Albarran and Gould v The Members of the Companies Auditors & Liquidators Disciplinary Board [2006] FCFCA 69
The Companies Auditors & Liquidators Disciplinary Board (CALDB) which is established under the ASIC Act 2001 is responsible for supervising the conduct of Auditors and Liquidators. ASIC and APRA have the power to make applications that these professionals be dealt with by the CALDB when they form the view that they are no longer fit and proper persons to hold such office or they have failed to adequately and properly perform the functions of their office.
The powers of the CALDB are extensive and potentially career ending. The CALDB can cancel or suspend the registration of an Auditor or Liquidator. It may also admonish or reprimand and require undertakings that certain conduct not be engaged in or not be engaged in except subject to specified conditions.
The CALDB conducts hearings, has the power to summons witnesses, is not bound by the rules of evidence but is subject to the rules of natural justice. Its hearings are, for the most part, conducted in private. None of its members are judicial officers. It is not a Court.
ASIC applied to the CALDB for the suspension of Mr Gould’s registration as a Liquidator and for the cancellation of Mr Albarran’s registration as a Liquidator. The CALDB made orders suspending Mr Gould’s registration for 3 months and found that Mr Albarran had failed to properly perform his duties as a Liquidator.
Mr Gould and Mr Albarran issued proceedings in the High Court to prevent the CALDB from further dealing with the applications against them. The High Court remitted the applications to the Federal Court which heard the applications as a Full Court.
Mr Gould and Mr Albarran argued that the relevant sections of the Corporations Act (sections 1292, 1294,1296, 1297 and 1298), which gave the CALDB its powers, were not valid laws because they purported to invest the judicial power of the Commonwealth in the CALDB.
They contended that the procedures of the CALDB which involved giving a party an opportunity to appear at a hearing, to make submissions and to give evidence was indicative of judicial process. Because the CALDB had to determine whether they, as registered liquidators, had complied with a legal standard, namely, whether they had carried out or performed relevant duties or functions adequately or properly meant that the power the CALDB was exercising was judicial power.
The Full Court rejected these contentions and found that the exercise by the CALDB’s of the power conferred upon it under section 1292(2) of the Act was not the exercise of judicial power.
The Full Court found that the function of the CALDB was not to find whether an offence had been committed and, if so, to inflict a punishment for that. It was not charged with the task of deciding a controversy between parties as to the existence or not of present mutual rights and obligations upon the application of the law to past events (a classic exercise of judicial power).
The true task of the CALDB was to determine whether, having regard to past failures of duties, a person’s defeasible right to be registered as an Auditor or Liquidator should continue into the future. The only consequence of the CALDB making an order under section 1292 (2) of the Act was the cancellation or suspension of registration.
Mr Gould and Mr Albarran have sought leave to appeal to the High Court. The High Court has granted leave and it is expected that the appeal will be heard before the end of the year. In the meantime, there are many cases that ASIC wishes to bring before the CALDB that have been put on hold pending the finalization of these proceedings. The appeal may also give the High Court an opportunity to rule on whether, and if so how, its decision in Rich v ASIC (2004) 220 CLR 129, that banning orders contained an element of punishment and were not simply protective of the public, applies to the orders the CALDB is empowered to make.
For further information, please contact Stephen Newman on +61 3 9608 2219 or s.newman@cornwalls.com.au
