Rich and Australian Securities and Investments Commission [2003] AATA 1339 (23 December 2003)

Last Updated: 5 January 2004

DECISION AND REASONS FOR DECISION [2003] AATA 1339

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2003/532

GENERAL ADMINISTRATIVE DIVISION	)
	Re	JOHN DAVID RICH

Applicant

And

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Respondent

DECISION

Tribunal

Justice Garry Downes, President

Date 23 December 2003

Place Sydney

Decision

The Tribunal decides that the applicant is entitled to be furnished with a statement from the respondent setting out the findings on material questions of fact, referring to the evidence or other material on which the findings were based and giving reasons for the decision conveyed by the respondent's letter to the applicant dated 16 January 2003.

...............................................

President

CATCHWORDS

CORPORATIONS - Tribunal has jurisdiction to review decisions by the Commission under s 536 of the Corporations Act 2001 - Commission's conduct under s 536 of the Corporations Act 2001 amounted to a decision.

PRACTICE AND PROCEDURE - applicant entitled to statement of Commission's reasons - Administrative Appeals Tribunal Act 1975 (Cth) s 28 - Tribunal would have jurisdiction to review Commission's decision - applicant taken to have standing.

Administrative Appeals Tribunal Act 1975 (Cth) s 27, s 28

Australian Securities and Investments Commission Act 2001 (Cth) subs 11(4)

Corporations Act 2001 (Cth) s 536, s 1317B

REASONS FOR DECISION

23 December 2003

Justice Garry Downes, President

1. John David Rich complained to the Australian Securities and Investments Commission, pursuant to s 536 of the Corporations Act 2001, about the conduct of liquidators. He requested the Commission to inquire and take action. The Commission decided to take no further action; confirming an earlier decision not to take any action. Mr Rich requested the Commission to furnish a statement of reasons pursuant to s 28 of the Administrative Appeals Tribunal Act 1975.. The Commission declined. Mr Rich applied to this Tribunal to determine whether he was entitled to a statement of reasons. In my opinion Mr Rich is entitled to such a statement.

2. In September 2002 solicitors acting for Mr Rich wrote to the Commission raising concerns with respect to the liquidators of One.Tel Ltd. A series of letters were subsequently exchanged. The Commission communicated with the liquidators about the subject matter of the complaint. The Commission was not motivated solely by Mr Rich's complaints. The chairperson of the Commission was involved. Three issues concerned the Commission. It sought and received responses on each of these from the liquidators. By letter dated 6 November 2002 Mr Rich's solicitors identified three specific areas of concern. These were different to the three issues referred to above. These concerns were addressed by the Commission. A file note of the Commission of 13 November 2002 records the following:

"The three issues of concern to [the solicitors for Mr Rich] have been considered and having considered the responses to our inquiries from the liquidators, our concerns are satisfied and therefore no further action is required."

On the same day the Commission wrote to the solicitors in response to the letter of 6 November:

"... ASIC has conducted its own enquiries into the issues raised in your letter.

"These enquiries have been completed to ASIC's satisfaction. Unless further information comes to hand which causes ASIC concern, it is not intended to take any action in respect of the Liquidators' conduct."

3. On 20 December 2002 Mr Rich wrote personally to the Commission again raising the three matters covered by the 6 November letter. The letter contained a number of attachments. The concluding paragraphs of the letter included the following:

"I now wish to have my complaints about the Liquidators' conduct dealt with by ASIC on a more formal basis. Pursuant to the provisions of section 536 of the Corporations Act I wish to formally complain to ASIC with respect to the conduct of the Liquidators' in connection with the performance of their duties particulars of which are contained in the earlier letters from Ebsworth & Ebsworth and in this letter.

"I request ASIC to inquire into the matter and to take such action as it thinks fit."

The Commission replied on 16 January 2003. The letter included the following:

"The attachments A to D to your letter have been previously seen and were considered by ASIC in reaching its decision of 13 November 2002 not to take any action in respect of the Liquidators' conduct.

...

