Middleton, Tom --- "ASIC's Director Disqualification Power Under Section 206F of the Corporations Act 2001 (Cth) - Regulatory Problems and Suggested Reforms" [2023] JCULawRw 5; (2023) 29 James Cook University Law Review 71

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ASIC’s Director Disqualification Power Under Section 206F of the Corporations Act 2001 (Cth) – Regulatory Problems and Suggested Reforms

Dr Tom Middleton*

Abstract

ASIC has an administrative (non-judicial) power under s 206F of the Corporations Act 2001 (Cth) to disqualify a person from managing a corporation (for up to five years). Section 206F is intended to assist ASIC to achieve its regulatory objectives in s 1(2) of the Australian Securities and Investments Commission Act 2001 (Cth) of protecting and promoting the confidence of Australian business participants (including investors and creditors) and enforcing the corporations legislation efficiently and cost-effectively. However, s 206F, in its current form, does not promote those regulatory objectives particularly because there are many uncertainties about the interpretation of the language used in s 206F and these problems have to be resolved on a case-by-case basis. Section 206F should be redrafted in clearer terms so that ASIC has a clearer and a more efficient and effective power to disqualify directors where their conduct in relation to the corporation's failure makes them unfit to be corporate managers.

I Introduction

ASIC has an administrative (non-judicial) power under s 206F of the Corporations Act 2001 (Cth) (‘Corporations Act 2001’) to prevent persons, who are unfit to act as directors, from managing corporations^[1] (for up to five years). ASIC can exercise this power if within seven years before ASIC issued the notice of the disqualification hearing, the person has been an officer of ’two’ or more corporations, and while that person was an officer, or within 12 months after that person ceased to be an officer of those corporations, each of those corporations was wound up on the ground of insolvency. ASIC’s power under s 206F can only be exercised where the liquidator has lodged a report under s 533 of the Corporations Act 2001.^[2]

Section 206F is intended to enable ASIC to quickly restrain particular conduct, or to quickly prevent a person from operating in the relevant business sector, thereby protecting the public from the potential harm that may otherwise be caused by allowing a continuation of that activity^[3] while evidence is gathered for possibly protracted court proceedings at other levels of the enforcement pyramid.^[4]

ASIC’s director disqualification power under s 206F is an alternative to ASIC’s power to apply to the court for a disqualification order^[5] under other provisions such as ss 206C and 206E of the Corporations Act 2001. Section 206F is procedurally less complex^[6] than court action and gives ASIC (rather than the court) the power to make the final disqualification order.

Section 206F was intended by Parliament to be a quick and cheap alternative to court action.^[7] Section 206F was intended to assist ASIC to achieve its public interest regulatory objectives in s 1(2) of the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act’) of protecting and promoting the confidence of Australian business participants (including investors and creditors) and enforcing the corporations legislation^[8] efficiently and cost-effectively and with a minimum of procedural requirements. Cost-effectiveness has been identified by Baldwin and Cave^[9] as one of the benchmarks of effective regulation.

However, it is argued in this article that s 206F,^[10] does not promote those regulatory objectives particularly because there are many uncertainties about the interpretation of the language used in s 206F and these problems have to be resolved on a case-by-case basis. The problem concerning the interpretation of s 206F is exacerbated by the fact that proceedings for a judicial review (on the ground of an error of law) of ASIC’s disqualification decision under s 206F can be commenced in the Federal Court or in the different State or Territory Supreme courts (exercising vested federal jurisdiction).^[11] The Federal Court and the courts of the different States or Territories are not bound by each other’s decisions. There are also a number of examples of inconsistent decisions between the courts of the different States in the context of interpreting the corporations legislation.^[12] The Administrative Appeals Tribunal (AAT) also has jurisdiction to conduct a merits review of ASIC’s disqualification decision. In making that decision the AAT has also been required to resolve issues relating to the interpretation of s 206F.^[13] These jurisdictional issues indicate that legislative reform would better promote a uniform approach to ascertaining the meaning and scope of s 206F, rather than the present case-by-case approach.

The current problems with the drafting of s 206F encourage legal entrepreneurship^[14] where the affected persons (the persons who may be the subjects of the disqualification order) may commence costly and protracted collateral litigation concerning the uncertainties in the law regarding the interpretation of s 206F to promote their own private interests, rather than the public interest.

The reforms suggested in this article would reduce the need for collateral litigation about the interpretation of s 206F, as has occurred in cases like ASIC v Murdaca^[15] and Bolton v ASIC.^[16] Those cases involved numerous appeals to the AAT and Federal Court resulting in considerable additional costs and delay in implementing ASIC’s original s 206F disqualification decisions. Notably in Bolton v ASIC [2023] AATA 2022 at [17] the AAT made the comment that ‘The proceedings have a lengthy history. They arise out of a delegate’s reviewable decision under s 206F of the Corporations Act 2001 (Cth) on 6 October 2015 to disqualify Mr Bolton from managing corporations for three years.’

According to some commentators, ASIC’s disqualification power in s 206F also imposes too many ‘legislative hurdles and preconditions’ for its effective operation.^[17]

It is argued that s 206F should be redrafted in clearer terms so that ASIC has a clearer and a more efficient and effective power to disqualify directors where their conduct in relation to the corporation's failure makes them unfit to be corporate managers.

II Preconditions to ASIC’s Disqualification Hearing

A Two or More Failed Corporations

ASIC’s disqualification power under s 206F can only be used in those cases where there are at least ‘two’ corporate failures involving the same officer. Section 206F does not adequately prevent or deter phoenix activity because the precondition or threshold of ‘two’ means that it “cannot be used in the first resurrection of the failed company.”^[18] Some commentators suggest that ASIC should also have the power under s 206F to disqualify directors in cases involving ‘first-time’ corporate failures.^[19]

In the context of a ‘first-time’ corporate failure, ASIC could apply to the court for a disqualification order under s 206C for a contravention of the civil penalty provisions, such as the directors’ duties provisions in ss 180-183 of the Corporations Act 2001, or the insolvent trading provision in s 588G of that Act. However, such a court application is more costly and protracted in comparison to ASIC’s administrative disqualification proceedings under s 206F.

B Was Wound Up

There has also been doubt about the meaning of the words ‘was wound up’ in s 206F. In particular there has been doubt about whether those words mean the date on which the corporation was first placed into liquidation and the winding up begins, or whether those words mean ‘fully wound up’ and only refer to the date when the winding up is complete or finished. Under the first interpretation ASIC could take action to protect the public under s 206F at the earliest possible date against all potential officers of the corporation who may have been responsible for its collapse even though the winding up process is ongoing and is not finalised. By contrast, if ASIC had to wait until the corporation was fully wound up before it could take action under s 206F, then ASIC could only take action against a limited group of officers who continued to hold office at that point in time, or who were officers in the 12 months prior to that point in time. This interpretation would mean that ‘ASIC could not take swift action to protect the public nor could it take action, at least under s 206F, against all potential officers of the corporation who may have been responsible for the failure of the corporation.’^[20] An amendment that clearly defines the words ‘was wound up’ to mean ‘the date on which the corporation was first placed into liquidation and the winding up begins’ would prevent repeated litigation in the courts and the AAT about the same interpretation issues. This definition would better promote ASIC’s regulatory objectives in s 1(2) of the ASIC Act of promoting more timely regulatory intervention.

III Public or Private Hearing?

Section 206F of the Corporations Act 2001 is silent on whether ASIC’s director disqualification hearings must be conducted in public or private. This means that, in such cases, ASIC has a discretion under s 52(1) of the ASIC Act about whether to conduct the hearing in public or private. Section 52(2) provides that in determining whether a hearing should take place in public or private, ASIC shall have regard to:

(a) whether the evidence is of a confidential nature or relates to the commission of an offence;

(b) any unfair prejudice to a person's reputation that would be likely to be caused if the hearing took place in public;

(c) any public interest in a public hearing; and

(d) any other relevant matter.

Section 53(2) empowers ASIC to direct that the hearing take place in private where, having regard to the matters referred to in s 52(2), that is desirable.

