Porter v Australian Prudential Regulation Authority [2010] FCA 125 (25 February 2010)

Last Updated: 2 March 2010

FEDERAL COURT OF AUSTRALIA

Porter v Australian Prudential Regulation Authority [2010] FCA 125

Citation:	Porter v Australian Prudential Regulation Authority [2010] FCA 125
Parties:	ROSS DAVID PORTER and FIONA CAMPBELL SHAND v AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY and WARREN SCOTT
File number:	NSD 962 of 2009
Judge:	PERRAM J
Date of judgment:	25 February 2010
Catchwords:	INSURANCE – Notice of intention by regulator to investigate affairs of general insurer – Whether notice may be served on judicial manager of general insurer INSURANCE – Notice to produce to regulator books in possession of persons – Whether liable to be set aside ADMINISTRATIVE LAW – Notice of intention by regulator to investigate affairs of general insurer – Notice served on judicial manager of general insurer rather than on general insurer – Whether failure to serve means that ensuing decision to investigate affairs of general insurer afflicted by jurisdictional error CORPORATIONS – Judicial management – Whether service on judicial manager is service on a corporation
Legislation:	Acts Interpretation Act 1901 (Cth) s 25 Corporations Act 2001 (Cth) s 109X Federal Court of Australia Act 1976 (Cth) ss 5, 23 Federal Court Rules O 26 r 1 Insurance Act 1973 (Cth) ss 3, 52, 55, 62M, 62P, 62Q, 62R, 62S, 62T, 62U, 62X, 62Y, 62ZF Trade Practices Act 1974 (Cth) s 155
Cases cited:	Andrew Koh Nominees Pty Ltd v Receiver & Manager of the Balneum Joint Venture [2007] WASCA 152 cited Australian Retailers Association v Reserve Bank of Australia [2005] FCA 1707; (2005) 148 FCR 446 cited Burt, Boulton and Hayward v Bull [1895] 1 QB 276 cited Chaplin v Young (1862) 6 LT 97 cited De Grelle and Co v Bull and Ward (1894) 10 TLR 198 cited Different Solutions Pty Ltd v Commissioner, Australian Federal Police (No 2) [2008] FCA 1686 cited East Melbourne Group Inc v Minister for Planning [2008] VSCA 217 cited Re Flowers & Co [1897] 1 QB 14 applied Gibbs v David (1875) LR 20 Eq 373 cited Kennedy v Baker (No 2) [2004] FCA 809 cited Minister for Aboriginal Affairs v Peko-Wallsend Limited [1986] HCA 40; (1986) 162 CLR 24 cited Minister for Immigration and Citizenship v SZIZO [2009] HCA 37; (2009) 259 ALR 405 applied Re Minister for Resources; Ex parte Cazaly Iron Pty Ltd [2007] WSCA 175 cited Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1982) 57 FLR 368 cited R v Henderson & Warwick [2009] VSCA 136 cited Rosanove v O’Rourke [1988] 1 QdR 171 cited Seven Network Ltd v Australian Competition and Consumer Commission [2004] FCAFC 267; (2004) 140 FCR 170 cited University of Western Australia v Gray (No 6) [2006] FCA 1825 cited
Texts cited:	Daniell’s Chancery Practice (8th ed., Stevens and Sons, 1914) Vol. II
Date of hearing:	28 October 2009
Date of last submissions:	3 December 2009
Date of judgment:	February 2010
Place:	Sydney
Division:	General
Category:	Catchwords
Number of paragraphs:	59
Counsel for the Applicant:	Mr R R I Harper SC with Ms J E Richards
Solicitor for the Applicant:	Shand & Associates
Counsel for the Respondent:	Ms C E Adamson SC with Mr C L Lenehan
Solicitor for the Respondent:	Australian Prudential Regulation Authority

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 962 of 2009

BETWEEN:

ROSS DAVID PORTER First Applicant FIONA CAMPBELL SHAND Second Applicant

AND:	AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY First Respondent WARREN SCOTT Second Respondent

JUDGE:	PERRAM J
DATE OF ORDER:	25 FEBRUARY 2010
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The application be dismissed with 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
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 962 of 2009

BETWEEN:

ROSS DAVID PORTER First Applicant FIONA CAMPBELL SHAND Second Applicant

AND:	AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY First Respondent WARREN SCOTT Second Respondent

