expenses incurred in the compliance were such as to be capable of being met without imposing an onerous burden on Westpac. The fact that Westpac outsourced the function of retrieval of the documents did not make the circumstances unusual or otherwise appropriate for the ASC to pay the costs it incurred.

6. The ERC Committee noted that payment of claims under section 89(3) of the Law must be met from the same pool of resources available for substantive investigations initiated pursuant to Part 3 of the ASC Law. As the funds allocated to the ASC are limited a constraint is imposed on the amount the Commission can allocate to the cost of investigations.

7. In light of the clear legislative intent and in view of limited resources available, the ERC Committee considered that expenses incurred in complying with Part 3 of the ASC Law, other than the allowances and expenses prescribed under the Regulations, should ordinarily be met by the person involved. These obligations apply whether the person involved is a natural person or a corporation. This burden is a consequence of the obligations of all citizens.

8. The ERC Committee is aware that there may be instances where the Commission may consider it reasonable to pay costs and expenses in compliance with ASC notices. However the ERC Committee did not consider that Westpac's application came within that category of application for which it might exercise its discretion in favour of the applicant bank."

The "ERC Committee" is the ASC's External Running Costs Committee. The Committee provides information to the ASC concerning enforcement matters and makes decisions relating to the ASC's enforcement practices and the allocation of resources.

Counsel for Westpac submitted that the decision-maker's reasons and decision were in error and miscarried on three alternative bases :-

1. The expenses incurred by Westpac were "expenses of an investigation" within the meaning of s 90 of the Act. Therefore, the ASC was, subject to s 91, obliged to pay the expenses. Section 89(3) is concerned with the amount of expenses payable by the ASC, rather than with any obligation or discretion to pay the expenses.

2. If s 90 does not source an obligation on the part of the ASC to pay the expenses of third parties incurred as a result of an investigation, then Westpac has a common law right to payment of the expenses in the absence of clear words in the Act excluding such common law right.

3. If s 89(3) confers upon the ASC a discretion as to whether it will pay expenses of an investigation incurred by persons other than the ASC (as well as a discretion as to amount), the decision-maker erred in the exercise of that discretion in acting upon irrelevant and erroneous considerations, namely that :-

(a) The intent of Part 3 of the Act is that innocent persons should, in the ordinary course, bear the costs of complying with requirements under the Part; and

(b) The resources of the ASC available to pay the expenses of investigations are limited.

The Claim to a Statutory Entitlement to Payment

To the extent that Westpac's claim to a right to payment under s 90 of the Act is in part based on the submission that s 89(3) only operates as a power to set the quantum of the obligation to pay under s 90 and not as a separate discretionary power to pay, it is convenient to commence with a consideration of s 89 of the Act.

Section 89 has as its subject matter allowances and expenses. Subsections (1) and (2) create an entitlement to a person answering a requirement to appear at an examination (s 19) or a hearing (s 58) to receive the prescribed allowances and expenses (if any). Section 89 is not a new or novel provision and its provenance is important to its proper construction. As appears from the Explanatory Memorandum to the Australian Securities Commission Bill 1988 (paragraph 230) clause 89 (now s 89) was based on s 296(10) and s 296(11) of the Companies Act 1981 (Cth), s 25(12) and s 25(13) of the Futures Industry Act 1986 (Cth), s 38(3) of the National Companies and Securities Commission Act 1979 (Cth) ("the NCSC Act") and s 19(11) and s 19(12) of the Securities Industry Act 1980 (Cth).

For present purposes it is sufficient to set out two examples from the legislation upon which the section was based to demonstrate the legislative intention underlying s 89.

The Companies Act 1981 (Cth) provided in s 295(1) as follows :-

"295(1) An inspector may, by notice in writing containing the prescribed matters given in the prescribed manner, require an officer of a corporation affairs of which are being investigated under this Part -

(a) to produce to the inspector such books of the corporation and other books relating to affairs of the corporation as are in the custody or under the control of the officer;

(b) to give to the inspector all reasonable assistance in connection with the investigation; and

(c) to appear before the inspector for examination on oath or affirmation and to answer questions put to him,

and may administer an oath or affirmation to that officer."

Section 296(10) and s 296(11) provided as follows :-

"296(10) A person who is required to attend for examination pursuant to paragraph 295(1)(c) is entitled to such allowances and expenses as are prescribed.

