Quinlivan v Australian Securities and Investments Commission [2010] FCAFC 161 (23 December 2010)

Last Updated: 23 December 2010

FEDERAL COURT OF AUSTRALIA

Quinlivan v Australian Securities and Investments Commission [2010] FCAFC 161

Citation:		Quinlivan v Australian Securities and Investments Commission [2010] FCAFC 161
Appeal from:		Quinlivan and Australian Securities and Investments Commission [2010] AATA 113
Parties:		DUDLEY JAMES QUINLIVAN v AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
File number:		QUD 78 of 2010
Judges:		DOWSETT, GREENWOOD AND GILMOUR JJ
Date of judgment:		23 December 2010
Catchwords:		CORPORATIONS – disqualification under s 206F of the Corporations Act 2001 (Cth) – whether and how delay in issuing show cause notice relevant – relevance and significance of failure of related companies – whether and how conduct in relation to companies not specified in show cause notice relevant
Legislation:		Administrative Appeals Tribunal Act 1975 (Cth) Corporations Act 2001 (Cth)
Cases cited:		Culley v Australian Securities and Investments Commission [2010] FCAFC 43; (2010) 183 FCR 279 approved Culley v Australian Securities & Investment Commission [2010] HCASL 282 cited Kardas v Australian Securities Commission [1998] FCA 1381; (1998) 53 ALD 303 discussed
Date of hearing:	12 August 2010
Place:	Brisbane
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	47
Counsel for the Appellant:	Mr I Temby QC with Mr G Radcliff
Solicitor for the Appellant:	Robinson & Robinson
Counsel for the Respondent:	Mr R Derrington SC with Mr D Chesterman
Solicitor for the Respondent:	Australian Securities and Investments Commission Litigation Counsel

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION	QUD 78 of 2010

ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN:	DUDLEY JAMES QUINLIVAN Appellant
AND:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Respondent

JUDGES:	DOWSETT, GREENWOOD AND GILMOUR JJ
DATE OF ORDER:	23 DECEMBER 2010
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The appeal be dismissed.
2. The appellant pay the respondent’s costs of and incidental to the appeal, including any reserved costs.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION	QUD 78 of 2010

ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN:	DUDLEY JAMES QUINLIVAN Appellant
AND:	AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Respondent

JUDGES:	DOWSETT, GREENWOOD AND GILMOUR JJ
DATE:	23 DECEMBER 2010
PLACE:	BRISBANE

REASONS FOR JUDGMENT

THE COURT:

INTRODUCTION

1. Section 206F of the Corporations Act 2001 (Cth) (the “Act”) provides:

(1) ASIC may disqualify a person from managing corporations for up to 5 years if:
(a) within 7 years immediately before ASIC gives a notice under paragraph (b)(i):
(i) the person has been an officer of 2 or more corporations; and
(ii) while the person was an officer, or within 12 months after the person ceased to be an officer of those corporations, each of the corporations was wound up and a liquidator lodged a report under subsection 533(1) (including that subsection as applied by section 526-35 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006) about the corporation’s inability to pay its debts; and
(b) ASIC has given the person:
(i) a notice in the prescribed form requiring them to demonstrate why they should not be disqualified; and
(ii) an opportunity to be heard on the question; and
(c) ASIC is satisfied that the disqualification is justified.

(1A) To avoid doubt, the references in paragraph (1)(a) to corporations include references to Aboriginal and Torres Strait Islander corporations.

(2) In determining whether disqualification is justified, ASIC:
(a) must have regard to whether any of the corporations mentioned in subsection (1) were related to one another; and
(b) may have regard to:
(i) the person’s conduct in relation to the management, business or property of any corporation; and
(ii) whether the disqualification would be in the public interest; and
(iii) any other matters that ASIC considers appropriate.

(2A) To avoid doubt, the references in subsection (2) to a corporation includes a reference to an Aboriginal and Torres Strait Islander corporation.

(3) If ASIC disqualifies a person from managing corporations under this section, ASIC must serve a notice on the person advising them of the disqualification. The notice must be in the prescribed form.

(4) The disqualification takes effect from the time when a notice referred to in subsection (3) is served on the person.

(5) ASIC may give a person who it has disqualified from managing corporations under this Part written permission to manage a particular corporation or corporations. The permission may be expressed to be subject to conditions and exceptions determined by ASIC.