JUDGE:	PERRAM J
DATE:	25 FEBRUARY 2010
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. The applicants are a solicitor (“Ms Shand”) and her client (“Mr Porter”). On Thursday 20 August 2009 a delegate of the first respondent (“APRA”) signed a notice on its behalf which required Ms Shand to produce certain books in her possession “relating to the affairs of Australian Family Assurance Ltd” and which included a detailed specification of various categories of “books”. The notice called for production at APRA’s offices which are situated at level 26, 400 George Street, Sydney and to do so by 4.00pm on Friday 4 September 2009. APRA sought to serve the notice on the same day it was issued – Thursday 20 August 2009 – but Ms Shand was neither available that day nor the next. In the event APRA served the notice upon her the following Monday, 24 August 2009. On 27 August 2009 a delegate of APRA issued, and there was served, a related notice to Ms Shand’s client, Mr Porter.
2. Despite the dual issuance of notices, on 3 September 2009 Mr Porter and Ms Shand commenced these proceedings seeking orders only to set aside the notice issued to Ms Shand. Pending this determination, the time for compliance with the notice has apparently been extended.
3. Despite the breadth of the notice issued to Ms Shand, the ambit of the present dispute is relatively narrow and, in substance, concerns APRA’s entitlement to access a hard drive presently stored within a safe in Ms Shand’s office. That hard drive is a specially formatted image of the hard drive of Mr Porter’s own laptop computer. How an image of Mr Porter’s laptop computer’s hard drive came to be in Ms Shand’s safe requires a slight digression.
4. Mr Porter is a director of Australian Family Assurance Ltd (“Austfam”) and has been its managing director since 1989. A number of years ago Austfam ceased to write any new business and thereafter dealt only with claims arising from policies which had already been written, a state of affairs usually described as being in run-off. The reasons for this are no longer material. Prior to going into run-off Austfam had, in 2000, entered into an arrangement with another insurer, Trans Pacific Insurance Corporation (“TPIC”), pursuant to which TPIC had agreed to indemnify Austfam for its liabilities on a certain class of policies written between the years 1995 and 1999.
5. In June of 2009, TPIC went into liquidation which left Austfam potentially with an exposure to its policy holders in the period 1995 to 1999 to the extent that TPIC lacked the funds to honour its indemnity to Austfam.
6. APRA is responsible for the supervision of insurers such as Austfam. On 3 July 2009, it successfully applied to this Court for an order placing Austfam under judicial management and a judicial manager was appointed on the same day. The effect of the orders which were made was to divest all management functions from those formerly controlling Austfam and invest those functions immediately in the judicial manager: s 62T Insurance Act 1973 (Cth) (“the Act”).
7. The judicial manager acted swiftly to give effect to that mandate. During the afternoon of Friday 3 July 2009, immediately following his appointment, four of his staff attended Austfam’s offices in Sydney. One of those staff requested access to Mr Porter’s laptop so that an image might be taken off its contents, including the contents of its hard drive. At that point it would appear that Mr Porter summoned his solicitor, Ms Shand, who then also attended Ausfam’s offices. Mr Porter’s concern was that the laptop and its hard drive contained information which was not relevant to the affairs of Austfam and other information which might have been the subject of a proper claim for legal professional privilege.
8. Ms Shand and the judicial manager’s representatives then sought to negotiate an arrangement which would both provide the machinery whereby access might be had to the hard drive and yet also to ensure that confidentiality and privilege were appropriately maintained. This could not be done in the time remaining on Friday afternoon.
9. Ms Shand had suggested, and the judicial manager’s staff had agreed, that the hard drive would be removed from Mr Porter’s computer and kept in their safe-keeping over the ensuing weekend during which time a further attempt to negotiate an appropriate access protocol would be pursued.
10. Those negotiations were not successful. It was then decided that Mr Porter’s laptop’s hard drive would be imaged, the imaged copy given to Ms Shand for safe keeping, the laptop returned to Mr Porter and that the issues surrounding access would be resolved at some later time if, and when, the judicial manager decided that he needed access to its contents.
11. Accordingly, on the morning of Tuesday 7 July 2009, the judicial manager’s staff reinstalled the hard drive back into Mr Porter’s laptop and then copied an image of that hard drive onto a 1.5 TB Seagate hard disk. The laptop was returned to Mr Porter and the Seagate drive was then handed to Ms Shand who, on the following day, provided the judicial manager with a receipt and the following undertaking:

I undertake to place this article in safekeeping to be available upon request by mutual agreement.

12. Since that time Ms Shand has kept the Seagate drive within a safe in her firm’s offices where it rests even now. Two days later, on Thursday 9 July 2009, officers of APRA met with the judicial manager’s staff to discuss the situation. APRA was informed that Mr Porter’s laptop’s hard drive had been forensically imaged and a copy kept inside Ms Shand’s safe. It appears that there were some further meetings between APRA and the judicial manager but the evidence does not disclose any further discussion about the Seagate drive itself. Ms Shand says, and I accept, that there were no further negotiations with the judicial manager as to the terms upon which the Seagate drive might ultimately be accessed.
13. In the meantime, however, APRA conceived a desire to have the Seagate drive for itself. On Wednesday 5 August 2009, a notice was served upon Ms Shand requiring her to produce it to APRA later the very same day. Proceedings in this Court rapidly followed which ultimately resulted in an order setting aside that notice. Whilst those proceedings were pending, APRA issued another notice to Ms Shand who in response, with Mr Porter, commenced these proceedings on 3 September 2009 to similarly set aside that notice.
14. One of the potential difficulties afflicting the earlier notice of 5 August 2009 was that it sought production merely of the Seagate drive itself which may have contained material which was either extraneous to the affairs of Austfam or potentially privileged. The second set of notices sought to remedy that deficiency. To understand the nature of that remedy it is necessary first to grasp the power upon which APRA relied. It is to be found in s 55 of the Act which provides (relevantly):