As a general rule, the common law favours the open administration of justice by way of public hearings. Publicity is the very soul of justice and contributes to the integrity of the decision-makers, thereby promoting public scrutiny and public confidence in the independence and fairness of the decision-making process.^[21]

However, the case law also indicates that private hearings may contribute to the administration of justice by allowing the issues to be determined informally and expeditiously. They encourage openness and they may allow matters to be discussed that the parties may be otherwise reluctant to raise at a public hearing. They may also be less intimidating for the affected person.^[22]

If ASIC decided to hold a s 206F hearing in public, the affected person could attempt to delay the hearing process by seeking a review of that decision by the Federal Court under s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (‘AD(JR) Act’) on the ground of an error of law. For example, the affected person may argue that ASIC has failed to take into account a relevant consideration under s 52(2) of the ASIC Act. In such a case, the affected person could also apply to Federal Court for a non-publication or suppression order pending the outcome of that review.

Section 37AF of the Federal Court of Australia Act 1976 provides that the Federal Court may make a non-publication or suppression order prohibiting or restricting the disclosure of the identity of the party or witnesses to the proceedings. Section 37AE provides that when deciding whether to make such an order, the Federal Court must take into account that the primary objective of the administration of justice is to safeguard the public interest in open justice.^[23] Such applications involve further costs and delays and do not promote the regulatory objectives underpinning s 206F.

By contrast, s 920A(2)(a) of the Corporations Act 2001 provides that ASIC’s banning hearings (to determine whether a person should be banned from providing financial services) must be conducted in private. There is no clear justification for this inconsistency regarding mandatory private hearings under s 920A and the option of public or private hearings under s 206F. Both s 206F and s 920A administrative hearings are similar in nature and serve similar regulatory purposes (of protecting the public). The concerns and interests of the affected persons (such as potential reputational harm and loss of employment) are the same in both types of hearings.

The public interest in giving ASIC the power to make administrative director disqualification orders under s 206F must be balanced with the need to protect the private interests of affected persons who may be the subject of those orders. Section 206F should be amended so that ASIC is required to hold such hearings in private. This would eliminate the risk of any unfair prejudice to the affected person’s personal and business reputation that would be likely to be caused if the hearing took place in public. The public interest in informing and protecting investors and creditors is still promoted by a private hearing. This is because when the s 206F private hearing is completed, and ASIC decides to make a disqualification order, ASIC’s disqualification decision then becomes public by way of ASIC making an entry in its register of disqualified directors and other officers.^[24] This register may be searched by the public for free via ASIC’s online site.^[25]

IV ASIC’s Notice of the Disqualification Hearing

Once the preconditions to the operation of s 206F are met, s 206F(1)(b)(i) requires ASIC to give the affected persons a notice in the prescribed form (Form 5249) of the disqualification hearing. Form 5249 requires the affected persons to show cause why they should not be disqualified from managing corporations.^[26] ASIC’s obligation to give the affected person a notice of the hearing is a statutory device for achieving procedural fairness or natural justice which ASIC is bound to observe at its disqualification hearing.^[27]

A Formal Requirements for a Valid Notice

Form 5249 requires ASIC to identify its ‘areas of concern’ about the person’s conduct that are relevant to the question of whether that person should be disqualified (and to attach the supporting documentation on which those concerns are based).^[28]

The ASIC Act also requires some additional disclosures to be made in the notice. For example, s 57(1) of the ASIC Act requires the notice to specify the place and time of the hearing. Section 57(3) also provides that the notice should set out the affected person's right to make written submissions to ASIC in lieu of a personal appearance at the hearing.

Section 59(2)(c) of the ASIC Act provides that ASIC is required to observe the rules of natural justice or procedural fairness at the disqualification hearing. Accordingly, ASIC’s notice of the disqualification hearing must also meet the requirements of those rules.

The fact that the words ‘areas of concern’ in Form 5249 are not defined and have an imprecise meaning, and the broad content of the rules of natural justice, mean that there are a plethora of grounds (based on either a ‘defect in form’ or a breach of natural justice) which the affected person could use to challenge the validity of ASIC’s notice of the disqualification hearing.

If there is a significant or material ‘defect in form’, the notice may be challenged by way of judicial review on the ground that ASIC has not acted within its statutory power to issue notices.^[29] ASIC's decision to issue a notice that contains a material ‘defect in form’ may be reviewable under s 5(1)(e) of the AD(JR) Act on the ground of an improper exercise of power or abuse of power. If ASIC’s notice does not comply with the rules of natural justice, ASIC’s decision to issue that notice could be reviewed under s 5(1)(a) of the AD(JR) Act on the ground of a breach of those rules.

An additional problem is that the courts have adopted two approaches to determining whether the formal requirements for a valid notice have been met. Generally speaking, the first approach to ‘form’ dictates that the notice is valid if it appears regular on its face. There is no obligation on the issuer of the notice to set out in the notice or elsewhere the justification for issuing the notice or the purpose for which it has been issued.^[30] This approach favours the public interest underpinning ASIC’s regulatory powers as it affords the recipient of the notice very few grounds on which to challenge the validity of the notice. This approach also promotes the public interest in protecting the investing public and creditors because it assists ASIC to obtain immediate compliance and to quickly conduct the disqualification hearing.

The second approach to ‘form’ involves a number of additional implied disclosure requirements. As a general rule, to be formally valid under this second approach to ‘form’, the regulator’s notice must disclose the purpose for which it was issued, the relationship between any information sought and the matter that the regulator is pursuing to assist the recipient to determine whether the regulator is acting within its statutory power and whether the information sought does relate to that matter.^[31] This approach favours the recipient of the notice because it requires ASIC to provide more information in its notices.

There is no clear judicial authority about which of the two approaches to ‘form’ will prevail in relation to Form 5249.

The uncertainties in the law have meant that the formal and natural justice requirements of ASIC’s notices have to be resolved on a protracted and costly case-by-case basis.

For example, in ASIC v Murdaca [2008] FCA 1399 at [40]–[41] the affected person challenged the validity of ASIC’s notice of the disqualification hearing because it failed to specify the preconditions for the s 206F hearing. The court held that s 206F and Form 5249 did not require any of the preconditions for the issue of a notice under that section to be stated in the notice.^[32]

The courts have indicated that, provided that ASIC complies with the requirements of Form 5249, the fact that a relevant matter is not stated in the notice will not, of itself, provide a ground for excluding consideration of that matter at the subsequent disqualification hearing. The s 206F notice is merely the initial way by which ASIC notifies the affected person of certain matters relating to the subsequent hearing. ASIC’s obligation to follow proper procedures at the hearing is distinct from its obligation to issue a proper notice of that hearing. Accordingly, ASIC may consider matters at the hearing that were not stated in the s 206F notice provided that ASIC (before making a final decision about whether to make a disqualification order) complies with the rules of natural justice. This means that ASIC must give the affected person all of the material that is relevant to ASIC’s final decision and afford that person a reasonable opportunity to respond to, make submissions on, and call evidence in relation to, that material.^[33]

Further uncertainty about the formal requirements of ASIC’s disqualification notice may be created by s 59(1) of the ASIC Act which requires ASIC to conduct the hearing with little formality and technicality. Section 59(1) only applies to ASIC’s administrative hearings and it does not apply to ASIC’s other powers to issue notices, such as its investigative powers to issue notices to produce books^[34] and notices to attend for an oral examination.^[35] Section 59(1) suggests that perhaps the formal requirements for ASIC’s disqualification notices (Form 5249) are not as strict as for its notices to produce books or its oral examination notices.

