House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Human Services Minister for Financial Services, Superannuation and Corporate Law the Hon Chris Bowen MP)

Chapter 6 - Compliance and enforcement

Outline of chapter

6.1 Chapter 6 of this explanatory memorandum outlines the powers Australian Securities and Investments Commission (ASIC) may exercise in relation to the investigation and enforcement of credit legislation, including the National Consumer Credit Protection Bill 2009 (Credit Bill) and the National Consumer Credit Protection (Transitional and Consequential Provisions) Bill 2009 (Transitional Bill).

Context of amendments

6.2 ASIC generally exercises its compliance and enforcement powers under the Australian Securities and Investments Commission Act 2001 (ASIC Act).

6.3 The ASIC Act is based on a separate referral of State powers. Relevant enforcement provisions have been included in the Credit Bill in order to cover credit matters.

6.4 The provisions in Chapter 6 largely replicate the relevant ASIC Act provisions, subject to changes to ensure they work effectively in the context of regulating credit activities.

6.5 Consistency with the provisions from the ASIC Act ensures that ASIC retains similar levels of enforcement rights, obligations, and capacity to administer and discharge its duties under the ASIC Act, Corporations Act 2001 (Corporations Act) and the Credit Bill.

6.6 Certain provisions of the ASIC Act have not been replicated in the Credit Bill. This is because either:

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those provisions are not relevant in the context of credit activities and the Credit Bill; or

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the provisions in the ASIC Act will apply appropriately without replication in the Credit Bill. This includes matters relating to the general function and operation of ASIC.

6.7 For example, section 127 of the ASIC Act has not been replicated in the Credit Bill. This section of the ASIC Act will apply appropriately because the Commonwealth credit legislation is 'protected information' for the purposes of paragraph 127(1)(b) of the ASIC Act by reason of the inclusion of this legislation in section 12A of the ASIC Act.

6.8 Some provisions in the ASIC Act that are being replicated limit the use of certain immunities from prosecution and impact on the privilege against self-incrimination.

6.9 The inclusion of more limited immunities in relation to ASIC powers was the result of extensive inquiries and empirical research into the difficulties of corporate regulation. The limiting of immunities was recommended by the Joint Standing Committee on Companies and Securities (1992) and by the 'Review of the Derivative Use Immunity Reforms' by John Kluver (1997). It was accepted that a full 'use' and 'derivative use' immunity would unacceptably fetter investigation and prosecution of corporate misconduct offences. Comparable issues would arise in relation to credit matters.

6.10 ASIC is given broad powers to obtain information about suspected contraventions of the credit legislation, as the most effective way of regulating credit activities and maintaining public confidence in the integrity of the credit industry.

6.11 The use of ASIC's powers under the Credit Bill is subject to Parliamentary scrutiny by the Parliamentary Joint Committee on Corporations and Financial Services.

Summary of new law

6.12 Chapter 6 of the Credit Bill outlines the powers that ASIC may exercise for the purpose of administering and enforcing the Commonwealth credit legislation.

6.13 The phrase Commonwealth credit legislation is defined as the Credit Bill (when enacted), any instrument made under the Credit Bill (when enacted), the Transitional Bill (when enacted) and any instrument made under it. [Part 1-2, Division 2, section 5]

6.14 These powers supplement the powers that are already available to ASIC under the ASIC Act, and replicate the powers contained in the ASIC Act as far as is possible and as necessary in the context of the Commonwealth credit legislation.

6.15 ASIC is given power to:

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gather information about credit activities and persons who engage in credit activities, including:

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the examination or questioning of persons where relevant to an ASIC investigation;

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inspection of books; and

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obtaining information about audits;

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undertake investigations for the effective administration of the Commonwealth credit legislation, such as investigating suspected contraventions of the credit legislation;

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use in proceedings information obtained under its information-gathering and investigation powers; and

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conduct administrative hearings as authorised by the Commonwealth credit legislation (for example, to make decisions about whether to cancel or suspend a licence).

6.16 This Chapter also sets out requirements in relation to the following matters:

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reports relating to ASIC investigations;

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procedures for examination of persons;

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procedures in relation to the production or seizure of books; and

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rules and procedures in relation to the conduct of hearings.

6.17 Further, the provisions establish offences for non-compliance with the requirements of this Chapter, the rules relating to self-incrimination and legal professional privilege and the evidentiary use and value of certain materials.

Detailed explanation of new law

Part 6-1 - Investigations

6.18 Division 2 of Part 6-1 of the Credit Bill provides that ASIC may make investigations either on its own initiative, or if it is directed to do so by the Minister. The powers to commence an investigation are consistent with the powers of investigation in sections 13 and 14 of the ASIC Act.

6.19 Consistent with existing ASIC powers, ASIC's powers of investigation under the Credit Bill include procedures that enable ASIC to respond effectively to suspected contraventions of credit legislation. As a result, ASIC can require potential defendants to present their positions to it promptly where delay would be contrary to the public interest.

6.20 ASIC's investigation powers assist in maintaining the integrity of the credit industry and promote consumer protection in relation to the provision of credit.

6.21 ASIC has a general power to make such investigation as it thinks expedient for the due administration of the Commonwealth credit legislation if it has reason to suspect that there may have been committed:

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a contravention of the credit legislation;

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a contravention of a law of the Commonwealth, or of a law of a referring State or Territory, that concerns the management, conduct or affairs of a licensee, a credit representative or other person who engages, or has engaged, in credit activities. In relation to a body corporate, affairs has the same meaning as in section 232 of the Corporations Act [Part 1-2, Division 2, section 5]. In relation to other persons, a definition has not been included and the natural meaning of the term applies; or

•

a contravention of a law of the Commonwealth, or of a law of a referring State or Territory, that involves fraud or dishonesty and relates to a credit activity or a credit contract, mortgage, guarantee or consumer lease.

[Part 6-1, Division 2, section 247]

6.22 The term credit legislation is defined as the Credit Bill (when enacted), the Transitional Bill (when enacted), the ASIC Act and any other Commonwealth, State or Territory legislation that covers conduct relating to credit activities (whether or not it also covers other conduct), but only in so far as it covers conduct relating to credit activities. [Part 1-2, Division 2, section 5]

6.23 This definition is necessarily broader than the definition of Commonwealth credit legislation, which is defined as the Credit Bill (when enacted), any instrument made under the Credit Bill, the Transitional Bill (when enacted) and any instrument made under it. [Part 1-2, Division 2, section 5]

6.24 For ASIC to have a reason to suspect a contravention requires more than mere speculation, but less than having reasonable grounds to believe that a contravention has occurred.

6.25 ASIC's decision to commence an investigation is not a reviewable decision under the Administrative Appeals Tribunal Act 1975 (AAT Act) or the Administrative Decisions (Judicial Review) Act 1977 (AD(JR) Act).

6.26 ASIC can be directed by the Minister to investigate a particular matter if the Minister is of the opinion that it is in the public interest to do so. [Part 6-1, Division 2, section 248]

6.27 ASIC can also be directed by the Minister to investigate a matter relating to:

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an alleged or suspected contravention of the Commonwealth credit legislation;

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an alleged or suspected contravention of a law of the Commonwealth or of a referring State or Territory that concerns the management, conduct or affairs of a licensee, a credit representative or other person who engages in, or has engaged in, credit activities, or that involves fraud or dishonesty and relates to a credit activity or a credit contract, mortgage, guarantee or consumer lease; or

•

a credit activity engaged in by a person.

6.28 The Minister also has power to direct ASIC to investigate a credit activity even if it does not involve an alleged or suspected contravention of a law. [Part 6-1, Division 2, section 248]

Reports of investigations

6.29 ASIC may prepare a report - either an interim report or a final report - that sets out certain findings and opinions arising out of an investigation. In some cases, ASIC is required to prepare a report and give a copy to the Minister. The powers to prepare reports are consistent with the powers in sections 16 and 17 of the ASIC Act.

6.30 ASIC must prepare an interim report if, in the course of an investigation under Part 6-1, it forms the opinion that:

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a contravention of a law of the Commonwealth, or of a referring State or Territory, has been committed, and that contravention is serious; or

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the preparation of an interim report would enable or assist the protection, preservation or prompt recovery of property; or

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there is an urgent need for the Commonwealth credit legislation to be amended.

[Part 6-1, Division 2, subsection 249(1)]

6.31 An interim report that ASIC is required to prepare must contain, as relevant, ASIC's finding about contraventions and material on which the findings are based, matters that will enable or assist the protection, preservation or prompt recovery of property, or ASIC's opinion and reasons for its opinion about the amendment of the legislation.

6.32 The requirement to prepare an interim report is intended to apply in circumstances where it is in the public interest for findings of facts to be made at an early stage of an investigation to assist a decision to be made about whether to commence civil or criminal proceedings, or to seek law reform, and to also assist in the preparation and conduct of proceedings if such proceedings are commenced. The public interest in preparing an interim report must be balanced against the public interest in maintaining the integrity of the investigation.

6.33 ASIC also has discretion to decide to prepare an interim report. [Part 6-1, Division 2, subsection 249(2)]

6.34 ASIC may choose to prepare a final report at the end of an investigation that sets out ASIC's findings about matters investigated, material on which those findings are based and any other matters relating to or arising out of the investigation that ASIC thinks fit. [Part 6-1, Division 2, section 250]

6.35 If a final report is prepared for an investigation, each record of an examination conducted in the course of that investigation must accompany the report. In addition, if, in ASIC's opinion, a statement made at an examination conducted in the course of another investigation under Part 6-1 is relevant to the investigation and a record has been made of that statement, a copy of the record must accompany the report. [Part 6-1, Division 2, section 251]

6.36 ASIC can be directed by the Minister to prepare either an interim report or a final report. If a report is prepared at the Minister's direction, it must also set out such matters relating to, or arising out of, the investigation that the Minister directs. [Part 6-1, Division 2, subsections 249(2) and (3), 250(2) and (3)]

6.37 Interim reports and final reports prepared are not legislative instruments. Subsections 249(4) and 250(4) are declaratory of the position that the interim or final reports are not a legislative instrument within the meaning of section 5 of the Legislative Instruments Act 2003. [Part 6-1, Division 2, subsections 249(4) and 250(4)]

6.38 All reports must be given to the Minister, and the Minister can choose to print and publish the report or part of it. [Part 6-1, Division 2, subsections 251(1) and (4)]

6.39 ASIC may also give a report of an investigation in whole or part to:

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specified agencies - if the report relates to a serious contravention of a law of the Commonwealth, or of a referring State or Territory. This will enable those agencies to use ASIC's findings in the administration of their own legislation and the exercise of their powers; and

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a person - if the report relates to a person's affairs to a material extent.

[Part 6-1, Division 2, subsections 251(2) and (3)]

6.40 The making of a report is a reviewable decision for the purposes of the AD(JR) Act. The rules of natural justice require ASIC to give a person whose rights, interests or legitimate expectations may be adversely affected by findings contained in the draft report an opportunity to be heard or to make submissions on those findings before the report is published: Kioa v West (1985) 116 ALR 321 at 582-583. Findings of fact contained in a report are also reviewable under the AD(JR) Act if there is an error of law or on the ground that there is no evidence or other material to justify the decision made: Australian Broadcasting Tribunal v Bond (1990) 94 ALR 11 at 38.

6.41 A report prepared by ASIC under Part 6-1 is admissible in proceedings (other than criminal proceedings) as prima facie evidence of any facts or matters that the report states ASIC to have found to exist. [Part 6-8, Division 2, section 308]

6.42 The term proceedings has the same meaning as in Part 3 of the ASIC Act, that is, a proceeding in a court, or a proceeding or hearing before, or an examination by or before, a tribunal, whether the proceeding, hearing or examination is of a civil, administrative, criminal, disciplinary or other nature. Tribunal is broadly defined and would include ASIC. [Part 1-2, Division 2, section 5]

6.43 The court or tribunal must be satisfied that the copy of the report has been given to the other party, and that the other party, and their lawyer, have had a reasonable opportunity to examine it and take the contents into account in preparing their case. [Part 6-8, Division 2, section 309]

6.44 Before a copy of a report is admitted into evidence, the other party can apply to cross-examine persons who were involved in preparing the report or making a finding about a fact or matter that the report states ASIC to have found to exist, or who gave information or produced a book on the basis of which a finding was made. Cross-examination must be allowed unless the court or tribunal considers that, in all the circumstances, it is not appropriate to do so. This gives the other party the opportunity to appropriately test the findings made by ASIC and the information on which those findings were based. [Part 6-8, Division 2, subsections 309(3) and (4)]

6.45 These provisions ensure that the other party has the opportunity to take the contents of the report into account when preparing their case, and appropriately test the findings made by ASIC and the information on which those findings were based.

6.46 Under section 246 of the ASIC Act, the Minister, ASIC, Commission members, delegates and staff are protected from liability for acts done, or omissions made, in good faith relating to the functions and powers of ASIC. This includes the preparation and distribution of a report under Part 6-1. It is intended to make regulations so that the credit legislation is a prescribed law for the purposes of section 246 of the ASIC Act.

Part 6-2 - Examination of persons

6.47 ASIC may, by written notice, require a person to:

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give to ASIC all reasonable assistance with an investigation under Part 6-1 of the Bill; and

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appear before an ASIC staff member for an examination on oath and to answer questions.

[Part 6-2, Division 2, section 253]

6.48 ASIC can exercise this power if it, on reasonable grounds, suspects or believes that the person can give information relevant to a matter that it is investigating, or is to investigate, under Part 6-1. [Part 6-2, Division 2, subsection 253(1)]

6.49 Intentional or reckless failure to comply with a requirement is an offence, unless the person has a reasonable excuse. The defendant has the burden of establishing that they had a reasonable excuse for non-compliance, as this matter is peculiarly within the knowledge of the defendant. The penalty is 100 penalty units or two years imprisonment or both. [Part 6-6, Division 2, subsections 290(1) and (4)]

6.50 Failure to comply with requirements made by ASIC in relation to an examination can seriously jeopardise ASIC's ability to exercise its powers and functions to properly inquire into questionable behaviour. In the absence of any reasonable excuse, criminal sanctions are appropriate to deter non-compliance.

