Siminton v Australian Prudential Regulation Authority [2008] HCATrans 280 (1 August 2008)

Last Updated: 13 August 2008

[2008] HCATrans 280

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M44 of 2008
No M45 of 2008

B e t w e e n -

DAVID ROBERT SIMINTON

Applicant

and

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

Respondent

Applications for special leave to appeal

HAYNE J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 1 AUGUST 2008, AT 2.42 PM

Copyright in the High Court of Australia

MR D.B. SHARP: If your Honours please, I appear on behalf of the applicant in both matters. (instructed by Erhardt & Associates)

MS D.S. MORTIMER, SC: If the Court pleases, I appear with MR S.J. HIBBLE for the respondent in both matters. (instructed by Australian Prudential Regulation Authority)

HAYNE J: Yes. Is there any reason why we should not hear the matters together?

MR SHARP: No, your Honour. In fact, I was about to ask in what manner your Honours would seek me to address.

HAYNE J: Is there any reason, Mr Sharp, why you should have more than 20 minutes to - - -

MR SHARP: We would submit yes, your Honour. These are discrete matters. One is a quasi-criminal matter or a criminal matter, criminal contempt. One is strictly a civil matter. They have been prepared as separate matters. They have a separate proceeding number.

HAYNE J: Are you saying that they should be heard separately or are you saying that they should be heard together?

MR SHARP: The question I was responding to was whether we should have more than 20 minutes, your Honour.

HAYNE J: I understand that.

MR SHARP: If we are to be heard together, I would submit that nonetheless we should still have 40 minutes. I do not believe we will take 40 minutes, but I do not think we should be curtailed in the time.

HAYNE J: Mr Sharp, at least in the first instance we will hear the matters together. We will allow you a total of 30 minutes and there will be a five minute warning at 25. We will see then what the position is. Yes, go ahead.

MR SHARP: Thank you. Just to clarify then, I will proceed on the basis of addressing seriatim on both matters, if your Honour pleases.

HAYNE J: Yes.

MR SHARP: I begin with M44 and I propose to seek and to present oral presentation in order to expound briefly on several of the points relied upon by the applicant in this application. In the Banking Act, section 65A, the legislature has created a statutory remedy for the executive, the executive being APRA and relevantly the sole person who can make use of this remedy, directed against contraventions or proposed contraventions of two statutory criminal offences, namely, the Banking Act sections 7 and 66. This remedy is referred to as a statutory injunction. It provides for APRA to seek and the Federal Court to make orders against persons contravening or proposing to contravene such provisions. In a variety of ways, it is submitted, the new remedy significantly impinges on judicial power and results in a breakdown of the constitutional separation of the powers.

In constitutional theory, it is submitted, it is the executive branch of government which administers the law. The use of the new remedy has been confined by the legislature to APRA, a part of the executive. The legislature has, however, not explicitly prescribed a sanction for breach of such court orders. The sanction is implicitly assumed to be the power of the judiciary to punish for contempt. It would have been starker, but probably no more relevant, if in fact the legislation had purported to say, “If these orders are breached, the sanction shall be an action or proceeding for contempt of court”. The judicial contempt power is singular or sui generis. Its scope and operation is immense and virtually unconstrained. Its purpose is to enable the judicial branch to maintain respect for its authority and integrity. In order to achieve its purpose, as such, resort to its use must necessarily be rare, exercised a last resort and with the utmost exercise of judicial discretion.

The judicial rule is that a court would not, other than in exceptional circumstances - which we submit are not relevant here - injunct the commission of a crime. It is the executive’s role to effect the operation of the law. Judicial contempt power is not intended to be used as a punishment for contravening the criminal law. The effect of the judicial rule was to maintain the separation of powers. The legislature by section 65A has purported to overturn the judicial rule and has subsumed the judicial contempt power as a sanction. The result, in effect, rather than maintaining the separation of powers, is precisely to the contrary.

It will be said that since the court retains the discretion as to whether to grant the statutory injunction or to punish its breach, that such power has not been significantly impacted or subsumed. But the court does not possess a power to determine at its discretion whether or not it will permit its power to be used by the executive for an executive purpose. But regardless as to whether or not the court constitutionally could do so, the separation of powers, we say, precludes this option, but nonetheless, even accepting that the court possesses the power or the discretion to do so, such discretionary is illusionary. The courts deal only with individual cases. It is likely that in most such individual cases a good case can be made out for the making of an injunction or, if necessary, the imposing of punishment for its breach and the court would be derelict not to do so.