Powers of APRA or inspector

(1) APRA or the inspector may, by notice in writing given to a person who is a prescribed person in relation to a body corporate that is a general insurer, authorised NOHC or the subsidiary of a general insurer or authorised NOHC or in relation to a body corporate that is associated with that body corporate, require that person:

(a) to produce to APRA or the inspector all or any of the books relating to the affairs of the body corporate that are in the custody or under the control of that person;
....

15. It will be seen that the provision operates by reference to “books” an expression defined in s 3 to include:

... any register or other record of information or any accounts or accounting records, however compiled, recorded or stored, and also includes any document.

16. The word “document” is defined in s 25 of the Acts Interpretation Act 1901 (Cth) to include any material from which images or writings are capable of being reproduced and the word “record” is defined to include information stored or recorded by means of a computer. It follows that each of the files located on the Seagate drive is a “book” to which s 55(1)(a) may extend.
17. The second set of notices therefore called upon Ms Shand and Mr Porter to produce not the Seagate drive itself but instead the “books” set out in the schedule to the notice. That schedule provided in part as follows:

All books relating to the affairs of Australian Family Assurance Limited ABN 78 003 044 862 (the body corporate) stored on the forensic image made on or about 7 July 2009 of a computer located at the premises at Level 3, 19-31 Pitt Street, Sydney including but not limited to the following books:

...

(emphasis added)

18. There then followed 10 paragraphs which, in various ways, sought to give form to the general request of the opening words.
19. It may be said at once that the new notices did not suffer from the vice of seeking the extraneous. However, two new difficulties have emerged which bear, in part, on the issues at hand. First, Ms Shand is not an officer of Austfam and never has been; she is concerned that she will not be able to differentiate those records on the Seagate drive which relate to the affairs of Austfam from those which do not. Secondly, the Seagate drive is recorded in a format which does not permit non-technical users, such as Ms Shand, to access it. It is those matters, which may be described as being of an administrative nature, which provide the impetus for the present application.
20. It is then useful to say something of the issues which have arisen between the parties. They may be conveniently grouped as follows:

(a) The investigation issue. APRA’s power to issue a notice under s 55(1) of the Act is, at least in the present circumstances, available only if it has on foot a formal investigation into the affairs of Austfam. Such an investigation could only take place if APRA had first served upon Austfam a notice requiring it to show cause why such an investigation should not be commenced: s 52(1C) There was no dispute that such a notice dated 20 August 2009 existed. However, the evidence showed that the notice was served upon the judicial manager rather than at Austfam’s registered address. Mr Porter and Ms Shand submitted that the notice had not been served as required so that there was on foot no investigation and, therefore, no power to issue the notices to Mr Porter and Ms Shand.

(b) The improper purpose issue. Mr Porter and Ms Shand submitted that an examination of the evidence showed that the real reason that the notice had been issued was to assist the judicial manager in obtaining access to Austfam’s documentation. Whilst the power in s 55 is broad it was to be seen as a power to facilitate APRA’s own investigations. The purpose of assisting the judicial manager was alien to that power and its existence, so it was submitted, rendered the exercise of the power invalid.

(c) The custody and control issue. The power in s 55 does not require production of books which are not in the custody or under the control of the recipient. Ms Shand accepted that she had custody and control of the Seagate drive; however, because she did not have the technical skills to access that drive she denied that she had custody or control of any of the books constituted by files which were present on it.

(d) The reasonableness issue. Mr Porter submitted that it must or should have been clear to APRA that Ms Shand knew nothing about the affairs of Austfam. It was unreasonable, in the circumstances, to issue a notice to her which required her to assess the relevance of the material about which, ex hypothesi, she was ignorant. The same point was reinforced by APRA’s knowledge that she could not access the Seagate drive without specialist assistance.

(e) The burden issue. Ms Shand submitted that in exercising the power under s 55 APRA was bound to consider the burden that the service of a notice would potentially place upon her. She contended that APRA had failed to take into account that burden so that its exercise of power was vitiated.