As a general rule, where a person is charged with a breach of the law, full particulars of the charge should be given to that person.^[36] In a court proceeding the defendant could successfully object where there has been a departure from the exact terms of the charge. This principle may not strictly apply to ASIC’s disqualification hearings in view of the requirement in s 59(1) of the ASIC Act that the hearing is to be conducted with little formality and technicality. Subsequent events may necessitate the widening of the scope of ASIC's hearing. Arguably, ASIC’s notice of the disqualification hearing will be valid as long as it complies with the rules of natural justice (as required by s 59(2)(c) of the ASIC Act) by setting out in broad terms what is alleged against the affected person. The rules of natural justice would require that, if there is a departure at the disqualification hearing from the matters set out in the notice that genuinely catches the affected person by surprise, that person should be granted an adjournment to deal with that matter.^[37]

Section 206F of the Corporations Act 2001 should be amended by including a provision that specifies a brief and exhaustive list of the disclosures that are required to be made in ASIC’s notice of the disqualification hearing. The words ‘areas of concern’ in Form 5249 should be given a more precise meaning so that those words refer (consistent with the rules of natural justice) to the critical issues or factors relating to the fitness or competence of a person to manage corporations. Section 206F should also be amended so that it imposes a statutory obligation on ASIC (consistent with the rules of natural justice) to disclose in the notice of the disqualification hearing any adverse and credible material that is relevant and significant to ASIC’s proposed disqualification decision so that the affected persons are given an opportunity to address these matters at the hearing.^[38] ASIC should also be required (by an amendment to s 206F) to identify in the notice of the disqualification hearing the powers and functions upon which it relies to ensure that the affected person is informed that ASIC is acting within its statutory powers.^[39]

These reforms would assist to ensure that ASIC’s hearing staff (who prepare and issue the notices of disqualification hearings) address such matters in the notice. This would provide more information to the affected persons and dissuade such persons from making applications for judicial review on grounds such as a ‘defect in form’ or a breach of the rules of natural justice. This would achieve greater certainty in the law, reduce the need to resolve such issues on a case-by-case basis, and save time and cost for both ASIC and the affected persons, thereby promoting more effective regulation.

B Time Within Which Notice Must Be Issued

Section 206F fails to specify the time frame within which ASIC must issue the notice of the disqualification hearing. This has resulted in challenges to the validity of ASIC’s decisions to issue the notices resulting in additional costs and delay. In Kardas v ASC^[40] Heerey J indicated that, given the protective nature of ASIC’s disqualification power, ASIC must issue the notice to the affected person within a reasonable time of ASIC having received the liquidator’s report. This approach also assists to ensure that the affected person is not kept in an ‘indefinite state of uncertainty’^[41] about possible disqualification.

One problem is that the question of what is a reasonable time is difficult to resolve and it must be determined on a case-by-case basis. It is a question of fact depending on the circumstances of the case. According to Heerey J, while the affected person’s and the relevant corporation’s affairs may be complex, ASIC should be in a position to make a decision about whether to issue the notice with reasonable promptness. This is because ASIC does not ‘start from scratch.’^[42] ASIC does have the benefit of the liquidator’s report and the liquidator will usually be able to provide ASIC with further information upon request.^[43]

However, in Culley v ASIC^[44] the court held that if notice of the disqualification hearing is given under s 206F within the period of seven years after the lodging of the liquidator’s report (that first triggered ASIC’s disqualification power), ASIC’s subsequent disqualification decision may be valid. In such a case, any lapse of time is only one of a range of discretionary factors that is relevant to both the exercise of ASIC’s disqualification decision and the attainment of the required satisfaction that a disqualification order is justified. Where the notice is issued within the seven-year period, as stated above, any lapse of time (such as the delay between the winding up of the corporations and ASIC’s disqualification decision) is not a pre-condition or bar to the exercise of ASIC’s disqualification power, but is simply a discretionary factor to be taken into account. The weight, if any, to be given to any period of delay is a matter for ASIC’s delegate (who conducts the disqualification hearing)^[45] to determine in light of all of the relevant circumstances in the particular case. ASIC’s disqualification power under s 206F is not subject to any implied requirement that it must be exercised within any shorter period than the seven years immediately preceding the giving of the notice.^[46] ASIC is not required to act any more promptly or quickly than within the express seven-year time limit stated in s 206F.^[47]

The approach adopted in Kardas v ASC means that ASIC should issue the notice with ‘reasonable promptness’ before that director becomes involved in new business enterprises. From a public interest regulatory perspective, the problem with the approach in Kardas v ASC is that ASIC’s decisions to issue the notices may be subject to numerous challenges on the ground that the notice was not issued within a reasonable time.

There are a wide variety of scenarios in which ASIC’s decision to issue the notice could be challenged on the ground that more than a reasonable time has elapsed. In any such collateral litigation the onus is on ASIC to adduce evidence to explain what activity occurred during the delay period, or the reason for inactivity during that delay period.^[48] ASIC may have a wide range of plausible explanations for any delay. This is because when deciding whether to issue the notice, ASIC must consider all matters known to it that are relevant to the ultimate decision about whether to disqualify the affected person.^[49] For example, as discussed below, whether the ‘two’ or more failed corporations are ‘related’ is a relevant consideration. If there is uncertainty about whether the relevant corporations are related which causes delay in both issuing the notice of the disqualification hearing and the final resolution of the matter, such uncertainty provides a reasonable explanation for the delay.^[50]

In some cases ASIC may have a reasonable explanation for the delay in issuing the notice such as where the director failed to keep adequate records and the liquidator had insufficient funds to conduct a thorough investigation into the collapse. The absence of adequate information and the complexity of the corporation’s affairs may mean that ASIC requires additional time to determine whether it should issue the notice.^[51]

Where ASIC has received two liquidators’ reports in relation to corporations in which the relevant person was a director, it may be reasonable for ASIC to delay its decision about whether to issue the notice to that person until it determines whether any further liquidators’ reports will be lodged in respect of other corporations in which that person was also a director. This approach enables ASIC to make a properly informed decision about whether to issue the notice. By contrast, where liquidators' reports have already been lodged with ASIC in respect of several corporations in which the relevant person is a director, it is not reasonable for ASIC to delay issuing the notice until it determined whether liquidators' reports would be lodged in relation to two other corporations in which that person was a director.^[52]

The precondition or threshold under s 206F that the affected person must be an ‘officer’ of two or more failed corporations may be met by including cases where the affected person is a deemed director (a de facto director or a shadow director)^[53] of a failed corporation.^[54] However, s 533 of the Corporations Act 2001 does not impose any obligation on liquidators to report to ASIC that there may have been deemed directors.^[55] This means that, in some cases, where the affected person is not a properly appointed (or de jure) director of the relevant failed corporations, ASIC may have to investigate the matter (pursuant to s 13(1) of the ASIC Act) to determine whether the affected person was a deemed director of those corporations. In such a case, it would be reasonable for ASIC to postpone its decision about whether to issue a notice of a s 206F disqualification hearing until the outcome of that investigation about the possible existence of deemed directors is known.

To avoid collateral litigation about whether ASIC has issued the notice within a reasonable time and the associated costs and delays, s 206F should be amended by adopting the approach in Culley v ASIC. Under this approach ASIC’s notice of the hearing is prima facie valid if it is given within the period of seven years after the lodging of the liquidator’s report (that first triggered ASIC’s disqualification power). This approach better promotes the public interest underpinning ASIC’s disqualification power by ensuring that the matter will be resolved by the conduct of ASIC’s hearing. The private interests of the affected persons are still protected by the fact that they will have the opportunity to make submissions at that subsequent hearing to ASIC about why the disqualification order should not be made. For example, ASIC would not make a disqualification order at the subsequent hearing if the affected persons could show that commercial factors beyond their control, rather than incompetence, caused the failure of the relevant corporations.^[56]

V Factors Relevant to Whether ASIC’s Disqualification Order is Justified

Section 206F provides that in determining whether a disqualification order is justified, ASIC must consider whether any of the insolvent corporations were related to one another. Section 206F also provides that ASIC may consider the affected person's conduct in relation to the business, property, or management of any corporation; whether the disqualification would be in the public interest (including the protection of persons who deal with corporations from conduct involving breaches of duty and recklessness and the need to maintain professional management standards); and ‘any other matters that ASIC considers appropriate.’

