What does it mean for a review tribunal to ‘stand in the shoes’ of a primary decision maker? The High Court’s judgment in Frugtniet v ASIC

Rudi Frugtniet has had a colourful career, during which he has been involved in administrative law proceedings against a range of State and federal regulatory bodies, including the former Victorian Board of Examiners, the Law Institute of Victoria, the Migration Agents Registration Authority and the Tax Practitioners Board. On 15 May 2019, the High Court gave judgment in his favour in an appeal on a question of law from a decision of the Administrative Appeals Tribunal disqualifying him from engaging in certain credit activities. While the case was only directly concerned with the treatment by the Tribunal of ‘spent convictions’ (as that term is defined in the Crimes Act 1914 (Cth)), the Court’s two judgments (one by Kiefel CJ, Keane and Nettle JJ, the other by Bell, Gageler, Gordon and Edelman JJ) contain an interesting discussion of the nature of merits review in the Tribunal (and, by extension, in the various State administrative tribunals that exercise a review jurisdiction similar to that of the Tribunal) and of what it means for a review tribunal to ‘stand in the shoes’ of a primary decision maker and reconsider its decision.

The facts

In June of 2014, a delegate of the Australian Securities and Investments Commission made a banning order under s 80 of the National Consumer Credit Protection Act 2009 (Cth) (the Credit Act) prohibiting Mr Frugtniet from engaging in credit activities on the grounds that he was not a fit and proper person to engage in those activities. Pursuant to s 327 of the Credit Act, Mr Frugtniet sought review of ASIC’s decision, invoking the jurisdiction conferred on the Tribunal by ss 25 and 43 of the Administrative Appeals Tribunal Act 1975 (Cth). In affirming ASIC’s decision, the Tribunal had regard to a number of matters, including the fact that Mr Frugtniet had been convicted of criminal offences in the United Kingdom in 1978 and in Victoria in 1997. Mr Frugtniet had not been sentenced to imprisonment for more than 30 months in respect of either of these convictions and the statutory ‘waiting period’ of ten years had elapsed in respect of each offence well before ASIC made its decision. It followed that both at the time of ASIC’s primary decision and at the time of the Tribunal’s decision on review, both of these convictions were ‘spent convictions’ within the meaning of s 85ZM of the Crimes Act.

The fact that the two convictions were spent convictions raised the question how they were to be treated in light of ss 85ZV(2)(b), 85ZW(b)(ii) and 85ZZH(c) of the Crimes Act. Pursuant to s 85ZV(2)(b), a person who has a spent conviction arising from a State or foreign offence is not required to disclose that fact to any Commonwealth authority for any purpose. While the wording of s 85ZW(b)(ii) is somewhat difficult to follow, it provides in essence that a Commonwealth authority may not take into account for any purpose the fact that a person was charged with or convicted of an offence to which a spent conviction relates. Finally, s 85ZZH(c) provides that ss 84ZV and 85ZW do not apply to the ‘taking into account of information by … a court or tribunal established under a Commonwealth law, a State law or a Territory law, for the purpose of making a decision, including a decision in relation to sentencing’. The regulatory scheme thus raised the question whether, notwithstanding that ASIC could not lawfully take Mr Frugtniet’s spent convictions into account in making its primary decision, the Tribunal could nevertheless take them into account in reviewing that decision. The Tribunal considered that it could. Mr Frugtniet contended that this was wrong and appealed to the Federal Court on a question of law.

Appeals to the Federal Court

Both a single judge of the Federal Court and a Full Court held that it had been open to the Tribunal to take Mr Frugtniet’s spent convictions into account in affirming ASIC’s decision. Thus the Full Court stated that ‘[t]he ordinary and natural meaning of s 85ZZH extends to apply it to the tribunal engaged in merits review’. According to the Full Court, this natural reading of s 85ZZH was consistent with the well-established principle that ‘the question for the determination of the Tribunal is not whether the decision which the decision-maker made was the correct or preferable one on the material before him. The question for the determination of the Tribunal is whether that decision was the correct or preferable one on the material before the Tribunal.’ That is, both the trial judge and the Full Court held that the task before the Tribunal being to reconsider ASIC’s decision de novo, the Tribunal was not limited to considering only the material to which ASIC could lawfully have regard.

