Legal database - View: Cases: Re Kippe and Australian Securities Commission

Kippe and Australian Securities Commission
(1995) 19 ACSR 296
(1995) 14 ACLC 128

(Decision by: Miss S A Forgie (Deputy President) )

Kippe and Australian Securities Commission, Re

Tribunal:

Administrative Appeals Tribunal

Member:
Miss S A Forgie (Deputy President)

Decision date: 7 December 1995

Brisbane

Decision by:
Miss S A Forgie (Deputy President)

DECISION AND REASONS

The Tribunal decides that

1. a decision to make a banning order under section 829 of the Corporations Law 19 is a proceeding for the imposition of a penalty within the meaning of sub-section 68(3) of the Australian Securities Commission Act 1989;

2. statements which the applicant made in his examination held on 15 September, 1994 under Part 3 of the Australian Securities Commission Act 1989 and which he claimed in accordance with sub-section 68(2) of the ASC Act might tend to incriminate him or make him liable to a penalty are not admissible in evidence against him in the Commission's consideration of whether it should make a banning order;

3. the applicant's signing of the record of his examination held on 15 September, 1994 under Part 3 of the Australian Securities commission Act 1989 and which he claimed in accordance with sub-section 68(2) of the ASC Act might tend to incriminate him or make him liable to a penalty is not admissible in evidence against him in the commission's consideration of whether it should make a banning order;

4. the statements and the record are not admissible in proceedings for review of the respondent's decision to make a banning order against the applicant; and

5. further consideration adjourned.

REASONS FOR DECISION

On 20 July, 1995, the applicant, Mr Maxwell Alfred Kippe, applied for review of a decision of a delegate of the respondent, the Australian Securities Commission ("the Commission"). The decision of the delegate, Mr Brendan Charles Behan, was dated 19 July, 1995. Mr Behan decided to make an order pursuant to paragraphs 829(f) and (g) and section 830 of the Corporations Law ("the Law"). The order, described as a "banning order" (section 9), prohibited Mr Kippe from doing an act as a representative of a dealer or of an investment adviser for a period of three years from the date of service of the order. The order was served on 19 July, 1995.

2. The parties agreed that, before Mr Kippe's application can be heard and determined on its merits, there is a preliminary question which must be answered. In brief, that question relates to whether the Commission, in making its order, was entitled to take into account certain statements made by Mr Kippe under compulsion under the Australian Securities Commission Act 1989 ("the ASC Act).

3. At the hearing, Mr Kippe was represented by Mr Keane Q.C. and Mr DK Smith of counsel and the Commission by Mr McShane a barrister in its employ. Reference was made to the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act")("T documents") but it was unnecessary to call other evidence.

THE ISSUES

4. There are two issues for determination. The first relates to the application of sub-section 68(3) of ("the ASC Act") to the Commission's decision to issue a banning order in respect of Mr Kippe. It is whether making the decision under review is "a proceeding for the imposition of a penalty" within the meaning of paragraph 68(3)(b). If it is, the statements which Mr Kippe made at his examination and in respect of which he claimed privilege in accordance with sub- section 68(2) of the ASC Act, are not admissible and may not be relied upon by the Commission in making its decision to issue the banning order. The second issue is whether the proceedings in this Tribunal are themselves such a proceeding.

THE BACKGROUND

5. For the purposes of the determination of the issues I find, on the basis of the material in the T documents, that Mr Kippe is a dealer's representative and an investment adviser's representative. Under section 19 of the ASC Act, he was given a written notice requiring him to attend for examination by members of staff of the Commission. That examination took place on 15 September, 1994. Mr Kippe was required to read and sign each page of the record of his examination.

6. Under sub-section 21(3), Mr Kippe was required to answer all questions which were put to him by the staff members of the Commission and which were relevant to the matter under investigation. He was advised that he could claim the benefit of sub-section 68(3) in response to any particular question but that he would then have to answer that question. It was explained to him by one of the persons conducting the examination that, where a proper claim had been made, the statement could not be used against him in subsequent criminal proceedings or in proceedings to impose a penalty other than in proceedings in respect of the falsity of the statement itself. (T documents, pages 96-97)

SUBMISSIONS

7. In the following paragraphs, I will outline in general terms the submissions made by both Mr Keane and Mr McShane.

8. Mr Keane submitted that the clear focus of paragraph 68(3)(b) is upon the result of the proceeding i.e. upon the imposition of a penalty. It is not upon the characterisation of the law which empowers the Commission to take certain action, upon the jurisdiction of the Commission in exercising that power or even upon such matters as the standard of proof to be met or the matters to be taken into account before the power may be exercised. It is also clear that paragraph 68(3)(b) is concerned with proceedings that may not be criminal and so may not be concerned with punishment for an offence. This is clear from the words of the paragraph itself and is confirmed by the definition of a "proceeding" in sub- section 5(1) and by an examination of the Report of The Joint Select Committee on Corporations Legislation, April 1989, Mr Ron Edwards (Chairman) Senator Jim Short (Deputy Chairman) which examined the Australian Securities Commission Bill before its enactment. By way of contrast, paragraph 68(3)(a) is concerned not with the result of a proceeding but with the characterisation of the proceeding itself. That paragraph is focussed upon the characterisation of the proceeding as a "criminal proceeding".

9. That there has been the imposition of a penalty upon a person, Mr Keane submitted, does not necessarily lead to the conclusion that the person has been guilty of an offence. Restrictions upon a person in terms of his earning his living or profession or disqualification from holding or obtaining a licence is a penalty even though such restrictions and disqualification may not relate to any offence. Mr Keane referred to cases such as Coogans v McDonald [1954] SLT 279, Police Service Board v Morris (1984-1985) 156 CLR 397 , Re Chapman and the Tax Agents' Board (1984) 84 ATC 4353 , New South Wales Bar Association v Evatt (1968) 117 CLR 177 and the dictionary definitions of "penalty".

10. The privilege against self penalisation was never solely concerned with penalties for an offence. Mr Keane referred in this context to the cases of Police Service Board v Morris. In addition, the privilege was never solely concerned with protection of a person against the imposition of fines. This is clear from the case of Environment Protection Authority v Caltex Refining Co v Caltex Refining Co Pty Ltd. The distinction drawn in sub-section 68(3) between a criminal proceeding and a proceeding for the imposition of a penalty is a deliberate distinction based upon broad and beneficial concepts and should not be read down.

11. Both Mr Keane and Mr McShane submitted that, in reviewing the Commission's decision, the Tribunal is bound by the same rules and has the same discretions as the Commission had in making the decision. Section 43 of the AAT Act was referred to by both and Mr Keane relied also upon section 25. Mr McShane referred also to cases such as Minister for Immigration and Ethnic Affairs v Pochi (1980) 4 ALD 139 at 143.

12. Mr McShane submitted that the process by which a decision to make a banning order is made by the Commission should be analysed. When that is done, there appear to be three clear steps. The first occurs when the delegate, having regard to the information he or she has and including the transcripts of any examination, forms a preliminary view that, in the absence of any other material coming to light, the Commission "would seriously consider" banning the person. (Story v NCSC (1988) 6 ACLC 560 at 573. At this stage, there is no proceeding for there is no proceeding before a court or a tribunal and that is so even if the "tribunal" is to be taken to mean the Commission while conducting a hearing.

13. The second step in the process occurs when the Commission is required by sub-section 837(2) to offer the person the right to appear and to be heard. This hearing does not constitute the process by which the decision to make the banning order is made. The hearing is but one procedural step leading to the making of the decision by the Commission that it has reason to believe the matters set out in section 829 of the Law. The Commission does not tender or admit evidence at the hearing and the hearing bears no similarity to an adjudicative trial. As a merely fact finding exercise, the hearing could not be described as a "proceeding" and, even if it could be, it could not be described as being for the imposition of a penalty. Its purpose was for hearing and seeing the person.