6.51 This power and the corresponding offence are consistent with section 19 of the ASIC Act.

6.52 A person can give information relevant to a matter if the person can:

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explain or state a matter;

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identify a person, matter or thing;

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disclose information; or

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answer a question.

[Part 1-2, Division 2, section 5]

6.53 The terms 'give' and 'information' when used in Chapter 6 have the same meaning as in Part 3 of the ASIC Act. [Part 1-2, Division 2, section 5]

6.54 ASIC can exercise this power if it suspects or believes that the person can give relevant information. A suspicion for the purposes of this provision must be more than mere conjecture, surmise or speculation, but it can be based on matters not admissible in evidence, such as hearsay. A 'suspicion that something exists is more than a mere idle wondering whether it exists or not; it is a positive feeling of actual apprehension or mistrust, amounting to a 'slight opinion, but without sufficient evidence': Qld Bacon Pty Ltd v Rees (1966) 115 CLR 266 at 303. The test for a belief is a higher threshold than suspicion.

6.55 A person is required to give all reasonable assistance in connection with the investigation. This may extend to actions as well as providing information.

Example 6.1: Examples of Reasonable Assistance

Examples of 'reasonable assistance' include:

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signing a power of attorney (ASC v Kutzner (1998) 16 ACLC 182);

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signing documents to authorise the release of information to ASIC (Smith v Papamihail (1998) 158 ALR 451);

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identifying where documents may exist by drawing a chart, map or diagram;

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providing passwords for access to computer files; and

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providing a key for a locked safe.

6.56 The overriding requirement is that the assistance sought must be 'reasonable'.

6.57 The notice given by ASIC must state the general nature of the matter that ASIC is investigating, or is to investigate. The notice must also set out the effect of subsection 257(1) (right of the examinee's lawyer to be present, address the inspector and examine the examinee) and section 295 (abrogation of the privilege against self-incrimination). [Part 6-2, Division 2, subsection 253(3)]

Procedure of an examination

6.58 The remaining provisions of Part 6-2 apply only where a person (the examinee) appears before another person (the inspector) for examination. These provisions do not apply to the power to require a person to give reasonable assistance. [Part 6-2, Division 2, section 254]

6.59 The provisions authorise the inspector to control the procedure of the examination. The inspector has power to:

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require the examinee to either take an oath or make an affirmation that the statements the examinee will make are true [Part 6-2, Division 2, subsection 255(1)];

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administer an oath or affirmation [Part 6-2, Division 2, subsection 255(1)];

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require the examinee to answer a question that is put at the examination and that is relevant to a matter that ASIC is investigating, or is to investigate, under Part 6-1 [Part 6-2, Division 2, subsection 255(4)];

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make directions about who can be present at the examination [Part 6-2, Division 2, section 256];

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curtail obstruction of the examination [Part 6-2, Division 2, section 257];

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give directions about the conduct of an examinee's lawyer [Part 6-2, Division 2, section 257];

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cause a record to be made of the examination [Part 6-2, Division 2, subsection 258(1)]; and

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impose conditions when providing the examination transcript to the examinee [Part 6-2, Division 2, subsection 258(2)].

6.60 These provisions are consistent with sections 20 to 24 of the ASIC Act.

6.61 Failure of an examinee to comply with a requirement to either take an oath or make an affirmation that the statements the examinee will make are true is an offence of strict liability, except to the extent that the person has a reasonable excuse [Part 6-6, Division 2, subsections 290(1) and (4)]. The defendant has the burden of establishing that they had a reasonable excuse for non-compliance, as this matter is peculiarly within the knowledge of the defendant. The penalty is 10 penalty units, or three months imprisonment or both [Part 6-6, Division 2, subsection 290(2)].

6.62 The inspector may require the examinee to answer a question that is put to the examinee and that is relevant to a matter that is being investigated. [Part 6-2, Division 2, subsection 255(4)]

6.63 The concept of 'relevance' is wide in the context of investigative powers. ASIC is not obliged to explain to the examinee why questions are relevant to the investigation.

6.64 Intentional or reckless failure to comply with a requirement under subsection 255(4) is an offence, unless the person has a reasonable excuse. The defendant has the burden of establishing that they had a reasonable excuse for non-compliance, as this matter is peculiarly within the knowledge of the defendant. The penalty is 100 penalty units or two years imprisonment or both. The offence and penalty is consistent with those for non-compliance with subsection 21(3) of the ASIC Act. [Part 6-6, Division 2, subsections 290(1) and (4)]

6.65 Failure to comply with requirements made by ASIC in relation to an examination can seriously jeopardise ASIC's ability to exercise its powers and functions to properly inquire into questionable behaviour. Criminal sanctions are appropriate to deter non-compliance where there is no reasonable excuse for non-compliance.

6.66 The requirement to answer a question overrides any duty of confidentiality and the privilege against self-incrimination. It is expressly provided that it is not a reasonable excuse for a person to refuse or fail to give information because the information might tend to incriminate the person or make the person liable to a penalty. However, if before making an oral statement, the examinee claims that the statement might tend to incriminate them or make them liable to a penalty, then the statement is not admissible in evidence against the person in criminal proceedings or proceedings for the imposition of a penalty (other than proceedings in respect of the falsity of the statement). [Part 6-6, Division 2, section 295]

6.67 A lawyer is entitled to refuse to answer a question if the giving of information would involve disclosing a privileged communication made by or on behalf of the lawyer in his or her capacity. The lawyer may not refuse to comply if the person on behalf of whom the communication was made consents to the lawyer complying with the requirement, or, if this person is a body corporate that is being wound up, the liquidator of the body gives their consent. [Part 6-6, Division 2, section 296]

6.68 If an examinee refuses to answer a question, the inspector may certify the refusal in writing (for example, by swearing an affidavit setting out details of the failure to comply) and apply to the court for an order that the person comply. The court may inquire into the matter to determine whether the refusal was based on a reasonable excuse. [Part 6-6, Division 2, section 297]

6.69 The examination must take place in private [Part 6-2, Division 2, subsection 256(1)]. This promotes the public interest in protecting the integrity of the investigation and the private interest of the examinee by ensuring that any prejudicial disclosures injurious to reputation or disclosures relating to personal or business confidences are not made public.

6.70 The following persons are entitled to be present:

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the inspector, the examinee and a member of ASIC;

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a staff member approved by ASIC - which is defined in Part 1-2 (Dictionary) by reference to section 5 of the ASIC Act to mean a person referred to in subsection 120(1) of the ASIC Act (staff engaged under the Public Service Act 1999) or employed under subsection 120(3) of the ASIC Act (additional persons employed under written agreements), a person engaged under section 121(1) of the ASIC Act (persons engaged under written agreements as consultants or to perform services) and any officers, employees or persons who under section 122 of the ASIC Act are to assist ASIC (staff seconded to ASIC); and

•

the examinee's lawyer.

[Part 6-2, Division 2, subsection 256(2)]

6.71 The inspector may also give directions about who may be present during the examination, or part of the examination. [Part 6-2, Division 2, subsection 256(1)]

6.72 The power to allow any other person to attend an examination must only be exercised where it is reasonable to do so, and without the private character of the examination being lost. It would not normally be reasonable to have persons with no connection with ASIC or the matter present.

Example 6.2

It may be reasonable to allow another person to attend:

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where the examinee is elderly, ill or otherwise in need of support; or

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to allow an accredited translator to be present to assist where a person speaks a language other than English.

6.73 The individual circumstances should be considered by the inspector. This power also allows the presence of persons recording the examination for transcription.

6.74 The power to give directions under subsection 256(1) may also be used to exclude a particular person from an examination. The inspector may use this power to overrule the examinee's choice of lawyer and exclude that particular lawyer from the examination if the inspector had a belief, in good faith and on reasonable grounds, that the presence of the particular lawyer would prejudice the investigation.

Example 6.3

ASIC may need to make this direction where a particular lawyer or firm of lawyers represents a number of examinees in the same investigation. This may increase the risk that persons to be examined have prior knowledge of questions and answers of previous examinees, which could affect the veracity of the examinee's answers and prejudice the investigation; Gangemi v ASIC (2003) 45 ACSR 383.

6.75 It is an offence for any other person to be present at an examination. This is an offence of strict liability. The penalty is 10 penalty units or imprisonment for three months or both. This offence and penalty is consistent with the offence and penalty in subsection 22(2) of the ASIC Act. [Part 6-2, Division 2, subsections 257(2) and (3)]

6.76 This offence provision recognises the importance of maintaining privacy of examinations for both the public interest in the integrity of the investigation and the private interests of the examinee. Criminal sanctions are appropriate to deter unauthorised attendance at examinations.

6.77 An examinee's lawyer may address the inspector and examine the examinee about matters about which the examinee has been questioned. The lawyer is subject to directions from the inspector about the timing of these activities; for example, the inspector might determine that any examination by the lawyer should take place after the inspector has finished questioning the examinee. [Part 6-2, Division 2, subsection 257(1)]

6.78 The inspector also has power to prevent the lawyer from exercising those rights in a manner that obstructs the inspector's own examination. Examples of obstruction by a lawyer may include prompting of answers or repeatedly interrupting the examination. A failure by the examinee's lawyer to comply with a requirement to stop addressing the inspector, or examining the examinee, is an offence of strict liability, attracting a penalty of 5 penalty units. This is because of the need to preserve the integrity of the examination, in order for it to be effective. [Part 6-2, Division 2, subsections 257(2) and (3)]

Record of examination

6.79 The inspector may, or must if the examinee requests, cause a record to be made of statements made at the examination. The making of a record of examination ensures the effectiveness of the examination because it records for future use the questions asked and answers given at the examination. If a record is made in, or reduced to, writing, the inspector may require the examinee to read and sign it. [Part 6-2, Division 2, subsection 258(1) and paragraph 258(2)(a)]

6.80 Signing the record of examination affects its evidentiary use. If the record is signed, it is, in any future proceeding, prima facie evidence of the statements that it records. [Part 6-8, Division 3, section 303]

6.81 Failure to read or sign a record in accordance with a requirement is an offence of strict liability, unless the person has a reasonable excuse. The defendant has the burden of establishing that they had a reasonable excuse for non-compliance, as this matter is peculiarly within the knowledge of the defendant. The penalty is 10 penalty units or three months imprisonment or both. This offence and penalty is consistent with the offence and penalty in section 63 of the ASIC Act. [Part 6-2, Division 2, paragraph 258(2)(a) and Part 6-6, Division 2, subsection 290(2)]

6.82 This offence provision recognises the importance of the signed record of examination as evidence in proceedings. Criminal sanctions are appropriate to deter non-compliance with a requirement to sign a record of examination, except where there is a reasonable excuse for the non-compliance.

6.83 It is expressly provided that it is not a reasonable excuse for a person to refuse or fail to sign a record in accordance with a requirement that the signing the record might tend to incriminate the person or make the person liable to a penalty. However, if before signing the record the examinee claims that the statement might tend to incriminate the person or make them liable to a penalty, the fact that the person has signed the record is not admissible in evidence against the person in a criminal proceeding or a proceeding for the imposition of a penalty (other than a proceeding in respect of the falsity of a statement contained in the record). [Part 6-6, Division 2, section 295]

6.84 This provision is included because it is necessary to expressly state that the privilege against self-incrimination does not apply in order to abrogate that privilege. It enables ASIC to obtain information that is necessary for the purposes of its investigation, but allows the person to maintain protection from the information being used against them in criminal proceedings or proceedings for the imposition of a penalty.

6.85 If an examinee refuses to sign a record, the inspector may certify the refusal in writing (for example, by swearing an affidavit setting out details of the failure to comply) and apply to the court for an order that the person comply. The court may inquire into the matter to determine whether the refusal was based on a reasonable excuse. [Part 6-6, Division 2, section 297]

6.86 If requested by the examinee, the inspector must give the examinee a copy of the written record subject to any conditions that the inspector imposes. For example, an inspector might impose conditions that protect the private nature of the examinations, such as limitations on the subsequent use and disclosure of the record. [Part 6-2, Division 2, paragraph 258(2)(b)]

6.87 A record of examination, together with a copy of any related book, may be given by ASIC to a person other than the examinee to be used in connection with proceedings. ASIC may give a copy of a record and related books to a person's lawyer if the lawyer satisfies ASIC that the person is carrying on, or contemplating in good faith, proceedings in relation to a matter to which the examination related. [Part 6-2, Division 2, subsection 259(1)]

6.88 The term 'related book' is not defined, but may include documents formally identified and incorporated in the record, and also documents referred to directly or indirectly that would help a reader to understand the record. For example, if an examinee refers to a meeting with a client in which a particular credit contract was suggested, written notes of that meeting may constitute a related book.

6.89 This power recognises the importance of litigants and potential litigants having access to information relevant to their proceedings, and supports the efficient conduct of those proceedings.

6.90 If a copy of a record is given to a person under this power, the person or any other person who has possession, custody or control of the copy or a copy of it must not use it, or publish or communicate to a person any part of its contents, except in connection with preparing, beginning or carrying on, or in the course of, proceedings. [Part 6-2, Division 2, subsection 259(2)]

6.91 Contravention of this provision is an offence of strict liability. The penalty is 10 penalty units or three months imprisonment or both. The offence and penalty are consistent with the offence and penalty in subsection 25(3) of the ASIC Act. [Part 6-2, Division 2, subsections 259(2) and (3)]

6.92 This provision is necessary because the release of the record may affect the confidentiality of the information contained in the record. This provision limits as far as possible the terms on which the information can be used and distributed to protect the confidential nature of that information. Criminal sanctions are appropriate to deter use of the record for a purpose not contemplated by the section.

6.93 It is also provided that ASIC may, subject to such conditions (if any) as it imposes, give to a person a copy of a written record of the examination together with any related book. [Part 6-2, Division 2, subsection 259(4)]

6.94 This is not a discrete power to give a copy of a record of examination to a person. It is a machinery or facilitative provision that enables the provision of records of examination and related books and the imposition of conditions where the giving of those documents is for a purpose authorised in some other way (for example under section 127 of the ASIC Act): see Johns v ASC (1993) 178 CLR 408.

