X v Australian Prudential Regulation Authority

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: Gleeson CJ,Gummow,Heydon,Crennan JJ,Kirby JJ
• Judgment Date: 21 February 2007
• Neutral Citation: 2007-0221 HCA A,[2007] HCA 4
• Docket Number: S284/2006
• Date: 21 February 2007

[2007] HCA 4

HIGH COURT OF AUSTRALIA

Gleeson CJ, Gummow, Kirby, HeydonCrennanHeydon and Kiefel JJ

S284/2006

X & Ors

Appellants

and

Australian Prudential Regulation Authority & Anor

Respondents

Representation

D F Jackson QC with D Hogan-Doran for the appellants (instructed by Minter Ellison)

D M J Bennett QC, Solicitor-General of the Commonwealth with J W J Stevenson SC, M N Allars and V E Whittaker for the respondents (instructed by Sparke Helmore)

Insurance Act 1973 (Cth), s 25A.

Royal Commissions Act 1902 (Cth), s 6M.

X v Australian Prudential Regulation Authority

X v Australian Prudential Regulation Authority

Administrative law — Judicial review — Injunction and declaratory relief — s 39B of the Judiciary Act 1903 (Cth) — Whether the appellants are entitled to an order restraining the Australian Prudential Regulation Authority (‘APRA’) from acting on a ‘preliminary view’ formed by its Senior Manager that the first and third appellants were not ‘fit and proper’ to act as senior managers of a foreign general insurer.

Administrative law — Royal Commissions — Protection of witnesses — s 6M of the Royal Commissions Act 1902 (Cth) — Appellants gave evidence at the HIH Royal Commission — Whether s 6M prevents the use of that evidence by APRA in deciding whether to disqualify the first and third appellants pursuant to s 25A of the Insurance Act 1973 (Cth) — Whether potential disqualification caused a ‘disadvantage’ to the appellants — Whether potential disqualification arose ‘for or on account of’ the first and third appellants' evidence to the Royal Commission — Whether the proper exercise of APRA's statutory powers and functions may constitute a ‘disadvantage’ arising ‘for or on account of’ evidence given before a Royal Commission.

Insurance —— Prudential regulation — Disqualification — APRA may take steps pursuant to s 25A of the Insurance Act 1973 (Cth) where a person is not ‘fit and proper’ to act as a senior manager of a foreign general insurer — Whether APRA may take into account evidence given at a Royal Commission by or about that person — Whether s 6M of the Royal Commissions Act 1902 (Cth) prevents the use of such evidence for the purposes of s 25A of the Insurance Act 1973 (Cth).

Statutes — Interpretation — Whether s 6M of the Royal Commissions Act 1902 (Cth) distinguishes between the giving of evidence and the content of the evidence so given.

Words and phrases — ‘for or on account of’, ‘disadvantage’.

ORDER

• 1. Set aside Paragraph 1 of the orders of the Full Court of the Federal Court of Australia made on 22 March 2006 in each of matters numbered NSD 1793 of 2005 and NSD 1794 of 2005 and in its place order that:

  • (a) Paragraph 2 of the orders made by Lindgren J on 16 September 2005 is varied to the extent necessary to provide that

    Question B: ‘Does the use by the first or second respondent of the evidence of the first applicant before the HIH Royal Commission contravene ss 6DD or 6M of the Royal Commissions Act 1902 (Cth)?’

    is answered

    ‘The answer to the question is governed by the construction of s 6M alone, and so understood is “No”.’

  • (b) The appeal is otherwise dismissed.

• 2. Otherwise, appeal dismissed with costs.

1 Gleeson CJ, Gummow, Heydon, Heydonand Crennan JJ. By Letters Patent dated 29 August 2001 which were expressed to be issued by the Governor-General pursuant to the Constitution, the Royal Commissions Act 1902 (Cth) (‘the Royal Commissions Act’) and what were described as ‘other enabling powers’, a Commissioner was appointed to inquire into the reasons for and circumstances surrounding the failure of the HIH Insurance Group (‘HIH’) prior to the appointment of provisional liquidators on 15 March 2001 (‘the HIH Royal Commission’) 1. This litigation arises from steps taken by a federal regulatory body in reliance upon documentary and oral evidence presented to the HIH Royal Commission.

The parties

2 The second appellant (‘Z’) is a foreign corporation incorporated in Germany. Z conducts an international reinsurance business. It is authorised to carry on insurance business in Australia by the first respondent, the Australian Prudential Regulation Authority (‘APRA’), pursuant to s 12(2) of the Insurance Act 1973 (Cth) (‘the Insurance Act’) and does so as a ‘foreign general insurer’ within the meaning of s 3 of the Insurance Act. A foreign general insurer which, like Z, is a body corporate not incorporated in Australia is required by s 118 of the Insurance Act to be represented in Australia by an individual resident here and appointed as its agent for the purposes of that Act. However, this does not affect the position of the first appellant (‘X’) and the third appellant (‘Y’). They are employed by Z in senior management positions outside Australia.