14. The third step occurs when the Commission or its delegate makes a decision to issue the banning order. This decision is separate from the information gathering processes which led to it. The making of the decision could not equate to a proceeding as defined for, even on the widest interpretation, it is not "a hearing before ... a tribunal". Mr McShane illustrated his submission by reference to sections 599 and 600 of the Law. An order made by a court prohibiting a person from managing a corporation is made in a proceeding. Where the Commission makes a similar order under section 600 it does not do so in a proceeding.

15. With regard to whether the proceeding (if it be one) is for the imposition of a penalty, Mr McShane said that the wording of sub-section 68(3) covers any proceeding for the imposition of a criminal consequence or a civil penalty. He referred to Part 9.4B of the Law which deals with the civil and criminal consequences of contravening certain provisions of the Law. A "penalty", Mr McShane argued, is to be equated with punishment and he proceeded to consider whether an order under section 837 of the Law is a penalty or punishment. He referred to cases such as Story v NCSC, Quinn v National Companies and Securities Commission (1994) 12 ACLC 412 , Nicholas v Commissioner for Corporate Affairs (1987) 5 ACLC 258 , Friend v Corporate Affairs Commission & Anor (1989) 7 ACLC 106 , Flavel v Barrett (1991) 54 A Crim R 452 and Re Network Agencies International Ltd (1991) 5 NZCLC 67,535 .

16. If regard were to be had to the consequences of a proceeding then that would mean that the limitations on the use of a person's statement would extend to any civil action where the defendant might suffer detrimental consequences. So, for example, the statement could not be used in simple recovery actions between parties or recovery actions brought by the Commission for the benefit of third parties pursuant to section 50 of the ASC Act. This could not be the intention of the Parliament for the purpose of sub-section 68(3) is to limit the use of privileged material in proceedings but not to eliminate the use of such material in any proceeding.

CONSIDERATION

The legislative scheme

17. I will begin by setting out the provisions of the ASC Act and of the Law which are relevant to the consideration of the issues raised in this case.

The ASC Act

18. Among other matters, the ASC Act provides for the functions, powers and business of the Commission (paragraph 1(b)). Part 3 of the Act is concerned with the investigations and information-gathering carried out by the Commission. Division 1 of that Part deals with the Commission's powers to investigate, Division 2 with its powers to require a person to appear for examination on oath and to answer questions, Division 3 with its powers to inspect books, Division 4 with its powers to disclose certain information, Division 5 with its powers to begin criminal and civil proceedings, Division 6 with hearings, Division 7 with offences, Division 8 with the Commission's powers where there has been non-compliance with Part 3, Division 9 with the evidentiary use of certain material and division 10 with general matters.

19. In the context of this case, section 19 of Division 1 is of particular importance. That section

"... applies where the Commission, on reasonable grounds, suspects or believes that a person can give information relevant to a matter that it is investigating, or is to investigate, under Division 1." (sub-section 19(1))

Sub-section 19(2) goes on to provide that:

"The Commission may, by written notice in the prescribed form given to the person, require the person;

(a)
to give to the Commission all reasonable assistance in connection with the investigation; and

(b)
to appear before a specified member or staff member for examination on oath to answer questions."

20. The inspector (i.e. the member or staff member of the Commission conducting the examination - section 20) is given additional powers under section 21. He or she may require the examinee (the person examined - section 20) to take an oath or make an affirmation that the statements the examinee makes will be true (sub-sections 21(1) and (2)) and may require the examinee to answer a question provided it is relevant to the investigation (sub-section 21(3)). It is an offence to fail to comply, "without reasonable excuse" with a requirement made under, among others, section 19 or sub- section 21(3) (sub-section 63(1)).

21. The inspector may keep a record of the statements made at the examination and must do so if the examinee requests it. Where a record is made, the inspector may require the examinee to sign the record after reading it or after it has been read to him or her (section 24).

22. The notice which the Commission gives under sub- section 19(2) must state the general nature of the matter it is investigating or is to investigate under Division 1 of Part 3. In addition, the notice must also set out the effect of sub-sections 23(1) and 68 (sub-section 19(3)). Sub-section 23(1) provides that an examinee's lawyer may be present at the examination and that he or she may address the inspector and examine the examinee about matters upon which the inspector has examined the examinee.

23. Section 68 is concerned with self-incrimination. It provides that, for the purposes of, among others, Part 3

"... it is not a reasonable excuse for a person to refuse or fail:

(a)
to give information;

(b)
to sign a record; or

(c)
to produce a book;

in accordance with a requirement made of the person, that the information, signing the record or production of the book, as the case may be, might tend to incriminate the person or make the person liable to a penalty."

24. Where, before making such a statement or signing a record of the examination, the person claims in accordance with sub-section 68(2) that doing so might tend to incriminate him or her or make him or her liable to a penalty and where the statement or signing the record might in fact tend to incriminate the person or make the person liable to a penalty, sub-section 68(3) provides that:

"The statement, or the fact that the person has signed the record, as the case may be, is not admissible in evidence against the person in:

(a)
a criminal proceeding; or

(b)
a proceeding for the imposition of a penalty; other than in a proceeding in respect of:

(c)
in the case of the making of a statement - the falsity of the statement; or

(d)
in the case of the signing of a record - the falsity of any statement contained in the record."

25. The word "proceeding" is defined in section 5 of the ASC Act to mean:

(a): "a proceeding in a court; or
(b): a proceeding or hearing before, or an examination by or before, a tribunal;; whether the proceeding, hearing or examination is of a civil, administrative, criminal, disciplinary or other nature;" (sub-section 5(1)).

26. The word "tribunal" is defined to mean:

(a): "a tribunal in Australia; or
(b): any other body, authority or person in Australia having power, by law or by consent of parties, to hear, receive or examine evidence;" (sub-section 5(1)).

The Corporations Law

27. Chapter 7 of the Law deals with securities. It is divided into various parts, each of which deals with a separate aspect of the securities industry. Part 7.3 deals with the participants in the securities industry. So, for example, it requires that those who carry on a securities business or an investment advice business must be licensed as such and sets out the obligations of being licensed and the rights of those who deal with unlicensed dealers and investment advisers (Divisions 1 and 2).

28. Division 3 regulates representatives of dealers and finance advisers. A body corporate may not act as a representative (section 810). A person may act as a representative of a dealer but only if the dealer holds a dealer's licence and the representative holds a proper authority from the dealer (section 806). He or she may act as a representative of an investment adviser only if the investment adviser is either a dealer holding a dealer's licence or holds an investment adviser's licence and the representative holds a proper authority from the investment adviser (section 807). Division 3 sets out the obligations of the licensed dealer or investment adviser in relation to those holding his or her proper authority and those of the representative.

29. Division 4 regulates the liability of licensed dealers and investment advisers for the conduct of their representatives while Division 5 provides for the exclusion of persons from the securities industry. Sections 824 to 827 provide for those circumstances in which the Commission may revoke a licence held by a dealer or an investment adviser. In certain circumstances, the Commission may also issue a banning order under section 828 if the dealer or investment adviser is a natural person.

30. Section 829 provides for those circumstances in which the Commission may make a banning order against a natural person who is not a licensed dealer or investment adviser but is a representative of a licensed dealer or of an investment adviser. Subject to the Commission's having given the person an opportunity to make submissions and give evidence at a hearing before the Commission, the Commission may make a banning order if:

(a)

"he or she becomes insolvent under administration;

(b)

he or she is convicted of serious fraud;

(c)

he she becomes incapable, through mental or physical incapacity, of managing his or her affairs;

(d)

he or she contravenes a securities law;

(e)

the Commission has reason to believe that he or she is not of good fame and character;

(f)

the Commission has reason to believe that he or she has not performed efficiently, honestly and fairly the duties of;

(i): a representative of a dealer; or
(ii): a representative of an investment adviser; or

(g)

the Commission has reason to believe that he or she will not perform efficiently, honestly and fairly the duties of;

(i): a representative of a dealer; or
(ii): a representative of an investment adviser." (section 829 and see also section 837)

31. The Commission must make a banning order by a written order and, by doing so, may

"... prohibit the person:

(a)
in any case - permanently; or

(b)
except where the Commission is empowered by virtue of paragraph 828(c) or 829(e) to make the order - for a specified period' from doing an act as:

(c)
a representative of a dealer;

(d)
a representative of an investment adviser; or

(e)
a representative of a dealer or of an investment adviser; whichever the order specifies." (sub-section 830(1))

32. The Commission may only vary or revoke a banning order in accordance with section 831, 832 and 833 (sub-section 830(2)). It may not grant a dealer's licence or an investment adviser's licence to a person if a banning order prohibits that person from doing an act as a representative of a dealer or of an investment adviser.

