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Daly and Australian Securities and Investments Commission [2020] AATA 4589 (29 October 2020)

Last Updated: 16 November 2020

Daly and Australian Securities and Investments Commission [2020] AATA 4589 (29 October 2020)

Division: Taxation and Commercial Division

File Number(s): 2019/7614

Re: Peter Daly

APPLICANT

And Australian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal: Deputy President McCabe

Date: 29 October 2020

Place: Melbourne

The Applicant’s request to hold the matter in abeyance is refused.

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Deputy President McCabe

CATCHWORDS

PRACTICE AND PROCEDURE - interlocutory application - abeyance - Federal Court proceedings - the Court and Tribunal reaching inconsistent conclusions - privilege - forensic advantage - matter to proceed in usual course to hearing

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth)

Australian Securities and Investments Commission Act 2001 (Cth)

Corporations Act 2001 (Cth)

CASES

Daly and Australian Securities and Investments Commission [2020] AATA 3202

Productivity Partners Pty Ltd and Australian Skills Quality Authority [2018] AATA 4878

Schroeder and Australian Securities and Investments Commission [2020] AATA 2453]

SECONDARY MATERIALS

Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Final Report (2019)

REASONS FOR DECISION

Deputy President McCabe


29 October 2020

1. This interlocutory application raises questions about how the Tribunal should proceed when other courts or tribunals are dealing with the same or related subject matter. That happens most commonly where an applicant before the Tribunal has been charged with criminal offences arising out of the subject matter of the review. In this case, the same regulator who made the reviewable decision before the Tribunal has commenced civil penalty proceedings against the applicant in the Federal Court. If the Tribunal review proceeds, the Tribunal will need to make findings of fact on evidence that will probably be before the Court. The applicant is worried about how his participation in one set of proceedings will affect the conduct of the other proceedings. The applicant has asked the Tribunal to stay the review proceedings until the court proceedings have been concluded.

THE APPLICATION FOR REVIEW: THE STORY SO FAR

2. Peter Daly is the applicant in these proceedings. He has asked the Tribunal to review a decision made by a delegate of the Australian Securities and Investments Commission (ASIC) to ban him from providing financial services pursuant to ss 920A and 920B of the Corporations Act 2001 (Cth). The background to the application was explained in Daly and Australian Securities and Investments Commission [2020] AATA 1516 which dealt with a(n unsuccessful) request for stay and confidentiality orders.
3. Mr Daly subsequently asked the Tribunal to refer a question of law to the Federal Court – that question being: Which law should the Tribunal apply in the review given the amendments to the Corporations Act? The amendments in question were made following the report of the Hayne Royal Commission. Those provisions include revised grounds upon which the Tribunal may make a banning order, and more extensive and prescriptive powers to make orders that would place further limits on the applicant’s freedom to do business. The amendments were enacted after the reviewable decision was made. The delegate applied the old law that was in force at the time of the decision. Ordinarily, the Tribunal would apply that law on review. But ASIC says a proper reading of the transitional provisions that accompanied the amendments directs the Tribunal to apply the new law in the course of the review.
4. The Tribunal has already considered the impact of some of the reforms in the course of its decision in Schroeder and Australian Securities and Investments Commission [2020] AATA 2453]. In any event, I declined to make the referral: see Daly and Australian Securities and Investments Commission [2020] AATA 3202. I said I was confident the Tribunal would be able to deal with the issue in the ordinary course of the review.
5. Shortly after I made the decision on the referral, ASIC commenced civil penalty proceedings against Mr Daly in the Federal Court. I was not told those proceedings were imminent when I dealt with the application for referral on a question of law. That was unfortunate. I understand the Federal Court proceedings arise out of substantially the same facts that prompted ASIC’s banning orders under review in the Tribunal.
6. Mr Daly has returned to the Tribunal with a fresh request in light of this development. He now wants the Tribunal review to be held in abeyance pending the outcome of the Federal Court proceedings. That could take a year or more. He makes that request in the knowledge the reviewable decision in these proceedings has not been stayed. The banning order would remain in effect while the parties agitate the civil penalty proceedings.
7. Ms Keily, counsel for Mr Daly, argued the principles I should apply in deciding the application are found in the Tribunal’s decision in Productivity Partners Pty Ltd and Australian Skills Quality Authority [2018] AATA 4878. With that authority in mind, Ms Keily outlined two principal arguments in favour of a stay. First, she argues there is a danger the Tribunal and the Court might end up making inconsistent findings in relation to essentially the same factual matrix. Given the Tribunal proceedings are at a more advanced stage, it is likely the Tribunal would deliver its reasons first. Ms Kiely says that could place the Federal Court and the Tribunal in an awkward position. Second, Ms Kiely says her client would experience difficulty given he wishes to invoke the privilege against self-exposure to a civil penalty in the Federal Court proceedings. Ms Kiely argues Mr Daly would have to either effectively abandon that privilege as he conducted a positive case before the Tribunal, or he would need to fight these proceedings with one arm tied behind his back in order to preserve the privilege. Ms Kiely pointed out a number of the witnesses Mr Daly might call in these proceedings are also respondents to the Federal Court action. They might also invoke the privilege, which would unfairly complicate Mr Daly’s defence even if he was prepared to push on.
8. Ms Kiely also argued Mr Daly would face an unfair burden if he had to progress the proceedings in the Tribunal at the same time as he defended the proceedings in the Federal Court.
9. I will briefly discuss the applicant’s arguments before going on to make observations about the correct approach. In doing so, it will be necessary for me to discuss the relationship between the courts (especially the Federal Court) and the Tribunal.

