The High Court’s decision in Rich v ASIC [2004] HCA 42 and its potential impact upon ASIC’s disqualification orders, banning orders and oral examinations

by Tom Middleton

In Rich v ASIC (2004) 78 ALJR 1354; 209 ALR 271; [2004] HCA 42 the majority of the High Court held that ASIC’s proceedings for an order under s 206C of the Corporations Act disqualifying a person from managing a corporation are proceedings that expose a person to a penalty. It is argued in this article that the decision in Rich v ASIC means that it is more likely that ASIC’s power to disqualify directors under s 206F of the Corporations Act and ASIC’s power to make banning orders under s 920A of the Corporations Act will, in future litigation, be classified as penal, rather than protective, in nature. If such proceedings are classified as penal in nature, then ASIC’s power under these provisions to make disqualification or banning orders may be unconstitutional under Ch III of the Commonwealth of Australia Constitution Act 1900 (UK). Reforms are suggested in this article to avoid any potential constitutional problems.
The decision in Rich v ASIC also means that where the examinee claims the penalty privilege at ASIC’s oral examination, the evidence given by that examinee at that examination will be inadmissible (by virtue of the use evidential immunity contained in ss 68(3)(b) and 76(1)(a) of the ASIC Act) against that examinee in any subsequent court proceedings or ASIC hearing in which it is sought to disqualify that examinee from managing corporations or in any subsequent ASIC hearing in which it is sought to ban that examinee from providing financial services. It is argued that this evidential immunity will severely prejudice ASIC’s ability to obtain or make disqualification orders and banning orders and prejudice the public interest underpinning ASIC’s power to obtain or make such orders. It is suggested that ss 68(3)(b) and 76(1)(a) of the ASIC Act be amended to restore the operation of use evidential immunity to the same position as it was in before the decision in Rich v ASIC so that the answers given at ASIC’s oral examination that expose the examinee to the risk of a disqualification order being made by the court or by ASIC, or to the risk of a banning order being made by ASIC, do not attract the statutory use evidential immunity in subsequent proceedings for such orders.

The full text of this article appears in the Companies and Securities Law Journal at (2005) 23 C&SLJ 248. You can subscribe to this journal here.


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