Issue 1: Was the banning order made as a result of a proceeding for the imposition of a penalty?

33. Much of the argument centred around the meaning of "penalty" and proceeding" but it seems to me that the starting point should be with the general law relating to privilege against self-incrimination for it is that privilege which section 68 restricts. I have summarised the provisions of section 68 at paragraphs 24-26 above.

Privilege against self-incrimination

34. The privilege against self-incrimination is stated in various ways. In Redfern v Redfern [1891] P 139, Bowen LJ said that "a party cannot be compelled to discover that which, if answered, would tend to subject them to punishment, penalty, forfeiture, or ecclesiastical censure." (page 147). This statement of the law was found to be somewhat archaic by the Court of Appeal in Blunt v Park Lane Hotel Limited, and Another [1942] 2 KB 253 as the jurisdiction of the ecclesiastical courts is generally obsolete. Goddard LJ said that no-one is bound to answer any question if the answer would, in the opinion of the Judge, have the tendency to expose him or her to any criminal charge, penalty or forfeiture. A person may claim privilege against the discovery of documents on the same ground. Goddard LJ said of penalties and forfeiture:

"Actions for penalties are penal actions. The plaintiff, like a prosecutor, must prove his case and cannot extract admissions from the defendant any more than from a prisoner charged on indictment. Forfeiture has always been regarded, both at law and in equity, as in the nature of a penal action. Indeed, all actions of ejectment were so regarded as having the object of depriving a man of his estate." (page 260)

35. Blunt's case was considered by the Court of Appeal in the case of In re Westinghouse Electric Corporation Uranium Contract Litigation M.D.L. Docket No. 235 (No 2) [1977] 3 WLR 492 . It did so in terms consistent with the statement of principles made by Goddard LJ. The Court of Appeal found that two companies, the directors of which had been called upon to produce documents, were entitled to claim privilege against self-incrimination upon the basis that there was an appreciable risk that production of the documents would result in penal proceedings being instituted against them under an EEC treaty. The European Commission could impose a fine as penalty under the treaty as an administrative action. The fine could be recovered in England, The Court of Appeal found, by proceedings for the recovery of a penalty.

36. The law in Australian has developed in a similar fashion. There has been recognition that the privilege gives protection to a person both against self-incrimination for a criminal penalty and self-exposure to a civil penalty. This is apparent from the High Court's judgment in Pyneboard Pty Ltd v Trade Practices Commission (1983) 45 ALR 609 , which was approved in this regard by the High Court in the later case of Environment Protection Authority v Caltex Refining Co Pty Ltd 1992-1993) 178 CLR 477 . It has also been adopted by, for example, the Supreme Court of Queensland in Price v McCabe (1984) 55 ALR 319 .

37. There has also been recognition that the privilege is available to a person in a wide range of proceedings including, but not limited to, those which may be described as judicial. The Pyneboard case, for example, concerned proceedings in the Trade Practices Commission. The privilege against self-incrimination has been allowed to be claimed on many occasions in this Tribunal (see for example Case U115 (1987) 87 ATC 686 ).

38. The privilege applies to a penalty that can be imposed in relation to matters other than criminal proceedings. This was so in Police Service Board v Morris and Martin in which the High Court considered whether the privilege against self incrimination or exposure to a penalty was capable of applying to the Police Regulations 1979 (Vic). Those regulations required that no member of the police force was to disobey a lawful order. It followed that the regulations also required a member to answer questions when those answers would tend to show that the member had committed a disciplinary (but not criminal) offence for it was lawful for a senior officer to order a junior officer to answer questions about what had occurred when he had been, or should have been, performing his duties. Gibbs CJ said:

"There is an obvious distinction between criminal offences and breaches of discipline and it is not necessary to insist upon that distinction for some purposes: see, eg Reg v White: Ex parte Byrney (1963) 109 CLR 665 at 670. Nevertheless, although the penalties provided by s.88 are disciplinary penalties, they are nonetheless penalties, and it is old law, confirmed by modern authority, that a person cannot be compelled to answer a question whenever the answer would tend to expose him to `any kind of punishment' - `anything in the nature of a penalty'. see Phillipps and Arnold. A Treatise on the Law of Evidence, 10th ed. (1852), vol. 2, p.487; Greenleaf on Evidence, 11th ed. (1863), vol. 1, p.621; Brav on Discovery (1885), p.313; In re Westinghouse Uranium Contract (1978) AC 547 at pp 563, 564 (a statement not challenged on appeal (1978) AC at pp612,627,632,647 and Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328 . Moreover, it is now acceptable that the privilege is capable of application in non-judicial proceedings: Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR at p340; Sorby v The Commonwealth (1983) 152 CLR at p 309. It was submitted by the Solicitor-General on behalf of the appellants that the relationship between the Crown and the members of the police force is deemed to be that of master and servant (see s.13(3) of the Police Regulation Act) and that the privilege has no relevance to proceedings to elicit disclosure by an employee to the employer of the actions of the employee in the course of the employment. However that may be, answers given by a member of the police force which tend to show the commission by him of an offence against s.88(1) might tend to render that member liable to the penalties provided by s.88 and not merely to civil sanctions for breach of contract. It is right to start with the assumption that the rule which confers the privilege is capable of applying to a statutory provision which requires members of the police force to answer questions tending to show the commission by them of disciplinary offences." (pages 403-404)

39. It follows from the cases that the privilege applies to all criminal proceedings but applies to a civil proceeding only in so far as it renders a person liable to the imposition of a penalty. In considering whether a person is liable to the imposition of a penalty, it is important to distinguish civil actions for penalties from civil actions from other matters such as compensation or damages. This distinction was made in Blunt's case. It was also made in a case such as R v Association Northern Collieries (1910) 11 CLR 738 . I will return to cases considering whether or not a statute imposes a penalty in later paragraphs.

The privilege and section 68 of the ASC Act

40. The scope of the privilege against self- incrimination and self-exposure to a penalty may be narrowed by Parliament. That Parliament has chosen to do so in section 68 is clear. For the purposes of Part 3 and certain other provisions of the ASC Act, Parliament has prevented a person from refusing to answer questions, sign a record or produce a book on the basis that to do so might tend to incriminate him or her or make him or her liable to a penalty. The wording of the section so closely accords with traditional expressions of the privilege that there can be no conclusion other than that for the purposes of Part 3 and certain other specified purposes, the privilege may not be claimed to justify a person's refusal to answer questions. The effect of this is that the Commission's investigative powers are unimpeded by claims of privilege. At the same time, the protection traditionally accorded the individual is preserved, in part by the operation of sub-sections 68(2) and (3). Those sub- sections provide that the statement or the fact that a person has signed a record may not be used in a criminal proceeding or in a proceeding for the imposition of a penalty. Although no protection is given in relation to documents that have been required to be produced, the wording of sub-section 68(3) mirrors the essence of the protection given by the privilege against the use of the information that the person has been required to give.

41. On its face, section 68 appears to have reached a balance between the understandable need for the Commission to investigate activities of concern to it and the equally understandable expectation of each person that he or she will enjoy the protection of the privilege against self- incrimination that Murphy J said "... is part of the common law of human rights." (Sorby v Commonwealth at page 311).