THE DANGER OF INCONSISTENT FACTUAL FINDINGS

10. Ms Kiely noted the Tribunal in Productivity Partners was concerned about the prospect of the Court and the Tribunal reaching inconsistent conclusions. In the course of his reasons, SM Tavoularis said (at [38]):

Plainly, decisions of the Federal Court are of greater precedential value than those of the Tribunal. If there were conflicting findings between the Tribunal and the Federal Court, it would greatly increase the likelihood of an appeal in the Tribunal proceedings and would, to my mind, open the possibility of eroding the ‘public trust and confidence in the decision-making of the Tribunal’. Accordingly, I consider that this weighs in favour of the Tribunal proceedings being stayed.

11. I agree inconsistency may appear inelegant. It is not inevitably a concern.
12. While the forensic fact finding processes undertaken in the General and Other divisions of the Tribunal are similar to those undertaken by the Court, the processes are not identifical. There is always potential for the Tribunal and the Court to make different findings of fact arising out of the same factual matrix if only because the Federal Court must apply the rules of evidence. Section 33(1)(c) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) makes clear the Tribunal is not bound by the formal rules of evidence and “may inform itself on any matter in such manner as it thinks appropriate.” That does not mean the rules of evidence are irrelevant to proceedings in the Tribunal: the rules of evidence embody the accumulated wisdom of the courts on how to elicit probative and relevant evidence in a way that is procedurally fair. They will ordinarily provide a useful guide to the Tribunal as it goes about its work. But the statute says what it says, and it would be an error of law for the Tribunal – a creature of statute – to reflexively apply the formal rules and exclude evidence simply because that material would not be admissible in a court. That makes sense when one recalls the Tribunal is an executive decision-maker that steps into the shoes of the original decision-maker to remake the decision. It would be odd if the Tribunal were prevented from considering relevant and probative evidence that was properly before the original decision-maker on the grounds that the evidence did not formally satisfy the more stringent rules of evidence that apply in a court.
13. It follows the Tribunal might make different factual findings than a court because different evidence might be admissible before the Tribunal. Any difference between the factual findings made by the Court or the Tribunal that was explicable by the different fact-finding processes is not a reflection on either body. It is a product of the difference between executive decision-making and the more formal process of judicial decision-making.
14. I have difficulty seeing how the Federal Court could be influenced in the conduct of its proceedings should it become aware of the Tribunal’s findings on a similar factual matrix. It is not as if the Court would be bound to accept the Tribunal’s findings. The rules of evidence would presumably preclude the Court from treating the Tribunal’s findings of fact as anything more than evidence of the Tribunal’s opinion – assuming the Tribunal’s opinion was relevant to anything the Court might decide in the first place.
15. In summary, I acknowledge the possibility there may be differences between the factual findings made by the Court and the Tribunal. While that is potentially inelegant, it may of less moment than the applicant supposes.