A General Deterrence

Section 206F does not expressly include the need to promote general deterrence as a relevant consideration when ASIC is determining whether a disqualification order is justified. This leaves room for an argument that ASIC’s decisions under s 206F involve an error of law under s 5 of the AD(JR) Act on the ground that ASIC has taken into account an irrelevant consideration (such as general deterrence). Arguably the need to promote “general deterrence” would impliedly fall within the ‘catch all’ provision in s 206F(2)(b)(iii) which states that when considering whether a disqualification order is justified, ASIC may take into account ‘any other matters that ASIC considers appropriate.’ It may be that those words will be interpreted by the courts more restrictively to exclude the need to promote ‘general deterrence’ by applying the rules of statutory interpretation, such as the ejusdem generis rule. Alternately, the courts may interpret those general words more broadly to include the need to promote ‘general deterrence’ in view of ASIC’s public interest regulatory objectives in s 1(2) of the ASIC Act and the remedial protective nature of ASIC’s financial services and credit regulation powers.^[57]

Some AAT and Federal Court decisions now indicate that the need to promote general deterrence must be taken into account in deciding whether a disqualification order should be made and, if so, the duration of that order.^[58] The AAT has indicated that the need to promote general deterrence, of itself, may justify a disqualification order under s 206F.^[59]

The reason why ASIC should consider general deterrence in deciding whether to make a disqualification order under s 206F and, if so, the duration of that order is that general deterrence:

(a) discourages other directors from breaching their professional obligations;

(b) assists to ensure that directors conform to exacting standards of honesty thereby meeting the expectations of the commercial world; and

(c) reduces the risk of substantial financial loss being incurred by the public.^[60]

The express omission of ‘general deterrence’ from s 206F encourages legal entrepreneurship which, in turn, involves costly and protracted collateral litigation in the different administrative and judicial forums challenging whether ‘general deterrence’ should be taken into account. The express recognition of the need to promote general deterrence in s 206F would eliminate such litigation. Such an amendment would also better recognise and promote the protective purpose of s 206F.

Support for such a reform is found in s 16A(2)(ja) of the Crimes Act 1914 (Cth) which expressly provides that, in the context of deciding upon the sentence to be imposed for a Commonwealth offence, the court must take into account the general deterrent effect that the proposed sentence may have on other persons. Section 16A(2)(ja) was inserted in 2015 to provide greater certainty in the law.

B Liquidator’s Report

The liquidator’s report (issued pursuant to s 533 of the Corporations Act 2001) triggers ASIC’s disqualification power under s 206F regardless of the content of that report.^[61] However, s 206F does not expressly require ASIC to consider the liquidator’s report in deciding whether a disqualification order is justified. Whether ASIC has an implied obligation to consider those reports, and the accuracy of those reports, is not clear.

In some cases, the affected persons have argued that ASIC must satisfy itself about the validity of the liquidator’s report before it issues the notice of the disqualification hearing under s 206F.^[62] Some AAT and Federal Court decisions indicate that ASIC is not required to investigate the truth of the information contained in the liquidator’s report when it appears to be regular on its face and comply with the requirements of s 533. ASIC is entitled to expect that the liquidators have acted bona fide when preparing their reports and that their views, as stated in their reports, are genuinely held. The liquidators are not required to have reasonable grounds for those views.^[63]

The latter point is understandable because the purpose of the liquidator’s report is to simply forewarn ASIC about potential ‘delinquent or aberrant behaviour.’^[64] The liquidator’s report promptly alerts ASIC about potential problems within the corporation that may require subsequent investigation by ASIC (pursuant to s 13(1) of the ASIC Act) to determine whether suspected contraventions have occurred (as reported by the liquidator).^[65] Those suspected contraventions could become the subject of future enforcement action by ASIC at any level of the enforcement pyramid regardless of the outcome of any s 206F proceedings.

Some AAT and Federal Court decisions indicate that when deciding whether a person should be disqualified, ASIC could, at the subsequent s 206F disqualification hearing, consider the correctness of the liquidator’s report but ASIC is not required to consider that matter when it issues the notice of the disqualification hearing. If it were otherwise, there would be endless challenges to the validity of the liquidators’ reports and this would render s 206F unworkable.^[66]

To promote the public interest in giving ASIC a broad power to conduct a disqualification hearing, s 206F should be amended to expressly state that ASIC is not required to consider the accuracy of the liquidator’s report as a precondition to ASIC’s decision to issue the notice of the disqualification hearing. However, to promote the private interests of the affected persons, s 206F should also expressly provide that where ASIC places reliance on the liquidator’s reports at the subsequent s 206F hearing, it is required to assess the accuracy/correctness or ‘worth’ of those reports when deciding whether a disqualification order under s 206F is justified.^[67]

C Related Corporations

ASIC is required by s 206F(2)(a) to consider whether the failed or insolvent corporations are related to each other and whether the failure of the corporations should be treated as several separate failures, or as the failure of one overall business operation.^[68] This requirement is imposed to ensure that the director’s failures do not appear worse than they are just because the affairs of a single failed business enterprise are carried on through several corporations, rather than one corporation.^[69]

The requirement that ASIC consider whether the insolvent corporations are related means that ASIC can assess the reasonableness or otherwise of the directors’ conduct and, the need to protect the public, by considering whether that conduct occurred in the context of one set of factual circumstances, events or transactions between those related corporations. If the conduct occurred within the one set of circumstances within a corporate group, this may mean that the seriousness or gravity of the directors’ conduct may be less because there is no continuous pattern of failure or non-compliance between different corporations or businesses.^[70]

Section 50 of the Corporations Act 2001 provides that a corporation is ‘related’ to another corporation where it is a holding corporation of that other corporation, or a subsidiary of that other corporation, or a subsidiary of a holding corporation of that other corporation.^[71] Section 46 of the Corporations Act 2001 provides that a corporation is subsidiary of another corporation only if that other corporation controls the composition of the first corporation’s board, or controls more than fifty percent of the voting shares, or holds more than half of the issued capital of the first corporation.^[72]

Despite the statutory definition of a ‘related’ corporation, it is not clear whether that definition applies to s 206F. For example, in Aghili v ASIC at [11]–[12] the AAT indicated that, even though the corporations in that case were not related for the purposes of s 50, that was not determinative. According to the AAT, in deciding whether a disqualification order was justified, regard could be given to the fact that the corporate group was ’holistic’ in nature or ‘operated as a single unitary commercial operation’ in a practical sense and that the failure of those corporations was the result of a single action, namely the appointment of an administrator. Similarly in Gilbert v ASIC the AAT indicated that corporations may be related where they are related operationally (rather than established for distinct business purposes), or where they are a part of the one business failure.^[73]

By contrast in JYWV v ASIC at [33] and [36]^[74] the AAT indicated that whether corporations are related for the purpose of s 206F should be interpreted in accordance with s 50 of the Corporations Act 2001 and not according to broader concepts, such as whether they have common connections in terms of directors and activities.

Section 206F should be amended to make it clear that the narrower concept of related corporation in s 50 applies to s 206F. This would prevent collateral litigation about which test applies. It may also give ASIC a broader disqualification power under s 206F. The private interests of the affected persons are still protected under such a reform because they still have the opportunity to make submissions at the disqualification hearing about why ASIC should not make a disqualification order.

Section 206F does not expressly give ASIC any guidance about the consequences that may flow from ASIC’s conclusion that the relevant corporations were related to one another.^[75] In Grossman v ASIC at [36] the AAT indicated that ASIC may make a disqualification order under s 206F if it is ‘justified’ even though the relevant corporations were related because in that case there were still two corporate failures of other unrelated corporations, within the relevant time frame. In Guss v ASIC at [13] and [14] the AAT indicated that even if the relevant corporations were related to one another, that would not deprive ASIC or the AAT of the ability (or jurisdiction) to be satisfied that a disqualification order is justified.^[76]

In some cases the AAT has indicated that the question of whether any of the relevant corporations are ‘related’ is matter which must be taken into account by ASIC but is not, of itself, determinative of whether the affected person should be disqualified under s 206F. It is just one of a wide range of matters to be considered by ASIC.^[77]

To provide greater clarity, and given that the courts are not bound by decisions of the AAT, s 206F should be amended to expressly provide that where ASIC decides that the relevant corporations were related, such a finding does not deprive ASIC of the power to make a disqualification order where such an order is justified based on all other relevant factors.