42. That this is the balance sought to be reached is confirmed by a reading of passages from the Report of the Joint Select Committee on Corporations Legislation to which Mr Keane referred. That it is appropriate for me to have regard to them is supported by cases sic as Barker v R (1983) 47 ALR 1 . The Joint Committee considered clause 68 of the Australian Securities Commission Bill which then provided that the privilege extended to a person who produced a book to the Commission and also prevented the use in subsequent criminal proceedings of evidence obtained as a direct or indirect consequence of a person's making a statement and signing a record. The predecessor of the Commission, the National Companies and Securities Commission, had suggested that the compulsive powers of the Commission would be virtually useless if clause 68 was passed in that form.

43. The Committee concluded:

"4.59 The Committee recognises that the privilege against self-incrimination is a firmly established, and important rule of the common law which acts to prevent a person from being compelled to incriminate themselves.

However, it must equally be recognised that abrogation of the rule by statute is an important and valuable power of the legislature which it can use to protect the public interest. The Committee is acutely aware that the abrogation of the privilege by the legislature must be treated with extreme caution; an approach regularly confirmed in the reports of the Senate Scrutiny of Bills Committee.

4.60 The Committee believes that the balance that must be struck in the end case is enactment of a provision which will allow the ASC maximum effectiveness in achieving its investigatory function. Equally, such a provision as subclause 68(3) should not deny - any more than is demonstrably necessary - the protection that has always been enjoyed in Australia. One of the purposes for establishing an ASC, is to allow investigation of possible breaches of the national scheme laws. The Committee believes that subclause 68(3) will not unnecessarily or unacceptably act to abrogate the privilege against self-incrimination, if it were amended to apply only to statements made by a person, and not to documents nor to any information, document, or other thing obtained as a direct or indirect consequence of the person making the statement."

44. The two objects of investigation and protection are not incompatible and it follows that there is no need to read down sub-section 68(1) on the one hand and sub-sections 68(2) and (3) on the other to accommodate both objects. Nor is there any reason to read down each of the paragraphs of sub-section 68(3). Paragraph 68(3)(a) accords with the privilege against self-incrimination and paragraph 68(3)(b) with the privilege against self-penalisation. Each should be given its well established meaning.

What is a penalty? - the dictionary meanings

45. Although I do not consider that it is possible to consider the meaning of "penalty" outside the context in which it is used, I will set out the definitions and cases to which reference was made during the hearing. That will, I believe, make it apparent why it is important to have regard to the context.

46. The word "penalty" is defined in the Macquarie Dictionary and the Shorter Oxford Dictionary in similar terms. In the Macquarie Dictionary the definition reads:

"1. a punishment imposed or incurred for a violation of law or rule. 2. a loss or forfeiture to which one subjects himself by non-fulfilment of an obligation. 3. that which is forfeited, as a sum of money. 4. consequence or disadvantage attached to any action, condition, etc. 5. Sport. a disadvantage imposed upon a competitor or side for infraction of the rules. 6. Horseracing. an additional handicap placed on a horse (for winning a race) after the original handicap weights have been issued ..."

47. The word "imposition" is a derivation of "impose" which is defined, in so far as it is relevant, in the Macquarie Dictionary as:

"v.t.1. to lay on or set as something to be borne, endured, obeyed, fulfilled, etc: to impose taxes. 2. to put or set by, or as by, authority: to impose an arbitrary meaning upon words. 3. to subject to some penalty, etc. ..."

48. It follows from the dictionary meanings of "penalty" and of "impose", that the ordinary meaning of the words "to impose a penalty" is to set a punishment, loss, forfeiture, disadvantage or consequence that must be borne, endured, obeyed or fulfilled. The "imposition of a penalty" therefore means the setting (by some means) of a punishment, loss, forfeiture, disadvantage or consequence that must be borne, endured, obeyed or fulfilled.

49. There are, therefore, two aspects of a penalty. The first is the nature of the consequence and the second is the way in which the consequence is imposed. On its ordinary meaning, the consequence may take several forms. That is apparent not only from the way those consequences are described in terms ranging from punishment to disadvantage but also in the ways in which the consequence has effect e.g. by being borne, endured, obeyed or fulfilled. The second aspect of a penalty relates to the way in which it comes about. It may come about in various ways. For example, it may come about by operation of the law or by a rule and may also come about because a person has agreed to subject himself or herself to it because he or has not fulfilled an obligation. It follows that, in everyday use, the word "penalty" may have a variety of meanings.

What is a penalty? - some cases

50. The width of meaning given to the word "penalty" was recognised by the High Court of Justiciary in Scotland in considering Coogans v Macdonald. The Court considered the Criminal Justice (Scotland) Act 1949 which provided that a notice as to the penalty for a statutory offence had to be served on a person accused of a statutory offence included on a summary complaint. The accused had been charged with a statutory offence concerned with reckless or dangerous driving and had been served with a notice stating that, if convicted, he would be subject to a fine or to imprisonment. He was not advised that he could be disqualified from holding a driving licence.

51. The overriding purpose of the relevant provision was, the High Court found, to ensure that a person charged with a statutory offence should be told about the sanctions it was within the power of a court to impose. Lord Justice- General Cooper, with whom the remainder of the Court agreed, said that:

"... I consider that the word `penalty' falls to be read in a wide popular sense, which is the sense the recipient of such a notice would naturally give it; and I select two definitions as adequately conveying that sense. The late Mr Robertson Christie (The Encyclopaedia Vol. 11. page 204) said: `Penalty in the broad sense may be defined as any suffering in person or property by way of forfeiture, deprivation or disability, imposed as a punishment by law or judicial authority in respect of ... an act prohibited by statute'. The Oxford Dictionary echoes the same wide conception by referring to `a loss, disability or disadvantage of some kind...fixed by law for some offence. If, as I think, this is the sense in which the Act of 1949 read, it necessarily follows that a disqualification from holding or applying for a licence imposed on conviction of an offence under the Road Traffic Acts is a `penalty' liability to which must be included in every suitable case in the statutory notice. In every case the person against whom such an order is made must suffer at least a theoretical `disability' or capitis diminutioI; and in the common case of a person who earns his living as a driver of motor vehicles, the disability is normally very grave, and is notoriously apprehended by many accused persons more keenly than a fine or even imprisonment. It is contrary to the letter and the spirit of the Act of 1949 that a person charged with a Road Traffic Act offence upon which disqualification may follow should be formally informed that he may be fined or imprisoned, but should not be informed that he may lose his driving licence." (page 281)

52. At first sight, Coogans' case is at odds with the judgement of Millhouse J in Flavel and Borrett & Haig (1991) 54 A Crim R 452. Millhouse J considered, among other matters, whether the magistrate had properly exercised his discretion to refuse to record a conviction against the accused. The accused, Messrs Borrett and Haig, had been convicted of three counts of improperly using their positions as directors of a company so as to cause it detriment. They were each fined $3,000 on the first count with no conviction recorded but were neither fined nor a conviction recorded against them in respect of the other two counts.

53. Section 16 of the Criminal Law (Sentencing) Act 1988 (SA) provides that "Where a court finds a person guilty of an offence for which it proposes to impose a fine (but no other penalty) ... [and the court is of the opinion that certain circumstances apply] ... the court may impose the fine without recording a conviction." Sub-section 227(2) of the Companies Code provides that a person who has been convicted of certain offences, including those in issue in Flavel's case,

"... shall not, within a period of 5 years after his conviction ... without the leave of the Court, be a director or promoter of, or be in any way (whether directly or indirectly) concerned in or take part in the management of, a corporation."

54. Millhouse J referred to the judgement of Bowen CJ in Eq (NSW) in Re Magna Alloys & Research Pty Ltd (1975) 1 ACLR 203 in which he said that

"The policy to which s 122 gives effect is that a person convicted of an offence of any of the types specified in that section is not to be permitted to act as a director or to take part in the management of a company. The section is not punitive. It is designed to protect the public and to prevent the corporate structure form being used to the financial detriment of investors, shareholders, creditors and persons dealing with the company. In its operation it is calculated to act as a safeguard against the corporate structure being used by individuals in a manner which is contrary to proper commercial standards.

