House of Representatives

Explanatory Memorandum

(Circulated by authority of the Acting Minister for Revenue and Financial Services, Senator the Hon Mathias Cormann)

Chapter 1 - Validation of agreements to employ staff or engage consultants

Outline of chapter

1.1 This Bill amends the ASIC Act 2001 and the Corporations Act 2001 to validate certain agreements to employ or engage ASIC staff that were purportedly made before the end of 9 March 2017.

Context of amendments

1.2 Part 6 of the ASIC Act 2001 provides for ASIC's staff.

1.3 Subsection 120(1) of the ASIC Act 2001 provides that ASIC's staff must be persons engaged under the Public Service Act 1999.

1.4 In addition, subsections 120(3) and (4) of the ASIC Act 2001 provide for the Chairperson of ASIC (Chairperson), on the Commonwealth's behalf, to employ persons under written agreements on terms and conditions determined by the Chairperson with the Minister's written approval.

1.5 Under subsection 121(1) of the ASIC Act 2001, the Chairperson may, on the Commonwealth's behalf, engage persons under written agreements as consultants to, or to perform services for, ASIC on terms and conditions determined by the Chairperson.

1.6 Subsection 102(1) of the ASIC Act 2001 empowers ASIC to delegate its functions and powers to a person, by writing under its common seal. However, subsection 102(2) limits the classes of persons to whom a delegation can be made.

1.7 Under paragraph 102(2)(b), a person is eligible to be a delegate of ASIC if the person is a staff member. That term is defined in section 5 of the ASIC Act 2001, and includes a person employed under subsection 120(3) and a person engaged under subsection 121(1).

1.8 Similarly, a delegation by a member of ASIC under section 119A of the ASIC Act 2001 or a delegation by the Chairperson under subsection 127(5) can only be made to specified classes of persons, one of which is a staff member as defined in section 5. What is said later about delegations under section 102 applies equally to delegations under section 119A or subsection 127(5).

1.9 The ASIC Act 2001 commenced on 15 July 2001. Before that, the Australian Securities and Investments Commission Act 1989 (ASIC Act 1989) contained substantially the same provisions as those just described.

1.10 However, before 5 December 1999, the powers to employ and engage staff contained in subsections 120(3) and (4) and 121(1) and (2) of the ASIC Act 1989 were conferred on ASIC itself rather than on the Chairperson. On that day, those subsections were amended by items 240 to 245 of Schedule 1 to the Public Employment (Consequential and Transitional) Amendment Act 1999 (Act No. 146, 1999). The amendments were consequential on the enactment of the Public Service Act 1999 and replaced references to ASIC with references to the Chairperson.

1.11 In the period ending on 9 March 2017 various irregularities occurred in the making of agreements under subsections 120(3) and 121(1) of first the ASIC Act 1989 and then the ASIC Act 2001. Some of these irregularities arose because the powers to employ and engage staff moved from ASIC to the Chairperson on 5 December 1999, which meant that delegations of those powers by ASIC were no longer effective.

1.12 The irregularities give rise to doubt whether the purported agreements were legally effective to employ or engage the persons concerned and to provide for their remuneration and other terms and conditions.

1.13 There is also doubt whether those persons (the affected staff members) became staff members as defined in section 5 of the ASIC Act 1989 and the ASIC Act 2001 so as to be eligible to be delegates of ASIC's functions and powers pursuant to instruments of delegation under section 102 of the ASIC Act 1989 and the ASIC Act 2001.

1.14 The affected staff members did however purport to exercise functions and powers under those instruments of delegation. The acts they did in purported exercise of those functions and powers may therefore lack a proper legal basis.

1.15 Those functions and powers included coercive powers, such as compelling the production of documents that may then have been used in evidence in court proceedings, so a range of outcomes under those Acts and the other laws ASIC has administered may be open to legal challenge.

Summary of new law

1.16 The amendments validate certain agreements to employ or engage ASIC staff that were purportedly made before the end of 9 March 2017 and thus provide a legal basis for the exercise by affected staff members of delegated functions and powers of ASIC.

1.17 The amendments also deal with the consequences of validating those agreements for the purposes of provisions of the Corporations Act 2001 and the ASIC Act 2001 dealing with the transition from the old corporations and ASIC legislation.