296(11) The Commission may, in its discretion, pay, on account of the costs and expenses incurred by a person in complying with a requirement under paragraph 295(1)(a) or (b), such amount as it thinks reasonable."

(Emphasis added)

Provisions to like effect dealing with attending an examination as part of an investigation and complying with the requirements of an investigation are found in s 25(10) and s 25(11) of the Futures Industry Act 1986 (Cth), and s 19(11) and s 19(12) of the Securities Industry Act 1980 (Cth).

The NCSC Act empowered that commission to hold hearings for the purpose of the performance of any of its functions or the exercise of any of its powers (s 36(11)). A power to summons a person to appear before that Commission at a hearing to give evidence and to produce documents was also provided for (s 37(1)). Section 38(3) of the NCSC Act provided as follows :-

"38(3) A person who attends at a hearing before the Commission pursuant to a summons issued under section 37 is entitled to be paid -

(a) in the case where the summons was issued at the request of a person - by that person; or

(b) in any other case - by the commission,

such allowances and expenses as are provided for by the regulations."

The explanatory memorandum to the Australian Securities Commission Bill 1988, after stating the provenance of clause 89 continues in paragraph 231 :-

"231. A person answering a summons to appear at an examination or hearing is entitled to the prescribed allowances and expenses (if any) and any other amount the ASC thinks reasonable."

It should also be recorded that s 33(2A) of the Acts Interpretation Act 1901 (Cth) came into operation on 18 December 1987. That subsection provided :-

"Where an Act assented to after the commencement of this subsection provides that a person, court or body may do a particular act or thing, and the word `may' is used, the act or thing may be done at the discretion of the person, court or body."

It is clear to my mind that the legislature in enacting s 89 intended :-

(a) to continue the entitlement of persons required to attend an examination as part of an investigation or a hearing before the ASC (which cannot be used for the purpose of an investigation under Division 1 of Part 3: see s 51(1)) to be paid the prescribed allowances and expenses;

(b) to continue to place the obligation to pay the prescribed allowances and expenses upon any party at whose request a summons to attend a hearing before the ASC is issued (s 89(2)(a) of the Act: see NCSC Act s 38(3)(a));

(c) to invest the ASC with the same discretionary power which was vested in NCSC in the investigation sections referred to above, for example s 296(11) of the Companies Act 1981 (Cth), to pay such amount as the ASC thought reasonable to a person required to render assistance in the investigation or to produce documents on account of the costs and expenses incurred by that person in complying with the requirement.

(d) to extend the discretionary power referred to in (c) above to all situations under Part 3 which involve the incurring of a compliance cost or expense and not simply those relating to an investigation under Division 1 (see for example Division 3 - Inspection of Books - s 28; Division 4 - Disclosure of Information about Securities or Futures Contracts - s 40 where it is clear the powers contained in each Division may be used for purposes other than conducting an investigation under Division 1).

The deletion of the words "in its discretion" after the word "may" in s 89(3) was in my view intended to give effect to s 33(2A) of the Acts Interpretation Act 1901 (Cth) and not intended to alter the nature of the discretionary power as it existed under the previous legislation upon which s 89(3) was based.

Section 89(3) is a discrete grant of discretionary power to pay and further to fix the amount of the payment in the circumstances set forth in the subsection. Section 89 repeats in the Act the previous statutory scheme of providing an entitlement to prescribed allowances and expenses, if any, for attendance and a discretionary power in the ASC to make additional payments in respect of compliance with requirements made by the ASC. It would be within the power of the ASC under s 89(3) to pay the whole or part of Westpac's costs and expenses of compliance if the ASC determined to do so. It follows, in my view, that the submission of Westpac that s 89(3) did no more than empower the ASC to set the quantum of the entitlement Westpac claimed under s 90 to be paid its costs and expenses of compliance must be rejected.

The claim of Westpac to an entitlement under s 90 of the Act is twofold. Firstly, it submitted the phrase "the expenses of an investigation" as used in s 90 of the Act included its expenses of compliance with a requirement made of it as part of an investigation. Secondly, it was submitted, the duty imposed upon the ASC by s 90 of the Act to pay the expenses of a corresponding investigation created an entitlement of Westpac to be paid.

Again s 90 and s 91 of the Act were not new or novel legislative provisions.