The court is given jurisidction to grant leave to a person, notwithstanding the prohibition, to act as a director or to take part in the management of a compnay, but an applicant who comes seeking leave bears the onus of establishing that the general policy of the legislature laid down in the section ought to be made the subject of an exception in his case (Re Ferrari Furniture Co Pty Ltd [1972] 2 NSWLR 790 ; Re Magna Alloys & Research Pty Ltd , 18 October, 1973, Street, CJ, in Eq; Re Macquarie Investments Pty Ltd (1975) 1 ACLR 40 ; Re Maelor Jones Pty Ltd (1975) 1 ACLR 4 ).

The court in exercising its discretion will have regard to the nature of the offence of which the applicant has been convicted, the nature of his involvement, and the general character of the applicant, including his conduct in the intervening period since he was removed from the board and from management. Where, as here, the applicant seeks leave to become a director and to take part in the management of particular companies the court will consider the structure of those companies, the nature of their businesses and the interests of their shareholders, creditors and employees. One matter to be considered will be the assessment of any risks to those persons or to the public which may appear to be involved in the applicant's assuming positions on the board or in management."

55. The same could be said of section 227, Millhouse J said, and so, like section 122, was not punitive. He then proceeded to consider whether the magistrate had properly exercised his discretion to refuse to record convictions. He examined the circumstances of their offences in the light of the purpose of section 227 to protect the public. He could see no reason why the normal consequences of findings of guilt should not follow and he recorded convictions against each on all three counts.

56. Millhouse J did not consider whether section 227 provided a penalty. What he did say was that, if it did,

"... it is an automatic one, not one imposed by the court. I think however it does not impose a penalty: The disqualification is simply a consequence of being convicted. Bowen CJ in Eq said of an analogous section it `is not punitive'. That is true of this section as well: therefore it does not rob the sentencing court of its discretion in an appropriate case to avoid convicting."

57. In this passage, Millhouse J is allowing for the possibility that a provision may provide for a penalty and yet not be punitive. His emphasis was not upon the penalty but upon the way in which it was imposed. It was not imposed by a court but was simply an automatic consequence of being convicted. This was an important distinction in considering the discretion given by section 16 of the Criminal Law (Sentencing) Act 1988. That discretion was available only if the court had imposed a fine and had not imposed the penalty under sub-section 227(2) of the Companies Code or otherwise.

58. It follows that there is no inconsistency in approach between Millhouse J and the High Court of Justiciary in Coogans' case. Unlike Millhouse J, the High Court's focus was entirely upon the character of disqualification as a consequence of a driving offence. It was not upon the way in which disqualification was imposed for it was clear from the case that it would be imposed by a court if it was imposed at all.

59. Although not necessary for his decision, it is of interest to note that Lord Justice-General Cooper in Coogans' case was prepared to entertain the notion that a penalty was not confined to "... `something imposed on the convicted individual which affects his pocket or his person' - in effect to fine or imprisonment ..." (page 282) but to a disqualification imposed in the interests of public safety. That was so in relation to the Summary Jurisdiction Act 1908, which preceded the Criminal Justice (Scotland) Act 1949 but which contained similar requirements as to notice. The 1908 Act contained a form

"... in which the warning is given to the accused of his liability not to fine or imprisonment but to an order ad factum praestandum aimed at securing the public safety or abating a public nuisance. ..." (page 282)

60. While I do not have an accurate translation of the words "ad factum praestandum" the effect of this passage is that Lord Justice-General Cooper was prepared to find that a penalty included an order that a person do something to make good what he had done (see definition of "praestore" in Black's Law Dictionary, 6th edition).

61. It would not be an undue extrapolation of Lord Justice-General Cooper's words to say that he was prepared to find that a penalty might not be confined to a liability, such as a fine or imprisonment, imposed as a punishment but might extend to an obligation imposed not for the purpose of punishment but to secure the public safety. As I have said, it was not necessary to decide this aspect of the case.

What is a penalty? - cases concerning the disqualification of a "licence"

62. There are many cases concerning the disqualification of those licensed to carry out particular activities. I will consider those to which either Mr Keane or Mr McShane referred.

63. In 1968, the High Court considered an order made by the Supreme Court of New South Wales suspending Mr Evatt as a barrister for two years following a finding that he had been guilty of professional misconduct (New South Wales Bar Association v Evatt (1968) 117 CLR 177 ). The New South Wales Bar Association had argued that Mr Evatt should have been disbarred.

64. The High Court considered the findings of fact that had been made by the Supreme Court and continued:

"The Supreme Court was, however, in error in not appreciating that its findings of misconduct demonstrated the unfitness of the respondent to be a barrister, and compelled the conclusion that he should be disbarred. The facts proved and found demonstrated unfitness to be a member of the Bar - not some isolated or passing departure from proper professional standards amounting to something less than proved unfitness. The Court did regard certain matters as extenuating circumstances but none of them really bears upon the vital issue, viz. whether the findings of misconduct, which were made, proved the unfitness of the respondent to be a barrister. The Supreme Court thought, moreover, that as the exercise of its disciplinary powers was, to some extent, a punishment for wrongdoing, mercy might be shown towards a young man who had not understood the error of his ways. The power of the Court to discipline a barrister is, however, entirely protective, and, notwithstanding that its exercise may involved a great deprivation to the person disciplined, there is no element of punishment involved. This has already been pointed out by this Court in Clyne v NSW Bar Association (1960) 104 CLR 186 at pp 201,202. The respondent's failure to understand the error of his ways of itself demonstrates his unfitness to belong to a profession where, in practice, the client must depend upon the standards as well as the skill of his professional adviser." (pages 183-184)

65. A similar conclusion has been reached in relation to the provisions of the Income Tax Assessment Act 1936 which regulate tax agents. Deputy President Hall said that, when considering the exercise of the discretion with respect to cancellation, it is necessary to consider the purpose for which the power is conferred. The predominant purpose of the exercise of the power with respect to cancellation of a tax agent's registration is to protect the public. That exercise will necessarily occasion some punishment to the individual affected but that is not its primary purpose. (see Re Chapman and Tax Agents' Board (1984) at page 4353)

66. In Story v NCSC (1988) 6 ACLC 560 , Young J expressed a similar view in relation to the provisions of section 60 of the Securities Industry (New South Wales) Code ("the Code"). Section 60 provided that the NCSC could revoke the licence held by a dealer in certain circumstances. One of those circumstances arose where the NCSC had reason to believe that the dealer had not performed the duties of the holder of such a licence. One of the grounds on which the NCSC could revoke a licence was that the person was not performing his or her duties efficiently, honestly and fairly.

67. Among other matters, Young J considered whether the dealer's licence should have been revoked. In doing so, he said that a finding that a dealer had been inefficient was not necessarily sufficient to justify a conclusion that his or her licence should be revoked. He considered what matters should be taken into account when he said:

"On the matter as to whether revocation should follow an opinion of inefficiency, various matters have to be weighed. One of these is the public interest that people should be permitted to follow a trade or profession which they are qualified to follow. Another is that the public expect those who fall short of minimum standards to be removed from the profession, at least until such time as the regulatory body can be assured that they are able to perform their functions efficiently. A third consideration is that the step of revocation is purely for the public benefit and is not punitive." (page 581)

68. The Tribunal in Quinn and ASC (1994) 12 ACLC 419 (Deputy President Burns and Mr Locke and Mr Davies, members) quoted this passage and also referred to other authorities when it said:

"In Nisic v CAC; A'Hearn v CAC (1990) 8 ACLC 514 , where the plaintiffs were holders of dealer's representative licences under s 44 of the Securities Industry (New South Wales) Code which had been revoked pursuant to s 60(1) of the Code, Enderby J stated, at p 525:

`The preamble to the Agreement acknowledges that in the interests of the public the confidence of investors has to be maintained for the protection of investors. The Code and the general scheme of legislation is intended to protect investors in the security industry from various forms of public mischief and abuse.'