The vice in the legislation is that the court has no discretion in the overall use of the remedy, not the individual use where the real vice lies, but in the overall use of the remedy and hence in the overall use of the contempt power as a sanction, which now resides in the executive. Routine use by the executive of such remedy and resort to the sanction will seriously impact on regard and respect for the court as a separate and independent branch of government causing it to be seen instead as an instrument of the executive. The constitutionally invidious effects of such legislation will be subtle and slow to emerge, but experience suggests, therefore, that they will become manifest and more common with each passing day.

Section 65A is also objectionable for subsuming the judicial power of discovery. To contravene section 7 and section 66 is to commit criminal offences and, with respect to section 7, to commit an indictable offence. Investigation and prosecution of crime is the role of the executive. By enabling what would otherwise be criminal trials to be conducted as civil proceedings, the legislature is purporting to enable the executive to use the judicial power applicable to civil proceedings, in particular, pleadings, discovery, pre-trial witness statements and so forth, to investigate alleged crimes. The effect of such legislation is to subsume judicial power into an instrument of the executive. We should bear in mind that the proceedings began in December 2005 and effectively went for more than two years.

CRENNAN J: There is another dimension. It is not just an investigation of crime. There is also the need to protect members of the public who may be misled by people who continue to commit offences under sections 7 and 66.

MR SHARP: But that would not preclude the laying of charges in proper circumstances, your Honour, with respect, and thereafter making such orders. We say that, yes, protection should be available to the public, and it is available to the public. If upon the laying of a charge or even before the laying of the charge, if there is an immediate need for protection even before a charge could be laid, an order could be made, but it would be with the, we would submit, proper procedure of it being in contemplation of a charge being made or, in fact, since a charge should be made almost immediately or as soon as possible, upon the making of a charge. We submit that the effect of this type of legislation is to completely throw out the concept of, if somebody is to be deprived of life, liberty and property, let it be upon proper proceedings upon charge, if not upon trial. We do not seek to argue to the contrary.

We say that the vice, if there is vice, is not that it should be conducted that these orders should not be made upon an improper circumstance, but that they should be made pursuant to proper procedure. The proper procedure, we say, is pursuant and taking cognisance of the criminal law. These are, in substance, criminal charges. The rule which is applied, we would argue, for centuries is that one is not deprived of liberty or property, which has been done in this case, without at least the laying of charges or the contemplation of laying of charges, which is what we would be submitting.

Finally, but not least, section 65A purports to grant the court power to grant injunction against a person on such terms as it thinks fit “to do a particular act or thing, if the Court thinks it desirable to do so”. There are no constraints or reservations placed on such power. They presumably could conclude – and I just hypothesise here, your Honour, and perhaps fantasise – an order that a person reside only in a distant place, internal exile, or a monastery, incommunicado, dress only in a certain way or wear a sign around his neck proclaiming whatever. The power to make orders in such circumstances is not, however, judicial. It is legislative.

The width of the power purportedly bestowed on the court can be assessed when one looks at some of the orders made in this case, particularly the interlocutory orders; do not leave the country, deprivation of liberty; reside at a designated address, similar; report regularly to the police, again; and do not deal in any way with moneys or other assets whether present or future regardless of whether or not they are connected to or derived from the subject matter of the alleged contravention. We are not saying deprivation of property without – we are not arguing before this Court that it constitutes breach of the constitutional constraint against deprivation of property without just terms, but what we are saying is that this is a deprivation of one’s rights with respect to property. The making of this last order - - -

HAYNE J: Most asset preservation orders take that form.

MR SHARP: Yes, your Honour.

HAYNE J: Do go on.

MR SHARP: Yes, I concede that, your Honour. That aspect is not disputed. We are not proposing to dispute that, but what we are proposing to dispute is the extent of the order. The making of this last order, a freezing order, is disputed insofar as it refers to future moneys and assets. It is alleged by the respondent to have been so made. As alleged, such an order could be referred to as – again I perhaps use hyperbole – has a starvation order - - -

HAYNE J: Mr Sharp, your case is not advanced by stating it hyperbolically.