The judgments in the High Court

Chief Justice Kiefel, Keane and Nettle JJ observed that both the trial judge and the Full Court had proceeded from a fundamental misunderstanding of the nature of the Tribunal’s review jurisdiction. Thus their Honours stated that:

Depending on the nature of the decision the subject of review, the AAT may sometimes take into account evidence that was not before the original decision-maker, including evidence of events subsequent to the original decision. But subject to any clearly expressed contrary statutory indication, the AAT may do so only if and to the extent that the evidence is relevant to the question which the original decision-maker was bound to decide; really, as if the original decision-maker were deciding the matter at the time that it is before the AAT. The AAT cannot take into account matters which were not before the original decision-maker where to do so would change the nature of the decision or, put another way, the question before the original decision-maker. As Kiefel J observed in Shi, identifying the question raised by the statute for consideration will usually determine the facts that may be taken into account in connection with the decision. The issue is one of relevance, to be determined by reference to the elements of the question necessary to be addressed in reaching a decision.

The fact that the Tribunal could have regard to evidence that was not before the primary decision maker was not to the point. The task of the Tribunal on review is to address the same question that was addressed and answered by the primary decision maker. In the absence of some express statutory provision, this question will have to be answered by reference to the same mandatory, forbidden and permissive considerations as the primary decision. The Tribunal can have regard to new evidence, but it cannot have regard to considerations that were legally extraneous to the primary decision. In the view of Kiefel CJ, Keane and Nettle JJ, nothing in the Credit Act explicitly authorised the Tribunal to have regard to considerations that ASIC was forbidden from taking into account and it was ‘not to be supposed that Parliament intended to make such a profound change to the nature of merits review by a legislative side-wind.’

To similar effect, Bell, Gageler, Gordon and Edelman JJ observed that:

The AAT exercises the same power or powers as the primary decision-maker, subject to the same constraints. The primary decision, and the statutory question it answers, marks the boundaries of the AAT’s review. The AAT must address the same question the primary decision-maker was required to address, and the question raised by statute for decision by the primary decision-maker determines the considerations that must or must not be taken into account by the AAT in reviewing that decision. A consideration which the primary decision-maker must take into account in the exercise of statutory power to make the decision under review must be taken into account by the AAT. Conversely, a consideration which the primary decision-maker must not take into account must not be taken into account by the AAT.

It followed from this principle that the Tribunal had no jurisdiction to ‘make a decision on the material before it taking into account a consideration which could not have been taken into account by the primary decision-maker in making the decision under review’ and that it had fallen into legal error by having regard to Mr Frugtniet’s spent convictions.

The Court’s judgment is consistent with an extensive line of authority in the Federal Court (and, more recently, in the Supreme Court of Victoria) that emphasises that when its review jurisdiction is invoked, the task of the Tribunal (and of the State administrative tribunals modeled on it) is to address the same question that was answered by the primary decision maker. While the Tribunal may rely on new evidentiary material in addressing the question, it cannot reformulate the question. Thus where the question before the primary decision maker was whether the applicant was entitled to payment of medical and like expenses under a statutory compensation scheme, a review tribunal cannot expand the question to include whether the applicant is entitled to benefits for permanent impairment. Similarly, where the primary decision concerned whether a disciplinary charge was proved, the review tribunal cannot purport to amend the charge and determine whether that different charge has been proved. The judgment in Frugtniet applies this line of authority and draws from it the natural conclusion that, in the absence of a clear statutory command to the contrary, a review tribunal that stands in the shoes of a primary decision maker must ‘remake’ the primary decision in the context of the mandatory, forbidden and permissive considerations prescribed in relation to the primary decision. It cannot ordinarily take into account considerations that were legally extraneous to the primary decision, in the sense that they were matters the primary decision maker was prohibited from taking into account.

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