Bills Digest No. 117, 2016–17
PDF version [507KB]
Christina Raymond
Law and Bills Digest Section
20
June 2017
Contents
Purpose of the Bill
Background
Structure of the Bill
Committee consideration
Senate Standing Committee for the
Scrutiny of Bills
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Parliamentary Joint Committee on
Human Rights
Key issues and provisions
Amendments to the ASIC Act
Key validation provisions
Effect of validation provisions on
court proceedings
Constitutional compensation provision
Amendments to the Corporations Act
Retrospective commencement
Concluding comments
Date introduced: 14
June 2017
House: House of
Representatives
Portfolio: Treasury
Commencement: 15
July 2001, immediately after the commencement of the Australian
Securities and Investments Commission Act 2001.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at June 2017
Purpose of
the Bill
The Bill proposes to amend the Australian
Securities and Investments Commission Act 2001 (ASIC Act) to
retrospectively validate certain agreements to employ or engage ASIC staff made
before the end of 9 March 2017.
The Bill also proposes to validate the exercise of powers
by staff whose agreements are validated, where the relevant powers were delegated
under the ASIC Act or other Commonwealth laws administered by ASIC
including the Corporations
Act 2001.
Background
The extrinsic materials to the Bill indicate that the
proposed amendments are intended to ‘eliminate potential legal risks that have
recently become apparent’ as a result of ‘administrative oversights’ in
relation to the agreements under which staff of ASIC are engaged as employees
or consultants, and the administrative instruments delegating regulatory powers
to those persons.[1]
These include coercive information-gathering powers compelling the production
of documents or information that may have been used in court proceedings, such
as enforcement proceedings under the Corporations Act or ASIC Act.[2]
The extrinsic materials indicate that one source of the
irregularity is that ASIC’s internal instruments of delegation were not updated
to reflect some amendments to the employment-related provisions of the ASIC
Act in 1999, which conferred power on the ASIC Chairperson to engage
persons outside of the Public Service Act
1999 (whereas that power was previously conferred upon ASIC as a legal
entity).[3]
The relevant legislation then governing ASIC was the Australian
Securities and Investments Commission Act 1989 (‘old ASIC Act’) which
was repealed and replaced by the ASIC Act in 2001 as a consequence of
the enactment of the Corporations Act.[4]
In his second reading speech, the Minister for Small
Business stated that the irregularities will ‘only potentially affect a small
proportion of ASIC staff’ and will ensure that ‘actions taken by those ASIC
staff will be effective’.[5]
He stated that this will, in turn, ‘remove any doubt about the validity of any
sanctions that have otherwise been legitimately imposed on people; and any
doubt about the effectiveness of the relief ASIC has provided’.[6]
To this end, the Minister stated that the proposed
amendments are of a technical nature only and effectively maintain the status
quo. That is, they ‘will have no impact on any current or former ASIC staff
members beyond ensuring the validity of their employment and actions’.[7]
Structure
of the Bill
The Bill contains a single schedule of amendments to
validate agreements to employ staff or engage consultants, which contains the
relevant amendments to the ASIC Act and the Corporations Act.
Committee
consideration
On 15 June 2017, the Senate Standing Committee for the
Selection of Bills deferred its consideration of the Bill to its next meeting.[8]
Senate
Standing Committee for the Scrutiny of Bills
At the time of writing, the Senate Standing Committee for
the Scrutiny of Bills had not reported on its consideration of the Bill.
Policy
position of non-government parties/independents
At the time of writing, non-government parties and
independent members of Parliament do not appear to have commented publicly on
the Bill.
Position of
major interest groups
At the time of writing, major interest groups do not
appear to have commented publicly on the Bill.
Financial
implications
The Explanatory Memorandum states that the Bill will have
no financial impact and no compliance cost impact.[9]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed
the Bill’s compatibility with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[10]
In particular, the Explanatory Memorandum states that the
Bill does not raise any human rights issues, by reason of its merely technical
effect in validating existing arrangements for the employment of ASIC staff or
consultants, and preserving the validity of their exercise of delegated powers
(that would otherwise have been valid but for the irregularity in relation to
these persons’ engagement).[11]
Parliamentary
Joint Committee on Human Rights
At the time of writing this Bills Digest, the Parliamentary
Joint Committee on Human Rights had not reported on its consideration of the
Bill.
