Review of decisions to exclude lawyers from ASIC and NCA examinations

This is a note about a decision by a judge who is only a year older than me, Justice Nye Perram, a novel and somewhat unsettling circumstance: Collard v Australian Securities & Investments Commission (No. 3) [2008] FCA 1681. I looked him up because the judgment is so beautifully written, and found a welcome in Bar News (go to p. 97). The case is about lawyers’ rights to appear for clients to be examined by ASIC (and also, incidentally, by the National Crime Authority). It is also of interest to me because of its discussion of who bears the burden of proof when seeking review in administrative law of a bureaucratic act which statute stipulates may only be taken if it is reasonable (or necessary) to do so. Who bears the burden of establishing reason or unreasonableness?

ASIC summonsed three people to be examined by inspectors. They all proposed to be represented at the examination by one lawyer. A direction was made by letter, the effect of which prohibited them from being commonly represented. The examinees sought judicial review under the ADJR Act of the decision expressed in the letter. Earlier, ASIC had commenced Supreme Court proceedings and had obtained asset preservation orders and orders requiring the surrender of the three examinees’ passports. The lawyer’s firm had been retained at the outset of those proceedings, and he was involved in them as well as in the examination. Those orders were to expire, and ASIC summonsed the examinees for examination a few days before that expiry, under s. 19 of the ASIC Act, 2001. ASIC’s inspectors expressed the view that

‘it will not be possible for [the three examinees] to have the same legal representatives, or different representatives each from [the firm], at their examination’

by a letter a week before the examination. The inspectors pushed back two of the three examinees’ examinations for just a few days, presumably to allow new representation to be scrambled together. The solicitors sought reasons under the ADJR Act. ASIC refused. The examinees brought the ADJR Act application. 5 days later, ASIC provided reasons. For reasons which I do not discuss in this post, the reasons were found by his Honour not to be the real reasons of the inspectors at the time when they made their direction, and were disregarded.

The power to exclude people from examinations was found in s. 22(1) of the ASIC Act, 2001. The provision says:

‘The examination must take place in private and the inspector may give directions about who may be present during it, or during part of it.’

The following propositions come from the judgment:

1. The power is vested in the inspectors, not in ASIC: [34] – [35].

2. Notwithstanding s. 23 (‘Examinee’s lawyer may attend’), s. 22 permits an inspector to exclude an examinee’s lawyer: Australian Securities Commission v Bell (1991) 32 FCR 517 at 521, 528-529 and 532-533.

3. The exclusion may be announced before the hearing, and may be in respect of the whole of the hearing: [40].

4. The owner of the relevant right is the lawyer, not the client, though it may be that the right is to be exercised by the lawyer for the benefit of the client and in accordance with lawful instructions: [47]. Nevertheless, because the lawyer owes fiduciary obligations to the client, ‘the duties thereby erected generate in the client a sufficient interest also to attract an obligation of procedural fairness.’ Accordingly, ‘the giving of a direction excluding a lawyer from an examination will require the affording of procedural fairness both to the lawyer and his or her client,’ (though satisfaction of the fairness obligation will often be met by giving the lawyer a chance to make submissions, on his or her own behalf and on behalf of the client). His Honour drew support in relation to the procedural fairness conclusion from Annetts v McCann (1990) 170 CLR 596 at 598 per Mason CJ, Deane and McHugh JJ. That was another case about procedural fairness in relation to a decision about a right to be heard, in that case at a coronial inquest.

5. The power to direct exclusion of a lawyer is only enlivened where the inspector believes that exclusion is necessary for the purposes of the examination (as opposed to the investigation of which the examination is a part, if there is any distinction in a particular case: [56]) and that belief is held on reasonable grounds and in good faith: [48]ff. There is no explicit reasonableness requirement in s. 22 of the ASIC Act, 2001. Rather, there is an implied obligation of reasonableness. The warrant for the implication lies in ‘the need ‘to prevent the power to exclude in s 22(1) from devouring the whole of the operation of s 23(1), which entitled the lawyer to be present’: [51].

6. In a review of an exclusion direction, the burden of proving the conditions for an exclusion direction falls on the inspector who made the direction: [53]. To state the obvious, that is so, even though the inspector would be the respondent at the suit of an applicant affected by his or her decision, and even though applicants and plaintiffs generally bear the burden of proof in civil litigation. The decision maker bears the same burden in the case of similar directions in relation to a National Crime Authority examination: [48]. In that case, it is because the power to exclude is found in s. 19 of the National Crime Authority Act, 1984 which empowers the NCA to do all things necessary to be done for or in connection with the preformance of its functions. Justice Perram said:

‘The fact that the power actually used depended upon the existence of a relevant necessity meant that an absence of such a necessity entailed ultra vires action. In that sense, it was for the Authority to show that its action was within power and to do that it needed to show the necessity which activated the power in s. 19.’

In this particular case, the inspectors’ concern seemed to be that the three different examinees were known to have different accounts of relevant events, and the inspectors wanted to hear the examinees’ unvarnished stories without the possibility of their lawyers steering their accounts towards divergence. Justice Perram said not every case of divergent testimony would justify what amounted to a separate representation order; it is a question of degree. In this case, there was simply inadequate inadmissible evidence to establish that there was a reasonable need from the point of view of the integrity of the examination to require separate representation. The burden of proof falling on ASIC’s inspectors, they lost, and their decision was set aside.

See also:

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2 Replies to “Review of decisions to exclude lawyers from ASIC and NCA examinations”

  1. Thanks so much for this – I am doing some research on Section 19 examinations so it is really helpful. I cannot, for the life of me, find how many days notice ASIC is required to give to an examinee to attend an examination. Have looked everywhere – any tips would be greatly appreciated. Thanks, Jill

  2. Thanks so much for this – I am doing some research on Section 19 examinations so it is really helpful. I cannot, for the life of me, find how many days notice ASIC is required to give to an examinee to attend an examination. Have looked everywhere – any tips would be greatly appreciated. Thanks, Jill

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