6.95 A failure to comply with conditions imposed by ASIC under subsection 258(2) or subsection 259(2) is an offence of strict liability. The penalty is 10 penalty units or three months imprisonment or both. The offence and penalty are consistent with the offence and penalty in section 26 of the ASIC Act. [Part 6-2, Division 2, section 260]

6.96 This offence provision recognises the importance of conditions for protecting the confidentiality of information contained in the record. Criminal sanctions are appropriate to deter use of the record contrary to conditions imposed by ASIC.

6.97 If a final report of the investigation is prepared under section 250, each record of an examination conducted in the course of that investigation must accompany the report. In addition, if, in ASIC's opinion, a statement made at an examination is relevant to any other investigation under Part 6-1 and a record has been made of that statement and a final report has been prepared for that other investigation, a copy of the record must accompany the report. This is to ensure that reports prepared by ASIC include a complete record of information about the basis on which ASIC's findings are made. [Part 6-2, Division 2, section 261]

Part 6-3 - Inspection of books and audit information-gathering powers

6.98 For most ASIC inquiries and investigations, records and documents are as important a source of evidence as oral testimony. ASIC has wide powers to compel the inspection and production of records of information, referred to as 'books', that relate to credit activities. These powers are consistent with the information-gathering powers in Part 3 Division 3 of the ASIC Act.

6.99 A book includes a register, any other record of information, financial reports or financial records, and documents. This definition is inclusive and therefore also covers any records of information that relate to credit activities engaged in by a person. [Part 1-2, Division 2, section 5]

When powers may be exercised

6.100 A power conferred by Part 6-3 (other than sections 264, 265, 269 and 270) may only be exercised by ASIC for the following purposes:

•

for the performance or exercise of any of ASIC's functions and powers under the Commonwealth credit legislation [Part 6-.3, Division 2, paragraph 263(a)];

•

for the purposes of ensuring compliance with the Commonwealth credit legislation [Part 6-3, Division 2, paragraph 263(b)];

•

in relation to an alleged or suspected contravention of the credit legislation or a law of the Commonwealth or of a referring State or Territory [Part 6-3, Division 2, paragraphs 263(c) and (d)]; or

•

for the purposes of an investigation under Part 6-1 [Part 6-3, Division 2, paragraph 263(d)].

6.101 An example of ASIC exercising its powers for the purposes of the performance or exercise of its functions and powers is using them to obtain information to assist it to make a decision on whether to make a banning order under section 80.

6.102 ASIC's power to obtain information to enable it to assess whether a person is complying with an obligation or requirement under the Commonwealth credit legislation can be used, for example, in the course of a surveillance of a person engaging in credit activities.

6.103 ASIC's power to obtain information can be used for making inquiries in relation to:

•

an alleged or suspected contravention of the credit legislation; or

•

a contravention of a law of the Commonwealth or of a referring State or Territory that:

-

concerns the management, conduct or affairs of a licensee or credit representative or another person who engages, or has engaged, in credit activities; or

-

involves fraud or dishonesty and that relates to credit activities or to a credit contract, mortgage, guarantee or consumer lease.

6.104 For ASIC to have a reason to suspect a contravention requires more than mere speculation, but less than having reasonable grounds to believe that a contravention has occurred.

6.105 The requirement that a contravention concern the management, conduct or affairs of a person would generally mean that the contravention must arise out of the internal management of the person or out of their conduct or business to the extent that it involves credit activities. It is generally not sufficient that the contravention merely relates to the management, conduct or affairs of the person: ASC v Lord (1991) 33 FCR 144 at 149.

6.106 The requirement that a contravention involves fraud or dishonesty does not require fraud or dishonesty to be an element of an offence: ASC v Lord (1991) 33 FCR 144 at 149.

Power to inspect books

6.107 A person who has been authorised in writing by ASIC is entitled to inspect (without charge) a 'book' that the Commonwealth credit legislation requires a person to keep. For example, staff members of ASIC would generally be authorised for the purpose of this provision. The authorisation can be of general application or limited to specified books. [Part 6-3, Division 2, subsection 264(1)]

6.108 The authorised person may require a person in whose possession, custody or control the book is to make the book available for inspection. [Part 6-3, Division 2, subsection 264(2)]

6.109 A book will be in a person's possession if the book is in their custody or under their control. [Part 1-2, Division 2, section 5]

6.110 Books that a person can obtain by exercising an enforceable legal right are therefore in the person's possession, notwithstanding that they do not have legal ownership of the books. More than one person can have custody or control of a book. For example, if an agent holds books on a person's behalf, those books are in the possession, custody or control of both the agent and the person, and may be inspected under a notice given to either the agent or the person.

6.111 The power of inspection only enables physical inspection of the books where they are located.

6.112 Failure to comply with a requirement to make books available for inspection is a strict liability offence unless the person has a reasonable excuse. The defendant has the burden of establishing that they had a reasonable excuse for non-compliance, as this matter is peculiarly within the knowledge of the defendant. The penalty is 10 penalty units or 3 months imprisonment or both. This offence and penalty is consistent with the offence and penalty in section 63 of the ASIC Act. [Part 6-3, Division 2, subsections 264(2) and (3) and Part 6-6, Division 2, subsections 290(2) and (4)]

6.113 Failure to comply with requirements made by ASIC in relation to inspection of books can seriously jeopardise ASIC's ability to exercise its powers and functions to ensure compliance with the law and properly inquire into questionable behaviour. Criminal sanctions and strict liability are appropriate to deter non-compliance where there is no reasonable excuse for non compliance.

Power to require an auditor to give information or produce books

6.114 ASIC may give a written notice to an auditor who prepares an audit report required by the Credit Bill requiring that auditor to give specified information or produce specified books to ASIC, at a specified place and time. [Part 6-3, Division 2, subsection 265(1)]

6.115 The place and time for production of books must be reasonable in all the circumstances. There could be a reasonable excuse for non-compliance with a notice to produce books where there is a capricious or unreasonable fixing of a time for production of books: Hopfner v Flavel (1990) 2 ACSR 295. [Part 6-9, Division 2, section 315]

6.116 This power may only be exercised:

•

for the purposes of ascertaining compliance with audit requirements under the Commonwealth credit legislation; or

•

in relation to an alleged or suspected contravention of:

-

audit requirements under the Commonwealth credit legislation; or

-

a law of the Commonwealth or of a referring State or Territory that either concerns the management, conduct or affairs of a licensee of credit representative or other person who engages in, or has engaged in, credit activities or involves fraud or dishonesty and relates to a credit activity engaged in by a person, or a credit contract, mortgage, guarantee or consumer lease; or

•

for the purposes of an investigation under Part 6-1 relating to such a contravention.

[Part 6-3, Division 2, subsection 265(2)]

6.117 This provision broadly sets out the proper purposes for ASIC to require production of books - that is, where ASIC needs to be able to consider a book to assess whether there has been compliance with an audit requirement, make preliminary inquiries about a possible contravention that relates to an audit matter (outside the formal investigation process), or investigate a matter.

6.118 If the notice requires the giving of information, that information can be given orally or in writing or both.

6.119 An intentional or reckless failure to comply with a requirement made under section 265 is an offence, unless the person has a reasonable excuse. The penalty is 100 penalty units or two years imprisonment or both. This offence and penalty is consistent with the offence and penalty in section 63 of the ASIC Act. [Part 6-6, Division 2, subsections 290(1) and (4)]

6.120 Failure to comply with requirements made by ASIC in relation to production of books can seriously jeopardise ASIC's ability to exercise its powers and functions to ensure compliance with the law and properly inquire into questionable behaviour. Criminal sanctions are appropriate to deter non-compliance where there is no reasonable excuse for non-compliance.

6.121 It is not a reasonable excuse for a person to refuse or fail to give information or produce a book because that might tend to incriminate the person or make them liable to a penalty. However, if before making an oral statement the person claims that the statement might tend to incriminate the person or make them liable to a penalty, the statement is not admissible in evidence against the person in criminal proceedings or proceedings for the imposition of a penalty (other than proceedings in respect of the falsity of a statement). [Part 6-6, Division 2, section 295]

6.122 This provision is included to expressly confirm that the privilege against self-incrimination does not apply, in order to abrogate that privilege. It enables ASIC to obtain information that is necessary for the purposes of its assessment or inquiries, but allows the person to maintain protection from the information being used against them in criminal proceedings or proceedings for the imposition of a penalty.

6.123 The notice can require the giving of information or production of books even if doing so would involve a breach of confidentiality owed to an audited body. [Part 6-3, Division 2, subsection 265(4)]

6.124 A person who responds to the notice is not liable to a proceeding or subject to a liability merely because of compliance with a requirement under Chapter 6. [Part 6-9, Division 2, section 320]

6.125 An auditor has qualified privilege in relation to the response. This is necessary to protect the auditor from legal proceedings for breach of confidence as a result of complying with a requirement made by ASIC. An auditor is also given qualified privilege in relation to information provided to ASIC where they are complying with their other statutory obligations as auditors. [Part 2-5, Division 4, section 105]

6.126 ASIC may, by written notice, extend the time within which the auditor must give the information or produce the books to which the notice relates. [Part 6-3, Division 2, subsection 265(5)]

6.127 ASIC can authorise an ASIC member or ASIC staff member to make a requirement under section 265. This authorisation can be of general application or limited by reference to the persons of whom requirements may be made, the books that may be required to be produced or the information that is required to be given. If the authorisation is given, the person may make a requirement as if references in section 265 to ASIC were a reference to the person. [Part 6-3, Division 2, section 268]

Powers to require production of books

6.128 ASIC may, by written notice, require the following persons to produce to ASIC specified books, at a specified place and time:

•

a person who engages in credit activity (either alone or together with any other person);

•

a person who, in ASIC's opinion, has been a party to engaging in a credit activity; or

•

a representative, banker, lawyer or auditor of a person referred to above.

[Part 6-3, Division 2, paragraphs 266(a) to (c)]

6.129 The notice may require the production of specified books relating to:

•

a credit activity engaged in by a person; or

•

the character of financial situation of, or a business carried on by, a person who engages in a credit activity.

[Part 6-3, Division 2, paragraphs 266(d) and (e)]

6.130 The power conferred in this provision is consistent with the powers conferred on ASIC by sections 30 and 31 of the ASIC Act, (with changes to limit unnecessary duplication and make those powers relevant to the context of the credit legislation).

6.131 The intention is to enable ASIC to require the production of all books that relate to a credit activity, a credit contract, mortgage, guarantee or consumer lease, or a person who engages in a credit activity (whether under an authorisation in accordance with the credit legislation or not).

6.132 ASIC is given broad powers so that it can:

•

obtain all information necessary to enable it to exercise its powers and functions;

•

ascertain whether persons involved in engaging in credit activities have done so in compliance with the Commonwealth credit legislation; and

•

make all appropriate inquiries and investigation where there is a possible contravention of the Commonwealth credit legislation and other relevant laws.

6.133 The person to whom a notice is given does not need to be the subject of ASIC's investigation or inquiry. If the person has custody or control of relevant books, they may be required to produce those books to ASIC for a proper purpose.

6.134 ASIC also has the power to obtain books by giving a person a written notice requiring production to a specified member or staff member of ASIC at a specified place and time of specified books that are in the person's possession, custody or control and relate to:

•

a credit activity engaged in by a person; or

•

the character or financial situation of, or business carried on by, a person who engages in a credit activity.

[Part 6-3, Division 2, subsection 267(1)]

6.135 ASIC also has the power to obtain books by giving a person a written notice requiring production to a specified member or staff member of ASIC at a specified place and time of specified books that are in the person's possession, custody or control and relate to the question of whether an auditor has complied with audit requirements under the Commonwealth credit legislation. [Part 6-3, Division 2, subsection 267(2)]

6.136 Books that a person can obtain by exercising an enforceable legal right are in the person's possession, custody or control notwithstanding the person does not have legal ownership of the books. More than one person can have possession, custody or control of a book. For example, if an agent holds books on a person's behalf, those books are in the possession, custody or control of both the agent and the person, and production may be required under a notice given to either the agent or the person. If the person who receives the notice does not have physical possession of a book, but the book is within their custody and control, compliance with the notice will involve the person exercising their legal right to obtain the return to them of the book so that it can be produced to ASIC.

6.137 The powers to require the production of books at a specified place and time are taken to require the person giving the notice to specify a place and time for production of books that is reasonable in all the circumstances. There could be a reasonable excuse for non-compliance with a notice to produce books where there is a capricious or unreasonable fixing of a time for production of books: Hopfner v Flavel (1990) 2 ACSR 295. [Part 6-9, Division 2, paragraph 315(a)]

6.138 If it is reasonable in the circumstances, ASIC may require production of books immediately. [Part 6-9, Division 2, paragraph 315(b)]

Example 6.4 : Production of books

Circumstances relevant to whether immediate production of books is reasonable may include:

•

the urgency of the inquiry or investigation - for example, whether assets are likely to be disposed of; or

•

volume, type and location of the documents sought - for example, with large organisations such as banks a reasonable time may be needed to locate documents covered by the notice; or

•

whether the person to whom the notice is given wishes to exercise their right to obtain legal advice: Swan v Scanlan (1982) 61 FLR 468.

6.139 The books specified in the notice need to be specified in enough detail for the person who is given the notice to understand what they are required to produce. The notice can only specify existing books; ASIC cannot use these powers to require a person to create a book.

6.140 ASIC can authorise a member or staff member to make a requirement under sections 266 and 267. This authorisation can be of general application or limited by reference to the persons of whom requirements may be made, the books that may be required to be produced or the information that is required to be given. [Part 6-3, Division 2, section 268]

6.141 If an authorisation is given, the person may make a requirement as if references in sections 266 and 267 to:

•

ASIC were a reference to the authorised person [Part 6-3, Division 2, paragraph 268(3)(a)];

•

to specified books or information were a reference to books or information that the authorised person specifies, whether in the requirement or not and whether orally or in writing, to the person of whom the requirement is made. This power supplements, and is not a substitute for, a written notice. It allows the authorised person to adjust a requirement to produce books to meet an immediate demand [Part 6-3, Division 2, paragraphs 268(3)(b) and (3)(c)]; or

•

to giving or producing to a specified person were a reference to giving or producing to the authorised person [Part 6-3, Division 2, paragraph 268(3)(d)].