D Directors’ Duties

Section 206C of the Corporations Act 2001 makes it clear that the court’s power to disqualify a person from managing corporations is subject to the requirement that a declaration of contravention of a civil penalty provision (including the directors’ duties in ss 180-183) has been made. By contrast, s 206F does not make it clear whether a breach of the directors’ duties must be established before ASIC can make a disqualification order under this section. This omission has meant that affected persons have commenced protracted and costly proceedings challenging ASIC’s disqualification decision under s 206F on the ground that they have complied with the directors’ duties.^[78]

The AAT has indicated that evidence of contraventions of the corporations legislation or breaches of the directors’ duties will be relevant to ASIC’s decision about whether to disqualify a particular director under s 206F. However, according to the AAT, ASIC is not required to identify specific contraventions of the corporations legislation, or breaches of the directors’ duties when making that decision. Rather, the operation of s 206F is triggered by evidence of a pattern of failure that invites closer scrutiny to determine whether the public should be protected by preventing the director from managing corporations.^[79]

One problem is that the decisions of the AAT do not necessarily resolve the question once and for all about whether a breach of the directors’ duties must be established for the purposes of a disqualification order under s 206F. This is because, as noted previously, decisions of the AAT are not binding on the various State or Territory Supreme courts or the Federal Court which also have jurisdiction in matters involving s 206F.

Section 206C has a different sphere of operation or scope as it applies to a broader range of situations than s 206F. This is because s 206C applies to any cases involving a contravention of any civil penalty provision and, unlike s 206F, s 206C is not restricted to cases involving repeated corporate failures. In some cases, there may be the potential for an overlap between the operation of s 206C and s 206F such as cases where there are both repeated corporate failures and contraventions of the civil penalty provisions (for example, the directors’ duties civil penalty provisions in ss 180-183 and the insolvent trading civil penalty provision in s 588G). This limited overlap does not mean that ASIC should be impliedly required to prove the same elements required by the civil penalty provisions (such as a breach of the directors’ duties) to make a disqualification order under s 206F.

As noted previously, Parliament enacted s 206F to give ASIC an administrative disqualification power (at the base of the enforcement pyramid) in those specific cases involving a director’s involvement in repeated corporate failures. Section 206F is intended to provide a quicker and more cost-effective alternative to court proceedings under s 206C (at a higher level on the enforcement pyramid) for a disqualification order for a breach of the civil penalty provisions (including the directors’ duties in ss 180-183). Section 206F was enacted to give ASIC an additional power in its regulatory toolkit to promote higher public interest regulatory objectives (including protecting the public in a timely manner) by quickly ‘weeding out directors with a track record of failure.’^[80]

ASIC’s s 206F disqualification hearing is more timely, cost-effective and efficient in comparison to court proceedings because s 59(1) of the ASIC Act provides that the s 206F hearing, unlike court proceedings, ‘must be conducted with as little formality and technicality, and with as much expedition, as the requirements of the corporations legislation ... and a proper consideration of the matters before ASIC permit.’ In addition, s 59(2)(a) of the ASIC Act provides that ASIC, at its disqualification hearing, ‘is not bound by the rules of evidence’ and procedure that apply in court proceedings.

The lower protections for the affected persons under s 206F, compared to the usual protections available to defendants in court proceedings under s 206C would be of concern to those who are the subject of s 206F proceedings. However, those lower protections may be partly justified on the basis that s 206F promotes higher public interest regulatory objectives including obtaining a more timely and efficient regulatory outcome by eliminating some of the collateral litigation that occurs in court proceedings about whether the relevant evidential and procedural rules have been observed. Those lower protections may also be partly justified by the fact that the maximum disqualification period that ASIC can order under s 206F is 5 years whereas a court, acting under s 206C, may disqualify a person for an unlimited period of time. Those lower protections for the affected persons, in the context of s 206F, also suggest that a s 206F hearing is not the proper forum to make a final determination about whether directors have breached their statutory duties in ss 180-183 (which attract more serious consequences – including a potentially unlimited period of disqualification under s 206C and a substantial pecuniary penalty under s 1317G).

Section 206F should be amended by including a provision that makes it clear that ASIC does not have to establish a breach of the directors’ statutory duties as a precondition to making a disqualification order under s 206F. This reform is consistent with the express approach adopted in relation to the operation of s 206C (noted above) and would better recognise the different regulatory purposes and sphere of operation of s 206C and s 206F and their different levels on the enforcement pyramid, as well as eliminating the collateral litigation described above.

VI Standard of Proof

Section 206F does not specify the standard of proof that applies in ASIC’s disqualification proceedings. As noted above, a s 206F hearing, unlike court proceedings, is conducted ‘with little formality and technicality’ and ASIC ‘is not bound by the rules of evidence’ and procedure that apply in court proceedings.^[81] This suggests that ASIC is not required to adopt the same standard of proof in its administrative disqualification proceedings as is applicable in court proceedings. The advantage for ASIC of not being bound by the rules of evidence is that ASIC can adopt a flexible procedure and can inform itself by whatever means it sees fit and is not restricted by technical rules regarding admissibility.^[82] Accordingly, ASIC can consider documents at the hearing that would be inadmissible as evidence in a court of law. The use of such documents by ASIC in reaching its decision would not constitute an error of law for the purpose of judicial review under s 5 of the AD(JR) Act.^[83]

Section 1332 of the Corporations Act 2001 provides that, ‘[w]here, in proceedings other than proceedings for an offence, it is necessary to establish, or for the Court to be satisfied, for any purpose relating to a matter arising under this Act, that ... a person has contravened a provision of this Act; ... it is sufficient if [the contravention] is established, or the Court is so satisfied, as the case may be, on the balance of probabilities’.

It is not clear whether s 1332 applies to ASIC’s disqualification proceedings under s 206F because, for the reasons discussed previously, ASIC’s s 206F disqualification power does not require proof of a ‘contravention’ of the Corporations Act 2001 (such as the directors’ duties provisions). In addition, s 1332 refers to ‘the Court’. In the context of s 206F, ASIC makes the disqualification decision, rather than the court.

There may be an error of law where a decision-maker adopts the wrong standard of proof. However, given that ASIC is not bound by the rules of evidence at its s 206F hearing, there is no error of law where ASIC chooses not to adopt the common law rules of evidence, such as the Briginshaw^[84] rule, or the statutory equivalent in s 140 of the Evidence Act 1995 (Cth) (and the various State and Territory equivalents), or the statutory rule of evidence in s 1332 of the Corporations Act 2001. In addition, s 140 of the Evidence Act 1995 (Cth) (and the various State and Territory equivalents) only apply to proceedings in the Federal Court and High Court (and the relevant State and Territory Supreme Courts) and do not apply to ASIC’s administrative proceedings under s 206F.