Detailed explanation of new law

Main validation provision

1.18 The main provision in the Bill is new section 249 of the ASIC Act 2001, which is taken to have commenced immediately after the commencement of the ASIC Act 2001 on 15 July 2001. [Schedule 1, item 2, section 249 of the ASIC Act 2001; item 1 in the table in subclause 2(1)]

1.19 Subsection 249(1) provides that agreements purportedly made before the end of 9 March 2017 under subsections 120(3) and 121(1) of the ASIC Act 1989 and the ASIC Act 2001 are taken to be, and always to have been, valid agreements for all purposes, whether or not their terms and conditions were validly determined under subsections 120(4) and 121(3) of those Acts. [Schedule 1, item 2, subsection 249(1) of the ASIC Act 2001]

Effects of validation

1.20 In the first instance, this validation regularises the legal relationship between the affected staff members and the Commonwealth.

1.21 Validation of the agreements also provides a proper legal basis for the exercise by affected staff members of delegated functions and powers of ASIC. There are a number of cases to consider here.

1.22 The simplest case is agreements with affected staff members purportedly made after the commencement of the ASIC Act 2001.

1.23 Once this Bill is enacted, validation of the agreements has the result that persons employed or engaged under the agreements will be taken to have become staff members, as defined in section 5 of the ASIC Act 2001, who could therefore exercise ASIC functions and powers, whether under that Act or any other Commonwealth laws administered by ASIC, delegated under section 102 of that Act. [Schedule 1, item 2, subsection 249(1), Note 1 of the ASIC Act 2001]

1.24 Those persons will therefore be taken to have been covered by applicable delegations under section 102, and their exercise of functions or powers under those delegations will no longer be open to challenge on the basis of invalidity of the agreements.

1.25 The same analysis holds for affected staff members whose agreements were purportedly made under the ASIC Act 1989, so far as concerns their purported exercise of delegated ASIC functions and powers after the commencement of the ASIC Act 2001, whether under that Act or any other Commonwealth laws administered by ASIC. This is because validation of the agreements will also have effect for the purposes of section 275 of the ASIC Act 2001, insofar as it applies to the appointment of staff under the ASIC Act 1989 (see also sections 274, 279 and 283 of the ASIC Act 2001).

Amendments of provisions dealing with transition from the old corporations legislation

1.26 The Bill contains specific amendments to deal with the consequences where the agreements of affected staff members were purportedly made under the ASIC Act 1989, and the affected staff members purported to exercise, before the commencement of the ASIC Act 2001, delegated functions and powers of ASIC under Commonwealth, State and Northern Territory laws administered by ASIC. The specific provisions are not intended to limit the generality of new section 249 of the ASIC Act 2001.

1.27 Chapter 10 of the Corporations Act 2001 contains comprehensive provisions giving a basis in Commonwealth law to everything that was in train under the old corporations legislation of the Commonwealth, States and Northern Territory immediately before the commencement of the ASIC Act 2001.

1.28 In particular, Division 6 of Part 10.1 contains 'transitional provisions relating to other things done etc. under the old corporations legislation' and includes sections 1400 and 1401.

1.29 Sections 1400 and 1401 of the Corporations Act 2001 create equivalent rights and liabilities to those that existed under provisions of the old corporations legislation immediately before 15 July 2001.

1.30 These equivalent rights and liabilities replace the pre-existing rights and liabilities, which are cancelled in each State by a provision of the Corporations (Ancillary Provisions) Act 2001 of that State - see, for example, subsection 7(2) of the Corporations (Ancillary Provisions) Act 2001 of New South Wales. In the Northern Territory the pre-existing rights and liabilities are cancelled by subsection 8(1) of the Corporations Reform (Northern Territory) Act of that Territory. In the Australian Capital Territory the pre-existing rights and liabilities are cancelled by subsection 6(1) of the Corporations (Repeals, Consequentials and Transitionals) Act 2001 (Act No. 55, 2001) of the Commonwealth.

1.31 Part 16 of the ASIC Act 2001 makes similar provision for matters in train under the old ASIC legislation before the commencement of the ASIC Act 2001. Sections 276 and 277 of that Act correspond to sections 1400 and 1401 of the Corporations Act 2001. The cancelling provisions described above also apply to pre-existing rights and liabilities under the old ASIC legislation.

1.32 In so far as the purported exercise by affected staff members of delegated ASIC functions and powers before the commencement of the ASIC Act 2001 lacked a proper legal basis, this Bill reinforces the validation provision in new section 249 of the ASIC Act 2001 by amending sections 1400 and 1401 of the Corporations Act 2001 and sections 276 and 277 of the ASIC Act 2001, to change the legal position arising from those sections to what it would have been if the agreements to employ or engage the affected staff members had always been valid.

1.33 The Bill contains two sets of amendments to achieve this outcome. The amendments are taken to have commenced immediately after the commencement of the ASIC Act 2001.