6.142 An intentional or reckless failure to comply with a requirement to produce books under sections 31, 33 and 34 is an offence, unless the person has a reasonable excuse. The penalty is 100 penalty units or two years imprisonment or both. This offence and penalty is consistent with the offence and penalty in section 63 of the ASIC Act. [Part 6-6, Division 2, subsections 290(1) and (4)]

6.143 Failure to comply with requirements made by ASIC in relation to production of books can seriously jeopardise ASIC's ability to exercise its powers and functions to ensure compliance with the law and properly inquire into questionable behaviour. Criminal sanctions are appropriate to deter non-compliance where there is no reasonable excuse for non-compliance.

6.144 It is expressly provided that it is not a reasonable excuse for a person to refuse or fail to produce a book in accordance with a requirement that the production of the book might tend to incriminate the person or make the person liable to a penalty. [Part 6-6, Division 2, section 295]

6.145 This provision is included because it is necessary to expressly state that the privilege against self-incrimination does not apply in order to abrogate that privilege. It enables ASIC to obtain information that is necessary for the purposes of its investigation.

6.146 If the requirement to produce books is made to a person who is a lawyer, and the book contains a privileged communication made by or on behalf of the lawyer in his or her capacity as a lawyer, the lawyer is entitled to refuse to comply. The lawyer may not refuse to comply if the person, on behalf of whom the communication was made, or, if this person is a body corporate that is being wound up, the liquidator of the body, consents to the lawyer complying with the requirement. [Part 6-6, Division 2, section 296]

Powers if books are not produced in accordance with a requirement

6.147 ASIC is given power to enforce compliance with a requirement to produce books, by:

•

seeking the issue of a warrant to search premises and seize books [Part 6-3, Division 2 sections 269 and 270];

•

requiring the person to state where those books may be found [Part 6-3, Division 2 section 272];

•

certifying the failure to comply to the court with a view to the court, in its discretion, inquiring into the case and ordering compliance [Part 6-6, Division 2, section 297]; and

•

making freezing orders [Part 6-7, Division 2, sections 299 to 301].

6.148 The powers in Part 6-3 (Inspection of books), Part 6-6 (Offences) and Part 6-7 (ASIC's powers in relation to non compliance with Chapter 6) are explained in more detail below.

6.149 If a staff member of ASIC has reasonable grounds to suspect that there are, or may be within the next three days, on particular premises in Australia books whose production has been required under this Part and that have not been produced, they can apply to a magistrate for the issue of a warrant to search premises for those books. [Part 6-3, Division 2, section 269]

6.150 A search warrant authorises the holder to search and enter private property, and seize books. It authorises what would otherwise be a trespass upon the privacy and property of another.

6.151 ASIC also has existing powers under other legislation to obtain a search warrant. For example, a warrant may be obtained under section 3E of the Crimes Act 1914 (Crimes Act), which applies generally to all offences against Commonwealth law.

6.152 A search warrant can only be obtained if ASIC has required a person to produce books and there has been non-compliance with that requirement. The power is intended primarily to enforce compliance with the notice that was given by ASIC, by authorising entry on property and seizure of books, rather than being an alternate means of obtaining books.

6.153 A warrant is issued to a member of the Australian Federal Police, who does not have to be named in the warrant. The warrant will enable that Australian Federal Police member to enter and search the premises and take possession of or secure against interference, books that appear to be the books whose production was required. [Part 6-3, Division 2, subsections 270(1) and (2)]

6.154 If a warrant is issued, the magistrate must set out on the information laid before him or her by ASIC the grounds that have been relied on to justify the issue of the warrant. This ensures transparency of the reasons for issuing the warrant and determining whether the warrant may be challenged. [Part 6-3, Division 2, subsection 270(3)]

6.155 The warrant must specify the premises that may be entered, and books that may be searched for, state whether entry is authorised during specified hours or any time, and state that the warrant ceases to have effect on a specified day not more than seven days after the date of issue. [Part 6-3, Division 2, subsection 270(4)]

6.156 ASIC may also require a person who has failed or refused to produce particular books in compliance with a requirement under Part 6-3 to state where the books may be found, and who last had possession, custody or control of the books and where that person may be found. [Part 6-3, Division 2, section 272]

6.157 This power enables ASIC to obtain information from a person about the location of books that will assist it to obtain those books from a third party.

6.158 An intentional or reckless failure to comply with section 272 is an offence, except to the extent that the person has stated the matter to the best of his or her knowledge or belief, or unless the person has a reasonable excuse. The defendant has the burden of proving that they had a reasonable excuse or that they stated the matter to the best of his or her knowledge, as this matter is peculiarly within the knowledge of the defendant. The penalty is 100 penalty units or two years imprisonment or both. This offence and penalty is consistent with the offence and penalty in section 63 of the ASIC Act. [Part 6-6, Division 2, subsections 290(1), (4) and (6)]

6.159 Failure to comply with requirements made by ASIC in relation to inspection of books can seriously jeopardise ASIC's ability to identify sources of books, and therefore its ability to exercise its powers and functions to ensure compliance with the law and properly inquire into questionable behaviour. Criminal sanctions are appropriate to deter non-compliance.

6.160 It is not a reasonable excuse for a person to refuse or fail to make a statement in accordance with a requirement under section 272 that the statement might tend to incriminate the person or make the person liable to a penalty. However, if before making an oral statement the person claims that the statement might tend to incriminate the person or make them liable to a penalty, the statement is not admissible in evidence against the person in criminal proceedings or proceedings for the imposition of a penalty (other than proceedings in respect of the falsity of a statement). This 'use immunity' does not apply if the statement is given in writing. [Part 6-6, Division 2, section 295]

6.161 This provision is included because it is necessary to expressly state that the privilege against self-incrimination does not apply in order to abrogate that privilege. It enables ASIC to obtain information that is necessary for the purposes of its assessment or inquiries, but allows the person to maintain protection from the information being used against them in criminal proceedings or proceedings for the imposition of a penalty.

6.162 If the requirement is made to a person who is a lawyer, and the giving of information would involve disclosing a privileged communication made by or on behalf of the lawyer in his or her capacity as a lawyer, the lawyer is entitled to refuse to comply. The lawyer may not refuse to comply if the person on behalf of whom the communication was made, or, if this person is a body corporate that is being wound up, the liquidator of the body, consents to the lawyer complying with the requirement. [Part 6-6, Division 2, section 296]

Powers if books are produced or seized

6.163 The member or staff member of ASIC specified in a notice or warrant under this Part has powers to:

•

take possession of books;

•

inspect, make copies of, or take extract from, the books; and

•

use, or permit use of, the books for the purposes of a proceeding.

[Part 6-3, Division 2, subsections 271(1) to (4)]

6.164 The books can be retained for as long as necessary for the following purposes:

•

exercising a power under this provision;

•

performing a function or power under the Commonwealth credit legislation, ensuring compliance with the Commonwealth credit legislation or carrying on an investigation;

•

making a decision about whether or not proceedings to which the books would be relevant should be begun; and

•

carrying on such proceedings.

[Part 6-3, Division 2, subsection 271(5)]

6.165 This ensures that ASIC is entitled to retain the books until such time as the purpose for obtaining the books, and any proper purpose that has subsequently arisen has been completed.

6.166 No-one is entitled to claim a lien on the books as against the person to whom they have been produced. [Part 6-3, Division 2, subsection 271(6)]

6.167 If a person would be entitled to inspect any of the books if they were not in the possession of ASIC, that person must be permitted to inspect the books. The person to whom books are produced may also permit another person to inspect any of the books. The exercise of the discretion to allow inspection is constrained by section 127 of the ASIC Act, which protects confidential information from unauthorised use or disclosure. [Part 6-3, Division 2, subsection 271(7)]

6.168 The person to whom books are produced may deliver them into the possession of ASIC or a person authorised by it to receive them. If this is done, the person who then has possession can exercise each of the powers in this provision. [Part 6-3, Division 2, subsection 271(8) and paragraph 271(1)(b)]

6.169 The person to whom books are produced, or to whom they are subsequently delivered, may require the person who produced the books or a person who was a party to the compilation of any of the books, to explain any matter about the compilation of the books. A corporation can be required to supply this information through its officers. [Part 6-3, Division 2, subsection 271(9)]

6.170 This provision enables ASIC to clarify matters that are not clear on the face of books that are produced (such as the meaning of codes and terms used in the books, or the identity of persons whose signatures appear in the books) and an explanation of systems used for compiling the books (such as methods used for identifying books required to be produced and IT systems used). This information can assist ASIC to understand and use the books produced, determine the importance of particular books in the context of other books that have been produced and also determine whether any other books ought to have been produced.

6.171 A requirement under subsection 271(9) can be answered in writing or orally.

6.172 A failure to comply with a requirement under subsection 271(9) is an offence, except to the extent that the person has stated the matter to the best of his or her knowledge or belief or unless the person has a reasonable excuse. The defendant has the burden of proving that they had a reasonable excuse or that they stated the matter to the best of his or her knowledge, as this matter is peculiarly within the knowledge of the defendant. The penalty is 100 penalty units or two years imprisonment or both. This offence and penalty is consistent with the offence and penalty in section 63 of the ASIC Act. [Part 6-6, Division 2, subsections 290(1), (4) and (5)]

6.173 Failure to comply with a requirement to explain matters about books that have been produced can jeopardise ASIC's ability to understand and use those books, and therefore its ability to exercise its powers and functions to ensure compliance with the law and properly inquire into questionable behaviour. Criminal sanctions are appropriate to deter non-compliance.

6.174 It is not a reasonable excuse for a person to refuse or fail to give information in accordance with a requirement that the information might tend to incriminate the person or make the person liable to a penalty. However, if before making an oral statement the person claims that the statement might tend to incriminate the person or make them liable to a penalty, the statement is not admissible in evidence against the person in criminal proceedings or proceedings for the imposition of a penalty (other than proceedings in respect of the falsity of a statement). This 'use immunity' does not apply if the explanation is given in writing. [Part 6-6, Division 2, section 295]

6.175 This provision is included because it is necessary to expressly state that the privilege against self-incrimination does not apply in order to abrogate that privilege. It enables ASIC to obtain information that is necessary for the purposes of its assessment or inquiries, but allows the person to maintain protection from the information being used against them in criminal proceedings or proceedings for the imposition of a penalty.

6.176 If the requirement is made to a person who is a lawyer, and the giving of information would involve disclosing a privileged communication made by or on behalf of the lawyer in his or her capacity as a lawyer, the lawyer is entitled to refuse to comply. The lawyer may not refuse to comply if the person on behalf of whom the communication was made, or, if this person is a body corporate that is being wound up, the liquidator of the body, consents to the lawyer complying with the requirement. [Part 6-6, Division 2, sections 295 and 296]

Part 6-4 - Proceedings after an investigation

6.177 This Part defines ASIC's power to commence criminal and civil proceedings, following an investigation. These powers are consistent with the powers in sections 49 and 50 of the ASIC Act.

ASIC may cause prosecution to be begun

6.178 Section 274 applies where it appears to ASIC, as a result of an investigation or from a record of examination conducted under Chapter 6, that a person may have committed an offence against the Commonwealth credit legislation and ought to be prosecuted for an offence. [Part 6-4, Division 2, subsection 274(1)]

6.179 ASIC may cause a prosecution of the person for the offence to be begun and carried on. [Part 6-4, Division 2, subsection 274(2)]

6.180 This power does not cover the commencement of prosecutions for offences against Part 2 of Division 2 of the ASIC Act, as this power is already contained in section 49 of the ASIC Act.

6.181 Criminal proceedings can also be brought against third parties who assisted in the contravention, as the application of the Commonwealth credit legislation is extended by both section 11 of the Criminal Code Act 1995 to aiders and abettors, and section 6 of the Crimes Act 1914 to accessories.

6.182 ASIC has a power to require a person to give all reasonable assistance in connection with a prosecution. This power may be exercised where ASIC, on reasonable grounds, suspects or believes that a person can give information relevant to a prosecution for the offence or the offence relates to matters being, or connected with, affairs of a licensee, credit representative or other person that engages, or has engaged, in credit activities. [Part 6-4, Division 2, subsections 274(3) and (4)]

6.183 The requirement can be made of a person who ASIC suspects or believes, on reasonable grounds, can give information relevant to the prosecution, or, if the offence relates to matters being, or connected with, affairs of a licensee, credit representative or other person that engages, or has engaged, in credit activities, any representative, banker, lawyer or auditor of the licensee, credit representative or other person that engages, or has engaged, in credit activities.

6.184 This power does not apply in relation to the person that is the subject of the prosecution or a person who is or has been that person's lawyer. [Part 6-4, Division 2, subsection 274(6)]

6.185 This power is independent of the power to require a person to give reasonable assistance in connection with an investigation. It is an additional power available to ASIC to further the prosecution of a matter. It only operates from the time at which ASIC commences a prosecution and does not apply at the earlier investigation stage.

6.186 This power is supplemented by ASIC's ability in relation to section 207, which allows ASIC to require certain assistance relating to prosecutions.

6.187 This power is subject to the rules applying to contempt of court.

6.188 A failure to comply with a requirement to give reasonable assistance with a prosecution is an offence, unless the person has a reasonable excuse. The defendant has the burden of proving that they had a reasonable excuse, as this matter is peculiarly within the knowledge of the defendant. The offence is one of strict liability. The penalty is 10 penalty units or imprisonment for three months or both. The offence and penalty are consistent with the offence and penalty in subsection 49(3) of the ASIC Act. [Part 6-4, Division 2, subsection 274(5) and Part 6-6, Division 2, subsection 290(2)]

6.189 The requirement to answer a question overrides any duty of confidentiality and the privilege against self-incrimination. It is expressly provided that it is not a reasonable excuse for a person to refuse or fail to give information in accordance with a requirement that the information might tend to incriminate the person or make the person liable to a penalty. However, if before making an oral statement the person claims that the statement might tend to incriminate the person or make them liable to a penalty, the statement is not admissible in evidence against the person in criminal proceeding or proceedings for the imposition of a penalty (other than proceedings in respect of the falsity of the statement). [Part 6-6, Division 2, section 295]

6.190 It is considered that ASIC's ability to seek this assistance will maintain the integrity of the financial system and credit regulation framework and outweighs, in these circumstances, the privilege against self incrimination.