FORENSIC ISSUES

16. The second argument posed by the applicant concerns forensic advantage. Many authorities discuss the forensic choices applicants make when they bring or defend proceedings. Those choices might be pre-empted or limited where the individual is involved in other proceedings that overlap in some way. That is often a serious problem where the applicant is charged with a criminal offence. The applicant in this case does not face criminal charges but the proceedings have serious consequences. Mr Daly and his lawyers will need to think carefully about how they conduct the defence.
17. Mr Daly must decide whether he will invoke the privilege against self exposure to a civil penalty in the Federal Court proceedings. I understand he has foreshadowed an intention to do so. Mr Daly might think twice about invoking the privilege in the Court in circumstances where he needs to run a positive case in the Tribunal. He knows that if he relies on the privilege in the Federal Court proceedings and refrains from comment, he might have difficulty in the Tribunal proceedings where he may need to run a more positive case if he is to succeed upon review. If he gives evidence in the Tribunal that would otherwise be the subject of a claim for privilege in the Federal Court proceedings, he might assist himself here and prejudice himself there. He argues he is being placed in an unfair position because he is being forced to choose. He says being forced to participate in both proceedings at the same time limits his legitimate forensic choices.
18. ASIC says there is nothing unusual or unfair about being required to make a choice of this nature in these circumstances. Mr Brady QC, counsel for ASIC, argued this was an inevitable consequence of a regulatory regime that contemplated a range of different regulatory responses that might operate simultaneously or independently. Mr Brady also pointed out the applicant had already provided a good deal of evidence in the course of earlier Federal Court proceedings, and to the ASIC delegate in the course of the primary decision-making process. To that extent, I was told, the applicant had already made his forensic choices. Moreover, Mr Brady said the applicant chose to apply to the Tribunal for a review. It is not as if he were the respondent in both proceedings, so that the choice was forced upon him by others. It was therefore appropriate to distinguish this case from the authorities dealing with a compulsory examination process where the applicant was forced to answer questions. Those cases suggest a more generous approach to stay applications might be appropriate.
19. The argument that Mr Daly has put himself in difficulty by making a review application is problematic. While Mr Daly was not obliged to challenge the delegate’s decision in this case, that decision has serious consequences. Mr Daly’s evidence provided at the stay hearing suggested a substantial part of his livelihood was at stake. He may not think he had much practical choice about commencing proceedings in the Tribunal.
20. Ms Kiely said Mr Daly’s predicament is complicated by the fact ASIC is approaching the regulatory task on a piece-meal basis. She said her client had a reasonable expectation when he engaged with ASIC at the conclusion of the earlier Federal Court proceedings and again during the process before the delegate that ASIC would produce a coherent, coordinated regulatory response. Mr Brady pointed out ASIC had placed the applicant on notice that it was considering the civil penalty proceedings some time ago, so there could be no surprise. Ms Kiely acknowledged there was formal notice of ASIC’s position but said ASIC’s approach has nonetheless been unfair to her client.
21. In a perfect world, ASIC would have progressed its various cases against the applicant in a more coordinated way. As a practical matter, ASIC must be afforded some latitude in its conduct. It is administering complex legislation with limited resources, and the factual matrix is complicated and contested. As it is, the legislation contemplates ASIC providing a number of distinct regulatory responses – most obviously, a response relating to the applicant’s rights (such as they are) to provide financial services (the subject matter of the review proceedings) in light of his conduct, and a separate response for specific contraventions of the Corporations Act that might result in an order that the applicant be disqualfied from managing corporations. An applicant who is involved in a financial services business and who is a director must accept the realities of that regulatory environment.
22. Having said that, I acknowledge there may be some impact on the applicant’s freedom to conduct proceedings in the Federal Court as he sees fit if he is required to progress the Tribunal proceedings at the same time. I am also concerned that witnesses the applicant might call might be unwilling to assist the Tribunal if they are also parties to the Federal Court proceedings. If they have relevant and probative evidence, their silence as they invoke the privilege will make it harder for the Tribunal to reach the correct or preferable decision.

THE PRINCIPLES

There are many court decisions which discuss how one might resolve potential inter-jurisdictional conflicts like the one in question here. The reasoning in those cases has been developed within a curial setting. There are some dangers in applying the reasoning reflexively to proceedings in the Tribunal. The Tribunal is a creature of statute, so the starting point is the legislation which governs the review in question. The principal source of procedural power is found in s 33 of the AAT Act, although the exercise of all the Tribunal’s powers is informed by the objective set out in s 2A which refers to the need to establish a review mechanism that is, amongst other things, “fair, just, economical, informal and quick” and “accessible”. In the present case, the objectives of the regulator are also relevant. Those are set out in s 1 of the Australian Securities and Investments Commission Act 2001 (C’th). I must also have regard to the objectives of Chapter 7 of the Corporations Act which are found in s 760A as I decide how I should proceed with the review process directed towards making the correct or preferable decision.