Section 90 of the Act was based on s 309(1) and s 309(8) of the Companies Act 1981 (Cth), s 39(1) of the Futures Industry Act 1986 (Cth) and s 33(1) of the Securities Industry Act 1980 (Cth) (Explanatory Memorandum para 232).

Section 90 of the Act is expressly made subject to the provisions contained in s 91 of the Act.

Section 91 of the Act was based on s 309(3), s 309(4), s 309(5) and s 309(6) of the Companies Act 1981 Cth, s 39(3), s 39(4), s 39(5) and s 39(6) of the Futures Industry Act 1986 (Cth) and s 33(3), s 33(4), s 33(5) and s 33(6) of the Securities Industry Act 1980 (Cth) (Explanatory Memorandum para 234).

The Companies Act 1981 (Cth) in s 309 provided :-

"309(1) Subject to this section and to clause 18 of the Agreement, the expenses of and incidental to an investigation shall be paid by the Commission.

.....

309(8) Where, in a case where the expenses of and incidental to an investigation or part of those expenses have been or are to be borne by a party to the Agreement, the expenses or part of the expenses borne or to be borne by that party are recovered by the Commission pursuant to this section, the Commission shall, to the extent of the amount recovered, reimburse or credit that party."

The Agreement referred to in s 309(1) of the Companies Act 1981 (Cth) was the Commonwealth/State Agreement of 22 December 1978 providing for a co-operative national scheme of companies and securities industry regulation. By clause 18 of that agreement provision was made as to when the cost and expenses of a special investigation would be borne by the National Commission to be established under the terms of the Agreement and when they were to be borne by a party to the Agreement (the NCSC) whose Minister ordered the investigation.

Subsection 309(2) of the Companies Act 1981 (Cth) included within the definition of the "expenses of and incidental to an investigation" any expenses incurred in civil proceedings brought by the NCSC in the name of the corporation (s 306(11)).

Section 309(3) and s 309(4) provided for the recovery by the NCSC of the expenses of an investigation as follows :-

"309(3) Where an investigation has been carried out under this Part and proceedings are instituted under sub-section 306(11) or otherwise as a result of that investigation, the Commission may make one or more of the following orders, namely:

(a) that a specified person pay, within the time and in the manner specified in the order, the whole, or a specified part, of the expenses of and incidental to the investigation;

(b) where expenses have been paid by the Commission, that a specified person reimburse the Commission, within the time and in the manner specified in the order, to the extent of the payment;

(c) that a specified person, within the time and in the manner specified in the order, pay, or reimburse the Commission in respect of, the whole, or a specified part, of the cost to the Commission of carrying out the investigation, including the remuneration of any employee of the Commission concerned with the investigation.

309(4) Where the Commission is of the opinion that the whole or any part of the expenses of and incidental to an investigation into affairs of a corporation under this Part should be paid by the corporation, the Commission may by order in writing direct the corporation to pay a specified amount, being the whole or part of those expenses, within the time and in the manner specified."

Provisions to like effect to those set out above from s 309 of the Companies Act 1981 (Cth) were replicated without material alteration in s 39(1), s 39(2)(a), s 39(3),s 39(4), s 39(5) and s 39(6) of the Futures Industry Act 1986 (Cth) and s 33(2)(a), s 33(3), s 33(4), s 33(5) and s 33(6) of the Securities Industry Act 1980 (Cth).

The extended definition of "expenses of an investigation" in s 5 of the Act to include the costs and expenses incurred in civil proceedings initiated by the ASC clearly has been based on s 309(2) of the Companies Act 1981 (Cth) and the other like provisions.

So far as is presently relevant, the explanatory memorandum said :-

"Cl 90: Expenses of investigation under Division 1

.....

233 Subject to cl 91 below, the ASC is required to pay the expenses of an investigation.

Cl 91: Recovery of expenses of investigation

234 This clause is based on CA sub-ss 309(3) to (6), FIA sub-ss 39(3) to (6) and SIA sub-s 33(3) to (6), but reflects a more reasonable policy in not enabling the ASC to recover costs of an investigation where the investigation has not resulted in a person being convicted or having judgment awarded against him or her.

235 Where a person is convicted of an offence, or has judgment awarded against him or her in federal proceedings, as a result of an ASC investigation, the ASC may order the person to pay the costs of the investigation and may recover the costs in Court proceedings if the order is not fully complied with."