2. On 11 August 2008 a delegate of the respondent (“ASIC”) gave a notice (the “notice”) to the appellant (“Mr Quinlivan”) pursuant to s 260F(1)(b)(i). The notice related to 15 companies of which Mr Quinlivan had been an officer. All of those companies had been wound up. In each case the liquidator had made a report pursuant to s 533(1) of the Act concerning the company’s inability to pay its debts. The notice called on Mr Quinlivan to show cause why he should not be disqualified from managing a corporation. We understand it to be accepted that the notice complied with the express requirements of s 206F(1). At a hearing held on 7 November 2008, Mr Quinlivan appeared by counsel but did not attend in person. Following the hearing ASIC’S delegate disqualified Mr Quinlivan from managing a corporation for a period of three years.
3. Mr Quinlivan sought review of that decision in the Administrative Appeals Tribunal (the “Tribunal”). The matter was heard on 16-18 and 25 March 2009, 23 June 2009 and 25 August 2009, the Tribunal being constituted by the Hon Dr BH McPherson CBE, a deputy president, and Mr BJ McCabe, a senior member. ASIC submitted that the period of disqualification should be increased to five years. The Tribunal affirmed the delegate’s conclusion that Mr Quinlivan should be disqualified and increased the period of disqualification to five years. It published extensive reasons. Mr Quinlivan now appeals to this Court pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the “AAT Act”). Section 44 limits such appeals to questions of law.

NOTICE OF APPEAL

4. At the hearing of the appeal Mr Quinlivan was given leave to amend the notice of appeal so that the relevant questions of law are:

2.1. Whether the AAT erred in law in construing s. 206F of the Corporations Act as making relevant to the decision whether and when to issue a Show Cause Notice the question whether the companies the subject of the notice were or might be related.

2.2. Whether the AAT erred in law in failing to answer the question whether or not such companies were related, as required by s. 206F(2)(a).

2.3. Whether the AAT erred in law by denying the appellant procedural fairness in that on the hearing of a review from an ASIC decision which was based on a Notice to Show Cause and accompanying documents specifying only matters relating to 15 named companies, it permitted ASIC to go outside that notice and those documents and raise questions concerning other companies and the appellant’s conduct in relation to them.

2.4. Whether the AAT erred in law in disqualifying the appellant by failing to take into account a relevant consideration, namely the delay that had occurred between the date on which the show cause notice could have issued and the date of the disqualification.

2.5. Whether the AAT erred in law in giving inadequate reasons.

5. Leave to amend was granted on the basis that the amended questions of law did not extend Mr Quinlivan’s case beyond that addressed in his outline of submissions. Grounds 2.3 and 2.5 were not pressed.

NOTICE OF CONTENTION

6. ASIC, by notice of contention, asserts that:
   1. The Tribunal ought to have held that the only requirement for the giving of a valid Notice pursuant to subsection 206F(1) of the Corporations Act 2001 (Cth) is that the Notice be given by the [Commission] to the relevant person not later than the expiry of the seven year period during which the events referred to in paragraph 206F(1)(a) occurred.
      
   2. The Tribunal erred in holding that there is an implied obligation or requirement in subsection 206F(1) of the Corporations Act 2001 (Cth) to the effect that in order for the [Commission] to give a valid a [sic] notice, the notice must be given to the relevant person within a reasonable period of time after the occurrence of the events referred to in paragraph 206F(1)(a).

THE TRIBUNAL’S REASONS

7. We should mention one preliminary matter. Whilst ASIC, in its notice to Mr Quinlivan, identified 15 companies in liquidation, only 14 of them are referred to in the Tribunal’s reasons. There is no reference to Creditlink Finance Pty Ltd. Mr Quinlivan does not suggest that this omission is of any relevance.
8. The Tribunal commenced with a very general summary of Mr Quinlivan’s experience as a company director, pointing out that:
   • Numerous corporations of which he was a director had been wound up in insolvency, commencing in the early 1990s;
   • the Commissioner of Taxation was the principal external creditor in most of those cases;
   • Mr Quinlivan had, himself, been bankrupt on two occasions, in 1981 and 1994, and had entered into a Pt X arrangement under the Bankruptcy Act 1966 (Cth) in 1992.
9. The Tribunal then outlined Mr Quinlivan’s history as a tradesman and property developer. The Tribunal identified three groups of insolvent companies with which Mr Quinlivan had been concerned. The first group comprised companies which were wound up in insolvency in the early to mid-1990s. The second group comprised the companies identified in the notice. They were wound up in insolvency between 2002 and 2007. The third group comprised companies with which Mr Quinlivan has been involved since 2007. Concerning the first group, Mr Quinlivan sought to explain the difficulties which his companies had encountered in the 1990s, leading to their liquidation. The Tribunal concluded that although some of his explanations had substance, there was nonetheless “enough evidence to conclude that poor management was also a factor in the failure of the companies”. It pointed out that liquidators’ reports had referred to poor record-keeping and inappropriate use of funds and that:

... there is evidence to suggest the companies unwisely incurred debt during periods of high interest rates when a more conservative approach might be warranted. Given Mr Quinlivan played a central role in those companies, he must bear at least some responsibility for what happened.

10. As we have said, Mr Quinlivan was bankrupted in 1994. He resumed his business career in 1998, after his discharge from bankruptcy, establishing a company called “National Consolidated Investments Pty Ltd”. It was involved in marketing property developments, apparently successfully. However Mr Quinlivan also developed a network of companies providing services to one another, for which services inter-company charges were made. Those companies comprised the group identified in the notice. The Tribunal concluded that:

As a result, each company ran up large debts owed to other companies in the group. Many of them had no other clients or debts, apart from those owed to the Commissioner of Taxation.

11. As we have said, they were wound up between 2002 and 2007. Mr Quinlivan said that the group’s problems began in August 2001 when the “Courier Mail” newspaper commenced to report adversely concerning its operations. Such bad press was a disaster for the group’s business. The group was also defrauded by an employee. The various companies accumulated substantial liabilities to the Commissioner of Taxation. Subsequently, the Australian Competition and Consumer Commission (the “ACCC”) asserted that the companies’ marketing practices contravened the provisions of the Trade Practices Act 1974 (Cth). There was litigation in which, as Mr Quinlivan claimed, he was successful, but the damage to his reputation had already been done. Companies within the group began to fail in 2002. The Tribunal noted that the liquidators’ reports concerning these companies identified their failure to keep appropriate financial records. In the case of Scottsdale Homes (No 10) Pty Ltd the liquidator also found that the company had traded whilst insolvent. None of the companies had any assets.
12. At the time of the hearing Mr Quinlivan was trading through other companies, comprising the third group. He said that he is now “squarely in the business of property development”. His projects are being carried out by nine companies which form the core of his development group, the largest being Corymbia Corporation Pty Ltd (“Corymbia Corporation”). These companies have assets. They also owe substantial debts, both secured and unsecured. The Commissioner of Taxation is, again, a substantial creditor. The Tribunal noted that “individual companies associated with Mr Quinlivan continue to flounder”. Scottsdale Homes (No 3) Pty Ltd was placed in administration on 12 November 2008. It had a tax debt in the amount of $660,177.88. In March 2009 Mr Quinlivan arranged for a reduction in such debt in order to avoid the appointment of a liquidator. Another company, Remi Lane Marine Charters Pty Ltd (“Remi Lane Marine”), possesses a yacht which is moored outside Mr Quinlivan’s home. He said that the vessel was available for charter but it had only been chartered on one occasion. The Tribunal concluded:

It is not clear what the company does at present, although it has managed to accrue a tax debt (including penalties) in the amount of $1,499,603. Its obligation to pay $23,000 each month to the financier of the boat is currently being met by someone else – perhaps by Mr Quinlivan himself, or by other companies in the wider Quinlivan group. At the hearing in March, Mr Quinlivan claimed he was in the process of making arrangements to pay the tax debt. Within a matter of days of making that claim, the company was placed in voluntary administration. The administrators were appointed on 26 March, shortly after the Commissioner of Taxation served the company with a winding up application. The Administrator’s Report as to Affairs observed:

• the company is owed $2,384,458 by other companies controlled by Mr Quinlivan – but added it was unclear whether those amounts were recoverable;
• the company owes other companies in the wider group $2,541,374 in respect of intercompany loans; and
• the company appears to have been insolvent since at least November 2008.
  

