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ASIC maintains powers under High Court rulings

ASIC maintains powers under High Court rulings

TWO SEPARATE constitutional challenges to the powers of Australian Securities and Investment Commission (ASIC) have been unanimously dismissed by the High Court of Australia. The Court found…

TWO SEPARATE constitutional challenges to the powers of Australian Securities and Investment Commission (ASIC) have been unanimously dismissed by the High Court of Australia.

The Court found ASIC had not breached the constitution by either banning an individual from being a director or cancelling or suspending a liquidator’s registration.

In one case, company director Milan Visnic took ASIC to court over its use of s 206F of the Corporations Act — the power to disqualify persons from managing a corporation — arguing that only a court could exercise such a power. For ASIC to disqualify him would therefore be unconstitutional, he claimed. Visnic had been banned by ASIC from managing a corporation for five years on 30 January 2006, after an investigation into 14 failed companies.

The High Court — in a joint judgment of six justices and a separate concurring judgment from Justice Kirby — rejected Visnic’s claim. The Court held that considerations of policy are important to the exercise of s 206F, and as such, ASIC’s use of the power is not judicial in nature. Section 206F empowers ASIC to determine whether to disqualify a person from managing a corporation by reference to criteria, including public interest, the Court said.

The other case involved a unanimous dismissal of separate appeals by two Sydney liquidators, heard together, after the Federal Court upheld ASIC’s decision to suspend their registration.

The liquidators, Vanda Russell Gould and Richard Albarran, originally claimed ASIC had misused s 1292 of the Corporations Act — which confers a power on the Companies Auditors and Liquidators Disciplinary Board (CALDB) to cancel or suspend a liquidator’s registration — as it was an unconstitutional application of a judicial power.

Also delivering a joint judgment by six justices and a separate judgment by Justice Kirby, the High Court held that the CALDB should determine whether functions and duties had been carried out or performed adequately and properly by reference to professional standards.

This function does not involve the ascertainment or enforcement of any existing right or liability in respect of an offence or the punishment for an offence, and so there was no improper exercise of judicial power.

What the CALDB should be doing, the Court held, is to uphold the standards of registered liquidators, ensure their compliance with an adequate and proper performance of their duties, and protect company shareholders, creditors, officers and employees, and the public.

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