In Re Van Reesema (Maelor Jones case) (1975-1976) CLC 40- 209; (1975) 11 SASR 322 , a case which involved an application for leave by a director of several companies who had been convicted of an offence involving fraud or dishonesty to become a director and take part in the management of a company at CLC p 28,255; SASR p 331, Zelling J relied on the following quote from the judgment of Street J in Re Altim Pty Ltd and Companies Act 1961 [1968] 2 NSWR 762 , which latter case concerned an undischarged bankrupt:

`The Court is given jurisdiction to grant leave for such activities to be carried on, but an applicant who comes to the Court seeking leave must bear the onus of establishing that the general policy of the Legislature laid down in this section ought to be made the subject of an exception in his case. It should be borne in mind that the section is not in any sense a punishment of the bankrupt. Nor should a refusal to grant leave under the section be regarded as punitive. The prohibition is entirely protective, and the power of the Court to grant leave is to be exercised with this consideration in the forefront.'"

...

26. The Tribunal is of the view that it would be inappropriate, and certainly so in cases of `serious fraud' such as this, for the Commission and the Tribunal in its shoes, to impose a banning order for a specified period. In coming to this view, the Tribunal has had regard to the need for protecting the public as well as having regard to the essential requirement that all who act as authorised representatives of a dealer or of an investment adviser hold a very significant position of trust, bearing in mind the onerous responsibilities necessarily involved in dealing with members of the public." (pages 418-419)

69. The judgment of Powell J in Friend v Corporate Affairs Commissioner & Anor was consistent with the position adopted in the previous authorities as was that of O'Bryan J in Nicholas v Commissioner for Corporate Affairs. O'Bryan J considered section 562A of the Companies (Victoria) Code, which is similar to section 600 of the Law. He said that

"... the overriding purpose of sec. 562A is not to impose a prohibition by way of penalty upon a relevant person for past conduct but to prohibit certain activities in order to protect the public from future conduct. This intention appears with reasonable certainty from the subject matter with which the section deals. The section is concerned to bring before the Commission persons who may be unfit to direct, promote or manage the affairs of a corporation by reason of past performance in relation to a relevant company. ..." (page 265)

70. Each of these cases makes it clear that, in imposing a disqualification, the courts will bear in mind that the purpose of this disqualification is not to punish the person but to protect the public It follows that the courts will have regard to the factors relevant to the protection of the public and not to those directed to punishment. It may be, of course, that some factors may be relevant regardless of the purpose of disqualification. So, for example, the nature and circumstances of a breach would be relevant regardless of whether disqualification is imposed as a punishment or for a public benefit. Some other factors may not be relevant and in that category would come the nature and severity of the consequences that holder of the licence may suffer through disqualification. If disqualification is necessary for a public benefit then it may be arguable that the impact upon the holder of the licence is of no weight.

71. When it is remembered that the principles and factors guiding a consideration of whether a person should be disqualified depends upon the purpose for which the power to disqualify is given, it seems to me that the cases I have considered in paragraphs above must be seen as limited to a consideration of that issue alone. They have not considered the wider issue whether it is possible that a disqualification which is not made for punitive reasons may yet be regarded as a penalty. The High Court in Evatt's Case acknowledged that the exercise of such a power may involve a great deprivation to the person concerned but did not need to (and did not in my view) consider whether that deprivation could be regarded as a penalty. The Tribunal in Re Chapman also acknowledged that consideration of a person's registration as a tax agent will necessarily occasion punishment.

72. Mr McShane submitted that O'Bryan J in Nicholas had decided that a power to ban a person from the management of a corporation was for the public benefit and not a penalty. To my mind, that is not what O'Bryan J decided. I have set out the crucial passage from his judgment at paragraph 68 above. Taken alone, that passage may be read as stating that section 562A did not impose a prohibition by way of penalty for past conduct but did impose a prohibition by way of penalty in order to protect the public in the future. When taken in context, it can continue to be read in the same way for O'Bryan J was concerned with whether section 562A could operate retrospectively in respect of events which occurred before it came into operation. He was concerned with whether certain events in the past were relevant in considering what was necessary to protect the public in the future. He was not specifically addressing whether an order prohibiting a person from acting as a company director could be a penalty and certainly did not conclude that it was not a penalty. Indeed it could, as I have indicated, be inferred that he did regard it as a penalty.

What is a penalty? - does it equate with punishment?

73. Is a penalty to be equated with punishment as Mr McShane has submitted? I have already set out the ordinary meaning of penalty in paragraphs 46-49 above. A punishment means, among other things, that which is inflicted as a penalty in punishing (see both the Macquarie Dictionary and the Shorter Oxford Dictionary). What is meant by "punishment" or "punish"? Insofar as it is relevant, the definition of the word "punish" in the Shorter Oxford Dictionary is

"1.a. trans. 7c cause (an offender) to suffer for an offence; to subject to judicial chastisement as retribution or requital, or as a caution against further transgression; to inflict a penalty on. b. To inflict a penalty for (something) ME. c. absol. To inflict punishment. late ME. ..."

74. The word "punishment" includes among its meanings "... that which is inflicted as a penalty; a penalty imposed to ensure the application and enforcement of a law ...". Similar definitions are given in the Macquarie Dictionary. It is apparent that the words "punish" and "punishment" are clearly aligned with the word "punitive" which means "awarding, inflicting or involving punishment; retributive." (Shorter Oxford Dictionary). It is also apparent that, on their ordinary meanings, a punishment is a penalty. It is also apparent from its ordinary meanings that a penalty may include a punishment as well as a loss, disadvantage or disability.

75. It seems to me that, on their ordinary meanings, the words "punishment" and "penalty" may on occasions be clearly aligned in meaning but may not always bear precisely the same meanings. I have not taken this aspect further for I am not convinced that considering it in isolation assists me in deciding the issues in this case.

What is a penalty? - the rules of statutory interpretation

76. I have looked next at the rules of statutory interpretation. At one time, perhaps more so than now, a distinction was drawn between penal legislation and that which was remedial or beneficial. If the legislation were penal and two interpretations were possible after applying the ordinary rules of statutory interpretation, the courts would adopt that which would avoid the penalty. Although this approach to interpretation is no longer as attractive as it was (see Pearce and Geddes Statutory Interpretation in Australia paragraph 9.8), it is useful to consider briefly those earlier cases.

77. It was said in Spencer (Earl) v Swannell (1838) 7 LJ `Ex 73 at 75 that "A penal law is a statute which imposes a penalty". There was no suggestion that the statute had to be concerned with either an criminal or a civil law to apply the particular rule of statutory interpretation relating to penalties. Indeed, the rule of interpretation regarding penal provisions was applied to statutes concerned with both (see, for example, London and North Eastern Railway Co v Berriman [1946] AC 278 at 330, which concerned an action for civil damages; Attorney-General v Brown [1920] 1 KB 773 , which concerned a forfeiture of goods and R v Chapman [1931] 2 KB 606 , which was a criminal prosecution).

78. That the word "penal" may apply to penalties for infractions of the general law which do not constitute offences was also made clear in Huntington v Atrrill [1893] AC 150 at 186, per Lord Watson. A similar view was adopted in R v Associated Northern Collieries where Isaacs J said that "an action is nonetheless civil merely because it is penal" (page 742). While every action for a penalty is not a criminal action for it may be a civil action, it is equally true that not every civil action is an action for a penalty. Civil actions taken to prevent or redress a civil injury are not actions for penalty (see, for example, R v Association Northern Collieries at page 742).

What is a penalty? - the need to analyse the provision in its context

79. None of the cases to which I have referred directly assists me in resolving the issues in this case. What these cases do is to underline the importance of considering the particular provisions in issue. They also illustrate that a penalty may come in different guises. The importance of analysing the issues under consideration is illustrated by the New Zealand case of Re Network Agencies International Ltd (in liq); Johnston v Edwards.