13. The creditors of the company approved a deed of arrangement, delaying payment of the tax debt for a period of 12 months. The Commissioner of Taxation voted against this deed but was out-voted by other group companies. Within the 12 month period there was to be an advance from Corymbia Corporation, once that company had secured its own “long promised loan facility”. The Tribunal noted that Corymbia Corporation had its own problems. An administrator was appointed on 26 June 2009, at about the same time as the Commissioner of Taxation filed a winding up application in this Court. The Commissioner was owed $2,951,513 although, at that stage, he sought to recover only $1,194,088.35. The company had assets (principally land) valued at over $63 million but debts totalling over $70 million. It entered into a deed of arrangement with its creditors on 10 August 2009. The deed provided for loans from two other group companies in the amount of $1.2 million and $359,000. Corymbia Corporation’s debts to other group companies were to be forgiven.
14. On 4 June 2009 the Commissioner of Taxation obtained a judgment against Remi Lane Investments Pty Ltd (“Remi Lane Investments”) in the amount of $4,241,536.12, after the company had failed to comply with earlier arrangements allowing it time to meet its obligations. It was placed in administration on 2 July 2009. The first meeting of creditors was told that it had debts of $17,889,610, of which the amount of about $4.7 million was owed to the Commissioner. Most of the other debts were owed to other group companies. Its only assets were debts owed by other group companies. Shortly after the Commissioner obtained judgment, it transferred real estate worth about $25 million. The company entered into a deed of arrangement on 20 August 2009, postponing payment of the first half of its debts for 12 months, with the balance due in 18 months.
15. Another group company, Corymbia Estates Pty Ltd (“Corymbia Estates”), owes $90,961.11 to the Commissioner, representing sums owing as unpaid GST and pursuant to a superannuation guarantee charge. The Commissioner commenced winding up proceedings on 20 July 2009. The company then entered into a repayment arrangement. It has experienced trouble in meeting its commitments under that arrangement. It has also been unable to pay $789,245 to Remi Lane Marine pursuant to the latter company’s deed of arrangement. ASIC estimated that the Commissioner of Taxation is currently pursuing Remi Lane Marine, Remi Lane Investments, Corymbia Corporation and Corymbia Estates for debts totalling $7,026,187.58. The Tribunal found that debts owed to the Commissioner of Taxation were “just one component of the financial difficulties of these companies”. Corymbia Corporation owes a significant amount to financiers, including Equititrust, a company upon which the group appears to rely heavily for its finance. Attempts to find other finance have met with difficulty.
16. Having so addressed Mr Quinlivan’s history of association with corporate failure from the early 1990s to the present time, the Tribunal addressed the causes of the failures between 2002 and 2007. It referred to adverse coverage of the group’s activities in the Courier Mail and a fraud perpetrated by the group’s chief financial officer, Mr Pavlovich. He had commenced work with the group in August 2001. The Tribunal observed that, prior to his employment, there had been little attempt to ascertain his qualifications for the job or his character. Mr Pavlovich took advantage of his position to steal significant amounts of money. His defalcations were discovered, and he was charged with criminal offences, said to involve misappropriation of amounts of $10,000 in 2002, $22,886.06 in 2003 and $344,615 in 2004. Mr Quinlivan asserted that he had misappropriated much larger amounts, but there appears to have been no other evidence to that effect. Mr Quinlivan said that Mr Pavlovich had also destroyed records in order to conceal his misconduct. Such destruction had made it difficult to administer the group’s affairs. The Tribunal concluded that although Mr Quinlivan and his companies had been victims of Mr Pavlovich’s fraud, such fraud had not played a significant role in “the demise of the group companies”. Reasons were given for this conclusion. The Tribunal was also satisfied that “Mr Pavlovich’s fraud was facilitated and exacerbated by the way in which Mr Quinlivan ran his companies”, and that the fraud was “not particularly sophisticated”.
17. The Tribunal expressed concerns about “Mr Quinlivan’s financial literacy”. It considered that he had focussed on the marketing side of the business “and had little time to involve himself in the minutiae of management and accounting”. Although he claimed to have met regularly with his managers and to have questioned them about the business, the Tribunal concluded that such questioning was neither extensive nor rigorous. The evidence also disclosed the absence of written records of inter-company agreements and loans. Such absence was a characteristic of the various corporate failures from the early 1990s until 2007. Mr Quinlivan produced some documentation relating to recent inter-company transactions, but the Tribunal considered that it was inadequate.
18. The Tribunal addressed the complex corporate structure adopted by Mr Quinlivan. It was unable to discern any legitimate tax advantage in such structure and considered that it only made “limited sense as an asset-protection strategy”. Mr Quinlivan suggested that it was administratively effective. The Tribunal appears not to have accepted this assertion. ASIC invited the Tribunal to conclude that the structure was devised “to protect Mr Quinlivan from liability”. On this analysis, the inter-company charges ensured that each company had sufficient “friendly” creditors able to vote at any creditors’ meeting considering the appointment of an external administrator or execution of a deed of company arrangement. The group structure also permitted Mr Quinlivan to decide whether to use the group’s resources to pay debts owed to the Commissioner of Taxation or to sacrifice a company so that its debt would go unpaid. The Tribunal observed, concerning these submissions:

While we acknowledge there is evidence consistent with that proposition, we do not think the material before us justifies us in going so far. But we are satisfied the evidence establishes Mr Quinlivan was an unsatisfactory director.

19. The Tribunal then referred to Mr Quinlivan’s evidence that he had not read many of the company documents which were put to him in cross-examination or understood their contents when he signed them. He also seemed to be unaware of the affairs of individual companies within the group. The Tribunal concluded:

We are satisfied [Mr Quinlivan] did not regard himself as having an active role in the management of the companies that subsequently failed. Those responsibilities were left almost entirely to subordinates like Mr Pavlovich, who were selected in a casual way and left effectively [un]supervised.

20. The word “supervised” appears at [58] of the Tribunal’s reasons but, clearly, the word should be “unsupervised”.
21. The Tribunal also concluded that:

Mr Quinlivan did not respond to signals that all was not well with his companies. He noted in the course of his evidence that he was aware of director penalty notices issued by the Commissioner of Taxation. Those notices indicated various companies were in default of their obligations. They should have caused him to investigate whether the group’s financial controls and personnel were working as intended. He did not do any of that: he merely handed the notices to Mr Pavlovich for his attention. He had a similar response when he became aware that the liquidators of some of the companies were not provided with the books and records they required to complete their investigations. He responded to the insistent correspondence by asking Mr Pavlovich to comply with the notices and provide the documents. Mr Quinlivan agreed in cross-examination that he did not follow up to ensure his instructions were obeyed or investigate how the problem arose.

22. The Tribunal then summarized its views concerning the failure of the group in 2002-2007. It accepted that external factors had played a part in such failure, but that cash flow difficulties and the high level of inter-company debt had also been substantial causes. It accepted that the group had been the subject of fraud but was not satisfied that the losses were as great as Mr Quinlivan had suggested. It observed that the cash flow problems were compounded by internal problems attributable to Mr Quinlivan, including the complex structure of the group, the poorly documented relationships between companies and “other examples of mismanagement”. It said that:

The task was made still more complicated by Mr Quinlivan’s preference for appointing himself as the sole director and secretary of most of the companies. That would be less of an issue if he were actively involved in the management of the companies and took time to appoint and supervise competent employees. But he did not. Mr Quinlivan was interested in sales, it seems, and his involvement in the affairs of the companies did not appear to extend beyond their contribution to the marketing operations of the group. He did not keep himself properly informed of their affairs, he did not always read what he had signed and he did not respond to information (eg, directors penalty notices from the Commissioner of Taxation or correspondence from the liquidators) which should have put him on notice of serious problems. At least some of the companies (eg, Scottsdale Homes No 10 Pty Ltd and Remi Morgan Burns Pty Ltd) had been trading while insolvent for some time before he appears to have noticed or responded.

23. In summary the Tribunal observed that Mr Quinlivan “has a poor track record in the management of companies”, that many had failed in insolvency and that the Commissioner of Taxation “has consistently featured as one of the major creditors”. It noted that a number of other companies had “narrowly averted liquidation when the tax debts of those companies had been settled at the last moment”, that a number of companies in the existing group owe significant amounts to the Commissioner and that a number are insolvent. It then concluded at [65]:

Mr Quinlivan appears to have limited insight into the causes of his failures in business. We were not satisfied he understood the extent to which his own shortcomings as a director and manager contributed to what occurred. In his evidence, he cast himself as the victim of unanticipated external events and forces. But in each case we have found that factors were either exaggerated, or their impact was exacerbated by his own shortcomings and misjudgments.

24. The Tribunal then referred to the Act, concluding at [72]:

We are satisfied there is ample evidence of Mr Quinlivan’s conduct that provides a basis for concluding he is not fit to be a director.