(f) The breadth issue. Both Ms Shand and Mr Porter pointed to the breadth of some of the paragraphs of the notice which were couched in general terms such as “all books concerning ...” and which were said to be impermissibly wide. Further, because Ms Shand was not an officer of Austfam, such a notice did not, with any clarity, inform her of what it was that she was obliged to do.

(g) The relevant consideration issue. Ms Shand submitted that APRA had failed to take into account the fact that the judicial manager was presently negotiating an access regime with Mr Porter and Ms Shand. That consideration was said to be a mandatory one failure to comply with which rendered the decision invalid.

21. It is convenient to deal with these issues in turn.

(a) The investigation issue

22. The power to issue a notice contained in s 55(1) is set out above. That provision must, however, be read with s 55(1A) which provide, relevantly, that a notice may be issued “only if”:

(a) ... APRA or the inspector is investigating the whole or part of the affairs of the body corporate ...

23. The words “only if” meant, so Ms Shand and Mr Porter submitted, that the existence of an investigation was a condition precedent to the power to issue a notice in s 55(1) arising. The power of investigation is conferred by s 52(2) and is enlivened when an insurer fails to show cause to APRA’s satisfaction why an investigation should not take place and APRA is satisfied that it is in the public interest that such an investigation be held. The failure to show cause arises if the insurer, having been served with a show cause notice, does not show cause. The service of a show cause notice is governed by s 52(1) which, subject to some immaterial preconditions, provides that:

... APRA may, by notice in writing serve on the body corporate, require it to show cause within such period after service of the notice, being not less than 14 days, as APRA specifies in the notice, why APRA should not:

(c) investigate the whole or any part of the business of the body corporate; or

...

24. It was pursuant to that power that APRA issued a show cause notice on 20 August 2009. That notice was not physically served at Austfam’s registered office. Instead, it was provided, so it was said, by an email sent to the office of the judicial manager. Section 109X(1) of the Corporations Act 2001 (Cth) is a facultative provision which permits service of documents on corporations. It provides:

Service of documents

(1) For the purposes of any law, a document may be served on a company by:

(a) leaving it at, or posting it to, the company's registered office; or

(b) delivering a copy of the document personally to a director of the company who resides in Australia or in an external Territory; or

(c) if a liquidator of the company has been appointed--leaving it at, or posting it to, the address of the liquidator's office in the most recent notice of that address lodged with ASIC; or

(d) if an administrator of the company has been appointed--leaving it at, or posting it to, the address of the administrator in the most recent notice of that address lodged with ASIC.

25. This provision authorises service upon a corporation by service upon its liquidator or administrator but does not, by itself, permit service on a corporation by service on a receiver or manager or a judicial manager.
26. The short question which arises is whether service on the judicial manager can constitute service on Austfam. As already noted, the judicial manager was appointed by this Court on Friday 3 July 2009 pursuant to s 62R of the Act immediately subsequent to an order placing Austfam under judicial management. It is necessary in the first instance to say something of judicial management. Chancery long recognised the office of manager although it tended in its significance to be obscured by the office of receiver. A manager’s function is to manage a trade or business but never on a permanent basis. It is an office which is ancillary to the carrying out of other functions. Thus it is common for chargeholders, upon default, to appoint receivers in order to obtain the benefit of property owned or received by a chargor. Where the chargor carries on a trade or business, however, it is also usual to empower the receiver to manage the business pending sale by a dual appointment as a receiver and manager. Managers are usually appointed by persons holding security interests but a court may appoint them too whenever it is necessary to do so. Thus managers have been appointed to carry on a coal mine: Gibbs v David (1875) LR 20 Eq 373; and a newspaper: Chaplin v Young (1862) 6 LT 97. It is said that the appointment of a manager is always a temporary state of affairs carried on with a view to a sale: Daniell’s Chancery Practice (8th ed., Stevens and Sons, 1914) Vol. II p. 1502-1503.
27. In this Court, a power is conferred by O 26 r 1 to appoint a receiver who, subject to any contrary order, is to have the powers of a receiver and also those of a manager. That rule would not appear directly to authorise the appointment of a manager simpliciter but I do not doubt that the power in s 23 of the Federal Court of Australia Act 1976 (Cth) extends to such an appointment in an appropriate case: cf. University of Western Australia v Gray (No. 6) [2006] FCA 1825 at [71] per French J.
28. As in the case of a court appointed receiver, however, it is tolerably clear that a court appointed manager is not the agent of the company to which her or she has been appointed: De Grelle and Co v Bull and Ward (1894) 10 TLR 198 at 199 per Charles J; Burt, Boulton & Hayward v Bull [1895] 1 QB 276 at 279 per Lord Esher MR. Consequently, service on a court appointed receiver and manager is not service upon the company to which the receiver and manager has been appointed: see Re Flowers & Co [1897] 1 QB 14 at 15-16 per Lord Esher MR.
29. The manager, the subject of these proceedings, is not a court appointed manager under Order 26 r 1 or a manager appointed under a charge or other security. Instead, he is appointed under specific statutory provisions. The nature of his appointment, and the legal consequences thereof, are to be discerned in the first instance from an examination of the legislation providing for that appointment. The legislation is contained in Part VB of the Act. The judicial manager is appointed by the Court (s 62R) and the appointment may be cancelled by the Court: s 62ZF. In the discharge of his/her office he/she is subject to the direction of the Federal Court of Australia: s 62X. The Court may encumber him with further duties if it so desires: s 62X(2). The remuneration of the judicial manager is subject to the complete control of the Court: s 62S. Section 62Q provides:

A general insurer is not judicially managed except in accordance with this Act.