Section 90 and s 91 of the Act are intended to provide for the manner in which and by whom the expenses of an investigation are to be borne. The scheme in the previous statutes upon which these sections were based was that primary responsibility for paying for the expenses was placed on the NCSC with a right to payment or reimbursement from another in the circumstances provided for under the relevant statute or by clause 18 of the Agreement. The Agreement is no longer relevant. To the extent that the earlier statutory provisions dealt with an investigation initiated by direction of the Ministerial Council, save for transition provisions, those references in the earlier statutes have no present relevance. Therefore, as the explanatory memorandum states, the underlying statutory intent of the previous legislation is re-enacted in the changed Federal context together with modifications to reflect the change in policy as to recoverability where proceedings do not result in a conviction or a judgment.

While s 90 of the Act creates a duty to pay the expenses of an investigation, the power to apply the ASC's monies for that purpose is to be found in s 135 of the Act.

The "expenses" dealt with by s 90 and s 91 are those incurred by the ASC or for which it becomes liable to pay by operation of any provision of the Act, not the expenses of some third party in compliance with a requirement under Part 3 of the Act. The costs and expenses claimed by Westpac do not become expenses of an investigation within the meaning of that term as used in s 90 until the ASC exercises its discretionary power under s 89(3) and determines to make a payment on account of such costs and expenses of compliance. Those expenses then become costs and expenses of the ASC, and Westpac becomes the beneficiary of a discretionary payment under s 89(3) to be reimbursed in whole or in part its costs and expenses of compliance.

The word "expenses" in the context of s 90 and s 91 bears its ordinary and natural meaning as being confined to monies expended by a person or an obligation incurred by the person. It does not include sums which the person claims a right to charge against others for his own services (Parr v Australasian Asiatic Trading and Engineering Co Pty Ltd [1958] VR 198 at 200 - 201; Attorney-General for New South Wales v Hunter [1983] 1 NSWLR 366 at 378 - 380).

The expenses of an investigation which the ASC are obliged to pay by operation of s 90 of the Act are the entitlements to prescribed allowances and expenses under s 89(1), any discretionary payments the ASC determines to make under s 89(3), the costs and expenses of any civil proceedings for recovery initiated by the ASC in the name of a company or a person with that person's consent under s 50 of the Act and such further outgoings as the ASC may in the discharge of its functions and powers reasonably and necessarily incur for the purposes of an investigation.

The relationship between s 90 and s 91 of the Act is that although the primary obligation to pay may be imposed on the ASC, the expenses may ultimately be borne by another if the conditions prescribed are satisfied.

Section 91 of the Act allows for recovery of the expenses of an investigation in the ways provided for in s 91(1)(c) and s 91(1)(d). Section 91(1)(c) enables the ASC, where it has incurred an obligation to pay an amount in respect of an investigation but has not discharged the obligation, to order the relevant person against whom the ASC is entitled to recovery to make the payment which will discharge the obligation. There seems no reason why s 91(2) would not authorise an order for payment to the person to whom the ASC is obliged. However, until payment is made to the person entitled, the ASC remains obliged to pay and under a duty to do so under s 90. The ASC's power to make good the recovery in the event of non-compliance with an order to pay depends upon the recovery of the money as a debt due to the ASC in a civil suit (s 91(4)). Section 91(d) enables the ASC to be reimbursed where a payment has been made to discharge an obligation incurred in the investigation prior to a recovery order being made.

Section 91(1)(e) is intended to cover the costs of the ASC which do not fall within the ordinary meaning of the word "expenses". It is unnecessary for this application to determine the limits of the ASC's right to recovery but the use of the word "cost" in the sub-section in contradistinction to "expenses" and the inclusion of the remuneration of a member or staff member of the ASC in the concept of "cost", demonstrate an intention to provide a recovery to the ASC wider than that provided for in s 91(1)(c) and s 91(1)(d) (in the same context but in respect of different statutory enactments see Parr v Australasian Asiatic Trading and Engineering Co Pty Ltd at 200 - 202; Attorney-General for New South Wales v Hunter at 380 - 382).