25. At [73] the Tribunal observed:

The repeated failure to remit group tax is particularly worrying. Those monies are like trust moneys in some respects ... . Special care should be taken with respect to monies which had been compulsorily deducted from the wages of employees. Those amounts are not like ordinary debts. Mr Quinlivan has a track record of failing to attend to his duty in this regard. It reflects poorly on his fitness to be a director.

26. At [74] and [75] the Tribunal considered the relationships amongst the companies identified in the notice. It acknowledged that it was required to have regard to that question, and that such requirement was “imposed to ensure that the director’s failures do not appear worse than they are just because the affairs of a single failed enterprise are carried on through several companies rather than one company”. It observed that:

It is no surprise that [the companies] might be affected when the business fortunes of the group changed. But the likelihood of failure of the individual companies was also increased by the intercompany debt arrangements. We also note that in at least one of the cases – that of Ausblue Pty Ltd – Mr Quinlivan was unable to explain why he decided to let the company fail rather than meet its taxation debt when he was able to do so.

27. At [75] the Tribunal concluded that any relationships amongst the companies did not cause it to form a different view of Mr Quinlivan’s conduct as a director. It noted, in particular, that Mr Quinlivan had made similar mistakes at other points in his business career “in relation to companies that have nothing in common with each other apart from the fact of his stewardship”.
28. The Tribunal then made some observations concerning the public interest and Mr Quinlivan’s assertion that he adopted quite different practices in conducting his current businesses. The Tribunal recognized that the public had an interest in encouraging enterprise and risk-taking, as well as an interest in ensuring that the management of corporations is conducted honestly, diligently and with skill. It also recognized the consequences for Mr Quinlivan of any disqualification, and the public interest in the completion of his existing projects. However the Tribunal considered that if he did not complete the projects, somebody else would probably do so. It considered the interests of employees, contractors and the group’s financiers. Some financiers had supported Mr Quinlivan’s continued involvement in group affairs. They considered that his removal would seriously disadvantage them and their depositors. The Tribunal accepted that disqualification would cause hardship to Mr Quinlivan and his family.
29. The Tribunal then dealt with the question of delay by ASIC in exercising its function pursuant to s 206F. The Tribunal accepted that the section required that ASIC act within a reasonable time. However it concluded that “unreasonableness” was a matter to be determined in the circumstances of each case. It concluded that ASIC’s explanation of the delay was such that it was not unreasonable.
30. Finally, the Tribunal considered whether or not Mr Quinlivan should be disqualified and the period of any such disqualification, concluding that he should be disqualified for a period of five years.
31. As can be seen from the above summary, the reasons are clear and detailed. There are significant and quite specific findings concerning Mr Quinlivan’s methods of operation. Although the proceedings necessarily focussed primarily upon events which occurred between 2002 and 2007, Mr Quinlivan’s history in corporate affairs covers a much longer period, commencing in the early 1990s and continuing to the present time.
32. We turn to the grounds of appeal identified in Mr Quinlivan’s written submissions and in the amended notice of appeal.