30. Although this is not necessary to decide the issue, it may be that this provision prevents the Court appointing a manager to a general insurer under an alternative statutory regime. If so, then neither the power in O 26 r 1 nor the Court’s power as a court of equity (see s 5(2) of the Federal Court of Australia Act 1976 (Cth)) could be utilized to appoint a manager to a general insurer. Once under judicial management, all other forms of external administration are brought to an end: s 62U. The Federal Court may impose judicial management where there are, broadly speaking, questions about the operation of a general insurer and the time taken to investigate the matter would be such that the interests of policy holders would be prejudiced: s 62M. Whilst a general insurer is under judicial management proceedings against it cannot be commenced or carried on without the judicial manager’s or the Court’s consent: s 62P. The function of a judicial manager, as in the case of an ordinary manager, is management. Section 62T provides:

Management vests in judicial manager
(1) Subject to subsections (2) and (3), if the Federal Court has made an order placing a general insurer under judicial management, then, at the time the judicial management commences:
(a) any person vested with the management of the general insurer immediately before that time is divested of that management; and
(b) the management of the general insurer vests in the judicial manager appointed by the Court.
(2) A general insurer may not issue policies without the leave of the Federal Court if the company is under judicial management.
(3) To avoid doubt, if the general insurer is a foreign general insurer:
(a) paragraphs (1)(a) and (b) do not apply to the extent that the management of the foreign general insurer relates to insurance business carried on outside Australia by the foreign general insurer; and
(b) subsection (2) does not apply to the issue of policies in the course of insurance business carried on outside Australia by the foreign general insurer.

31. I would not read this provision as conferring upon a judicial manager authority to receive documents on behalf of a general insurer. This is so for a number of reasons. First, the functions of management thereby conferred seem to me to be conceptually indistinguishable from the functions of management of an ordinary court appointed manager. It is difficult, therefore, to distinguish Re Flowers & Co [1897] 1 QB 14 which holds that service on a court appointed manager is not service on a debtor because a court appointed manager is not the agent of the debtor.
32. Secondly, whilst the Court of Appeal’s decision in Re Flowers & Co does not bind this Court, it is a decision of a distinguished bench the principal reasons for judgment of which were delivered by Lord Esher MR. Further, it is a decision which has been referred to often enough without demur by intermediate appellate courts of this country, albeit not on this point: Rosanove v O’Rourke [1988] 1 Qd R 171 at 173 per Connolly J; Andrew Koh Nominees Pty Ltd v Receiver & Manager of the Balneum Joint Venture [2007] WASCA 152 at [24] per Buss JA (with whom Steytler P agreed).
33. Thirdly, at a conceptual level, service on the judicial manager could only constitute service on a general insurer to which he or she was appointed if the judicial manager had authority, as a matter of law, to receive documents on behalf of the general insurer. Section 62T causes the judicial manager to succeed to the “management” of the general insurer. It is apparent from s 62T(1)(a) that “management” is something which is “vested” in persons for that provision “divests” any such person of management. So viewed, the appointment of a judicial manager brings about no alteration in the internal architecture of a general insurer. All of the management functions vested in one group of people immediately before the appointment of the judicial management are thereafter vested in the judicial manager.
34. It is possible, in the abstract, that an insurer might well have conferred upon a particular officer within it the authority to receive documents on the corporation’s behalf. If that had occurred then s 62T would cause that management role to devolve upon the judicial manager. There was no evidence, however, of such an arrangement in the case of Austfam. In general, such arrangements are unlikely to exist because s 109X of the Corporations Act 2001 explicitly overcomes the intangible nature of a corporation by permitting service upon it, other than through human agency, by allowing documents to be served at the registered office. It follows – absent some evidence that the officers comprising the management of a general insurer are, in fact, authorised to receive documents on its behalf – that the effect of s 62T will not be to authorise a judicial manager to receive documents on its behalf.
35. The correctness of that analysis is confirmed by s 62Y of the Act which sets out the judicial manager’s various powers in the following terms:

Powers of judicial manager

(1) The judicial manager of a general insurer has the following powers:

(a) to bring or defend any legal proceedings in the name and on behalf of the general insurer;

(b) to appoint a legal practitioner to help him or her in the performance of his or her duties;

(c) to appoint an actuary (other than the actuary appointed for the purposes of section 39) to help him or her in the performance of his or her duties;

(d) to sell or otherwise dispose of all or any of the property of the general insurer;

(e) to do all acts and execute in the name and on behalf of the general insurer all deeds, receipts and other documents;

(f) for the purpose of paragraph (d), to use the general insurer's common or official seal;

(g) subject to the Bankruptcy Act 1966, to prove in the bankruptcy of any debtor of the general insurer or under any deed executed under that Act;

(h) to draw, accept, make and endorse any bill of exchange or promissory note in the name and on behalf of the general insurer;

(i) to obtain credit, whether on the security of the general insurer or otherwise;

(j) to take out letters of administration of the estate of a deceased debtor, and to do anything necessary for obtaining payment of any money due from a debtor, or his or her estate, that cannot conveniently be done in the name of the general insurer;

(k) to appoint an agent to do anything that it is not practicable for the judicial manager to do personally or that it is unreasonable to expect him or her to do personally;

(l) such other powers as the Federal Court directs.

(2) The powers conferred by this section are in addition to powers conferred on a judicial manager by any other provision of this Part.

36. These powers do not include any authority to receive documents on behalf of the insurer.
37. APRA submitted that it sufficed to affect service on the person who had the management of Austfam, here, the judicial manager. It was said that service could not have been effected upon the directors because of s 62T(1)(a). This was so because that provision operated to divest them of their management functions. However, that argument assumes that it would have been possible to serve the company by serving its directors, a proposition which is not self-evident.
    
38. APRA also relied upon s 109X (supra) and submitted that the position of a judicial manager was to be seen as an analogous to that of a liquidator upon whom service clearly could be effected by reason of s 109X. I do not think that s 109X assists APRA; if anything, it shows that specific statutory authority is necessary in order to allow service upon an external administrator.
39. It follows that APRA did not serve a show cause notice upon Austfam in any manner contemplated by s 52(1). The question then is whether that failure has the consequence that there is presently no investigation on foot. APRA submitted that the show cause provision – s 52(2) – was directed to the end of ensuring that the subject of a proposed investigation received procedural fairness and that, on any view, the person in charge of the company – the judicial manager – knew of the existence of the show cause notice. It cannot have been Parliament’s intention, so it was submitted, that in those circumstances the investigation should be a nullity. Ms Adamson SC who appeared for APRA placed particular reliance upon the High Court’s decision in Minister for Immigration and Citizenship v SZIZO [2009] HCA 37; (2009) 259 ALR 405 at 414 [34]- [35] per the Court. There, speaking of the somewhat stricter statutory regime applying to hearings before the Refugee Review Tribunal, the Court said that:

... the manner of providing timely and effective notice of hearing is not an end in itself. The procedural steps dealing with the manner of giving notice are to be distinguished from other components of the statutory statement of the hearing rule, including the obligation to give particulars of adverse information and to invite the applicant to appear to give evidence and to present arguments relating to the issues arising in the decision under review.

While the legislature may be taken to have intended that compliance with the steps in ss 441G and 441A would discharge the tribunal’s obligations with respect to the giving of timely and effective notice of the hearing, it does not follow that it was the intention that any departure from those steps would result in invalidity without consideration of the extent and consequences of the departure.

(footnotes omitted)

40. Mr Harper SC who appeared for Ms Shand and Mr Porter contended that s 52 was not just concerned with procedural fairness but was to be seen as a mandatory prerequisite to the power of appointment.
41. With some hesitation I have come to the conclusion that APRA’s submission is to be preferred. A show cause notice is a statutory device for achieving procedural fairness. Contrary to Mr Harper’s submission it is difficult to discern any reason why a failure to serve such a notice in the manner prescribed by the Act should result in invalidity. That difficulty would be lessened if it could be demonstrated that a show cause notice served some other function beyond the facilitation of procedural fairness. However, I can perceive no such other purpose which makes it difficult to distinguish the reasoning in SZIZO. In those circumstances the show cause notice was not served on Austfam as required by s 52(2) but this does not invalidate APRA’s decision to embark upon an investigation.

(b) The improper purpose issue

42. Mr Porter and Ms Shand submitted that, as a matter of fact, the purpose APRA had in issuing the notices to them was to circumvent the agreement which the judicial manager had reached with Ms Shand. This was said to be because there was no direct evidence from the delegate as to why he issued the notice and because the correspondence of another APRA officer, a Ms Balding, showed that:

APRA served the notice on Ms Shand because the Judicial Manager reported that he was having difficulties accessing AustFam data.