The Bringinshaw rule (and the equivalent provision in s 140 of the Evidence Act 1995 (Cth)) means that the phrase ‘on the balance of probabilities’ has various shades of meaning. The rigour of the court's application of this civil standard of proof varies, depending upon the seriousness of the allegations made, the nature of the cause of action and any defence, the nature of the subject matter of the proceeding, the inherent unlikelihood of an occurrence of a given description and the gravity of the consequences that may flow where a contravention is proven.^[85] The Briginshaw rule (and the equivalent provision in s 140 of the Evidence Act 1995 (Cth)) reflects the concepts of common sense, fairness and reliability.^[86]

According to the case law, whether ASIC adopts the rules of evidence at its administrative hearings (such as hearings under s 206F), including the rules relating to the applicable standard of proof, is a matter for ASIC to determine.^[87] While s 59(2)(a) of the ASIC Act provides that ASIC is not bound by the rules of evidence, the scheme of that Act does not preclude the operation of those rules. Section 59(2)(a) does not prevent ASIC from applying the rules of evidence.^[88] In some cases it may be preferable for ASIC to adopt the rules of evidence because those rules provide a useful guide and assist to provide ‘a method of inquiry best calculated to prevent error and elicit truth.’^[89]

The AAT has indicated that ‘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.’^[90] The rules of evidence may be of assistance where the ASIC Act provides no guidance. ASIC may, for example, rely on the rules of evidence to determine practical problems, such as the sequence of receiving evidence and what to do if it is unable to reach a clear conclusion on the issue.^[91]

ASIC’s administrative disqualification decision under s 206F of the Corporations Act 2001 has grave or serious consequences for the affected persons ( concerning their reputation, livelihood and employment prospects) and, in such cases, it is not reasonable for ASIC to make a decision based on ‘inexact proofs, indefinite testimony or indirect references.’^[92] Given both the serious nature of the allegations involved in ASIC’s 206F disqualification proceedings, and the serious consequences for the affected person that flow from making a disqualification order, it is argued that ASIC should apply the common law Briginshaw standard of proof (or the equivalent standard of proof in s 140 of the Evidence Act 1995 (Cth)) in deciding whether such an order should be made.^[93]

This reform could be adopted by adding a note to s 206F about the applicable standard of proof. This would remove any uncertainty in the law and prevent collateral litigation challenging ASIC’s disqualification decision on grounds relating to the applicable standard of proof. This reform may also reduce challenges to ASIC’s disqualification decision based on an alleged breach of the rules of natural justice or procedural fairness under s 5(1)(a) of the AD(JR) Act. This is because, as noted above, the Briginshaw rule promotes ‘fairness’ in decision-making. The adoption of this rule may assist ASIC to meet its obligation under s 59(2)(c) of the ASIC Act to afford the affected person natural justice or procedural fairness at the disqualification hearing. A similar amendment about the applicable standard of proof should also be made in relation to ASIC’s administrative power to ban persons from providing financial services and credit services.^[94]

VII Conclusion

As at 30 June 2023, ASIC had disqualified 28 directors from managing corporations under s 206F of the Corporations Act 2001, compared to 58 in 2022, and 49 in 2021.^[95] Three of those disqualifications in 2023, eight of those disqualifications in 2022, and four of those disqualifications in 2021, involved the disqualification of directors who were engaged in illegal phoenix activity. ASIC has indicated that it is committed to using its regulatory powers to identify, disrupt and take enforcement action against directors and other persons who engage in such illegal phoenix activity.^[96] Corporate insolvencies have increased by 62.5% in 2023, when compared to 2022.^[97] These statistics indicate that there may be an increased need for ASIC to conduct s 206F disqualification hearings in future years.

It is recognised that there needs to be an appropriate balance between the competing public and private interests. The private interests of the affected persons must not be sacrificed simply to promote the efficiency of ASIC’s administrative disqualification powers.^[98] However, the reforms suggested in this article would not impact on the affected person’s rights to seek review of ASIC’s disqualification decisions in the AAT or the Federal Court. Rather, they would simply reduce the need for such external reviews, or collateral litigation, on grounds concerning the interpretation of s 206F, as has occurred in cases like ASIC v Murdaca^[99] and Bolton v ASIC.^[100] The adoption of clearer language in s 206F would not only promote ASIC’s regulatory objectives but would also better safeguard the rule of law and protect the regulated community from a potential exercise of arbitrary power.^[101]

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* Adjunct Associate Professor, Law Discipline, James Cook University, Townsville.

¹ Nicholas v Corporate Affairs Commissioner (Vic) [1988] VicRp 40; [1988] VR 289, 299 cited in Quinlivan v ASIC [2010] AATA 113, [71] (‘Quinlivan’).

^[2] Kender v ASIC [2018] AATA 4445, [4], [9] and [10] (‘Kender’); and Hammond v ASIC [2020] AATA 1325, [6] (‘Hammond’).

^[3] Sage v ASIC [2005] FCA 1043, [30]; and Chapel Road Pty Ltd v ASIC [2007] NSWSC 975, [27].

^[4] The Corporations Act 2001 is based on an enforcement pyramid model. Administrative (non-judicial) proceedings are at the base of the pyramid (see, for example, ASIC’s banning or disqualification proceedings under s 206F and s 920A). Civil proceedings for non-punitive court orders are at the next level of the pyramid (see, for example, s 1324 injunctions and s 1317H compensation orders). Civil proceedings for punitive court orders are at the next level (see, for example, s 206C disqualification orders, s 1317G pecuniary penalties). Criminal proceedings are at the top of the pyramid (see, for example, the criminal offence for a breach of the directors’ duties in s 184). Evidential and procedural complexity, the protections for the defendant, and costs and delay in achieving a regulatory outcome, increase as the enforcement response is escalated up the pyramid: See generally Senate Standing Committee on Legal and Constitutional Affairs, Report on the Social and Fiduciary Duties and Obligations of Company Directors (1989), 190; Ayres I and Braithwaite J, Responsive Regulation: Transcending the Deregulation Debate (Oxford University Press, New York, 1992) p 35; ASIC v HLP Financial Planning (Aust) Pty Ltd (2007) 164 FCR 487; [2007] FCA 1868, [50]; and T Middleton, ASIC Corporate Investigations and Hearings (Thomson Reuters Subscription Service, 2022) at [8.1380].

^[5] Murdaca v ASIC [2009] FCAFC 92; (2009) 178 FCR 119; 258 ALR 223; 27 ACLC 1,218; [2009] FCAFC 92, [101]; and Thompson v ASIC [2010] AATA 1063, [30] (‘Thompson’).

^[6] See s 59(1) and s 59(2)(a) of the ASIC Act, as discussed subsequently.

^[7] Murdaca (n 5), [101]; Thompson (n 5), [30]; May v ASIC [2013] AATA 180, [4] (‘May’), ASE16 v ASIC (2016) 112 ACSR 36; [2016] FCA 321, [20] (‘ASE16’); Oreb v ASIC (No 2) (2017) 247 FCR 323; [2017] FCAFC 49, [28] (‘Oreb’); and Bolton v ASIC [2018] AATA 976, [39] (‘Bolton’).

^[8] Defined in s 9 of the Corporations Act 2001 to include that Act and the ASIC Act.

^[9] Baldwin R and Cave M, Understanding Regulation: Theory, Strategy, and Practice (Oxford University Press, Oxford, 1999) 76.

^[10] See also s 206F(1)(b)(i) of the Corporations Act 2001 which specifies that ASIC’s notice of the disqualification hearing must be in the prescribed form: Form 5249.

^[11] Section 1337B(1) of the Corporations Act 2001.

^[12] See, for example, the inconsistent decisions in Green v FP Special Assets Ltd [1992] 1 Qd R 1; (1990) 3 ACSR 731; 9 ACLC 75 and ASC v Ampolex Ltd (1995) 38 NSWLR 504; 85 A Crim R 240; 18 ACSR 735; 14 ACLC 80.

^[13] Section 1317B of the Corporations Act 2001; and s 25 of the AAT Act. See, for example, Bolton (n 7).

^[14] See J Braithwaite, Markets in Vice, Markets in Virtue (Federation Press, 2005) 247.

^[15] Murdaca v ASIC [2008] AATA 209; ASIC v Murdaca [2008] FCA 1399; and Murdaca v ASIC (n 5).

^[16] Bolton v ASIC [2015] AATA 977; Bolton (n 7); Bolton v ASIC [2018] AATA 4215; Bolton v ASIC [2021] AATA 5293; and Bolton v ASIC [2023] AATA 2022.

^[17] Parliamentary Joint Committee on Corporations and Financial Services, Corporate Insolvency Laws: a Stocktake, June 2004, [8.52]–[8.59]: http://www.aph.gov.au/binaries/senate/committee/corporations_ctte/completed_inquiries/2002-04/ail/report/ail.pdf, viewed 1 November 2022; and Anderson H, ‘‘The Proposed Deterrence of Phoenix Activity: An Opportunity Lost?’’ [2012] SydLawRw 20; [2012] 34 Sydney Law Review 411, 419.