DELAY

33. In Mr Quinlivan’s amended statement of facts, issues and contentions in the Tribunal, the question of delay was treated as a matter which was relevant to the discretion to disqualify rather than to the power to do so. The Tribunal seems to have proceeded upon that basis. At para [68] it set out the text of s 206F(2) and then considered a wide range of matters, concluding, at paras [89]-[92], with a discussion of the question of delay. In the following paragraphs, under the heading “Should Mr Quinlivan be disqualified in all the circumstances”, the Tribunal summarized its conclusions, commencing with the words “After considering all of these matters ...”.
34. In the outline of argument on appeal Mr Quinlivan claimed that the Tribunal had:
    • failed to understand that it was an implied requirement of s 206F that a notice pursuant to s 206F(1)(b)(i) be issued within a reasonable time;
    • wrongly identified the delay as being for 15 months when it was, in fact, for 35 months;
    • wrongly took into account the possibility that the corporations identified in the notice might have been related; and
    • wrongly concluded that the delay could be excused.
35. We should explain the relevance of company relationships in the context of delay. Most of the s 533 reports were delivered to ASIC in 2005 or earlier. The last report was delivered in May 2007. The notice was not issued until August 2008. One of ASIC’s explanations for its delay in issuing the notice was that it was unsure whether any or all of the companies, in respect of which reports were delivered in or before 2005, were related. Such uncertainty was resolved by information contained in the report concerning Scottsdale Homes (No 10) Pty Ltd which was delivered in 2007. Mr Quinlivan submits that such relationships were not relevant to the decision to issue the notice, although they were relevant to the discretion to disqualify. He submits that any uncertainty about the question of relationships was therefore irrelevant to the delay in issuing the notice. The notice of contention also concerns the relevance of ASIC’s delay in issuing the s 206F(1)(b)(i) notice.
36. In the Tribunal Mr Quinlivan seems to have treated delay as relevant to the exercise of the discretion to disqualify, or at least that is the thrust of his outline of facts, issues and contentions. The Tribunal proceeded in that way. However it observed that the power to disqualify “must be exercised within a reasonable time” and that “(u)nreasonable delay might preclude the exercise of the power”. Mr Quinlivan points to this language and certain observations in the decision of Heerey J in Kardas v Australian Securities Commission [1998] FCA 1381; (1998) 53 ALD 303 as supporting the proposition that the power must be exercised within a reasonable time. On one reading of the decision in Kardas, it is authority for the proposition that ASIC must act within a reasonable time if it wishes to exercise the power to disqualify pursuant to s 206F. On another reading of the decision, it establishes only that delay may be relevant to the exercise of the discretion. In May 2010, the Full Court published its judgment in Culley v Australian Securities and Investments Commission [2010] FCAFC 43; (2010) 183 FCR 279. In that decision, especially at [49] and [50], the Full Court concluded that Kardas established only that delay was a relevant consideration in exercising the discretion to disqualify, and not a matter going to power. Although Mr Quinlivan invites us to overrule that decision, no reason has been shown for doing so. We are satisfied that the decision is correct, substantially for the reasons which the Full Court gave in that case. An application for special leave to appeal from the decision was dismissed by the High Court earlier this month (see Culley v Australian Securities & Investment Commission [2010] HCASL 282).
37. Once it is accepted that delay goes only to the exercise of the discretion, the validity of the reasons for delay in issuing the notice becomes a matter to be considered in that context. Mr Quinlivan raises a different “question of law” concerning the Tribunal’s treatment of delay in its exercise of the discretion. We will deal with the relationships question when we consider that question.

RELATED CORPORATIONS

38. Mr Quinlivan submits that the Tribunal erred in law in failing to make or explain findings as to whether any, and if so which, of the corporations identified in the notice were related, a matter to which it was to have regard by virtue of s 206F(2)(a). He submits that in order to consider the matter appropriately, the Tribunal was obliged to decide whether the companies were related and if they were, to identify the consequences. He submits that at [74]-[75] the Tribunal merely concluded that it did not matter either way, and that it therefore did not perform the appropriate task.
39. There is some difficulty in defining the term “related” in s 206F(2). It may depend upon the definition of the term “related entity” in s 9 of the Act or upon the definition of the term “related body corporate” in s 50 of the Act. However it does not matter for present purposes. In our view the Tribunal simply assumed that most, if not all, of the companies in question were related, and that they were acting together in conducting their businesses. The Tribunal understood that the purpose of the requirement in s 206F(2)(a) was to ensure that a person was not disqualified simply because two or more corporations, engaged in the same enterprise, had failed. That view of the provision has not been challenged on appeal. The Tribunal’s assumption was plainly in Mr Quinlivan’s favour. Treating such relationships as established, the Tribunal then concluded that they did not cause it to take a different view of Mr Quinlivan’s conduct as a director. The Tribunal pointed out that the way in which the business of the group had been conducted had contributed to the likelihood of failure. Further, Mr Quinlivan had allowed one company in the group to go into liquidation although he need not have done so. The Tribunal also referred to Mr Quinlivan’s unsatisfactory conduct with respect to the management of corporations other than those identified in the notice.

MR QUINLIVAN’S CONDUCT IN CONNECTION WITH OTHER CORPORATIONS

40. In his outline of submissions, Mr Quinlivan submits that the Tribunal erred in the weight given to Mr Quinlivan’s conduct in relation to corporations not identified in the notice. However, the real complaint seems to be that he should only have been required to demonstrate why he should not be disqualified having regard to his conduct in connection with the identified companies. He referred to paras [44]-[45] of the notice which state:
    44. By reasons of the matters referred to above, ASIC is concerned that you may have:
        

(a) Managed corporations such that they failed, were wound up and had deficiencies.