The legislative history of s 90 and s 91 of the Act and the operation of the two sections in relation to each other satisfies me that the sections are concerned only with the duty of the ASC to pay its expenses of an investigation and its right to effect recovery of those expenses together with its other outgoings and costs of an investigation. So understood, s 90 was not intended by the legislature to create rights or entitlements in third parties to recover the costs and expenses of compliance with a requirement of the ASC albeit one made by the ASC as part of an investigation by it under Division 1 of the Part.

The Claim to a Common Law Entitlement to Payment

Counsel for Westpac submitted that it had a common law right to be indemnified for expenses incurred by it in retrieving the documents from Pickford Records Management ($2,557.28) and in the value of employee's time whilst engaged on the task ($480.00). It was submitted that the common law would imply a contract from the circumstance that the request was made and that the Bank as a non-interested party would be out of pocket in complying with the request if there was no implied offer to reimburse on the part of the party making the request. This principle, it was submitted, is discernible in the cases on expenses incurred by a person served with a subpoena duces tecum to attend on the trial of an action. In support of these submissions counsel relied upon the decisions in Bank of New South Wales v Withers [1981] FCA 51; (1981) 52 FLR 207; Re John Dee (Export) Pty Limited [1990] ATPR 41-006 and Re Equiticorp Finance Ltd Ex parte Brock [No 2] (1992) 27 NSWLR 391.

The submissions of Westpac are not sustainable upon a consideration of the authorities including those referred to above.

The circumstances in which the common law would imply a contract between the party causing a subpoena to attend and give evidence or produce documents to be issued and the person required to respond to the subpoena, historically were, and remain, limited. The expenses were limited to the cost of travel, accommodation and sustenance. The right to reimbursement was limited to such reasonable expenses actually incurred over and above the conduct money tendered (Pell v Daubney [1850] EngR 941; (1850) 5 Ex Ch 955; Bank of New South Wales v Withers at 226). The common law did not allow for recovery of compensation for the loss of time in attendance at court under a subpoena even if there was an actual promise to pay by the person issuing the subpoena (Willis v Peckham (1820) 1 Brod & Bing 515 at 516; [1820] EngR 227; 129 ER 821 at 822; Collins v Godefroy (1831) 1 B & Ad 950 at 956 - 957; [1831] EWHC J18; 109 ER 1040 at 1042; In re McMullen (1859) 3 QSCR 205 at 209).

The effect of the decisions in Collins v Godefroy and Pell v Daubney is that absent some statutory provision or rule of court providing for recovery, expenses outlaid in the costs of searching out documents, of determining whether they fall within the scope of the subpoena and getting them to court are to be borne by the person upon whom the subpoena is served (Bank of New South Wales v Withers at 225 - 226; Equiticorp Finance Ltd; ex parte Brock [No 2] at 396 - 397; R v Connell [No 2] (1992) 8 WAR 532; Pyramid Building Society (In Liq) v Farrow Finance Corporation (In Liq) Ex parte Farrow, Clarke and Lawson [1995] 1 VR 464 at 466, 468; Deposit & Investment Co Ltd (Receivers Appointed) v Peat Marwick Mitchell & Co (1996) 39 NSWLR 267 at 282).

The common law would not imply a contract to pay compensation for time lost nor enforce an actual promise to pay because compliance with the subpoena was the performance of a duty imposed by law on all citizens as an incident of citizenship and as such provided no consideration for any actual or implied promise to pay (Collins v Godefroy at 956 - 957; 1042). Those cases where orders have been made that the expenses of collating documents are to be paid by the person causing a subpoena to issue, or a summons for attendance and examination to issue, have all had as the source of the power some actual or implied power vested in the Court or Tribunal empowered to issue the demand (see for example Equiticorp Finance Ltd; ex parte Brock [No 2] at 396; Re Kempal Pty Ltd (Receiver and Manager Appointed in liq) (1989) 17 NSWLR 550 at 551; Re John Dee (Export) Pty Ltd at 51,095 - 51,096 and the review of the various Superior Court jurisdictions undertaken by Bainton J in Deposit and Investment Co Ltd (Receivers Appointed) v Peat Marwick Mitchell & Co at 282 - 290).

The expenses which Westpac now contends it has a common law right to recover on the basis of an implied contract do not fall into the category of expenses in respect of which the common law gave such a right (Bank of New South Wales v Withers at 225 - 226, 228). Lockhart J in re John Dee (Export) Pty Ltd when sitting as the Trade Practices Tribunal did not in my view in his reference at p 51,096 to the judgment of Sheppard J in Bank of New South Wales v Withers intend to throw doubt on Sheppard J's statement of the common law position or intend to extend the category of expenses which the common law would imply a contractual right of reimbursement in respect of.