^[18] Anderson H, n 17, 419.

^[19] Parliamentary Joint Committee on Corporations and Financial Services, n 17.

^[20] ASE16 (n 7), [44], [62] and [64]; Oreb (n 7), [55]; and Reed v ASIC [2017] AATA 930.

^[21] JTMJ v ASIC [2010] AATA 471, [6] and [13].

^[22] Re ABCD and Commissioner of Taxation (2008) 50 AAR 287; [2008] AATA 898, [151].

^[23] See generally SRD v ASC (1994) 52 FCR 187; [1994] FCA 1252, 189 (FCR); ASE16 (n 7), [72]–[75]; and Zivanovic v ASIC [2017] FCA 1633, [26]–[28].

^[24] Section 1274AA of the Corporations Act 2001; ASIC v Murdaca [2008] FCA 1399, [7]; ASE16 (n 7), [92]; and Bolton (n 7), [42].

^[25] See ASIC, Professional Registers: http://www.asic.gov.au/asic/asic.nsf/byheadline/Professional+registers?openDocument, viewed 1 November 2022; and see Anderson H, n 17, 419.

^[26] Section 206F(1)(b)(i) of the Corporations Act 2001; ASIC v Murdaca [2008] FCA 1399, [16]. See generally Warne v ASIC [2009] AATA 340, [51]; Sgaravizzi v ASIC [2019] AATA 6890, [10]; and Timeless Sunrise Pty Ltd v BigJ Enterprises Pty Ltd (No 7) [2022] VSC 549, [93] (‘Timeless’).

^[27] Section 59(2)(c) of the ASIC Act; Porter v APRA [2010] FCA 125, [41]; Murdaca v ASIC (n 5), [101]; Thompson (n 5), [30]; May (n 7), [4]; ASE16 (n 7), [20] and [22]; O’Sullivan v ASIC [2018] FCA 228, [13] (‘O’Sullivan’); and Wang v ASIC [2023] AATA 1568, [125] (‘Wang’).

^[28] See generally Timeless (n 26), [94].

^[29] Re ABM Pastoral Co Pty Ltd (1978) 3 ACLR 239, 247.

^[30] Melbourne Home of Ford Pty Ltd v Trade Practices Commission [1979] FCA 15; (1979) 36 FLR 450 (FC Fed Ct); Phillips v Corporate Affairs Commission (SA) [1986] SASC 9540; (1986) 11 ACLR 182; and ASC v Lucas [1992] FCA 234; (1992) 36 FCR 165; 108 ALR 521; 7 ACSR 676; 10 ACLC 888 at [40], [44], [45], [58] and [59].

^[31] Commissioner of Taxation (Cth) v Australia and New Zealand Banking Group Ltd (1979) 143 CLR 499; 53 ALJR 336; 9 ATR 483; 23 ALR 480; 79 ATC 4,039, 522 per Gibbs ACJ; Pyneboard Pty Ltd v Trade Practices Commission [1982] FCA 17; (1982) 57 FLR 368; 39 ALR 565, 571 (ALR) (FC Fed Ct); Bannerman v Mildura Fruit Juices Pty Ltd [1984] FCA 156; (1984) 2 FCR 581; 55 ALR 367, 370 (ALR) (FC Fed Ct); SA Brewing Holdings Ltd v Baxt [1989] FCA 398; (1989) 23 FCR 357; 89 ALR 105, 116 per Fisher and French JJ; MacDonald v ASC [1993] FCA 594; (1993) 43 FCR 466; 116 ALR 514; 30 ALD 71; 11 ACSR 128; 11 ACLC 804, 807; Pilnara Pty Ltd v Commissioner of Taxation [1999] FCA 945; Kluver J, ‘‘ASC Investigations and Enforcement: Issues and Initiatives’’ (1992) 15(1) University of New South Wales law Journal 31, 42; and Bolton B, ‘Compelling Production of Documents to the ASC’ (1995) QLSJ 221, 229.

^[32] ASIC v Murdaca [2008] FCA 1399, [40]–[41].

^[33] ASIC v Murdaca [2008] FCA 1399, [40]–[41]; and Murdaca v ASIC (n 5), [93], [94] and [127].

^[34] See ss 30-34 of the ASIC Act.

^[35] See s 19 of the ASIC Act.

^[36] See Johnson v Miller [1937] HCA 77; (1937) 59 CLR 467; and Russell v Duke of Norfolk [1949] 1 All ER 109, cited in Connell v NCSC (1989) 14 ACLR 765; 7 ACLC 748, 754 (ACLC).

^[37] Story v NCSC (1988) 13 NSWLR 661; 13 ACLR 225; 6 ACLC 560, 238 (ACLR).

^[38] Hodgkinson v Companies Auditors and Liquidators Disciplinary Board (1994) 50 FCR 504; 12 ACLC 648, 650 (ACLC) per Drummond J, citing Kioa v West [1985] HCA 81; (1985) 159 CLR 550; 60 ALJR 113; 62 ALR 321, 587 (CLR) per Mason J. See also McLachlan v ASIC [1999] FCA 244; (1999) 85 FCR 286; 17 ACLC 656, 666; Murdaca v ASIC (n 5), [94]; Snedden v Minister for Justice for the Commonwealth (2014) 315 ALR 352; [2014] FCAFC 156, [175] and the authorities referred to therein; and Wilson Transformer Company Pty Ltd v Anti-Dumping Review Panel [2022] FCAFC 4, [64].

^[39] Broken Hill Pty Co Ltd v NCSC [1986] HCA 31; (1986) 160 CLR 492; and Elders IXL Ltd v NCSC [1987] VicRp 1; [1987] VR 1.

^[40] [1998] FCA 775; (1998) 16 ACLC 1,695; 29 ACSR 304; 53 ALD 303; [1998] FCA 1381, 313-314 (ACSR).

^[41] Kardas v ASC [1998] FCA 775; (1998) 16 ACLC 1,695; 29 ACSR 304; 53 ALD 303; [1998] FCA 1381.

^[42] Ibid.

^[43] Ibid cited in Scott v ASIC [2010] AATA 54, [46]; Quinlivan (n 1), [89]–[91]; and JYWV v ASIC [2010] AATA 936, [107] (‘JYWV’).

^[44] (2010) 183 FCR 279; [2010] FCAFC 43, [30], [36] and [50] (‘Culley’).

^[45] See s 102 of the ASIC Act.

^[46] Culley (n 44), [30], [35], [36] and [50]; Quinlivan v ASIC [2010] FCAFC 161 (‘Quinlivan 2’), [36]; and JYWV (n 43), [106].

^[47] Culley (n 44), [2] and [9]. In Culley v ASIC [2010] HCASL 282, the High Court dismissed an application for special leave to appeal that decision. See also Quinlivan 2 (n 46), [36]; and JYWV (n 43), [106].

^[48] JYWV (n 43), [113].

^[49] Quinlivan 2 (n 46), [45].

^[50] Ibid,

^[51] Quinlivan (n 1), [89]–[91].

^[52] JYWV (n 43), [110].

^[53] These terms are defined in s 9AC and s 9AD of the Corporations Act 2001.

^[54] Hammond (n 2), [6], [29]-[30], [52] and [55].

^[55] ASIC v Wily [2019] NSWSC 521, [69] and [72] (‘Wily’).

^[56] Sheslow v ASIC [1994] AATA 250; (1994) 20 AAR 161; 12 ACLC 740; 34 ALD 539, [59] (‘Sheslow’); and Andrews v ASIC [2006] AATA 25, [63] (‘Andrews’).

^[57] See the statutory interpretation rule in s 1(3) of the ASIC Act.

^[58] Grossman v ASIC [2011] AATA 6, [112], [119]–[120] and [125] (‘Grossman’); and Zivanovic v ASIC (No 2) (2018) 126 ACSR 634; [2018] FCA 676, [37], [39], [45] and [50] (‘Zivanovic (No 2)’).

^[59] Wang (n 27), [13].