6.191 If the requirement under subsection 274(4) is made to a person who is a lawyer, and the giving of information would involve disclosing a privileged communication made by or on behalf of the lawyer in his or her capacity as a lawyer, the lawyer is entitled to refuse to comply. However, the lawyer may not refuse to comply if the person, on behalf of whom the communication was made, or, if this person is a body corporate that is being wound up, the liquidator of the body, consents to the lawyer complying with the requirement. [Part 6-6, Division 2, section 296]

6.192 If a person refuses to comply with the requirement, the person making the requirement may certify the refusal in writing (for example, by swearing an affidavit setting out details of the failure to comply) and apply to the court for an order that the person comply. The court may inquire into the matter to determine whether the refusal was based on a reasonable excuse. [Part 6-6, Division 2, section 297]

6.193 Nothing in section 274 affects the operation of the Director of Public Prosecutions Act 1983. [Part 6-4, Division 2, subsection 274(7)]

ASIC may cause civil proceedings to be begun

6.194 ASIC has the power to cause certain civil proceedings to be begun and carried on in another person's name if, as a result of an investigation or from a record of an examination conducted under Chapter 6, it appears to ASIC to be in the public interest for the person to being and carry on such proceedings (other than proceedings under Commonwealth credit legislation). [Part 6-4, Division 2, section 275]

6.195 Proceedings that ASIC may begin and carry on are proceedings for the recovery of damages for fraud, negligence, default, breach of duty or other misconduct, committed in connection with a matter to which the investigation or examination related, or proceedings for recovery of property of a person.

6.196 ASIC may cause proceedings to be begun and carried on in a person's name (not in the name of ASIC), but must only do so with the person's written consent.

6.197 This provision reflects the important role of ASIC in the areas of public policy and law enforcement. It enables ASIC to cause proceedings to be taken where persons have suffered loss or damage, but do not have the resources to maintain expensive and complicated litigation. The purpose of the provision is to commence litigation where there is otherwise insufficient private funding, or the value of individual claims is too small to make litigation worthwhile, but there are good prospects of recovery.

6.198 This power is necessary to ASIC for the proper and efficient exercise of its functions and powers. This is because it enables ASIC to take action in response to offending conduct in a timely way. In some instances, this may be a more appropriate or effective response to misconduct than lengthy and costly investigations that may or may not result in a successful criminal prosecution. In some instances, this may better serve the public interest in protecting consumers.

6.199 Before this power can be exercised, ASIC must consider that it is in the public interest to for a person to begin and carry on civil proceedings. There must be a causative link between the investigation or examination under Chapter 6 and ASIC's view that it is in the public interest to begin and carry on proceedings. Public interest has a broad meaning.

6.200 If the person in whose name proceedings will be begun is a natural person, that person must consent to ASIC beginning and carrying on the proceedings in the person's name. This requirement allows the private interests of the person to override the public interest in causing the proceedings to be begun and carried on. The consent of the person must be present at all stages of the litigation. For example, settlement negotiations can not be conducted or concluded by ASIC without the consent of the persons in whose name proceedings are brought.

6.201 If the person in whose name proceedings will be begun is a company, there is no consent requirement. The public interest in the proceeding prevails over private interests of the company.

Part 6-5 - Hearings

6.202 Division 2 gives ASIC the power to hold hearings for the purpose of the performance or exercise of any of its functions or powers under the Commonwealth credit legislation, other than a function or power conferred by Part 6-1 (which deals with investigations). [Part 6-5, Division 2, section 277]

6.203 The power to hold hearings is consistent with the provisions dealing with hearings in Part 3 Division 6 of the ASIC Act.

6.204 There are two general types of hearing that may be conducted by ASIC:

•

discretionary hearings; and

•

hearings that ASIC is required to hold, in accordance with the Commonwealth credit legislation.

6.205 A discretionary hearing can be held by ASIC for the purposes of the performance or exercise of any of its functions or powers, including the functions or powers set out in section 12A of the ASIC Act.

6.206 The power to hold a hearing may, for example, be used to determine whether particular conduct is acceptable, and not against public interest, to restore confidence in the honesty, efficiency and fairness of the provision of credit activities, or to determine whether particular conduct complies with the law, whether it is against the public interest and if, as a consequence, there should be a change in the law: Broken Hill Pty Co Ltd v National Companies and Securities Commission (1986) 160 CLR 492.

6.207 The requirement to hold a hearing is subject to exceptions, where there is a need for ASIC to be able to act quickly. Otherwise, ASIC is required to offer a hearing to the affected person and provide that person with the opportunity to make submissions on how ASIC should exercise its discretion on a particular matter, in order to ensure natural justice in the process.

6.208 Unless an exception applies, ASIC is required under the Credit Bill and Transitional Bill to give a person an opportunity to attend a hearing and make submissions before ASIC decides to

•

impose conditions, or vary or revoke conditions, on registration [Transitional Bill, Schedule 2, Part 3, subitems 14(1) and (2)];

•

suspend or cancel a person's registration [Transitional Bill, Schedule 2, Part 3, subitem 22(2)];

•

refuse to grant a credit licence [Part 2-2, Division 3, section 41];

•

impose conditions, or vary or revoke conditions, on a credit licence [Part 2-2, Division 4, section 45];

•

suspend or cancel a credit licence [Part 2-2, Division 6, section 55];

•

make a banning order [Part 2-4, Division 2, section 80]; or

•

not vary or cancel a banning order in accordance with an application [Part 2-4, Division 2, section 83].

6.209 Exceptions to the general rule that ASIC is required to hold a hearing are specified in the law, and generally relate to situations where there may be a need to act quickly to protect the public (for example, where a licensee is insolvent).

6.210 The advantages of enabling ASIC to conduct administrative hearings and make administrative decisions and orders are that they are procedurally less complex than court proceedings, and they generally allow ASIC to respond in a more timely and cost-effective manner to contraventions of the Commonwealth credit legislation. This is particularly important from the perspective of the public interest and protecting and promoting the confidence of participants in the credit industry (including consumers and persons who engage in credit activities).

6.211 The public interest in ASIC having wide powers to make administrative orders is balanced with the need to protect private interests of affected persons who may be the subject of those orders. Private interests of affected persons are protected through:

•

clear rights and protections in the administrative process, including:

-

the right to receive a written notice of the hearing [Part 6-5, Division 2, section 285];

-

the requirement that certain hearings be held in private [Part 6-5, Division 2, section 280];

-

the requirement for ASIC to observe the rules of natural justice [Part 6-5, Division 2, paragraph 285(2)(c)];

-

the affected person's right to be represented by a lawyer at the hearing [Part 6-5, Division 2, subsection 285(8)]; and

•

the affected person's right to administrative or judicial review of ASIC's administrative decisions or orders.

6.212 ASIC has general discretion over how a hearing is conducted. However, the overriding requirement is that hearings must be conducted with as little formality and technicality, and with as much expedition, as the requirements of the credit legislation (other than the excluded provisions) and a proper consideration of the matters before ASIC permit. [Part 6-5, Division 2, subsection 285(1)]

Hearings to be held in public or in private

6.213 ASIC has the power to direct that a hearing take place in public or in private. [Part 6-5, Division 2, section 278]

6.214 In making such a direction, ASIC must have regard to whether matters that will arise during the hearing are of a confidential nature or relate to the commission of an offence, whether any unfair prejudice to a person's reputation would be likely to be caused if the hearing took place in public and whether it is in the public interest that the hearing take place in public. [Part 6-5, Division 2, subsection 278(2)]

6.215 For a compulsory hearing, if ASIC has a discretion and the person who has been given the opportunity to appear at the hearing asks that all or part of the hearing be held in public, the hearing or part of the hearing must be held in public unless ASIC is satisfied that it is desirable that the hearing take place in private for one of the reasons referred to in section 278. If a direction under subsection 279(2) is given in writing, it is not a legislative instrument [Part 6-5, Division 2, subsection 279(3)]. This provision is declaratory of the position that the direction is not a legislative instrument within the meaning of section 5 of the Legislative Instruments Act 2003 [Part 6-5, Division 2, section 279].

6.216 However, ASIC does not have any discretion to direct that a hearing be held in public if the Commonwealth credit legislation requires that the hearing take place in private. [Part 6-5, Division 2, section 280]

6.217 In each of the provisions of the Credit Bill and Transitional Bill that require a hearing to be held (listed above), the Bills provide that the hearing must take place in private.

6.218 ASIC has power to determine who may be present at a hearing that is to be held in private. If a hearing is to be held in private, the only persons who may be present are:

•

a member of ASIC or a staff member approved by ASIC [Part 6-5, Division 2, paragraphs 282(3)(a) and (3)(b)];

•

the person to whom the Commonwealth credit legislation required ASIC to give the opportunity of appearing at a hearing [Part 6-5, Division 2, paragraphs 282(2)(a) and (3)(c)];

•

a person who represents the person who the Commonwealth credit legislation required ASIC to give the opportunity of appearing at a hearing (which can be an employee of the person if they are a natural person, or an officer or employee if they are a body corporate, or a lawyer [Part 6-5, Division 2, subsections 285(6) and (8), subparagraph 282(2)(b)(i) and paragraph 282(3)(c)]; and

•

a person for whom ASIC has given a direction that they may be present, and a person who represents that person [Part 6-5, Division 2, subsection 282(1), subparagraph 282(2)(b)(ii), paragraph 282(3)(c)].

6.219 ASIC's power to make directions about who may be present includes a power to make directions that a person may not be present. However, this discretion would not enable ASIC to exclude a person who is entitled to be present at the hearing. [Part 6-5, Division 2, subsection 282(2)]

6.220 It is an offence of strict liability for a person to be present at a hearing without an entitlement to be present or an ASIC direction authorising the presence of that person. The penalty is 10 penalty units or three months imprisonment or both. This is necessary to protect the private nature of these types of hearings. [Part 6-5, Division 2, subsections 282(3) and (4)]

6.221 In making a direction under subsection 282(1) that a person may be present at a hearing, ASIC may consider whether allowing other persons to attend is fair to the affected person and whether the other person's presence will assist in the conduct of the hearing. For example, in some circumstance it may be appropriate for a friend or relative to be present to provide the affected person with support, or for the person to have an adviser other than a lawyer to assist them.

6.222 A direction under section 282(1) is not a legislative instrument. The provision is included to assist readers, as the instrument is not a legislative instrument within the meaning of section 5 of the Legislative Instruments Act. [Part 6-5, Division 2, subsection 282(5)]

General procedure of the hearing

6.223 ASIC has general discretion about how a hearing is conducted. However, an overriding requirement is that hearings must be conducted with as little formality and technicality, and with as much expedition, as the requirements of the corporations legislation (other than the excluded provisions) and a proper consideration of the matters before ASIC permit. [Part 6-5, Division 2, subsection 285(1)]

6.224 A hearing conducted by ASIC is inquisitorial in nature, to find out the true position about whether, for example, a person should be granted a licence or whether a person should be prevented from engaging in credit activities for the protection of the public. The provisions allow for the proceeding of a hearing to be flexible and enable the person who is given the opportunity of appearing at the hearing the opportunity to make submissions to ASIC in a way that they consider appropriate.

6.225 If ASIC were required to follow formal procedures in the conduct of hearings, it would lose its ability to respond to contraventions in a timely way, which would be contrary to the public interest.

6.226 At the hearing,

•

ASIC is not bound by the rules of evidence. It may take into account any material that is relevant, credible and probative;

•

ASIC may permit a person to intervene, on such conditions as it thinks fit; and

•

ASIC must observe the rules of natural justice, including the bias rule and the hearings rule.

[Part 6-5, Division 2, subsection 285(2)]

6.227 The provision that ASIC is not bound by rules of evidence, such as inadmissibility of hearsay evidence, enables ASIC to have regard to the widest range of information and evidence. This is consistent with the inquisitorial nature of the hearing. The requirement that ASIC observe the rules of natural justice ensures that the procedures adopted by ASIC in obtaining and considering information and evidence during the hearing are fair.

6.228 The requirement that ASIC observe the rules of natural justice generally include the bias rule and hearings rule.

6.229 The bias rule is that a person must not hear and make a decision on a matter if they have actual or apprehended bias.

6.230 Actual bias exists where the decision-maker has prejudged the case against the person, or acted in a way that shows that the decision-maker had a concluded view and was not open to persuasion in favour of the person. Apprehended bias may exist where there is a reasonable apprehension that the decision-make might not bring an impartial and unprejudiced mind to the resolution of the legal and factual matters at the hearing, so that those matters will not be decided on their merits.

6.231 The hearings rule is that no person should be condemned unheard. The hearings rule relates to matters such as the giving of notice of the hearing, the degree of formality of the hearing, use of material not disclosed to person who is given the opportunity of the hearing, cross-examination of evidence, and the giving of reasons for a decision. ASIC must not make a decision based on evidence obtained without knowledge of the affected person. ASIC must inform the affected person of the nature of any credible and relevant prejudicial evidence that is significant to the decision to be made, and give the person the opportunity to test that evidence.

6.232 Division 4 of Part 4 of the ASIC Act (Meetings of ASIC) applies as far as practicable to hearings. [Part 6-5, Division 2, subsections 285(3) and (4)]

Specific procedural requirements

Notice of hearing

6.233 If a hearing is required, ASIC must give a written notice appointing a place and time for the hearing. The person who is given the opportunity to attend the hearing is not compelled to attend. The hearing is the person's opportunity to make submissions about matters that the person wishes ASIC to take into account. If the person does not wish to attend, they may still lodge with ASIC written submissions before the day of the hearing. [Part 6-5, Division 2, section 283]

6.234 If the person chooses to neither appear nor make written submissions, ASIC may make a decision based on the information that it has before it.

6.235 There is no prescribed form for a notice of hearing. This is consistent with the overriding requirement that hearings be conducted with little formality or technicality [Part 6-5, Division 2, subsection 285(1)]. In determining the content of the form, ASIC must have regard to the rules of natural justice [Part 6-5, Division 2, paragraph 285(2)(c)]. For example, the rules of natural justice require that affected persons be informed of the substance of ASIC's concerns about a particular matter to enable them to understand the concerns to be addressed and prepare their submissions.