23. I have already acknowledged the applicant will carry a significant burden if he is expected to advance his case in the Tribunal while defending proceedings in the Federal Court. It would be expensive, stressful and demanding to deal with both sets of proceedings at once – but one wonders whether dealing with them consecutively is likely to be much less onerous. In any event, it is not clear whether a participant in regulated occupations should be heard to complain about the burden of regulatory responses that are not, on their face, being pursued in an oppressive manner. (Counsel for the applicant alluded to concerns about oppression, but I am not satisfied on the material before me that ASIC has behaved improperly.) One who enjoys the benefits of participating in an occupation that is regulated in the public interest must be taken to accept the risk of bona fide regulatory action when the public interest is at stake.
24. I have more concerns about the fairness of requiring the applicant to proceed in the Tribunal if doing so will limit his legitimate forensic choices in other proceedings that are already on foot. If the applicant were effectively required to abandon the Tribunal review or compromise the conduct of the Court proceedings, that would be a worry. Yet it is unclear how the applicant’s position would be improved by waiting for the Court proceedings to conclude. If he invokes the privilege in the Court proceedings, would he thereafter have a free hand to make forensic choices in the Tribunal proceedings that were inconsistent with the way he conducted his case in the Court? It seems to me he will be required to make his choices in the Court proceedings (assuming they are, in a practical sense, his priority) and then live with those choices regardless of when the Tribunal conducts its review.
25. I also need to be fair to the decision-maker, of course. ASIC agreed it was unable to point to specific prejudice if the review were to be held in abeyance. Delay creates a risk that memories will fade, documents could be lost, and witnesses will scatter. The delay is presumably less of an issue where all the evidence would be gathered in anticipation of the Court proceedings. TI also note the decision under review has taken effect, so it is not as if the applicant is able to put off the awful day of reckoning when the decision is implemented. But there is a further issue. ASIC points out the applicant is able to remain involved on the periphery of a financial services business notwithstanding the banning order that was made. ASIC has foreshadowed asking for more extensive banning orders that it says can be made under the recent amendments to the Corporations Act. ASIC says the Tribunal can make those orders on review. ASIC would like to progress the review and make submissions to that effect. ASIC points out it is precluded from revisting the banning decision of its own motion in light of s 26 of the AAT Act. It needs the Tribunal to bring matters to a head. The applicant, for his part, has every incentive to wait.
26. The applicant finds himself in a predicament as a result of his involvement in a course of conduct, even if the details and implications of that conduct remain at issue. The regulator has deployed a battery of regulatory measures that are, on their face, legitimately open. ASIC may yet have the opportunity to expand its regulatory response by seeking more elaborate banning orders. The Tribunal should hesitate before preventing those processes from taking their course. The applicant needs the freedom to make forensic choices in his response, to be sure, but those choices have inescapable consequences. While I have already referred to subtle differences in the way in which the Court and the Tribunal go about making findings of fact, it is difficult to see how the applicant should be permitted to run a completely different case in the Tribunal. He knows the issues that are likely to arise in the Court proceedings. He can make forensic choices in those proceedings and act accordingly in the Tribunal. If his prospects of success in the Tribunal suffer as a consequence of those choices, that may be an unfortunate incident (for him) of the regulatory regime.
27. It follows I do not regard requiring the applicant to proceed with the review as being unfair, nor am I satisfied it is likely to work an injustice. I accept the applicant might be forced to make choices about the evidence it leads in the Tribunal (which potentially reduce its prospects of success that forum) in order to preserve the privilege in the Court proceedings. I also acknowledge the Tribunal may have a harder time making the correct or preferable decision if it does not have access to all of the relevant and probative evidence. But the applicant would presumably feel obliged to be circumspect in leading evidence before the Tribunal even if ASIC had not yet commenced civil penalty proceedings. Requiring the applicant to go on with the review will not risk a miscarriage of justice.
28. There is obviously something to be said for the economies involved in having one decision-maker hear all of the evidence and reach a concluded view rather than conduct parallel enquiries. The Tribunal could inform itself by waiting for the Court to make its findings. But I have already pointed out the Tribunal’s less formal processes may yet result in different evidence being considered, and different findings of fact being made. In those circumstances, the economies are unlikely to be significant, whereas the delay is likely to be lengthy.
29. Ultimately, the decisive consideration is the public interest. The parliament has seen fit to give ASIC new powers that are intended to afford greater protection to the investing public. It faces constraints in the exercise of those powers while the Tribunal’s review is on foot. While we are yet to have the argument over whether the Tribunal is able to step into ASIC’s (re-sized) shoes or content itself with the old pair, the applicant continues to enjoy the benefit of a decision made under the old law. It is not in the public interest that he be permitted to indefinitely put off a decision on whether he is to be subject to more extensive banning orders.
30. I am not satisfied the review process in the Tribunal should be held in abeyance. In doing so, I do not presume to definitively conclude the review would not have any impact on the Federal Court proceedings. That is properly an issue for the Court to decide. As a matter of law, the Tribunal is an inferior tribunal in the sense it is supervised by the Federal Court. Ms Kiely acknowledged her client could approach the Court for orders that affected the conduct of the Tribunal’s review. The applicant remains free to do so.
31. [deleted paragraph]

CONCLUSION

32. The Tribunal review shall proceed. The parties should confer about potential revisions to the Tribunal and revert to the Tribunal with orders that can be made by consent, or request a directions hearing so a new timetable may be decided should that be necessary.
33. At the request of the applicant, I have made an interim order under s 35 of the AAT Act in relation to the contents of paragraph [31] of these reasons given I was told the information referred to therein may be sensitive and confidential in nature. The contents of that paragraph should be redacted from any version of these reasons that is published online until further order. The parties are free to make further submissions in relation to this order.

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Associate

Dated: 29 October 2020