43. I accept that there is no direct evidence from the delegate. However, the onus lies on Mr Porter and Ms Shand to prove improper purpose and not the converse. Further, I do not accept that the matters relied upon by Mr Porter and Ms Shand go so far as they contend. It is true that there were meetings between the judicial manager and officials from APRA; it is true too that minutes of those meetings record this statement:

The JM also advised APRA that on entering into AUSTFAM offices and taking over, they had imaged Ross Porter’s laptop. Ross porter [sic] was reportedly very upset about this move, and claimed that the contents of the laptop was [sic] privileged as it contained mostly AFA Pty Ltd files. An agreement was reached whereby the image was locked into the safe of legal counsel for AFA Pty Ltd – Fiona Shand.

The JM advised that they were having difficulties obtaining access to the file server to access AUSTFAM data – the main issue being that the computers are the property of AFA Pty Ltd and they are being denied access.

44. However, it is clear that the data in respect of which there were access difficulties was data which had to be accessed through AFA’s file server. This was clearly not a reference to Mr Porter’s laptop. In those circumstances, the suggested improper motive is not established. In any event, given that judicial management is a process put in place to protect the interests of policy holders it is by no means obvious that APRA would be prohibited from assisting the judicial manager in his or her role.

(c) The custody and control issue

45. Section 55(1) authorises the compulsory production of books which are in the “custody” or “control” of a person. Those two words have a well established meaning which for present purposes may be summarised as involving notions of de facto dominion: cf. R v Henderson & Warwick [2009] VSCA 136 at [78] per Warren CJ (with whom Vincent and Dodds-Streeton JJA concurred). Ms Shand admits she had such control over the Seagate hard drive as a chattel but denied that she had such control over the computer files located on it by reason of having neither the skills nor the software to access them.
46. I reject this as a matter of fact. I accept, of course, that Ms Shand lacks the computer skills to carry out the task at hand; I accept also, as Mr Harper SC submitted on her behalf, that she does not even know what kind of computer expert would be necessary in order to access the Seagate drive. However, I do not accept that that means she is not able to obtain access. It would be easy enough for her to ask technicians from the judicial manager’s office to show her how the data might be retrieved or, if they will not, what kind of expert she might speak with to the same end. There are any number of firms in this city offering technology services of this kind. Imaging of hard drives is a widespread phenomenon in modern insolvency and litigation practice. Such images are frequently before the Court as are the experts involved in their production: cf. Kennedy v Baker (No 2) [2004] FCA 809; Different Solutions Pty Ltd v Commissioner, Australian Federal Police (No 2) [2008] FCA 1686.
47. Ms Shand submitted that she had attempted to access the Seagate drive but had been told by the judicial manger’s technicians that it was too difficult and not to attempt it. It followed that I should conclude that it was impossible for her to access the files located on the drive. I cannot accept this argument either. The discussion in question did take place but in an entirely different context. It is true, and I accept, that Ms Shand did make an inquiry on or about 26 August 2009 of staff at the judicial manager’s office on the topic of how to obtain access to the Seagate drive so she could provide documents to the judicial manager. From this course she was dissuaded because a staff member of the judicial manager told her by email that it would be cheaper to obtain the documents in question directly from Mr Porter’s computer. What that person actually said in the email to Ms Shand was as follows:

“The “back up” or “forensic image” in your safe is a copy of his [the First Applicant’s] live computer. Recovering them (the documents) from the “back up” or “forensic image” is expensive, complicated and not necessary if Ross can print them off his live computer.

Please call Grant to resolve this before doing anything else or incurring IT costs. An IT person without the appropriate software and skill set will not be able to access this.”

48. Contrary to Ms Shand’s submission, this is not evidence that it was impossible for her to obtain access; rather, it was that other avenues should, in the interest of cost saving, be first explored. Once it is accepted that access by Ms Shand though probably difficult is nevertheless both possible and lawful, it seems to me that the present argument cannot succeed.
49. I do not need to answer, therefore, whether it would be possible to have custody or control of a storage medium such as a hard drive but not also to have custody and control of the files contained on it. Such an issue might arise if, for example, a drive were password protected (although even there there may be issues). Without expressing a concluded view it might be that the meaning of the words “custody” and “control” in s 55 needs to take account of the fact that the definition of “books” in the same provision extends to cover incorporeal chattels such as computer files.