^[60] R v Pantano (1990) 49 A Crim R 328, 330; R v Rivkin (2003) 198 ALR 400; [2003] NSWSC 447, [44]; R v Richard [2011] NSWSC 866, [90]–[93]; and DPP (Cth) v Couper [2013] VSCA 72, [118].

^[61] Murdaca v ASIC (n 5), [100], [103]-[106] and [114]; Wily (n 55), [64]; and Wang (n 27), [125].

^[62] See, for example, Murdaca v ASIC (n 5), [62].

^[63] Murdaca v ASIC (n 5), [86]–[120] cited in Aghili v ASIC [2012] AATA 353, [13] and [14] (‘Aghili’); and O’Sullivan (n 27), [17] and [29].

^[64] Murdaca v ASIC (n 5), [86]–[120]; Aghili (n 63), [13] and [14]; May (n 7), [4]; Boorer v HLB Mann Judd (NSW) Pty Ltd [2014] NSWCA 100, [28]; and ASIC v Bettles [2023] FCA 975, [732] (‘Bettles’).

^[65] Murdaca v ASIC (n 5), [105]; O’Sullivan (n 27), [17]; and Bettles (n 64), [732].

^[66] Murdaca v ASIC (n 5), [101] and [118]; Thompson v ASIC (n 5), [30]; Grossman (n 58), [7]; ASE16 (n 7), [20]; O’Sullivan (n 27), [17] and [29]; and Ehrenfeld v ASIC [2019] AATA 6892, [14].

^[67] Wang (n 27), [126].

^[68] Boorer v ASIC [2012] AATA 390, [12], [19] and [42] (‘Boorer’); and May (n 7), [22].

^[69] Quinlivan v ASIC (n 1), [74]; Quinlivan 2 (n 46), [39]; May (n 7), [22]; and Maley v ASIC [2013] AATA 924, [18] (‘Maley’).

^[70] Gabay v ASIC [2014] AATA 425, [17] (‘Gabay’).

^[71] Gilbert v ASIC [2020] AATA 191, [13] (‘Gilbert’).

^[72] See generally Boorer (n 68), [13] and [14]; Aghili (n 63), [10]–[12]; Gabay (n 70), [18]; and Holden v ASIC [2016] AATA 605, [13] (‘Holden’).

^[73] Gilbert (n 71), [14]–[15], citing Quinlivan 2 (n 46), [39]; and Andrews (n 56), [23].

^[74] JYWV (n 43). Not following Sheslow (n 56), [39].

^[75] Guss v ASIC (2006) 90 ALD 349; [2006] AATA 401, [13] (‘Guss’); and Grossman (n 58), [37].

^[76] Cited in Grossman (n 58), [36] and [37].

^[77] Boorer (n 68), [18].

^[78] See, for example, the submissions in Holden (n 72), [7].

^[79] Guss (n 75), [48]; Quinlivan (n 1), [70]–[71]; JYWV (n 43), [138]; Richards v ASIC [2011] AATA 235, [12]; Aghili (n 63), [17]; Holden (n 72), [28]; Zivanovic (No 2) (n 58), [28]; and Hammond (n 2), [60].

^[80] Maley (n 69), [22]; and Kender (n 2), [15]; and Wang (n 27), [219].

^[81] See ss 59(1) and (2)(a) of the ASIC Act.

^[82] Re Delonga and ASC [1994] AATA 346; (1994) 15 ACSR 450; 13 ACLC 246, 250 (ACLC) (AAT), citing Cullen v Corporate Affairs Commission (1988) 14 ACLR 789; 7 ACLC 121, 124 (ACLC) per Young J. See also Marelic v Comcare [1993] FCA 599; (1993) 47 FCR 437; 121 ALR 114; 32 ALD 155, 119 (ALR) per Beazley J.

^[83] Winter v ASC (1995) 56 FCR 107; 13 ACLC 422, 432 (ACLC) per von Doussa J.

^[84] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 (‘Briginshaw’).

^[85] Ibid, 362 per Dixon J; ASIC v RAC Cochrane [1999] NSWSC 814; and Australian Law Reform Commission, Discussion Paper 65: Civil and Administrative Penalties, Part A, The Role of Penalties in Government, [2.80], https://www.alrc.gov.au/publication/securing-compliance-civil-and-administrative-penalties-in-federal-jurisdiction-dp-65/ (viewed 1 November 2022); Commonwealth Bank of Australia v Saleh [2007] NSWSC 903, [18]; Orrong Strategies Pty Ltd v Village Roadshow Ltd (2007) 207 FLR 245; [2007] VSC 1, [31], [818]–[819] and [821]; ASIC v Macdonald (No 11) [2009] NSWSC 287, [182]–[184]; ASIC v Australian Property Custodian Holdings Ltd (No 3) [2013] FCA 1342, [33] and [35]; Patrick Stevedores Holdings Pty Ltd v Construction, Forestry, Maritime, Mining and Energy Union [2019] FCA 451, [16]; and ASIC v Gallop International Group Pty Ltd [2019] FCA 1514, [18].

^[86] Sullivan v Civil Aviation Safety Authority (2014) 226 FCR 555, [93] and [99] (‘Sullivan’).

^[87] Ibid, [8], [91], [92], [93], [97], [99], [101], [115], [116], [121] and [122]; Tarrant v ASIC (2015) 66 AAR 24; 317 ALR 328; [2015] FCAFC 8, [121]; WWKJ v Minister for Foreign Affairs [2018] AATA 3894, [60]; and ASIC v Hutchison [2020] FCA 978, [93]. See generally McDermott v ASIC [2020] AATA 3362, [85].

^[88] Bolton v ASIC [2018] AATA 4640, [69] (‘Bolton 2’).

^[89] R v War Pensions Entitlement Appeal Tribunal; Ex parte Bott (1933) 50 CLR 228, 256 per Evatt J; Sullivan n 86), [93]; and Bolton 2 (n 88), [72].

^[90] Daly v ASIC [2020] AATA 4589, [12].

^[91] McDonald v Director-General of Social Security (1984) 1 FCR 354; 6 ALD 6; [1984] FCA 57, 356 (FCR) per Woodward J; and Nom v Director of Public Prosecutions (Vic) [2012] VSCA 198, [80] (‘Nom’).

^[92] Sullivan (n 86), [16]; and Frugtniet v ASIC [2022] AATA 295, [50].

^[93] Briginshaw (n 84); YFFM v ASIC [2010] AATA 340, [60]; Catena v ASIC (No 2) [2010] FCA 865, [24]; and Nom (n 91), [90] and the authorities cited therein.

^[94] See s 920A of the Corporations Act 2001; and s 80 of the National Consumer Credit (Protection) Act 2009 (Cth).

^[95] ASIC, Annual Report, 2023, 61, at https://download.asic.gov.au/media/b3zf3or3/asic-annual-report-2022-23_full.pdf; ASIC, Annual Report, 2022, 31, https://download.asic.gov.au/media/10dg0aqv/asic-annual-report-2021-22_full.pdf; and ASIC, Annual Report, 2021, 31, https://download.asic.gov.au/media/2aaomxuz/asic-annual-report-2020-21-full-1.pdf.

^[96] ASIC, Annual Report, 2023, 61, at https://download.asic.gov.au/media/b3zf3or3/asic-annual-report-2022-23_full.pdf; ASIC, Annual Report, 2022, 45, at https://download.asic.gov.au/media/10dg0aqv/asic-annual-report-2021-22_full.pdf; and ASIC, Annual Report, 2021, 47, at https://download.asic.gov.au/media/2aaomxuz/asic-annual-report-2020-21-full-1.pdf.

^[97] ASIC, Corporate Insolvency Update, Issue 28, June 2023, at https://asic.gov.au/about-asic/corporate-publications/newsletters/asic-corporate-insolvency-update/asic-corporate-insolvency-update-issue-28/.

^[98] Hyland, Margaret ‘Who is Watching the Watchdog?: A Critical Appraisal of ASIC's Administrative Powers’ (2009) 2 Journal of the Australasian Law Teachers Association 29.

^[99] See n 15.

^[100] See n 16.

^[101] See n 98.