Power to summons witnesses and take evidence

6.236 The person who has been given an opportunity to appear at the hearing may choose to call witnesses to provide evidence to support their submissions. ASIC may also choose to call witnesses to enable it to fully inquire into the subject matter of the hearing.

6.237 ASIC has power to give a written summons requiring a person to appear at a hearing to give evidence, produce specified documents or both. [Part 6-5, Division 2, subsection 284(1)]

6.238 An example of where the issue of a summons may be appropriate is where a witness is not willing or is unable to give a written statement, such as where a contractual duty of confidentiality prevents them from disclosing the relevant information.

6.239 ASIC may also permit a witness to give evidence by tendering a written statement, and, if required, verifying that statement by oath. Whether a written statement is permitted may depend on matters such as the credibility of the witness and whether the evidence should be tested. [Part 6-5, Division 2, subsection 284(6)]

6.240 ASIC may require a witness to either take an oath or affirmation that the evidence the person will give will be true. It is a matter for the discretion of the ASIC member conducting the hearing whether an oath or affirmation is required. This will depend on the circumstances of a particular matter. For example, the taking of an oath or affirmation may be required if the credibility of the witness is an issue. [Part 6-5, Division 2, subsections 284(2) and (3)]

6.241 The ASIC member conducting the hearing may also require a witness to answer a question, and, if the witness is attending under a summons, produce a document specified in the summons. ASIC may also use its powers under Part 6-3 powers to require the production of books. [Part 6-5, Division 2, subsection 284(4)]

6.242 Failure to comply with a requirement to appear in accordance with a summons, take an oath or affirmation and answer a question or produce a document are offences of strict liability, except to the extent that the person has a reasonable excuse. The penalty is 10 penalty units or 3 months imprisonment or both. This offence and penalty is consistent with the offence and penalty in section 63 of the ASIC Act. [Part 6-5, Division 2, subsections 284(4) and (5); Part 6-6, Division 2, subsections 290(2) and (4)]

6.243 This offence provision recognises the public interest in ASIC having power to inquire into matters to the fullest extent possible before making decisions in the exercise of its functions and powers, and also to support the interest of the person who has been given the opportunity of a hearing in being able to secure the attendance all necessary witnesses. Criminal sanctions are appropriate to deter non-compliance unless there is a reasonable excuse for non-compliance.

6.244 It is expressly provided that it is not a reasonable excuse for a person to refuse or fail to give information or produce a book in accordance with a requirement that information or the production of the book might tend to incriminate the person or make the person liable to a penalty. [Part 6-6, Division 2, section 295]

6.245 This provision is included because is necessary to expressly state that the privilege against self-incrimination does not apply in order to abrogate that privilege. It enables ASIC to obtain information from a witness that is sought by ASIC or the person who has been given the opportunity of a hearing to fully inquire into the matters that are the subject of the hearing. It is not a reasonable excuse for a person to refuse or fail to give information or produce a book in accordance with a requirement that the information or production of a book might tend to incriminate the person or make the person liable to a penalty.

6.246 However, if before making an oral statement or producing a book the examinee claims that the statement or the production of the book might tend to incriminate the person or make them liable to a penalty, the statement or the production of the book is not admissible in evidence against the person in a criminal proceeding or a proceeding for the imposition of a penalty (other than a proceeding in respect of the falsity of the statement). [Part 6-6, Division 2, subsections 295(2) and (3)]

6.247 If the requirement to give information or produce books is made to a person who is a lawyer, and the information would involve disclosing, or the book contains, a privileged communication made by or on behalf of the lawyer in his or her capacity as a lawyer, the lawyer is entitled to refuse to comply. The lawyer may not refuse to comply if the person on behalf of whom the communication was made, or, if this person is a body corporate that is being wound up, the liquidator of the body, consents to the lawyer complying with the requirement. [Part 6-6, Division 2, section 296]

ASIC may restrict publication of certain material

6.248 ASIC may make a direction preventing or restricting the publication of evidence given before, or matters contained in documents lodged with, ASIC. In determining whether to make a direction, ASIC must have regard to:

•

whether the evidence given, or matter arising during the hearing is a confidential nature and relates to the commission of an offence;

•

any unfair prejudice to a person's reputation would be likely to be caused unless ASIC exercises its power;

•

it is in the public interest that ASIC exercises its power to prevent or restrict publication of the evidence or matter; and

•

any other relevant matter.

[Part 6-5, Division 2, section 281]

6.249 The publication of information obtained at a hearing before the conclusion of the hearing could prejudice the effective conduct of that hearing.

6.250 This power is necessary because a person who is given the opportunity to appear at a hearing, or a witness, may have lawful possession of a recording or transcript of a hearing, and are under no duty of confidentiality to ASIC.

6.251 The non-disclosure order should be necessary to preserve the secrecy of the hearing, limited to the persons present at the hearing and the evidence given at, and documents before, the hearing and should only operate during the hearing or for a reasonable time after the hearing.

6.252 Failure to comply with a direction under subsection 281(1) is an offence, unless the person has a reasonable excuse. The defendant has the burden of proving that they had a reasonable excuse, as this matter is peculiarly within the knowledge of the defendant. The penalty is 50 penalty units or imprisonment for one year or both. The offence and penalty are consistent with the offence and penalty in subsection 66(2) of the ASIC Act. [Part 6-5, Division 2, sections 281; Part 6-6, Division 2, section 293]

6.253 A direction under subsection 281(1) is not a legislative instrument. The provision is included to assist readers, as the instrument is not a legislative instrument within the meaning of section 5 of the Legislative Instruments Act 2003. [Part 6-5, Division 2, subsection 281(3)]

Representation of persons appearing at hearing

6.254 A natural person may appear in person or be represented by an employee of the person approved by ASIC. [Part 6-5, Division 2, subsection 285(5)]

6.255 A body corporate may be represented by an officer (within the meaning of Part 3 of the ASIC Act) or employee of the body corporate approved by ASIC. [Part 6-5, Division 2, subsection 285(6)]

6.256 An unincorporated association, or person in their capacity as a member of an unincorporated association, may be represented by a member, officer (within the meaning of Part 3 of the ASIC Act) or employee of that association approved by ASIC. [Part 6-5, Division 2, subsection 285(7)]

6.257 Any person may be represented by a lawyer. [Part 6-5, Division 2, subsection 285(8)]

6.258 The right to representation by a lawyer is a fundamental right to protect private interests. ASIC may overrule the choice of lawyer of an affected person or a witness in appropriate circumstances (such as where the presence of the particular lawyer prejudices the conduct of the hearing) by making a direction that that the particular lawyer may not be present. This does not restrict the right of the person to be represented by another lawyer. [Part 6-5, Division 2, subsection 282(1)]

ASIC to take into account evidence and submissions

6.259 ASIC must take into account all evidence given, and submissions made, during the hearing (whether they have been given or made in writing or orally), including written submissions given before the hearing. [Part 6-5, Division 2, section 286]

6.260 ASIC cannot choose to ignore evidence or submissions, though it may accord evidence or submissions different weight depending on all the circumstances of the matter, including the credibility of the witnesses.

Reference to court of questions of law

6.261 If a question of law arises during a hearing, ASIC may, of its own motion or at a person's request, refer to the court for a decision on that question. In this case, ASIC must not give a decision to which that question is relevant pending the court's decision or proceed with the hearing in a manner that is inconsistent with the court's opinion. All documents that are before ASIC in connection with the hearing must be sent to the court, and will be returned after the court has made a decision. [Part 6-5, Division 2, section 287]

Protection for participants

6.262 Members of ASIC that perform or exercise functions or powers in relation to a hearing, lawyers and other person's appearing on a person's behalf and witnesses have the same protection and immunity as a Justice, barristers and witnesses in proceedings in the High Court. [Part 6-5, Division 2, section 288]

6.263 ASIC staff members may also be protected by the defence against liability for damages in section 246 of the ASIC Act. It is expected that regulations will be made to prescribe the credit legislation as a prescribed law for the purposes of section 246 of the ASIC Act.

6.264 A person is also not liable to a proceeding merely because they have complied, or propose to comply, with a requirement made or purported to be made under this Chapter. This gives protection from liability (for example, for breach of confidentiality) arising from complying with a requirement to answer a question, or produce documents, during a hearing. [Part 6-9, Division 2, section 320]

Part 6-6 - Offences

Non-compliance with requirements made under Chapter 6

6.265 There are a number of offences for non-compliance with requirements of Chapter 6. [Part 6-6, Division 2, section 290]

6.266 These offences have been referred to in the above discussion of each of those requirements.

6.267 Each of these offences and the penalties that apply to the offences are consistent with those set out in Part 3 Division 7 of the ASIC Act.

6.268 The criminal sanctions applying to refusal or failure to comply with requirements made by ASIC are appropriate because:

•

criminal sanctions play an important role in deterring inappropriate conduct; and

•

failure to comply with requirements made by ASIC in relation to examinations, production of books and the conduct of hearings can seriously jeopardise ASIC's ability to exercise its functions and powers to ensure compliance with the Commonwealth credit legislation.

6.269 There are a number of strict liability offences which attach to breaches of Chapter 6. These offences are strict liability offences, as they relate to the punishment of offences lacking 'fault' and they:

•

enhance the effectiveness of the regulatory regime dealing with ASIC's enforcement powers; and

•

encourage participants to put in place systems and policies that address the risk of contraventions of the relevant provisions.

6.270 Offences under subsections 290(1) and (2) do not apply if the person has a reasonable excuse for their non-compliance. The person has the burden of proving that they had a reasonable excuse, as this matter is peculiarly within the knowledge of the defendant. [Part 6-6, Division 2, subsection 290(4)]

6.271 Whether there is a reasonable excuse at law for non-compliance depends on all the relevant circumstances of a particular case. It is not necessarily limited to physical or practical difficulties of compliance and may include any excuse which would be accepted by a reasonable person as justifying non-compliance taking into account the importance of the particular statutory requirement: ASIC v Albarran [2008] FCA 147 at [82] and [134].

Example 6.5 : Reasonable excuse

Some examples of where a court has considered that a person has established that they had a reasonable excuse are:

•

The time specified for compliance with a notice for production of books, or the specification of what is to be produced, is unreasonable or capricious: Hopfner v Flavel (1990) 8 ACLC 706 at 711.

•

The recipient of the notice only has possession of books that fall outside the scope of the books specified in the notice. The onus is on the recipient of the notice to determine whether the books in their possession are within the scope of the notice: General Benefits Pty Ltd & Tomblin v ASIC [2001] SASC 137 at [45].

Some examples of where a court has found that matters did not constitute a reasonable excuse for non-compliance are:

•

a duty of confidentiality. The need to maintain a duty of confidentiality does not fall within the statutory definition of a reasonable excuse: ASC v Zarro (1991) 32 FCR 546;

•

the fact that the person does not have physical custody of relevant books if the person has custody and control of those books;

•

mere inconvenience, such as a prior engagement: Re Deam Ltd [1974] ACLC 27,799 at 27,803;

•

there is current litigation challenging the validity of the notice: Macdonald v ASC [No 2] (1994) 12 ACLC 246 at 252;

•

the fact that a person may suffer personal detriment in terms of damage to business reputation or the risk of losing future commercial dealings: von Doussa v Owens [No 1] (1982) 30 ACSR 367 at 380-381; and

•

the possibility that compliance would expose a person to liability for breach of a foreign law: Bank of Valetta plc v National Crime Authority (1999) 164 ALR 45.

False information

6.272 A person must not:

•

give information, or make a statement, that is false or misleading in a material particular during an examination; or

•

give evidence that is false or misleading in a material particular at a hearing.

[Part 6-6, Division 2, subsections 291(1) and (2)]

6.273 It is a defence if the person believes on reasonable grounds that the information, statement or evidence was true and not misleading. The onus is on the defendant to prove this, as this matter is peculiarly within the knowledge of the defendant. [Part 6-6, Division 2, subsection 291(3)]

6.274 The penalties for these offences are 100 penalty units or two years imprisonment or both and 10 penalty units or 3 months imprisonment or both respectively [Part 6-6, Division 2, subsections 291(1) and (2)]. These offences and penalties are consistent with section 64 of the ASIC Act.

6.275 Criminal sanctions for the provision of false or misleading information to ASIC are appropriate because it is important for ASIC to be able to rely on information given and statements made in the course of examinations and hearings when making decisions about investigations and proceedings that may result from an investigation, and decisions about the subject matter of a hearing.

Obstructing person executing a warrant under this chapter

6.276 A person must not engage in conduct that results in the obstruction or hindering of a person who is executing a warrant issued under section 270, unless the person has a reasonable excuse. The onus is on the defendant to prove this, as this matter is peculiarly within the knowledge of the defendant. [Part 6-6, Division 2, subsections 292(1) and (2)]

6.277 The penalty is 100 penalty units or two years imprisonment or both. This offence and penalty is consistent with the offence and penalty in section 65 of the ASIC Act.

6.278 An occupier or person in charge of premises that are entered under a warrant issued under section 270 must not intentionally or recklessly refuse or fail to provide all reasonable facilities and assistance. The penalty is 25 penalty units or six months imprisonment or both [Part 6-6, Division 2, subsection 292(3)]. This offence and penalty is consistent with the offence and penalty in section 65 of the ASIC Act.

Disrupting hearings

6.279 A person must not engage in conduct that results in the disruption of a hearing. [Part 6-6, Division 2, subsection 293(1)]

6.280 A person must not contravene a direction given under subsection 281(1), which prevents or restricts the publication of certain material before a hearing, unless the person has a reasonable excuse. The onus is on the defendant to prove this, as this matter is peculiarly within the knowledge of the defendant. This is an offence of strict liability. [Part 6-6, Division 2, subsections 293(2) to (4)]

6.281 These offences are punishable on a summary conviction. The penalty is 50 penalty units or one year imprisonment or both [Part 6-6, Division 2, subsections 293(1) and (2)]. These offences and the penalties are consistent with offences in section 66 of the ASIC Act.