MR SHARP: Very well, your Honour.

HAYNE J: You will put your case in proper and reasoned terms without resort to hyperbole. Go on.

MR SHARP: Very well, your Honour. I will not use the term I was proposing to use, but I will say that what it means is that he would be deprived of the use of any moneys. One does not live in the future in the modern civilised world without recourse to funds. We say that this is not the order that his Honour has made, as of course it is part of our address with respect to M45, we say he did not seek to make an order freezing future moneys, but perhaps the vice of even freezing the existing moneys is that the matter should be dealt with promptly and with respect to the minimum amount.

Now, this was a total order totally freezing all of the applicant’s existing funds and assets and for a period which I have already indicated went for approximately two years. Such an order, a freezing order, even today, we would respectfully submit, is meant to be prima facie confined to present moneys, present assets and with the idea that it should be restricted to the minimum amount required to safeguard the threat that of the court’s orders being frustrated which would of course in this case would have been not a total amount or anywhere near the total order that was made.

Although alleged to have contravened two statutory criminal provisions, such orders depriving him of his liberty and property were made without charge, much less conviction, and such purported power is foreign to the judicial role and cannot, we respectfully submit, validly be granted by the legislature to a court. These provisions which we have just referred to are foreign. I am only addressing this aspect because this is what it is said to mean. It is a suspicion that somehow or other the future moneys could be used to meet perhaps future damages charges, a suspicion, but not derivative from the existing moneys. If, we say, the order was meant to apply to future assets, given the prima facie meaning of a freezing order, then one would expect the court or the judge making such an order to clearly say so.

I am moving away now from the constitutional aspects, your Honour. I will move to the practical aspects of banking. In order to meet the final orders that were made the court had to find that the applicant had carried on an unauthorised banking business. Merely proposing to do so would not justify an order disposing of all of the applicant’s assets. The respondent has challenged the assertion that the applicant was in the currency commodity trading business, apart from evidence we submit which was evident in the trial. As such they allege it in the statement of claim and I refer the Court to the particulars, to paragraph 15, where it is alleged that he has invested money with commodity traders. So we say that quite clearly right from the outset the respondent was aware of the primary nature or the nature of the applicant’s, if I can call it that, business. It was a currency commodity trading venture.

In finding that the applicant carried on banking business the court has misapplied the accepted constitutional definition of “banking business” and, in particular, the Winters Case, nor can the finding of a breach of section 66 be used to justify such an order. There is no basis shown for an award of damages and, in any event, section 65A(11), which purports to authorise APRA to seek such damages on behalf of non-party third persons, is surely constitutionally invalid as lacking any sufficient connection to a legislative head of power.

It is not to do with banking, although it of course is in the ambit of banking that it is legislated. What it purports to do is to provide a remedy for non-party third persons to be represented by APRA without in any way determining their wishes, their position and for APRA to purport or to claim to be able to make a claim for damages on their behalf regardless, such non-third party persons, of course, not being before the court. The ambit of such a power is extremely wide and, we would respectfully submit, cannot possibly be said to be sufficiently or relevantly connected to the constitutional granting of power with respect to banking, the regulation of banking. It is a, if anything, a judicial proceeding that subsection (11) purports to relate.

I propose now to turn to M45, your Honours, the contempt matter. The relevant order of Justice Gray is clearly a freezing order as now generally referred to or what was once referred to as a Mareva injunction. It is perhaps an interesting thought that in fact since it is now not regarded as an injunction, section 65A might not apply to it, but I do not seek to pursue that tantalising argument. We accept for the purposes of this argument, with respect, that it does. Section 65 would include a Mareva order, although it is now no longer regarded as an injunction.

This fact has consequences, the fact I am referring to is that it is a freezing order, not a seizing order, it is a freezing order. Prima facie a freezing order is intended to relate to presently existing moneys or assets and not to future acquired moneys or assets, or at least other than those which have been derived in the future from those moneys or assets which have been frozen by the order. We would not quibble – and this is perhaps of relevance with respect to the suggestion that interest on existing accounts might cause problems. We would say that is not a problem.