For the above reasons I am satisfied that Westpac has no common law right to recover the sum of $3,037.28 or any part thereof from the ASC. In consequence the second submission contended for by Westpac fails.

The Claim to Payment Under s 89(3) of the Act

Westpac submitted that the decisionmaker erred in refusing to exercise the discretion under s 89(3) to pay Westpac's expenses in complying with the ASC's requirements under Part 3 of the Act. It was submitted that the decisionmaker was in error in holding the view that Part 3 disclosed a legislative intention that innocent persons should bear the cost of complying with the ASC's requirements under the Part. It submitted that there was no such intention disclosed and as a matter of construction such an intention ought not to be inferred. Further it was submitted that the view of the decisionmaker that the resources of the ASC available to pay for the expenses of investigations were limited was an irrelevant consideration to a proper exercise of the discretion under s 89(3) as to whether or not to pay the costs and expenses claimed by Westpac.

It was submitted that the common law provided that innocent persons should not pay the expenses of an investigation and that they ought be paid by the party benefiting from compliance with the requisition. In support of such a submission Westpac again relied upon the decisions of Bank of New South Wales v Withers and Re Equiticorp Finance Ltd; Ex parte Brock [No 2]. Abrogation of that common law principle or right to be indemnified or reimbursed should not be imputed to the legislature, it was submitted, in the absence of the clearest statement of legislative intention.

As a matter of construction Westpac submitted that the Part was neutral as to any underlying legislative intention as to who should pay. In those circumstances it was submitted the court should presume that the legislators intended to observe the principle that law should be just and avoid a construction of the statute that leads to injustice (F A Bennion Statutory Interpretation 2nd Ed (1992) at 549).

Further, it was submitted, that the Part ought to be construed having regard to the principle against penalisation under a doubtful law. Relevantly, for present purposes, it was submitted that the Part ought not be construed as intended to deprive Westpac of its common law rights or property without compensation or to impose a statutory detriment to the enjoyment of rights, property or economic interests unless the wording of the statute is clear.

Westpac further submitted, that to the extent that the ASC believed it was the intention of Parliament that part of the cost of investigation be borne by persons as a burden of citizenship, that the belief was erroneous; for to construe Part 3 as intended to have such effect would be to give the Part an operation which impinged the right of Westpac under the Australian Constitution not to be subject to civil conscription (General Practitioners Society in Australia v The Commonwealth [1980] HCA 30; (1980) 145 CLR 532 at 565). The civil conscription alleged was the compulsory provision of services by Westpac to find and collate documentation and to make it available to the ASC as part of its statutory role as an investigator at the cost and expense of Westpac. Such coercion, it was submitted, operated to conscript Westpac into the civil role of an investigator to provide services as such without remuneration. It was not submitted by Westpac that Part 3 of the Act infringed any constitutional guarantee Westpac had against civil conscription. Rather, it submitted that Part 3 was not to be construed in such a way as had the effect of infringing the guarantee.

The relevant part of the reasoning of the decisionmaker is contained in paragraphs 3, 6 and 7 of the reasons which stated :-

"3. Subsection 89(3) envisages that costs and expenses will be incurred in complying with Part 3 requirements. However, unlike subsection 89(1), the legislation confers no prima facie entitlement to payment of those costs and expenses upon establishment that they were incurred. Subsection 89(3) confers upon the Commission a discretion as to whether it will make a payment in a particular instance. This is consistent with the general principle that the obligation to comply with compulsory requirements under Part 3 of the ASC Law, including the production of documents is an incident of being a citizen, including being a corporate citizen. In the usual event the person bears the cost of complying with such requirements although subsection 89(3), allows for the payment of the person's costs in particular instances.

.....

6. The ERC Committee noted that payment of claims under section 89(3) of the Law must be met from the same pool of resources available for substantive investigations initiated pursuant to Part 3 of the ASC Law. As the funds allocated to the ASC are limited a constraint is imposed on the amount the Commission can allocate to the cost of investigations.