6.282 The criminal sanctions, including strict liability, are appropriate because:

•

criminal sanctions play an important role in deterring inappropriate conduct;

•

obstructing or hindering a person in exercising its examination and information-gathering powers can seriously jeopardise ASIC's ability to exercise its functions and powers to ensure compliance with the Commonwealth credit legislation and properly inquire into questionable behaviour;

•

obstructing or hindering a person in the conduct of a hearing, can seriously jeopardise ASIC's ability to exercise its functions and powers to make an appropriate decision on a matter arising under the Commonwealth credit legislation in a timely way; and

•

publishing material that has been obtained, or that is considered, in the course of a hearing, contrary to a direction by ASIC, may undermine the privacy of the hearing and may prejudice the effective conduct of the hearing.

Concealing books relevant to investigation

6.283 If ASIC is investigating, or about to investigate, a matter a person must not:

•

engage in conduct resulting in concealment, destruction, mutilation or alteration of a book relating to that matter; or

•

if the matter is in a particular State or Territory, engage in conduct resulting in the taking or sending of the book out of that State or Territory.

[Part 6-6, Division 2, subsection 297(1)]

6.284 The purpose of this provision is to deter conduct being engaged in to defeat the purposes of the Commonwealth credit legislation, or delay or obstruct an investigation by ASIC. A defence is provided where the person establishes that they did not intend to defeat the purposes of the Commonwealth credit legislation, or delay or obstruct an investigation by ASIC. The onus is on the defendant to prove this, as this matter is peculiarly within the knowledge of the defendant. [Part 6-6, Division 2, subsection 297(2)]

6.285 The penalty is 200 penalty units or five years imprisonment or both. This offence and the penalty are consistent with the offence in section 67 of the ASIC Act.

Self-incrimination

6.286 The common law privilege against self-incrimination provides that no-one is bound to answer any question or produce any document or thing if the answer or the document or thing would have a tendency to expose that person to conviction for a crime.

6.287 The doctrine of penalty privilege provides that a person cannot be compelled to disclose evidence that may subject the person to a penalty.

6.288 These privileges can be used by a person not to do some act, except where they are expressly or by implication abrogated by legislation.

6.289 The Credit Bill overrides these privileges as it expressly provides that it is not a reasonable excuse for a person to refuse or fail to give information, sign a record or produce a book in accordance with a requirement that information, signing the record or the production of the book might tend to incriminate the person or make the person liable to a penalty. [Part 6-6, Division 2, subsection 295(1)]

6.290 Although it is not expressly stated that the privilege is not a legal excuse for non-compliance, it is judicially accepted that this is the effect of such a provision: Mortimer v Brown (1969-1970) 122 CLR 493 at 496.

6.291 A person cannot therefore rely on this privilege to justify or excuse non-compliance with a requirement made by ASIC under Chapter 6. This provision is consistent with section 68 of the ASIC Act.

6.292 The Joint Senate Select Committee on Corporations Legislation indicated that the abrogation of these privileges by statute is necessary to give ASIC maximum effectiveness in achieving its investigatory function, thereby protecting the public interest. The same considerations apply to ASIC's functions and powers under the Commonwealth credit legislation.

6.293 It is provided that if, before making an oral statement giving information or signing a record pursuant to a requirement under this Chapter, a person claims that the statement, or signing the record, might tend to incriminate the person or make the person liable to a penalty, and that it would in fact do so, the statement or the fact that the person has signed the record is not admissible in evidence against the person in criminal proceedings or proceedings for the imposition of a penalty (other than in relation to the falsity of the statement or a statement in the record). [Part 6-6, Division 2, subsections 295(2) and (3)]

6.294 These provisions are consistent with subsections 68(2) and (3) of the ASIC Act.

6.295 These provisions afford a natural person the protection of use immunity. There is no provision for derivative use immunity.

6.296 Subsection 295(2) expressly confines the evidential immunity in subsection 295(3) to natural persons. Corporations cannot claim the privilege against self-incrimination, the penalty privilege, use immunity or derivative use immunity.

6.297 The use immunity in subsection 295(3) applies in proceedings for the imposition of a penalty. The term proceedings has the same meaning as in Part 3 of the ASIC Act, that is, a proceeding in a court, or a proceeding or hearing before, or an examination by or before, a tribunal, whether the proceeding, hearing or examination is of a civil, administrative, criminal, disciplinary or other nature. 'Tribunal' is broadly defined and would include ASIC. [Part 1-2, Division 2, section 5]

6.298 If privilege is claimed, oral statements, and the fact that a record has been signed, cannot be used and is not admissible in evidence against the person in proceedings by ASIC for the suspension or cancellation of registration or a licence and banning orders (which may result in the imposition of non-monetary penalties).

Legal professional privilege

6.299 At common law, legal professional privilege protects communications between clients and their lawyers from disclosure. The privilege applies to confidential communications between clients, their lawyers and third parties made for the dominant purpose of use in litigation, whether actual or contemplated (litigation privilege). Legal professional privilege also applies to confidential communications between clients and their lawyers made for the dominant purpose of giving or receiving legal advice (legal advice privilege).

6.300 Legal professional privilege is based on the duty of confidentiality between lawyer and client, and on the public interest in assisting the administration of justice by facilitating the representation of clients by lawyers.

6.301 If a lawyer is required under Chapter 6 to give information or produce a book, and the information would involve disclosing, or the book contains, a privileged communication made by or on behalf of the lawyer in his or her capacity as a lawyer, the lawyer is entitled to refuse to comply. The lawyer may not refuse to comply if the person on behalf of whom the communication was made, or, if this person is a body corporate that is being wound up, the liquidator of the body, consents to the lawyer complying with the requirement. [Part 6-6, Division 2, subsections 296(1) and (2)]

6.302 If the lawyer refuses to comply with a requirement under Chapter 6 on the basis of legal professional privilege, he or she must as soon as practicable give to the person who made the requirement a written notice setting out:

•

if the lawyer knows the name and address of the person to whom, - that name and address;

•

if the requirement is to give information and the communication was made in writing - sufficient particulars to identify the document containing the communication; and

•

if the requirement is to produce a book - sufficient particulars to identify the book, or part of the book, containing the communication.

[Part 6-6, Division 2, section 296]

6.303 The lawyer is not entitled to refuse to provide this information, for example on the basis that the release of this information would endanger the privilege.

6.304 This provision therefore allows a lawyer to preserve the confidentiality and privilege that may attach to communications sought by ASIC. However, ASIC can use the information obtained under subsection 296(3) to give a requirement to the person identified by the lawyer to produce the otherwise privilege communications. The decision of whether to comply with a requirement from ASIC is then a matter for that person. Although legal professional privilege is a legal excuse for non-compliance, it is not a 'reasonable excuse' for the purposes of the offence provisions in Chapter 6.

6.305 A statement that a person makes at an examination is admissible in evidence against the person in proceedings unless the statement discloses a matter in relation to which the person could claim legal professional privilege, if subsection 303(1) did not apply in relation to the statement, and the person objects to the admission of evidence of the statement. [Part 6-8, Division 2, paragraph 303(1)(d)]

6.306 This provision affords the examinee 'use immunity' in relation to statements made at an examination. It has no application in relation to production of books. This provision achieves a level of balance between the public interest in ASIC having access to all relevant information and the competing public and private interest in preserving the client's legal professional privilege.

Powers of the court in relation to non-compliance with Chapter 6

6.307 If a person refuses or fails to comply with a requirement made under Chapter 6 (other than Part 6-6), and ASIC is satisfied that the person does not have a reasonable excuse, ASIC may certify the failure in writing (for example, by swearing an affidavit setting out details of the failure to comply) and apply to the court for an order that the person comply with the requirement. [Part 6-6, Division 2, section 297]

6.308 The court may inquire into the matter to determine whether the refusal or failure was based on a reasonable excuse. If the court makes an order requiring compliance with the requirement, a refusal or failure to comply would amount to a contempt of court.

Part 6-7 - ASIC's powers in relation to non-compliance with Chapter 6

6.309 ASIC can make 'freezing orders' that restrain certain dealings in a credit contract, mortgage, guarantee or consumer lease where:

•

ASIC considers that information about a credit contract, mortgage, guarantee or consumer lease needs to be found out for the purposes of the exercise of any of ASIC's powers under Chapter 6; and

•

a person has refused or failed to comply with a requirement made under Chapter 6, that would provide ASIC with that information.

[Part 6-7, Division 2, section 299]

6.310 The orders that can be made by ASIC are orders:

•

restraining a specified person from assigning any interest in a credit contract, mortgage, guarantee or consumer lease;

•

restraining a specified person from acquiring any interest in a credit contract, mortgage, guarantee or consumer lease;

•

restraining the exercise of a right under a credit contract, mortgage, guarantee or consumer lease; and

•

directing a credit provider, mortgagee, beneficiary of a guarantee or lessor in relation to which one of these orders is in force to give written notice of that order to any person whom the credit provider, mortgagee, beneficiary of a guarantee or lessor knows to be entitled to exercise a right in relation to the credit contract, mortgage, guarantee or consumer lease.

[Part 6-7, Division 2, section 300]

6.311 Interest in relation to a credit contract, mortgage, guarantee or consumer lease may include:

•

the money that is obtained on credit;

•

property obtained using the money obtained on credit; and

•

real property and goods that secure a credit contract.

6.312 This power is intended to be used on a short-term basis to preserve the status quo where a person fails to comply with a requirement under Chapter 6 to provide information.

6.313 This power can be exercised unilaterally by ASIC without the need of an application to court, and the delay involved in such an application. This power is consistent with the power in section 73 of the ASIC Act.

6.314 An order under subsection 300(1) is not a legislative instrument. Subsection 300(3) is only declaratory of the position that the order is not a legislative instrument within the meaning of section 5 of the Legislative Instruments Act 2003. [Part 6-7, Division 2, subsection 300(3)]

6.315 ASIC may also make orders varying or revoking an order made under section 300. [Part 6-7, Division 2, subsection 301(1)]

6.316 If ASIC makes an order under this Part, it must:

•

give a copy of the order, and any subsequent order varying or revoking that order, to the person to whom the order is directed [Part 6-7, Division 2, subsection 301(3)]; and

•

publish the order in the Gazette [Part 6-7, Division 2, subsection 301(2)].

6.317 Failure to comply with an order made under this Part is an offence. The penalty is 25 penalty units or imprisonment for six months or both. This offence and penalty is consistent with the offence and penalty in section 75 of the ASIC Act.

Part 6-8 - Evidentiary use of certain materials

6.318 This Part of the Credit Bill provides for the admissibility in evidence of:

•

information obtained by ASIC in response to a requirement made under Chapter 6; and

•

reports prepared by ASIC under Part 6-1.

6.319 This Part is generally consistent with Part 3 Division 9 of the ASIC Act.

Statements made at an examination

6.320 In general, a statement that a person makes during their examination is admissible in evidence against that person in proceedings, except in specified circumstances. [Part 6-8, Division 2, subsection 303(1)]

6.321 A statement will not be admissible if:

•

the use immunity in subsection 295(3) applies [Part 6-8, Division 2, paragraph 303(1)(a)];

•

if the statement is not relevant to the proceedings and the person objects to the admission of evidence of the statement [Part 6-8, Division 2, paragraph 303(1)(b)];

•

the statement is qualified or explained by some other statement made at the examination, evidence of which has not been tendered at the proceedings, and the person objects to the admission of the statement [Part 6-8, Division 2, paragraph 303(1)(c)]; or

•

the person could claim legal professional privilege in the proceedings in relation to the matter disclosed in the statement, and the person objects to the admission of the statement [Part 6-8, Division 2, paragraph 303(1)(d)].

6.322 The examinee's statements may also be admitted in proceedings against the examinee that is heard together with proceedings against another person. [Part 6-8, Division 2, subsection 303(2)]

6.323 Where the record of examination has been signed by the examinee, the record is prima facie evidence of the statements that it records. [Part 6-8, Division 2, subsection 303(3)]

6.324 A statement that a person makes at an examination of the person may also be admissible in proceedings where that person is not called as a witness.

6.325 If direct evidence by the person (the absent witness) would be admissible in the proceedings, a statement that the absent witness made at an examination is admissible if:

•

the absent witness is dead or unfit, because of physical or mental incapacity, to attend as a witness;

•

the absent witness is outside the State or Territory in which the proceedings is heard and it is not reasonably practicable to secure their attendance, or they cannot be found; or

•

another party requires the absent witness to be called as a witness and the tendering party does not call the absent witness.

[Part 6-8, Division 2, section 304]

6.326 These provisions are not exhaustive as to the circumstances in which statements made at an examination will be admissible in a court. The provisions only supplement other means available to adduce evidence of statements made in examination as original evidence to prove the facts contained in those statements, or to prove another fact in issue in the proceedings. If the tendering party does not satisfy the requirements in the Credit Bill, it may still be able to rely on the general law of evidence or some other statute to make the statement admissible against a person. [Part 6-8, Division 2, section 310]

6.327 If a statement contained in a record of examination is admitted as evidence against a person other than the examinee under section 304, the weight to be given to the statement as evidence of a matter is to be determined having regard to the following matters:

•

the amount of time between the matter and the making of the statement;

•

any reason the person may have had for concealing or misrepresenting a material matter; and

•

any other circumstances from which it is reasonable to draw an inference about the accuracy of the statement.

[Part 6-8, Division 2, subsection 305(2)]

6.328 If the person who made the statement is not called as a witness in the proceeding, evidence that would be admissible in relation to the person's credibility and to show that the statement is inconsistent with another statement made by the person is also admissible. [Part 6-8, Division 2, subsection 305(3)]

6.329 This provision ensures that an unfair advantage cannot be obtained by tendering a record of an examination in evidence rather than calling the examinee as a witness.

6.330 A party that intends to apply to have statements made at an examination admitted in evidence in proceedings may give written notice to another party of this intention. The written notice must be given not less than 14 days before the first day of the hearing. The statements to that the person will apply to admit in evidence must be specified. [Part 6-8, Division 2, subsections 306(1) and (2)]

6.331 This requirement ensures that sufficient and timely notice is given to the defendants of the statements that are to be tendered as evidence so that those defendants are given an opportunity to formulate objections to the admission of those statements.