"We have also reviewed the Liquidators' Annual Report dated 14 November 2002 ... and remain satisfied that the intended action of the Liquidators, as disclosed to creditors, is appropriate at this time.

"On our reading of your letter, your main concern appears to be about the Liquidators' decision not to further investigate the renounceable rights issue. This issue has been raised in your defence to ASIC's proceedings and will be the subject of review by the Court. Under these circumstances the Liquidators have decided to await the outcome of the litigation before considering any further action and this decision has been agreed by the Committee of Inspection.

"Section 536 of the Act is a discretionary section and based on the information presently in ASIC's possession we remain satisfied with our enquiries and do not intend any further action unless further information comes to hand which causes ASIC concern. However, if you have further relevant information, which you believe is not already held by ASIC, we invite you to provide it for our consideration."

4. By letter dated 11 February 2003 Mr Rich requested the Commission to provide "a statement of reasons for its decision not to investigate this matter further" pursuant to s 28 of the Act. The Commission replied on 14 February 2003 refusing to provide reasons. It accepted that the Commission's "decision not to take further action" was "a decision as defined in subsection 3(3) of the AAT Act" but asserted that the decision was not "'a decision made under this Act' as provided in subsection 1317B(1) of the [Corporations] Act" because the power to make the decision came from subs 11(4) of the Australian Securities and Investments Commission Act 2001 and not from the Corporations Act 2001.. As such it was not subject to review and there was no provision requiring reasons to be given.

5. Section 1317B(1) of the Corporations Act confers jurisdiction on this Tribunal "for review of a decision made under this Act by ... ASIC ..." Section 28 of the Act entitles persons "entitled to apply to the Tribunal" for review of "a decision in respect of which an application may be made to the Tribunal for a review" to "request ... a statement in writing setting out the findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving the reasons for the decision".

6. On 31 March 2003 Mr Rich commenced proceedings to challenge the decision of the Commission not to provide a statement of reasons. In form the application is an application for review. However, the body of the application shows that it is not an application for review of the substantive decision of the Commission not to enquire but an application under subs 28(1AC) of the Act for a decision "whether the applicant was, or was not, entitled to be furnished with the statement."

7. Applications for review must be made within 28 days of the decision. An issue has been raised as to whether Mr Rich's application is out of time. However, there does not seem to be any time limit for applications under subs 28(1AC). Accordingly, the application is not out of time. In any event, I understand the Commission only to oppose an extension of time on the ground that the application must fail. I would grant an extension of time if one were necessary.

8. Prior to the hearing the applicant sought the issue of a summons addressed to the Commission to produce a number of documents. The Commission opposed the application. On 24 September 2003 I granted leave for the issue of the summons on the basis that I would determine during the hearing whether the documents to be then produced should be made available to Mr Rich and his advisors.

9. The documents were produced to the Tribunal during the hearing. The Commission opposed their production to the applicant. The ground of opposition was that the applicant was not entitled to any reasons because the Tribunal had no jurisdiction to review the decision of the Commission and nothing in the documents could change this. The basis for this argument was broadly the argument put in the Commission's letter of 14 February 2003.

10. I heard argument on this issue on an interlocutory question as to whether the documents should be produced to the applicant. I ruled that they should. My reasons for this decision were given on 13 October 2003. The oral reasons have been reduced to writing. I affirm them. They should be taken to be incorporated in these reasons.

11. The effect of my earlier reasons is that decisions under s 536 of the Corporations Act are amenable to review in this Tribunal pursuant to s 1317B of the Corporations Act. However, although this conclusion involves the rejection of the Commission's major argument it does not follow, as I pointed out in my earlier reasons, that the applicant must succeed.

12. Standing to apply to the Tribunal for review of decisions is only conferred on "persons ... whose interests are affected by the decision" (s 27). It has not been suggested that Mr Rich was not so affected. However, there is no evidence as to his precise association with One.Tel. The reasons given for refusing a statement of reasons do not suggest that Mr Rich was not affected by the decision. No submission to that effect was put to me either orally or in written submissions. In the circumstances, I will proceed on the basis that Mr Rich has standing before the Tribunal.