7. In light of the clear legislative intent and in view of limited resources available, the ERC Committee considered that expenses incurred in complying with Part 3 of the ASC Law, other than the allowances and expenses prescribed under the Regulations, should ordinarily be met by the person involved. These obligations apply whether the person involved is a natural person or a corporation. This burden is a consequence of the obligations of all citizens."

(Emphasis added)

At the outset it is to be noted that the decisionmaker did not draw any distinction between "innocent" or "guilty" persons. Rather, the legislative policy that the decisionmaker perceived as inherent in Part 3 was one applicable to all citizens who were required to comply with the requirements under the Part. Counsel for the ASC submitted that in the absence of s 89(1) and s 89(2) there would be no entitlement to payment of allowances or expenses, nor, in the absence of a favourable exercise of discretion under s 89(3), any entitlement to payment of such amount as the ASC thinks reasonable on account of costs and expenses incurred by compliance. Thus, it was submitted, the discretion was intended by the legislature only to operate in circumstances where the general rule - that persons bear the costs of compliance as a burden of citizenship - does not apply viz in exceptional circumstances.

For reasons which I have set out above, there is no common law principle or entitlement to payment for the costs and expenses of the type incurred in the present case as has been contended for by Westpac. In the absence of some express legislative provision providing for the recovery of those costs or an inherent power to condition the obligation to comply with the payment of the cost and expense associated with compliance (eg the power identified by Lockhart J in John Dee (Export) Pty Ltd) at common law such costs are to be borne as "an inherent burden of citizenship" (see Bank of New South Wales v Withers at 225 citing Wigmore on Evidence 3rd Ed; Pyramid Building Society (in liq) v Farrow Finance Corporation (in liq) at 466 and Equiticorp Finance Ltd; Ex parte Brock [No 2] at 396).

In the instant case, the legislature has made specific legislative provision on the issue of costs and expenses of compliance. In so doing it has expressed an intention that the general rule that the costs and expenses of compliance are to be borne by the citizen is not to apply. Rather, the question of recovery of costs and expenses incurred by a person in complying with the requirements of the ASC under Part 3 is to be determined by reference to the statutory provisions construed in accordance with the ordinary canons of statutory interpretation.

There is therefore no warrant to interpret s 89(3) of the Act with a bias against the exercise of the discretion in other than the exceptional case or to give effect to a general common law rule which the legislature clearly intended to abrogate in the circumstances covered by Part 3 of the Act. The Part is totally neutral in its terms as to how the discretion is to be exercised. This has two consequences. The first is that the discretion being unconfined, except insofar as there may be found in the subject matter scope and purpose of the statute some implied limitation on the factors to which the decisionmaker may legitimately have regard, the factors that may be taken into account by the decisionmaker are similarly unconstrained (per Mason J in Minister for Aboriginal Affairs v Peko-Wallsend Limited [1986] HCA 40; (1986) 162 CLR 24 at 40). The second is that the Court will presume that the legislature intended that the discretion would not be exercised in such a way as to lead to an injustice (see R v Tower Hamlets London Borough Council Ex parte Chetnik Developments Ltd [1988] 1 AC 858 at 877). On each occasion the exercise of the discretion falls to be considered, the ASC must consider whether the exercise, or refusal to exercise the discretion, will result in an injustice to the person who seeks a favourable exercise of it. Otherwise, it is for the ASC to decide the factors to be taken into account and the weight to be attached to each factor (Peko-Wallsend at 41; Sean Investments v Mackellar (1981) 38 ALR 363 at 375).

To the extent that the decisionmaker erroneously presumed the operation of an underlying legislative intention or policy that the discretion was not intended to be exercised in other than exceptional circumstances and thereby fettered the exercise of the discretion to give effect to that presumed intention or policy, the decisionmaker erred. That does not mean however that in determining any particular application for payment, for the ASC to treat and weight as a relevant factor that there are some burdens inherent in citizenship for which a person is not indemnified nor compensated would be an error. Nor does it mean that to treat and weight it as a factor, in the formulation of any general policy or guidelines on, when and in what amount payment will be made would not be an error. The two situations are different.

Although it is unnecessary to do so I will express my view on the further arguments of Westpac lest it take the same objections on any other occasion the ASC is called upon to exercise the discretion under s 89(3) of the Act in favour of Westpac.