If future moneys are clearly derived from frozen moneys, then of course we would not seek to argue that they would not be caught by such an order, but unless the frozen moneys are shown to be derivatives, unless the frozen assets are shown in some way to be derivatives of that which is frozen, we say future moneys, future assets are not caught by a freezing order, certainly not unless some specific aspects are included in the order to make that clear. Prima facie we say a freezing order is directed and includes only existing assets. We say if the freezing order was contrary to such presumption intended to apply to after acquired moneys or assets, one would expect the maker of such order to say so.

In addressing the learned Full Court, I – I, of course, counsel appeared, as was my learned friends for the respondent – was at pains to make the point that this was a freezing order with which we were concerned. Whilst noting this fact, the learned Full Court was wrong to suggest that this was what I had called it. This can be found at application book page 49, line 38, your Honours. I will refer your Honours to it. At line 38 it says:

The orders which the appellant has termed “freezing orders” are in fact injunctions which are designed to restrain the conduct to which the orders refer, throughout the currency of the orders.

Now, their Honours make it clear that they believed that I was referring to it as a freezing order, and I was, and they assumed that I was doing so in order to claim for that term the meaning of which I was presenting or arguing that a freezing order applied prima facie to existing assets. But their Honours are wrong to this extent, because it was not I that referred to it as a freezing order, it is the words or term used by his Honour Justice Gray when, in his reasons for judgments, his Honour refers to it as “freezing”. In fact, the reasons in the reasons for judgment make it clear, we respectfully submit, despite what the learned Full Court assessed it, to make it clear that his Honour did not regard it in his reasons for judgment as applying to future moneys. Perhaps I could take your Honours to the reasons for judgment of Justice Gray and, in particular, paragraph 11:

It is also appropriate, in my view, to make orders endeavouring to ensure that any assets over which the respondent does have control will be frozen effectively. With one exception, I propose to make the orders sought today by the applicant in that respect.

The applicant, of course, being APRA –

The applicant was prepared to make concessions that would have allowed the respondent to withdraw $500 a week from whatever funds would otherwise be available to him, but for the freezing orders –

So it is quite clear that his Honour has termed them such and regards them as such –

for his living expenses, and his reasonable legal expenses in defending the proceeding. I have some disquiet about that, because the material before me is absolutely silent –

and this is where we say his Honour makes it clear that he does not regard it as applying to future moneys –

as to what other sources of funds the respondent may have available to him, and as to what means he may have of meeting his legal costs and of discharging his living expenses, without resort to any of the frozen assets. I therefore decline to adopt those concessions.

So his Honour is contemplating that there are going to be – because they could not be existing moneys, the existing order totally freezes his existing moneys and assets, but his Honour is quite clearly there contemplating that he will have available to him other moneys of which he has no knowledge, he does not know anything about, but he is quite clearly conceding the possibility or the likelihood of him properly having available other moneys with which to pay his legal fees and meet his living expenses.

I have already addressed it perhaps in my arguments with respect to M44, but the alternative would be, knowing that the applicant in these proceedings has sought to rely on his right against self-incrimination, it would be arguable if his Honour were to make it a total present and future freezing of all present and all future moneys unless explanation providence is given that it was an attempt – and we do not say it was, we say quite the contrary, his Honour was aware of this – to deny him his right against self-incrimination by making it virtually impossible for him to survive over the next, as it turned out, approximate two years without at least coming forward and saying, “Very well, I will tell you whatever is required. I will disregard my right against self-incrimination in order to get at least some money”. But his Honour had made it clear that he was not doing that in this paragraph. He was quite clearly contemplating that he would have future moneys.

It is clear, I have said, from these paragraphs that I have submitted that that is the case. It is clear that a component of the finding of contempt that the terms of the order on which it is based must be clear and unambiguous and that such component is required to be proved beyond reasonable doubt, that Justice Tracey correctly accepted such principles and, we say, that the Full Court also accepted such principles and noted that such issues were in dispute. I do not believe that that is a matter of dispute here today, but those were accepted by the courts and they were in fact the bases on which the court below proceeded.

I am now moving on to the question of the drawing of inferences, your Honours. At application book page 31 Justice Tracey regarded the applicant’s failure to give or call evidence as of potential significance and was prepared to draw adverse but unspecified inferences against him, but as the precedent relied on by him and by the learned Full Court – that is at application book page 83. Perhaps I should take your Honours to it.