13. Jurisdiction to review conduct under s 536 of the Corporations Act will only arise when a decision has been made under the section. Section 536 specifically permits complaints to be made to the Commission by any person relating to the conduct of liquidators. The section provides that the Commission "may inquire" and where it inquires "the Court may take ... action".. There are accordingly two kinds of decision which may be made under the section, namely decisions whether to inquire and decisions flowing from an inquiry. An inquiry may itself involve a number of decisions. Where a decision is made not to inquire there will be no occasion for the second kind of decision to be considered.

14. The section does not permit the Commission to act after an inquiry but empowers the Court to act. Subsection 536(2) empowers the Commission to report misfeasance, neglect or omission to the Court whereupon the Court can act. The provision in subs 536(1) that where the Commission inquires the Court may act must presuppose an application by the Commission to the Court under subs 536(2). Such an application would be the outcome of what I have described above as the second kind of decision.

15. There are a number of circumstances which can lead to decision-making under s 536. Complaint to the Commission is one of them. However, the mere fact that the Commission makes some inquiries relating to the conduct of a liquidator does not mean that it is acting under s 536. In every case an initial question as to whether s 536 has been invoked will arise.

16. It seems to me that the question of whether s 536 has not been invoked can arise even though there is a complaint and even though the complaint refers to s 536. To my mind, though they may be rare, there will be occasions when a complaint is made purporting to be under s 536 which on its face does not have sufficient merit to warrant making a decision whether or not to inquire. In these circumstances the Commission will be competent to decide not to act at all on the complaint, not even to consider if a s 536 inquiry should be held. That is not to say that no decisions not to inquire will be decisions under s 536. The test is not whether the decision is positive or negative, but whether it is a decision following consideration under the section.

17. In the present case it is necessary to focus on the letter of 20 December and the reply of 16 January. It was the letter of 20 December which was the complaint under s 536 and, if there was a decision under s 536, it is evidenced by the letter of 16 January.

18. The 16 January letter does not suggest that the complaint has been peremptorily dismissed without consideration of s 536. It refers to s 536. It refers to the decision of 13 November. It refers to review of that decision by reference to material not published until 14 November. It states that the Commission remains satisfied with its inquiries and decision. The paragraph set out from the letter above commencing "On our reading of your letter ..." appears to involve a new decision that a proposal of the liquidators, agreed by the Committee of Inspection, is part of the reasoning not to act.

19. One cannot ignore that the real thrust of the decision is that the matter had already been investigated and would not be further considered. However, that is really shorthand for review of the earlier decision without repeating the exercise in full. That seems to me to constitute the fresh decision a decision under s 536 in any event. It would be unfortunate if the decision of 13 November was protected from review in this Tribunal simply because no appeal to s 536 appeared in the letter of complaint. Although I do not need to decide this, it may be that the decision of 13 November itself could have been made the subject of a request for a statement of reasons pursuant to s 28.

20. In my opinion the decision not to take further action communicated by the letter of 16 January following from both fresh consideration of Mr Rich's complaint of 20 December and from reconsideration of the decision of 13 November amounts to a decision under s 536 of the Corporations Act which is subject to review.

21. Accordingly, I must decide pursuant to s 28(1AC) of the Act that the applicant John David Rich is entitled to be furnished with a statement in writing setting out the findings on material questions of fact, referring to the evidence or other material on which the findings were based and giving reasons for the decision conveyed by the letter from the Commission to Mr Rich dated 16 January 2003.

I certify that the twenty-one (21) preceding paragraphs are a true copy of the reasons for the decision herein of Justice Garry Downes, President

Signed: .......................................................................................

Associate

Date of Hearing 13 October 2003

Date of Decision 23 December 2003

Counsel for the Applicant G Flick SC

Solicitor for the Applicant Joanne Kelly

Counsel for the Respondent R Henderson

Solicitor for the Respondent Australian Securities and Investments Commission