1.34 The first set extend the operation of sections 1400 and 1401 of the Corporations Act 2001, and sections 276 and 277 of the ASIC Act 2001, so as to create actual rights and liabilities equivalent to those that would have existed under the old corporations and ASIC legislation immediately before 15 July 2001 if the agreements validated by section 249 of the ASIC Act 2001 had been valid without the application of that section (so that the purported exercise, by affected staff members, of delegated ASIC functions and powers would also have been valid without that section). [Schedule 1, items 1, 3, 4, 6, 8 and 10]

1.35 The second set of amendments limit the operation of sections 1400 and 1401 of the Corporations Act 2001, and sections 276 and 277 of the ASIC Act 2001, to exclude pre-existing rights and liabilities that actually existed under Commonwealth, State or Northern Territory law but would not have existed if the agreements validated by section 249 of the ASIC Act 2001 had been valid without the application of that section (so that the purported exercise, by affected staff members, of delegated ASIC functions and powers would also have been valid without that section). [Schedule 1, items 1, 3, 5, 7, 9 and 11]

1.36 These specific provisions are not intended to limit the consequences that flow from new section 249 of the ASIC Act 2001 validating agreements. [Schedule 1, items 1, 3, 5, 7, 9 and 11]

Effect on court proceedings

1.37 The Bill inserts provisions in the Corporations Act 2001 and the ASIC Act 2001 to provide for the effect on court proceedings of the substantive provisions it inserts into those Acts.

1.38 The substantive provisions have effect for the purposes of new court proceedings, that is those commenced on or after the day this Bill receives the Royal Assent. [Schedule 1, items 2, 5, 7, 9 and 11, paragraphs 249(3)(a), 276(5)(a) and 277(6)(a) of the ASIC Act 2001, paragraphs 1400(6)(a) and 1401(6)(a) of the Corporations Act 2001]

1.39 They also have effect for the purposes of court proceedings already underway that have not been finally determined as at the day this Bill receives the Royal Assent. Proceedings (whether original or appellate) are not finally determined until all avenues of appeal or review are exhausted or closed. [Schedule 1, items 2, 5, 7, 9 and 11, paragraphs 249(3)(b), 276(5)(b) and 277(6)(b) of the ASIC Act 2001, paragraphs 1400(6)(b) and 1401(6)(b) of the Corporations Act 2001]

1.40 It follows that court proceedings that have been finally determined are not to be re-opened to give effect to the substantive provisions. However, if an appeal is still open on the day this Bill receives the Royal Assent and is later pursued, the law applicable on the appeal includes the substantive provisions.

Compensation for compulsory acquisition

1.41 Section 1350 of the Corporations Act 2001 prevents an acquisition of property that results from the operation of that Act from being invalid because of paragraph 51(xxxi) of the Constitution. It does so by making the person who acquires the property liable to pay compensation of a reasonable amount in respect of the acquisition.

1.42 This Bill inserts new section 250 into the ASIC Act 2001 to make similar provision for an acquisition resulting from the operation of what subsection 250(4) defines as a validation provision: section 249 and the other provisions that that Bill inserts into sections 276 and 277 of that Act. [Schedule 1, item 2, section 250 of the ASIC Act 2001]

1.43 However, section 250 of the ASIC Act does not apply where the effect of a validation provision is to provide a proper legal basis for an exercise of a delegated ASIC function or power that, if originally valid, would have triggered section 1350 of the Corporations Act 2001 on account of an acquisition of property. [Schedule 1, item 2, paragraph 250(1)(c) of the ASIC Act 2001]

1.44 Because of this exclusion, section 250 of the ASIC Act 2001 is expected to apply only where the acquisition of property resulting from a validation provision would not have occurred if the agreements validated by section 249 had been valid without that section.

1.45 In that type of case the acquisition would depend in some way on loss of a right to rely on invalidity of the agreements. It could be expected that only nominal compensation would be payable, since the claimant would be seeking a windfall gain based on a technical defect in what was otherwise a valid exercise of a delegated ASIC function or power.

Application

1.46 When enacted, the Bill will be taken to have commenced immediately after the commencement of the ASIC Act 2001 on 15 July 2001.

1.47 This will ensure that certain agreements to employ or engage ASIC staff that were purportedly made before the end of 9 March 2017 are validated and thus provide a legal basis for the exercise by affected staff members of delegated functions and powers of ASIC.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Treasury Laws Amendment (2017 Measures No. 3) Bill 2017

1.48 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

1.49 This Bill amends the ASIC Act 2001 and the Corporations Act 2001 to validate certain agreements to employ or engage ASIC staff that were purportedly made before the end of 9 March 2017.

Human rights implications

1.50 This Bill does not engage any of the applicable rights or freedoms.

Conclusion

1.51 This Bill is compatible with human rights as it does not raise any human rights issues