3 Z produced documents to the HIH Royal Commission in response to a notice issued pursuant to s 2 of the Royal Commissions Act. X and Y each travelled to Australia and furnished to the HIH Royal Commission a statement and gave oral evidence.

4 The first respondent, APRA, is established as a body corporate by ss 7 and 13 of the Australian Prudential Regulation Authority Act 1998 (Cth) (‘the APRA Act’). The second respondent (‘Mr Godfrey’) is Senior Manager of APRA. Section 9 of the APRA Act states that APRA has the functions conferred upon it by the APRA Act and any other law of the Commonwealth. Section 8 of the Insurance Act vests in APRA the general administration of that statute. The

main object of the Insurance Act is to protect the interests of policyholders and prospective policyholders under insurance policies issued by general insurers and Lloyd's underwriters and to do so ‘in ways that are consistent with the continued development of a viable, competitive and innovative insurance industry’ (s 2A(1)).

The disqualification procedures

5 Reference should now be made to Pt III Div 5 (ss 24-27) of the Insurance Act. This Division confers on APRA powers to ‘disqualify’ persons who then, under pain of criminal sanction, are not to act, among other capacities, as a senior manager or agent in Australia of a foreign general insurer (s 24(1)(b)). APRA may disqualify a person ‘if it is satisfied that the person is not a fit and proper person to be or to act’ in such a capacity (s 25A(1)).

The ‘preliminary view’ of APRA

6 On 18 February 2005, Mr Godfrey wrote letters to each of X and Y giving them the opportunity to make submissions as to why APRA should not decide to disqualify them under s 25A(1). The letters stated a ‘preliminary view’ of Mr Godfrey that the addressee was not a fit and proper person to be the holder of the senior insurance roles referred to in s 24(1) of the Insurance Act.

7 Attached to each letter sent by Mr Godfrey was an annexure (with copies of documents) setting out information that Mr Godfrey had considered in reaching his preliminary findings. Detailed references were made to documentary evidence provided to the HIH Royal Commission and to various items of oral evidence given to that body by X and Y. Mr Godfrey wrote that, in forming his preliminary conclusion, he had had regard to the submissions of Counsel Assisting the HIH Royal Commission and the Commission's findings in its Final Report. He also noted that a complete transcript of the hearings was available on the HIH Royal Commission website.

8 The solicitors for the appellants responded on 4 May 2005 by detailed letter to Mr Godfrey. The solicitors noted that the Insurance Act provided a procedure for internal review within APRA and then for review by the Administrative Appeals Tribunal (‘the AAT’) of any decision that was made to disqualify X and Y. However, the solicitors stressed their view that the very publication of the initial decisions would cause detriment to their clients, including the need to meet obligations to inform regulatory authorities in other countries. The solicitors went on to contend that any subsequent decision to disqualify X and Y pursuant to s 25A of the Insurance Act upon the bases put forward in the letters of 18 February 2005 would be beyond power and would be unlawful and involve the commission of an offence under the Royal Commissions Act.

The Federal Court proceedings

9 Something more should be said here respecting the avenues for administrative and judicial review of disqualification decisions by APRA made in exercise of its powers under the Insurance Act. A request for internal review by APRA may be made under s 63(2); applications then may be made to the AAT for review of decisions of APRA affirmed or varied under that procedure (s 63(7)). From the AAT, there is an ‘appeal’ to the Federal Court on a question of law. This is provided by s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (‘the AAT Act’). In addition, disqualification decisions by APRA answer the definition of decisions to which the Administrative Decisions (Judicial Review) Act 1977 (Cth) (‘the ADJR Act’) applies, and are not excluded by Sched 1 thereof.

10 However, the appellants chose another avenue of judicial intervention to bring to a halt any further proceedings by APRA upon the preliminary views formed by Mr Godfrey. Section 39B of the Judiciary Act 1903 (Cth) relevantly confers original jurisdiction upon the Federal Court with respect to any matter in respect to which an injunction is sought against an officer of the Commonwealth (s 39B(1)) and in any matter arising under any laws made by the Parliament (s 39B(1A)(c)).

11 The appellants instituted proceedings in the Federal Court seeking, together with declaratory relief, an order restraining APRA from taking any further action with respect to X and Y pursuant to s 25A(1) of the Insurance Act 2. The substance of the declaratory relief that was sought was that APRA did not have the power to disqualify X and Y pursuant to s 25A(1) of the...