For the reasons which I have set out above, a discretionary power is given by s 89(3) of the Act to relieve a person from the costs and expenses incurred in compliance in such amount as the ASC thinks reasonable. Whenever a person is put to cost and expense in order to comply with a requirement of the ASC under the Part, that person is thereby adversely affected in the enjoyment of his or her wealth and economic pursuits. Section 89(3) is not as a matter of course to be construed, or to operate, as an entitlement to be relieved of that detriment by a favourable exercise of the discretion. If that were intended an entitlement in terms similar to s 89(1) and s 89(2) could have been provided for. Nor, is there room for the adoption of any rule of construction to give effect to the principle against penalisation under a doubtful law so that a power to take advantage of an enactment in the hope of a favourable exercise of the discretion (to apply for the exercise of the discretionary power in s 89(3) of the Act) is converted into an entitlement to payment or a right to have the discretion exercised in one way only, namely to determine to pay the costs and expenses incurred in compliance with the requirements of the ASC (as to the distinction see Mathieson v Burton [1971] HCA 4; (1971) 124 CLR 1 at 23; Esber v The Commonwealth [1992] HCA 20; (1992) 174 CLR 430 at 439 - 440).

Whether or not there is a general guarantee against civil conscription to be implied in the Australian Constitution is unnecessary to determine. In my view simply because a requirement to produce for inspection by the ASC documents in the possession or power of a person gives rise to administrative work additional to that ordinarily carried out by Westpac in its business of banker, does not convert that incidental administrative work into the compulsory provision of services as an investigator by Westpac nor convert compliance with the requirement into the compulsory provision of investigatory services to the ASC (see the reasoning of Gibbs J with whose analysis Barwick CJ, Stephen, Mason and Murphy JJ agreed as to what constituted civil conscription in the circumstances in General Practitioners Society v The Commonwealth at 560).

As to the decisionmaker having regard to the resources available to the ASC, Westpac submitted that there was no evidence that the resources available for investigation were limited other than by appropriation by Parliament or that payment of the costs and expenses of Westpac would adversely effect its ability to undertake substantive investigations. Affidavit material read on the application by Westpac sought to contrast its claim for $3,037.28 against a budget appropriation of $125 million for the year 1994/1995 and against the circumstance that in that year only sixteen applications for payment were made, the average claim being $4,067. It was irrelevant, Westpac submitted, that proper claims to be reimbursed the costs and expenses diminished the pool of funds available for substantive investigations. This was so because the payment of such costs and expenses were part of the costs of the investigation and intended to be met from funds appropriated for that purpose.

It cannot be said, in my view, that the impact of calls for payment of the costs and expenses of compliance by persons with the ASC's requirements under Part 3 upon the resources of the ASC and its ability to discharge its statutory functions is an irrelevant consideration. Nor is it impermissible to formulate some general policy or guidelines relating to when the ASC will exercise the discretion in s 89(3) in favour of an applicant for payment (Drake v Minister for Immigration and Ethnic Affairs [1979] AATA 179; (1979) 46 FLR 409 at 420) provided that such a policy or guidelines are not uncritically applied in every case without an independent assessment of all the circumstances of the particular case (Minister for Immigration v Gray [1994] FCA 1052; (1994) 50 FCR 189 at 206).

Outcome on the Application for Review

Westpac is entitled to have the decision of the ASC not to pay the sum of $3,037.28 set aside and to have the matter remitted to the ASC for decision in accordance with these reasons. However, Westpac is not entitled to the declaration which it sought having failed to make out that it had either at common law or under Part 3 of the Act an entitlement to payment by the ASC of the reasonable costs and expenses in complying with the notices.

Westpac although succeeding on an issue which entitles it to have the decision set aside failed substantially on the other issues which it sought to argue. The justice of the case as between the two parties is best served in my view by making no order as to costs of the application thereby leaving each party to bear its own costs.

I certify that this and the preceding twenty-seven (27) pages are a true copy of the reasons for judgment of his Honour Justice Cooper.

Date: 10 February 1997

Associate

Counsel for the Applicant: P A Keane QC with him J C Sheahan and R L Seiden

Solicitors for the Applicant: Allen Allen & Hemsley

Counsel for the Respondent: J D M Muir QC with him J D McKenna

Solicitors for the Respondent: Australian Securities Commission

Date of Hearing: 23 July 1996

Place of Hearing: Brisbane

Date of Judgment: 10 February 1997