(d) The reasonableness issue

50. Next it was argued that APRA was aware that Ms Shand knew nothing about the affairs of Austfam and that to issue a detailed notice to her was, in those circumstances, unreasonable. I do not accept this argument. To begin with, whilst no doubt Ms Shand has a clear view about her own lack of knowledge of the business of Austfam, it does not follow that APRA was aware of that lack of knowledge.
51. Secondly, I do not accept that it would be impossible for Ms Shand, by inspecting files on the Seagate drive, to tell which relate to the affairs of Austfam and which do not. Ms Shand’s argument conceals a suppressed and unacceptable premise that only those who understand the affairs of the company are able to identify documents relating to that company’s affairs. I do not think that follows readily or at all. Solicitors such as Ms Shand are frequently called on, in the process of discovery, to assess the relevance of client material without having any more expertise in the client’s affairs than that arising from the retainer. Ms Shand, of course, is retained by Mr Porter. No doubt, as his solicitor, she may seek his assistance to the extent that matters are unclear.
52. More importantly, I do not think that a failure upon APRA’s part to grasp such a matter – assuming I am wrong – is within the realm of the standard unreasonableness necessary to make good this ground of review: cf: Australian Retailers Association v Reserve Bank of Australia [2005] FCA 1707; (2005) 148 FCR 446 at 583 [550] per Weinberg J; East Melbourne Group Inc v Minister for Planning [2008] VSCA 217 at [182]- [183] per Redlich JA; Re Minister for Resources; Ex parte Cazaly Iron Pty Ltd [2007] WSCA 175 at [252]- [255] per Buss JA (with whom Wheeler and Pullin JJA concurred).

(e) The burden issue

53. Ms Shand next submitted that the delegate had failed to take into account, when deciding to issue the notice to, the inconvenience and burden this might impose upon her. Reliance was put on a passage in the Full Court’s reasons in Pyneboard Pty Ltd v Trade Practices Commission [1983] HCA 9; (1982) 57 FLR 368 at 377-378 where the Full Court, speaking of s 155 of the Trade Practices Act 1974 (Cth), said:

The mere fact that compliance with a requirement to furnish information or to produce documents would be burdensome will not invalidate that requirement in a s. 155 notice (see Melbourne Home of Ford v. Trade Practices Commission (No. 3); Riley McKay Pty. Ltd. v. Bannerman). Nor will objective harshness, unreasonableness or oppressiveness of a requirement in such a notice constitute an independent ground of invalidity. If invalidity by reference to these qualities is to be established, it must be by reference to the implied general limitation upon the power conferred by s. 155(1) of the Act to which reference has already been made, namely, that it is a condition of a valid exercise of power that it be used in good faith for the purpose for which it was conferred and with regard to the effect that the exercise of the power will have upon those affected thereby. It is only if the harshness, oppressiveness or unreasonableness of a requirement in a s. 155 notice is, in all the circumstances, such as to warrant the conclusion that the requirement could not have been imposed in good faith or could only have been imposed to achieve a collateral purpose or without regard to the burden which it would impose upon the recipient, that harshness, oppressiveness or unreasonableness will result in invalidity.

(footnotes omitted)

54. I would not read this as authority for the proposition that a decision maker is bound to consider the burden that the issue of a notice may have upon its recipient. Rather, it is directed to notions of reckless indifference. So much is plain from the context of the discussion which concerns the absence of good faith. A reckless disregard to the burden that a notice may impose upon a recipient may well show bad faith or the presence of a collateral and improper purpose. But I do not think that, ordinarily, a failure to take into account the burden imposed by a notice is, without more, of that character. Certainly, I do not read the Full Court as saying that the burden imposed upon the notice’s recipient is a mandatory consideration when exercising the power to issue.
55. In any event, I do not think that the evidence establishes that APRA did not have regard to the burden in question. There was no evidence of a direct kind from the delegate and I do not think that Ms Shand has succeeded in proving the negative which this argument binds her to prove.

(f) The breadth issue

56. Ms Shand then relied upon well-known statements of principle which established that notices of the present kind must, generally, be expressed with sufficient clarity to ensure that the recipient knows what is required of him or her: cf. Seven Network Ltd v Australian Competition and Consumer Commission [2004] FCAFC 267; (2004) 140 FCR 170 at 182 [49] per Sackville and Emmett JJ. Here, so it was submitted, the notice was replete with expressions such as “relating to the affairs of Austfam” which, to a person such as Ms Shand, called for the application of judgment which she simply could not be expected to have.
57. I do not agree. As I have already indicated, I do not think that the task of determining whether a file on Mr Porter’s hard drive relates to Austfam is an undertaking of that kind.

(g) Failure to take into account a relevant consideration

58. It was submitted that APRA failed to have regard to the fact that the Seagate drive was in Ms Shand’s custody whilst an access regime was being negotiated. Such a matter is not mandatory consideration in terms of Minister for Aboriginal Affairs v Peko-Wallsend Limited [1986] HCA 40; (1986) 162 CLR 24 at 39-42 per Mason J. I can extract from the scope and purpose of the Act no implication that APRA must have regard, in deciding whether to issue a notice, to any other access arrangements which may exist with a third party. The Act does not say it; nor is to be inferred.

Disposition

59. This application should be dismissed with costs.
    

I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Associate:

Dated: 25 February 2010