Case: Kardas v Australian Securities Commission (1998) 29 ACSR 304
Outcome: applied
parties referred to the decision of Heerey J in Kardas v Australian Securities Commission (1998) 29 ACSR 304. In that case his Honour was concerned with the construction and application of s 600 of the Corporations Law , the predecessor of s 206F. The applicant had brought proceedings under the ADJR Act to challenge a disqualification decision. One of the grounds was that the Commission had failed to comply with an implied obligation that it exercise its power within a reasonable time. In dealing with that ground his Honour said (at 313-4) that: "Counsel relied on the judgment of O'Bryan J in Halliday v CCA (14 May 1990, SC(Vic), unreported). His Honour there held that a delay of almost two years between service of a show cause notice and a decision to prohibit would be too long. A statutory power (such as the power of prohibition under s 600) conditioned upon the occurring of a certain event (such as the making of a s 533 report in respect of two or more companies) will often be subject to an implied requirement that it be exercised within a reasonable time: Koon Wing Lau v Calwell [1949] HCA 65 ; (1949) 80 CLR 533 at 573-4; [1949] ALR 97 ; Giris Pty Ltd v FCT [1969] HCA 5 ; (1969) 119 CLR 365 at 383; [1969] HCA 5 ; [1969] ALR 369 ; Re Federal Cmr of Taxation; Ex parte Australena Investments Pty Ltd (1983) 50 ALR 577 at 578; Repatriation Commission v Morris (1997) 26 AAR 284 at 289. I am satisfied that the s 600 power is subject to such a requirement. Once a liquidator's report in respect of a second "s 600 company" triggers the power of disqualification, that power, if it is to be exercised at all, should be exercised with reasonable promptness. A person potentially the object of that power should not be kept in an indefinite state of uncertainty. More importantly, since the purpose of a s 600 disqualification is prophylactic rather than punitive, there should be as little delay as possible in taking steps to protect the public. What is a reasonable time will depend on the circumstances. The affairs of companies vary greatly in their complexity. But the commission does not, as it were, start from scratch. It will, ex hypothesi, have the benefit of a liquidator's report and no doubt the liquidator would usually be willing and able to provide further information and explanation on request." Counsel for ASIC sought to distinguish Kardas on the basis that the two companies involved in that case were not related. In the present case the Tribunal had found that Resources, Special Projects and Associates were related companies. Resources was solely an employer of labour. Special Projects had been formed to act as a head contractor on two projects, one of which failed. Associates acted as construction manager under contract with a developer for a fee. Associates was the principal company in the group. As a result, it was argued, it would have been premature for ASIC to issue a show cause notice under s 206F before it had received the liquidator's report on Associates. That did not occur until 7 April 2005. Accordingly, it was contended, ASIC's compliance with the reasonable celerity requirement should be assessed as if the last triggering event had occurred on 7 April 2005. The time between then and the issuing of the disqualification notice was one year and 10 months. This delay was not, so it was submitted, to be regarded as unreasonable. No explanation was given for the delay of three years and five months between the winding up of Associates and the provision of the liquidator's report. There is no evidence of any relevant action being taken by ASIC between its receipt of the liquidator's report on Associates in April 2005 and July 2006. On 12 July 2006 ASIC wrote to the liquidators of Special Projects and Resources seeking further information about those companies. On the following day a similar request was directed to the liquidator of Associates. The avowed purpose of these requests for further information was to assist ASIC in determining whether to take action against Mr Culley under s 206F. The liquidators responded to these requests. The last of these responses was received by ASIC on 28 September 2006. The reason for the 15 month delay between the receipt of the liquidator's report on Associates and the despatch of requests for further information is unexplained.