The X&Y Files: High Court confirms APRA's powers

By Peter Mann and Ray Giblett.

Key Points:
A regulator is free to act against a person who gave evidence at a Royal Commission. The Royal Commissions Act 1902 (Cth) does not prevent regulators (such as APRA) from using evidence provided to a Royal Commission in the exercise of their powers.

On 21 February 2007, the High Court in X v Australian Prudential Regulation Authority [2007] HCA 4 rejected the argument that taking action against a person who appeared as a witness at a Royal Commission constitutes victimisation in contravention of section 6M of the Royal Commissions Act 1902 (Cth).

Background

Two senior managers of a foreign reinsurer conducting business in Australia, X and Y, gave evidence at the HIH Royal Commission. In reliance upon evidence provided to the Royal Commission, APRA formed the preliminary view that neither X nor Y were fit and proper persons to be holders of senior insurance roles referred to in section 24(1) of the Insurance Act 1973 (Cth). APRA provided them with an opportunity to make submissions as to why APRA should not disqualify them.

Attached to the APRA notification were annexures setting out the information APRA had taken into consideration in forming its preliminary view. This included detailed references to evidence provided to the HIH Royal Commission.

Rather than utilising the usual statutory procedure for challenging APRA's decisions, X and Y applied to the Federal Court seeking an order to restrain APRA from taking any further action against them relying on section 6M of the Royal Commissions Act, which says:

"Any person who uses, causes or inflicts, any violence, punishment, damage, loss, or disadvantage to any person for or on account of:

(a) the person having appeared as a witness before any Royal Commission; or

(b) any evidence given by him or her before any Royal Commission; or

(c) the person having produced a document or thing pursuant to a summons, requirement or notice under section 2;

is guilty of an indictable offence.

Penalty: $1,000, or imprisonment for 1 year."

Federal Court proceedings

In the Federal Court it was submitted that if APRA were to proceed with disqualification, it would cause X and Y a "disadvantage" "for or on account of" their having appeared as witnesses and given evidence before the Royal Commission. This argument was rejected and X and Y appealed.

Findings of the High Court

On appeal, the High Court rejected the appellants' argument regarding section 6M. The High Court held that section 6M must be considered in the overall context of the Royal Commissions Act. For example, section 6P allows a Royal Commission to forward evidence to a regulator if it considers it appropriate to do so. The Royal Commissions Act also contains a contempt power.

The High Court held:

• Section 6P of the Royal Commissions Act, dealing with the communication of information, contemplates the operation of the Act together with the administration by authorities (such as APRA) of other statutes such as the Insurance Act. In the present case, APRA proceeded to discharge its statutory powers conferred upon it by the Insurance Act. The court found there was no basis for a finding that the exercise of APRA's power was for a purpose other than the proper discharge of its statutory functions.
• There was not the necessary connection between the attendance of X and Y at the Royal Commission, or the evidence they gave, with the past or threatened conduct of APRA. The evidence provided by X and Y at the Royal Commission may provide some, or even all, of the material which APRA may consider, and upon which it may rely, in giving effect to the regulatory provisions of the Insurance Act.
• Any disadvantage suffered by X or Y, as a consequence of the proper application of those regulatory provisions, would not be "for or on account of" their attendance at the Royal Commission or the evidence given. APRA had not victimised the appellants as alleged, nor did it propose to victimise the appellants in the sense required for the commission of an offence under section 6M of the Royal Commissions Act.

Conclusion

The decision in X v APRA should disabuse senior managers of the notion that they are protected from evidence given at a Royal Commission being used against them. The High Court has confirmed that regulatory bodies may utilise such information provided it is in the proper exercise of their powers.

This highlights the importance of thorough preparation and the vigorous protection of rights in connection with Royal Commissions.

The decision in X v APRA is also noteworthy insofar as it preserves the usefulness of Royal Commissions. Governmental regulatory bodies such as APRA will be waiting to exercise their powers in the wake of a Royal Commission.

For further information, please contact Peter Mann.