HAYNE J: I think you may assume that we are familiar with RPS and what is said in RPS.

MR SHARP: Thank you, your Honour. Then it is quite clear that it is not just the failure to call evidence or to give evidence that can give rise to the inference that there is no reasonable explanation, it is the absence of an explanation, and that is specifically alluded to in the passage relied on by their Honours in the courts below, that failure to give evidence or for there to be an explanation. We say there was a manifest explanation in this case. First of all, these were potential criminal matters, an indictable offence in one and an offence in the other. The applicant had exercised his right against self-incrimination throughout the approximate two years of the proceedings, right from day one. That was manifest. That was clearly an explanation as to why he might not give evidence and, we say, this becomes even more obvious when the fact becomes clear that his Honour was considering three matters simultaneously, in the sense that he had not delivered judgment on the first and was hearing the second and in fact in the event his Honour did not give reasons for judgment for any of the three matters, he heard them one after the other.

HAYNE J: Mr Sharp, you have had your 30 minutes. Can you state as shortly as you can what other point or points, if there are any, that you say would warrant a grant of leave?

MR SHARP: Yes, your Honour. Only, first of all, that their Honours ruling in the transcript, in failing to enable reference to the transcript, we say that we sought to refer to the transcript - - -

HAYNE J: No, what I am asking you to do, Mr Sharp, if you would be good enough to attend to it, is to state the points which you say warrant a
grant of leave. I am not asking you to argue the point. I am asking you to state what the point is.

MR SHARP: Very well, your Honour. The points are these. First of all, there is the constitutional aspects. If section 65 is constitutionally valid, we would say then that is a matter of profound importance. The second aspect we say is that, with respect to the question of reference to the transcript, their Honours ruling in the Full Court was directly contrary and we say in the passages cited it is quite clear that their Honours say that if there an ambiguity, then reference should be made to relevant, in effect, all relevant surrounding material so that there is hence a conflict between two intermediate courts, the Full Court in this instance and Athens v Randwick City Council in the New South Wales Court of Appeal. We say that that is a matter which should be resolved by this Court.

Those are the two matters with respect to M45. With respect to M44, that is the constitutional aspects again, and the question as to resolving what is, we say, a misreading of the constitutional definition of “banking”, which is of importance because it is a constitutional as well as a criminal aspect, and the misreading, we say, which should be clarified, of Winter’s Case, a significant misreading as to what constitutes banking or what does not constitute banking. That also should be resolved by this honourable Court, your Honour. Those are the issues.

HAYNE J: Thank you, Mr Sharp. We will not trouble you, Ms Mortimer.

MS MORTIMER: If your Honour pleases.

HAYNE J: In matter M44 of 2008 the applicant seeks special leave to appeal to this Court against orders of the Full Court of the Federal Court of Australia dismissing the applicant’s appeal against orders made by a single judge of that court in consequence of findings that the applicant was carrying on and was proposing to carry on the business of banking in Australia in contravention of section 7 of the Banking Act 1959 (Cth).

The applicant alleges, among other things, that section 65A of the Banking Act is invalid for want of power or because the powers and authority to decide issues which that section gives to the Federal Court of Australia is a breach of the Chapter III of the Constitution. An appeal to this Court on these grounds, as articulated in both written and oral argument, would enjoy no reasonable prospect of success.

Insofar as the applicant would seek also to challenge the conclusions reached by the primary judge and the Full Court that the applicant’s conduct constituted carrying on an unauthorised banking business in Australia, those arguments likewise would enjoy insufficient prospects of success to warrant a grant of special leave to appeal to this Court. Special leave is refused with costs.

In matter M45 of 2008 the applicant seeks special leave to appeal against orders of the Full Court of the Federal Court of Australia dismissing the applicant’s appeal against orders made by a single judge of that court consequent upon findings that eight charges of contempt of court by the applicant had been established.

The constitutional arguments which the applicant would seek to advance in this application are of the same general kind as those sought to be advanced in M44. Those arguments would enjoy no reasonable prospect of success if special leave to appeal were to be granted.

The other arguments which the applicant would seek to advance on appeal to this Court would likewise enjoy insufficient prospects of success to warrant a grant of special leave to appeal in this matter. Special leave is accordingly refused with costs.

AT 3.20 PM THE MATTER WAS CONCLUDED