80. Mr McShane submitted that Fisher J of New Zealand's High Court had held that an action for personal liability for the debts of a company under section 319 of the Companies Act 1955 (NZ) was not an "action to recover a sum by way of penalty". He continued that Fisher J had analysed the question by looking at whether the statutory purpose of the action for personal liability was to punish company officers or to compensate creditors of the company. I agree with Mr McShane's submission but it is the process of reasoning that is more important than the conclusion reached.

81. The provisions in issue were paragraph 4(1)(d) and subsection 5(5) of the Limitation Act 1950 (NZ) which provided:

"4(1) Except as otherwise provided in this Act, the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say, -

...

(d)
Actions to recover any sum recoverable by virtue of any enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture.

...

(5) An action to recover any penalty or forfeiture, or sum by way of penalty or forfeiture, recoverable by virtue of any enactment shall not be brought after the expiration of 2 years form the date on which the cause of action accrued:

Provided that for the purposes of this subsection the expression `penalty' shall not include a fine to which any person is liable on conviction of a criminal offence." (page 67,537)

82. The case concerned Mr Johnston's application under section 319 of the Companies Act 1955 (NZ) for an order declaring the officers of a company to be liable personally for the debts of that company. That order could be made where the company was unable to pay its debts, was being wound up or had failed to keep proper accounting records and the court considered that the failure had contributed to the company's inability to pay its debts, had contributed to uncertainty as to the assets and liabilities of the company or had impeded the orderly winding up of the company.

83. Fisher J framed the question that he had to answer:

"The first question must therefore be whether an application under sec 319 of the Companies Act is an action to recover a `sum by way of penalty or forfeiture' within the meaning of subsection (5) or merely an action to recover a `sum recoverable by virtue of any enactment' in terms of sec 4(1)(d). That question is, of course, to be determined by reference to the legislative intention indicated by the usual meaning of the words `penalty or forfeiture' and such broader considerations as may be inferred from the statute as a whole." (page 67,537)

84. After considering cases such as Thomson v Lord Clanmorris [1900] 1 Ch 718, In re JE Hurdley and Son, Ltd (in liquidation) [1941] NZLR 686, Re Maney & Sons De Luxe Service Station Ltd; Maney v Cowan Ltd [1969] NZLR 116 and Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 , Fisher J found that the Limitations Act 1950 drew a distinction between an action whose primary purpose was either punishment of the defendant and an actin whose primary purpose was compensation for the plaintiff.

85. He went on to say of section 319:

"I think it must be accepted that both punishment and compensation are features of the provision. As Tompkins J commented in Maloc Construction Ltd (in liq) v Chadwick and Ors (1986) 3 NZCLC 99 , 794 at pp 99,805; 99,810, sec 319 provides a civil remedy to the extent that there may be a declaration of personal liability which will benefit creditors and contributories but it also includes a punitive element pursuant to which an officer's personal culpability will affect the level at which his personal liability will be set. Speaking of a similar provision (sec 332 of the UK Act corresponding to 320 of the NZ Act) Lord Denning MR said In Re Cyona Distributors Limited (1967) a Ch889, at p902, `An order can be made either at the suit of the liquidator etc or of a creditor. The sum may be compensatory. Or it may be punitive.' The fact that sec 319 has that dual character does not in itself suggest any particular leaning towards sec 4(1)(d) or sec 4(5) of the Limitation Act. When reparation is ordered in the context of a prosecution, compensation is recognised as a subsidiary object of punitive proceedings. The converse is true when exemplary damages are awarded in civil proceedings. The inquiry must be addressed to the predominant object of the cause of the action." (page 67,540)

86. Fisher J looked to five factors that persuaded him to find that section 319 was not punitive. First, a separate section of the Companies Act 1955 provided that an officer of a company who failed to take reasonable steps to secure the company's compliance with obligations committed an offence. Second, section 319 permitted the proceedings to be brought by a person such as a creditor as well as by the liquidator. Third, the Companies Act 1955 set the limitation period for the offence as three years. It would be strange if the limitation period for proceedings under section 319, which must be at leastly partly compensatory, had a shorter limitation period (two years) than a punitive provision. Fourth, the remedy afforded under section 319 was limited in its scope to the total of the debts owed by the company regardless of whether the culpability of the officers was such that a more serious penalty would be appropriate if viewed from a punitive point of view. Fifth, Fisher J looked to a related provision providing for transgressions involving greater culpability than the use of section 319 and so justifying punitive measures.

87. Taking all five factors into account, Fisher J concluded that

"... the wording of the relevant statutory provisions, policy considerations, and authority, all point to the same conclusion. Proceedings under sec 319 do not constitute an action to recover a sum by way of penalty or forfeiture for the purpose of sec 4(5) of the Limitation Act." (page 67,541)

88. Fisher J approach in this case was to analyse first the Limitation Act 1950 (NZ) to determine the nature of the actions to which it referred. He then analysed the type of action under the Corporation Act 1955. This approach is consistent with that adopted in the cases to which I have referred and I propose to adopt it in this.

Is disqualification under section 829 the imposition of a penalty?

89. I have already set out what I consider to be the scope and meaning of section 68 of the Act. It remains to consider the nature of disqualification under section 829 of the Law. That section does not create an offence and is not concerned with a criminal proceeding in any way. It is concerned with a civil matter. Whether or not it is a civil matter concerned with the imposition of a penalty depends upon the nature of a banning order. A banning order takes from a person a privilege that he or she previously enjoyed. That privilege was to hold a licence which invited him or her to work as a representative of a dealer or of an investment adviser. The loss of that privilege means that the person is not able to work as a representative and so is not able to earn his or her living, or some part of it, as a representative. This is certainly a loss or disadvantage to the person concerned. It may, indeed, be regarded as a punishment upon the person because it is the consequence that the Commission has decided is appropriate in view of the fact that the person's conduct or circumstances come within the categories set out in section 829. The banning order is a punishment or disadvantage imposed upon the person by the decision of the Commission.

90. This conclusion is not at odds with the conclusions reached in cases such as Story, Whelan and Friend in relation to company regulation and Evatt and Chapman in the regulation of certain professions and activities, that disqualification of a person is not imposed for punitive reasons. Care must be taken to separate the essential nature of a disqualification from the reasons why it may be imposed. A disqualification could well be imposed for punitive reasons. That may be the case where a person is convicted of certain driving offences in the criminal jurisdiction and is illustrated by the case of Coogans. It may also be imposed for the protection of the public generally and in respect of certain matters. That is so in the disqualification cases to which I have referred. The purpose for which a disqualification is imposed will determine the principles by which any disqualification will be imposed and the factors which will be taken into account. I have illustrated that in paragraph 69 above. Whatever the principles and whatever factors are taken into account, the disqualification remains a punishment (albeit a civil punishment and not a punishment for a criminal offence) or a disadvantage to the person. It must, therefore, be a penalty.

91. A banning order is no different from a disqualification of the type to which I have referred. Therefore, while I accept that a banning order made under section 829 is not intended to be punitive but for the protection of the public, I am satisfied that it is the imposition of a penalty upon the person to whom it is directed.

92. Before leaving this aspect, I should comment upon Mr McShane's submission that the conclusion I have reached would lead to a conclusion that a statement meeting the requirements of sub-section 68(2) could not be used in any civil action in which the defendant might suffer detrimental consequences. He gave as examples simple recovery actions between individuals or recovery actions brought by the Commission for the benefit of third parties under section 50 of the ASC Act. Section 50 permits the Commission, in certain circumstances to begin and carry on proceedings to recover damages for fraud, negligence, default, breach of duty or other misconduct committed in connection with a matter to which an investigation or examination related or to recover property.

93. There is, however, a distinction between actions brought under section 50 of the ASC Act and a banning order under section 829 of the Law. Actions for fraud, negligence, default, breach of duty and misconduct may lead to finding that a defendant is subject to an obligation such as, for example, to pay an amount of money by way of damages or to return property. In one sense, it may be said that the result of an action under section 50 is that the defendant suffers a detriment or a disadvantage and so a penalty that he would not have suffered if the action had not been brought. In this it may lead to the same result as an action under section 829 to make a banning order as both suffer a detriment.