6.332 Written objections of the other party must be given within 14 days, and the court or tribunal may determine those objections as a preliminary point before the hearing of the proceedings. [Part 6-8, Division 2, subsections 306(3) to (5)]

6.333 The notice must specify the statements to be tendered in sufficient detail, so that the defendants have no difficulty in identifying what the statements are for the purpose of considering whether or not to object. The requirement to set out specified statements may include questions, answers and other comments or remarks made in the examination that are necessary to properly understand the examinee's answers.

6.334 If notice has been given by the tendering party in accordance with subsections 306(1) and (2), the other party is not entitled to object to the statement unless they have objected to the statement being admitted in accordance with subsection 306(3), or the court or tribunal gives leave to object. [Part 6-8, Division 2, subsection 306(7)]

6.335 If the procedure in section 306 is not followed, statements made at an examination may still be admissible in evidence under the general law of evidence or some other evidential statute. [Part 6-8, Division 2, section 310]

Copies of, or extracts from, certain books

6.336 Subsection 271(4) allows a person to whom books are produced under Chapter 6 to use, or permit the use of, any of the books for the purposes of a proceeding.

6.337 A copy of, or extract from, a book will be admissible in evidence in proceedings as if it were the original book, where it relates to:

•

the affairs of a licensee, credit representative or other person who engages, or has engaged, in a credit activity;

•

a credit activity engaged in by a person; or

•

the character or financial situation of, or a business carried on by, a person who engages, or has engaged, in a credit activity.

6.338 It must be proved that the book is a true copy of the original, and this may be proved by evidence from a person who has compared the copy or extract with the original. [Part 6-8, Division 2, subsections 307(2) and (3)]

6.339 The copy or extract does not need to be made under section 271 for this provision to apply.

Report under Part 6-1

6.340 A report prepared by ASIC under Part 6-1 is admissible in proceedings (other than criminal proceedings) as prima facie evidence of any facts or matters that the report states ASIC to have found to exist. [Part 6-8, Division 2, section 308]

6.341 The court or tribunal must be satisfied that the copy of the report has been given to the other party, and that the other party, and their lawyer, have had a reasonable opportunity to examine it and take the contents into account in preparing their case. If this does not occur the copy is not admissible under section 81. [Part 6-8, Division 2, subsection 309(2)]

6.342 Before a copy of a report is admitted into evidence, the other party can apply to cross-examine persons who were:

•

involved in preparing the report or making a finding about a fact or matter that the report states ASIC to have found to exist; or

•

who gave information or produced a book on the basis of which a finding was made.

6.343 Cross-examination must be allowed unless the court or tribunal considers that, in all the circumstances, it is not appropriate to do so. This gives the other party the opportunity to appropriately test the findings made by ASIC and the information on which those findings were based. [Part 6-8, Division 2, subsections 309(3) and (4)]

6.344 These provisions ensure that the other party has the opportunity to appropriately test the findings made by ASIC and the information on which those findings were based.

Part 6-9 - Miscellaneous

6.345 A requirement that can be made of a body corporate under Chapter 6 may also be made of a person who is or has been an officer (within the meaning of Part 3 of the ASIC Act) or employee of the body. [Part 6-9, Division 2, section 312]

6.346 This is because a body corporate can only do acts through its officers and agents. For example, if a body corporate has produced books in accordance with a requirement under section 266, ASIC may require a director or employee of the body to explain matters in relation to the books under subsection 271(9).

6.347 A person who makes a requirement under Chapter 6 (other than Part 6-5) must be able to produce an identity card and evidence of their authorisation to make the requirement. [Part 6-9, Division 2, section 313]

6.348 This provision provides protection against inspectors making requirements that are outside the scope of their authorisation.

6.349 Subsection 313(2) states that the identity card is not a legislative instrument. This provision is declaratory of the existing position, that an identity card is not a legislative instrument within the meaning of section 5 of the Legislative Instruments Act 2003.

6.350 For ASIC's powers to be effective, there must be clear procedures for service of notices. A notice setting out requirements must be validly served before the recipient is under an obligation to comply with the notice.

6.351 The provision in section 109X of the Corporations Act for service of documents on bodies corporate is applied to the giving of documents under Chapter 6 to natural persons. [Part 6-9, Division 2, section 314]

6.352 The provision also has the effect of applying the service procedures in section 109X of the Corporations Act to the service of a notice under Chapter 6 on a natural person. As a result a notice can be served on a natural person either:

•

personally - it is sufficient for the document to be left with the person served. It is not necessary that its nature and purpose be identified, described or brought to the attention of the person served; or

•

by posting it to or leaving it at the address of the place of residence or business of the intended recipient last known to the process server. The notice may be left with a person who the process server believes on reasonable grounds to live or work at the address of the intended recipient and who is at least 16 years of age. This ensures that service is effected, establishes proof of service, even when the intended recipient refuses to take the notice from the process server and removes the common law requirement that the nature of the document must be described where the person to be served does not accept the document.

6.353 Where a provision in Chapter 6 gives the power to require the production of books at a specified place and time, the provision is taken to require the person giving the notice to specify a place and time for production of books that is reasonable in all the circumstances [Part 6-9, Division 2, paragraph 315(a)]. There could be a reasonable excuse for non-compliance with a notice to produce books where there is an unreasonable fixing of a time for production of books: Hopfner v Flavel (1990) 2 ACSR 295.

6.354 If it is reasonable in the circumstances, ASIC may require production of books immediately. [Part 6-9, Division 2, paragraph 315(b)]

Example 6.6 : Production of books

Circumstances relevant to whether immediate production of books is reasonable may include:

•

the urgency of the inquiry or investigation - for example, whether assets are likely to be disposed of; or

•

volume, type and location of the documents sought - for example, with large organisations such as banks a reasonable time may be needed to locate documents covered by the notice; or

•

whether the person to whom the notice is given wishes to exercise their right to obtain legal advice: Swan v Scanlan (1982) 61 FLR 468.

6.355 An examination or a hearing is a judicial proceeding for the purposes of Part III of the Crimes Act (offences relating to the administration of justice). [Part 6-9, Division 2, subsection 316(1)]

6.356 Part III of the Crimes Act provides for a number of offences relating to the administration of justice, which apply in relation to the institution and conduct of judicial proceedings. These include offences such as:

•

giving false testimony in, or with the intention of instituting, a judicial proceeding;

•

fabricating evidence with intent to mislead any tribunal in a judicial proceeding;

•

intimidation of persons in relation to their appearance as a witness in judicial proceedings;

•

corruption of a witness in judicial proceedings;

•

deceiving a witness in judicial proceedings with intent to affect their testimony;

•

destroying any book, document or thing that may be required in evidence in judicial proceedings; and

•

preventing a person from attending as a witness pursuant to a subpoena or summons.

6.357 Specified sections of the Evidence Act 1995 apply to an examination in the same way that they apply to proceedings before a court to which the Evidence Act 1995 applies. The provisions that are applied to examinations are:

•

Part 2.2 in full - documents;

•

sections 69, 70 and 71 - exceptions to the hearsay rule for business records, contents of tags, labels and electronic communications;

•

section 147 - proof of documents produced by processes, machines and other devices in the course of business; and

•

Division 2 of Part 4.6 - proof of certain matters by affidavits or written statements.

[Part 6-9, Division 2, subsection 316(2)]

6.358 Examinees and persons who have been required to appear as a witness at a hearing are entitled to allowances and expenses prescribed in the regulations (if any). It is proposed to seek regulations that will prescribe allowances and expenses. ASIC may also, at its discretion, pay an amount it considers reasonable on account of costs and expenses incurred in complying with a requirement under Chapter 6. [Part 6-9, Division 2, section 317]

6.359 A decision by ASIC to refuse to exercise its discretion under subsection 317(3) to pay reasonable expenses incurred in complying with a requirement is a reviewable decision under the AD(JR) Act.

6.360 As a general rule, the expenses of an investigation are to be paid by ASIC. [Part 6-9, Division 2, section 318]

6.361 'Expenses' bears its ordinary meaning and is confined to moneys expended by a person or obligations incurred by a person. ASIC is not responsible for paying expenses of a third party, unless those expenses are payable under section 317. Other expenses of an investigation may include the costs and expenses of initiating civil proceedings under section 275 and any other outgoings that ASIC may reasonably and necessarily incur for the purposes of the investigation.

6.362 ASIC has the power to make orders for the recovery of expenses of its investigation from a proceeding begun as a result of an investigation under Part 6-1 where:

•

a person who is convicted of an offence against a law of the Commonwealth or a law of a referring State or Territory in a prosecution; or

•

a person has a judgement against them, or a declaration or other order is made against them.

[Part 6-9, Division 2, subsection 319(1)]

6.363 The orders that ASIC may make are:

•

An order that the person pay the whole of a specified part of the expense of the investigation [Part 6-9, Division 2, paragraph 319(1)(c)] - this order may be made where ASIC has incurred an obligation to pay expenses, but has not discharged that obligation.

•

An order that the person reimburse ASIC to the extent of a specified amount of such expenses of the investigation as ASIC has paid [Part 6-9, Division 2, paragraph 319(1)(d)] - this order may be made where ASIC has already paid the expenses of the investigation. ASIC may make a single reimbursement order directed to more than one person because section 23 of the Acts Interpretation Act 1901 provides that words in the singular include the plural. If a reimbursement order is made to more than one person, those persons are jointly and severally liable under the order: Corporate Affairs Commission v Australian Timber Pty Ltd (1998) 16 ACLC 1642 at 1647.

•

An order to pay, or reimburse ASIC in relation to the whole, or a specified part, of the cost to ASIC of making the investigation [Part 6-9, Division 2, paragraph 319(1)(e)] - this order may require a person to pay costs of an investigation that do not fall within the ordinary meaning of 'expenses'.

6.364 For paragraphs 319(1)(c) and (d), 'expenses' bears its ordinary meaning and is confined to moneys expended by a person or obligations incurred by a person, but will include expenses payable under section 317.

6.365 For paragraph 319(1)(e), the costs of an investigation includes remuneration of ASIC members and ASIC staff members. These terms are defined in the Dictionary in section 5 of the Credit Bill by reference to the definitions in section 5 of the ASIC Act, and include persons engaged by ASIC under the Public Service Act 1999, additional staff employed under written agreements, persons engaged under written agreements as consultants and persons who are staff members, officers and employees of other agencies under the Public Service Act 1999 that have been seconded to ASIC.

6.366 The order must be made by ASIC in writing and specify when and how the payment or reimbursement is to be made. [Part 6-9, Division 2, subsection 319(2)]

6.367 Failure to comply with an order under this provision is an offence of strict liability. The penalty is 50 penalty units or imprisonment for one year or both. This offence provision and penalty is consistent with the offence and penalty in section 91 of the ASIC Act. [Part 6-9, Division 2, subsections 319(3) and (4)]

6.368 Where a person fails to pay an amount payable under an order, ASIC may also recover that amount as a debt due to ASIC. The right to recover money does not, however, entitle ASIC to access or continue to hold funds originally obtained by ASIC under a voluntary undertaking. [Part 6-9, Division 2, subsection 319(5)]

6.369 A report of an investigation may make recommendations about the making of orders for payment or reimbursement of expenses and costs of the investigation. [Part 6-9, Division 2, subsection 319(6)]

6.370 An order for payment or reimbursement of expenses and costs of the investigation is not a legislative instrument [Part 6-9, Division 2, subsection 319(7)]. This provision is declaratory of the existing position, as these types of orders are not a legislative instruments within the meaning of section 5 of the Legislative Instruments Act 2003.

6.371 A person is neither liable to a proceeding, nor subject to a liability, merely because the person has complied, or proposes to comply, with a requirement made or purported to be made under Chapter 6. [Part 6-9, Division 2, section 320]

6.372 This provision is necessary to ensure that persons who are required by ASIC to answer questions or provide books or other information are not discouraged from complying with the requirement by the possibility of civil liability for breach of a contractual or equitable duty of confidentiality.

6.373 This provision does not protect voluntary informants, because it is limited to circumstance of compliance with a Chapter 6 requirement.

6.374 The functions and powers conferred by Chapter 6 are additional to, and do not derogate from, any other function or power conferred by a law of the Commonwealth, a State or a Territory. [Part 6-9, Division 2, section 321]

6.375 This provision is necessary to ensure that the operation of the Credit Bill does not prejudice, or is interpreted as limiting the effect of other laws that confer functions and powers on ASIC, ASIC members and ASIC staff members.

6.376 ASIC has a power to accept enforceable undertakings from a person in connection with a matter in relation to which ASIC has a function or power under the Commonwealth credit legislation. [Part 6-9, Division 2, subsection 322(1)]

6.377 This power enables ASIC to accept an enforceable undertaking from credit licensees, representatives of credit licensees and other persons that engage, or who have engaged, in credit activities in relation to credit activities. This power enhances ASIC's ability to enforce compliance with the law.

6.378 Acceptance of an enforceable undertaking is an enforcement outcome that may be used by ASIC as an alternative to commencing civil or administrative action in relation to a contravention of the Commonwealth credit legislation.

6.379 A person cannot be compelled to offer or enter an enforceable undertaking.

6.380 If an enforceable undertaking is given by a person the person may withdraw from, or vary, the undertaking at any time, but only with ASIC's consent. [Part 6-9, Division 2, subsection 322(2)]

6.381 A variation of an undertaking may be necessary, for example, to extend the time allowed to complete a particular act. A variation to an enforceable undertaking modifies the original undertaking but does not replace it.

6.382 If ASIC considers that the person who gave the undertaking has breached any of its terms, ASIC may apply to the court for:

•

an order directing the person to comply with the terms of the undertaking;

•

an order directing the person to pay to the Commonwealth an amount referable to the financial benefit that the person has obtained that is reasonably attributable to the breach;

•

any orders that are appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach; or

•

any other orders the court considers appropriate.

[Part 6-9, Division 2, subsections 322(3) and (4)]

6.383 The court may make orders that can compel the person providing the enforceable undertaking to comply with their undertaking, and put all persons, including third parties who would benefit from the undertaking, in the position that they would have been in had the enforceable undertaking not been breached.

6.384 A breach of an enforceable undertaking cannot be the subject of contempt proceedings. However, the breach of a court order made in relation to a breach of an enforceable undertaking may constitute contempt of court.