(b) Managed corporations such that tax, superannuation and other employee liabilities:

1. Were incurred and not paid.
2. Were incurred in circumstances where you intended to pay other liabilities and prior to such liabilities.
3. Were not paid in circumstances where other liabilities were paid.
   

45. It may not be in the public best interest to allow a person who is engaged in the above activity, to be concerned in the management of corporations.
    

41 In his amended notice of appeal, this ground becomes a complaint that the Tribunal failed to afford Mr Quinlivan procedural fairness, in that it considered material not included in the notice. As we have said, that ground was abandoned during oral argument. We infer that such abandonment included the ground identified in the outline of submissions. In any event s 206F(2)(b) demonstrates that ASIC may, in exercising the discretion to disqualify, take into account a wide range of matters, not limited to the content of the notice. It is no doubt obliged to ensure that the recipient of a notice is accorded appropriate procedural fairness, but it does not follow that only matters identified in the notice may be considered.

INADEQUACY OF THE TRIBUNAL’S REASONS

42. As we have said, this ground was abandoned in argument.

EXERCISE OF THE DISCRETION

43. Mr Quinlivan asserts that the Tribunal ought to have taken into account, in exercising its discretion to disqualify him, ASIC’s delay between the date when the notice “could have issued” and the date of disqualification. The Tribunal gave detailed consideration to the question of delay. In oral submissions on appeal counsel focussed on the Tribunal’s identification of a delay of about 15 months, submitting that the relevant delay was much longer. The first s 533 reports were received on 18 September 2005 and the last, on 10 May 2007. The notice was issued on 11 August 2008. Mr Quinlivan was notified of his disqualification on 21 November 2008. The Tribunal’s identification of a delay of 15 months related to the period from May 2007 until August 2008. The Tribunal accepted ASIC’s explanation of its delay from September 2005 until May 2007. As we have said, the Commissioner had been concerned about the question of company relationships. That concern was apparently resolved by the last s 533 report received in May 2007. However there was still an absence of relevant information. It seems that the s 533 reports were of only limited assistance because the companies had not kept proper records. Further, the liquidators had had insufficient funds to conduct appropriate enquiries. The parties also caused delay by the ways in which they conducted proceedings in the Tribunal.
44. The Tribunal identified the consequences of disqualification for various interested parties. At para 90, it recognized the risk that delay might affect third parties. The question of prejudice flowing from disqualification is, of course, to be distinguished from prejudice caused by delay. The fact that the delay had been explained was not conclusive of the matter. If such delay had caused prejudice to any person, then such prejudice would have to be considered. The only apparent prejudice arguably arising from any delay was to the financiers. The Tribunal recognized this possibility but nonetheless exercised its discretion in favour of making an order for disqualification. We see no error of law in the Tribunal’s consideration of this matter. No doubt the Tribunal also had regard to the protection which disqualification would provide to persons who might otherwise, in the future, deal with companies conducted by Mr Quinlivan, had he not been disqualified.
45. One other matter requires comment. It is Mr Quinlivan’s submission that ASIC’s delay in issuing the notice cannot be explained by its alleged concern about the question of inter-company associations. The basis of the submission is that the question was irrelevant to the decision to issue the notice. We do not agree. Inter-company association was a relevant consideration in the exercise of the discretion to disqualify. The procedure prescribed by s 206F is for the purpose of exercising that discretion. The notice simply commences the process. A relevant consideration in deciding whether a notice should be given is whether ASIC considers that disqualification may be a likely or appropriate outcome. In considering those matters it should consider all factors which may be relevant to the ultimate decision as they are known to ASIC. Given that inter-company association is a relevant consideration by virtue of the Act, it must be seen as being of some importance. The Tribunal did not err in law by accepting that uncertainty about that matter offered an acceptable basis for delay in issuing the notice, leading to delay in the final resolution of the disqualification process.

ASIC’S CONTENTIONS

46. As to the notice of contention we are not satisfied that the Tribunal committed the errors there alleged. We suspect that it identified the ambiguity in Kardas, which was subsequently identified by the Full Court in Culley, and proceeded accordingly.

ORDERS

47. The appeal must be dismissed with costs.

I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Dowsett, Greenwood and Gilmour.

Associate:

Dated: 23 December 2010