94. In other respects the two actions are not the same. The essential nature of an action under section 50 is not to punish a person or to impose a detriment of some sort upon the person. The purpose is to obtain damages or recover property from that person in order to compensate another person. That is so even though the proceedings are taken by the Commission in a person or company's name. It does so when it appears to the Commission that it would be in the public interest for the person to do so. Even though the Commission begins the proceedings it may only so by consent if an individual is concerned. Even though section 50 enables the Commission to institute the proceedings, those proceedings are conducted in the person's name and retain their essential nature as compensatory or aimed at restitution. A banning order, in contrast, is not compensatory in any way but is intended to disqualify a person for the protection of the public. Its essential nature is that of a penalty.

95. A person in the position of Mr Kippe could not claim the privilege against self-penalisation in respect of such proceedings whether they were instituted by the person himself or herself personally or by the Commission on his or her behalf. They are compensatory proceedings and not proceedings for the imposition of a penalty. For the same reasons, a person in Mr Kippe's position could not claim that a statement is rendered inadmissible by sub-section 68(3) in respect of such proceedings. There is a clear distinction between a civil matter which is properly characterised as compensatory and a matter such as a banning order under section 829, which is properly characterised as being for the imposition of a penalty.

Was the banning order made in a proceeding for the imposition of a penalty

96. Mr McShane has argued that the banning order was not made as a result of a proceeding. If that is correct, the answers Mr Kippe gave at his examination could be taken into account in considering whether or not a banning order should be made. That would be so even though he claimed privilege in respect of them and even though I have found that the making of a banning order is the imposition of a penalty.

97. I have set out the definition of a "proceeding" in section 5 of the ASC Act at paragraph 25 above. The word is defined, in part, by reference to itself and so I should look at the meaning of that word. The word "proceeding" is defined in the Macquarie Dictionary to mean:

n.1.a. a particular action or course of action. 2. action, course of action, or conduct. 3. the act of one who or that which proceeds. ... 5. Law a. the instituting or carrying on of an action at law. b.a. legal step or measure: to institute proceedings against a person."

98. There are a number of past cases which have considered the meaning of the word "proceeding" but each has done so in its own particular context. I must do the same. It seems to me that a proceeding does not mean simply a hearing. If that had been intended the word "proceeding" would have been defined to mean a "hearing" and not a "proceeding or hearing". It seems to me that the word "proceeding" must be given a broader rather than narrower interpretation for it is apparent from the definition of the word and that of "tribunal" that the word "proceeding" will relate to a wide range of matters ("civil, administrative, criminal, disciplinary or other nature") conducted by tribunals or by bodies whose only common theme is that they have the power, by law or by consent of the parties, to hear, receive or examine evidence. There is nothing in the definition of "proceeding" or of "tribunal", or that may be gleaned from them, that suggests that the proceeding must take place during, and is limited to, an occasion when evidence is being heard or received. It follows that the word "proceeding" is to be given its ordinary meaning and that ordinary meaning should not be read down. A proceeding is an action or a course of action and the definition of "proceeding" in section 5 of the ASC Act should be read in that way.

99. The Commission is, for the purposes of the definition, a tribunal for it has the power to hear, receive and examine evidence (see definition of "tribunal" in paragraph 26 above). A deliberation by the Commission under section 829 as to whether or not it will make a banning order does not take place in a hearing or in an examination of the person concerned. Nor does it take place as part of the investigative procedures generally. I agree with Mr McShane's submission that the various steps leading to the imposition of a banning order are quite distinct. Each step is an action or course of action of at least an administrative or civil nature by the commission and its delegates or members. The making of a decision to make a banning order is an action by the Commission. This is consistent with the view that the proceedings in a court are the day to day steps in an action (Smallery v Robey & Co Ltd [1962] 1 All ER 133 at 135). It is also consistent with the consideration by the High Court of the word "proceedings" in Re Coldham; Ex Parte Australian Building Construction Employees' and Builders Labourers' Federation (1986) 159 CLR 522 at 527-529. The High Court was considering the meaning of the word "proceedings" in relation to section 41 of the Conciliation and Arbitration Act 1904. A banning order is, therefore, made in a proceeding of the Commission.

100. Does it take place in a proceeding before the Commission? The definition of "proceeding" distinguishes in effect among a "proceeding in a court", a proceeding or hearing before ... "a tribunal" and "an examination by or before a tribunal". I think the distinction is more semantic than real. A proceeding in a court needs no elaboration in this case. An examination may, for example, be undertaken by the Commission if it is undertaken by a member or staff member or a person may be examined, in certain circumstances, by his or her lawyer. In the latter case, it may be said that the examination has taken place before the Commission and not by the Commission.

101. What of a proceeding "by or before" a tribunal? A matter may be "before" a person or body when it is in front of or under consideration by that person or body (see the definition of "before" in the Macquarie Dictionary and Shorter Oxford Dictionary). Given the width of the definition to include a proceeding, hearing or examination of a civil, administrative, criminal, disciplinary or other nature, I think that it is in that sense that a proceeding should be understood for the purposes of the definition of a proceeding in sub-section 5(1) of the ASC Act and also in sub-section 68(3). A proceeding or hearing is before a tribunal if it is in front of or under consideration by the tribunal. This meaning of "before" is consistent with the meaning of the word "before" in the context of an examination (see paragraph 99 above). Putting to one side a proceeding in a court and a hearing or examination by or before a tribunal, a proceeding is any step or action in front of or under consideration by a tribunal. There need be no hearing in the sense in which this Tribunal sits to hear both parties or even a hearing in the sense of an opportunity to be heard as may be given under the ASC Act.

102. It follows that the process by or at which the Commission decides whether or not to issue a banning order under Section 829 of the Law is a proceeding before the Commission and so a proceeding for the purposes of the definition of a "proceeding" in sub-section 5(1) of the ASC Act. It also follows that the process by which the Commission decided to issue the banning order against Mr Kippe was a proceeding for the imposition of a penalty. As such, the statements he made at his examination and in respect of which he claimed privilege in accordance with sub-section 68(2) of the ASC Act are not admissible pursuant to sub-section 68(3) of that Act.

Issue 2:

Are the statements also inadmissible in proceedings in the Tribunal for review of the banning order

103. There seems to be no doubt that, having regard to the provisions of section 43 of the Administrative Appeals Tribunal Act 1975, sub-section 68(3) of the ASC Act must lead to the conclusion that statements to which it applies would be inadmissible in reviewing the commission's decision to make a banning order. As Smithers J said in Minister for Immigration and Ethnic Affairs v Pochi:

"... in reviewing a decision the Tribunal is to be considered as being in the shoes of the person whose decision is in question. It follows from this that in reaching a decision in review of a decision of an administrator the Tribunal, should consider itself as though it were performing the relevant function of that administrator in accordance with the law as it applied to him, including the law contained in any relevant statute interpreted according to its terms and objectives." (page 143)

103. For the reasons I have given I decide that:

1.: a decision to make a banning order under section 829 of the Corporations Law 19 is a proceeding for the imposition of a penalty within the meaning of sub-section 68(3) of the Australian Securities Commission Act 1989;
2.: statements which the applicant made in his examination held on 15 September, 1994 under Part 3 of the Australian Securities Commission Act 1989 and which he claimed in accordance with sub-section 68(2) of the ASC Act might tend to incriminate him or make him liable to a penalty are not admissible in evidence against him in the Commission's consideration of whether it should make a banning order;
3.: the applicant's signing of the record of his examination held on 15 September, 1994 under Part 3 of the Australian Securities commission Act 1989 and which he claimed in accordance with sub-section 68(2) of the ASC Act might tend to incriminate him or make him liable to a penalty is not admissible in evidence against him in the commission's consideration of whether it should make a banning order;
4.: the statements and the record are not admissible in proceedings for review of the respondent's decision to make a banning order against the applicant; and
5.: further consideration adjourned.

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