Key issues
and provisions
Amendments
to the ASIC Act
Items 1–7 contain proposed amendments to the ASIC
Act. The key proposed amendment is item 2, which inserts new
sections 249 and 250.[12]
Key validation
provisions
New subsection 249(1) contains a validation
provision in relation to agreements purportedly made under the employment
provisions of the ASIC Act or the old ASIC Act before the end of 9 March
2017.[13]
The validation provision states that such agreements are, for all purposes,
taken to be and always to have been valid agreements. Two notes are inserted to
explain the technical legal effect of the validation provisions, with respect
to the exercise of delegated functions and powers under the ASIC Act and
Corporations Act.
New subsection 249(2) provides that the validation
provision in subsection (1) applies to the relevant agreements specified in
subsection (1) whether or not such an agreement was expressed to be made on
behalf of the Commonwealth.
Effect of validation
provisions on court proceedings
New subsection 249(3) provides for the effect of
the validation provisions in subsections (1) and (2) on court proceedings. It
provides that the proposed amendments are generally of prospective effect, and
will apply to proceedings (original or appellate) that commence on or after the
day on which the Bill (if enacted) receives Royal Assent, or proceedings that
were commenced prior to that date if they had not been finally determined.
The Explanatory Memorandum indicates that this application
provision is designed to ensure that ‘court proceedings that have been finally
determined are not to be re-opened to give effect to the substantive
provisions’ of the Bill (if enacted).[14]
Constitutional
compensation provision
New section 250 is a type of constitutional
compensation provision referred to colloquially as an ‘historic shipwrecks
clause’. Clauses of this kind are commonly used to manage constitutional risk
arising from section 51(xxxi) of the Constitution.[15]
Section 51(xxxi) provides that the Commonwealth Parliament may only legislate
with respect to the acquisition of property by the Commonwealth upon ‘just
terms’. Legislation that results in an acquisition of property other than on
just terms will be invalid.
In the event that legislation is found to constitute an
acquisition of property within the meaning of section 51(xxxi), so-called
‘historic shipwrecks’ clauses purport to satisfy the ‘just terms’ requirement
by imposing liability upon the Commonwealth to pay ‘reasonable’ compensation,
the quantum of which can be determined by a court. This may prevent the
relevant law from being held to be unconstitutional.[16]
New section 250 provides that the Commonwealth is
liable to pay ‘reasonable compensation’ in the event that the operation of a
validation provision[17]
would result in an acquisition of property other than on just terms within the
meaning of section 51(xxxi). (This is provided, however, that the relevant
‘acquisition’ did not already trigger an existing ‘historic shipwrecks’ clause
in section 1350 of the Corporations Act.)
The Explanatory Memorandum states that the compensation
clause ‘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’. In other words, the
relevant ‘property’ that might be found to have been acquired would be, in
effect, ‘loss of a right to rely on invalidity of the agreements’.[18]
The Explanatory Memorandum further states that ‘it could
be expected that only nominal compensation would be payable’ in such cases
because ‘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’.[19]
Amendments
to the Corporations Act
Items 8–11 contain proposed amendments to certain
transitional provisions in sections 1400 and 1401 of the Corporations
Act.[20]
These measures are largely complementary to the proposed amendments to the ASIC
Act made by items 1–7 that validate the relevant engagement of ASIC
personnel.
In particular, items 8–11 extend the operation of
the existing transitional provisions in sections 1400 and 1401 of the Corporations
Act, so as to effectively preserve rights or liabilities accrued as a
result of the purported exercise of powers by ASIC personnel whose employment
arrangements were validated by new section 249 of the ASIC Act.[21]
Items 9 and 11 also deal with the effects of
validation on court proceedings, by inserting into sections 1400 and 1401 of
the Corporations Act provisions corresponding to new subsection
249(3) of the ASIC Act as inserted by item 2 (discussed
above).[22]
Retrospective
commencement
Subclause 2(1) (table item 1) of the Bill
provides that the proposed amendments to the ASIC Act and the Corporations
Act in Schedule 1 (detailed above) will commence retrospectively,
from 15 July 2001, immediately after the commencement of the ASIC Act.
The Explanatory Memorandum states that retrospective commencement is necessary
to ensure the validity of all affected agreements to engage staff of ASIC from
the time of their making.[23]
Concluding comments
The proposed amendments will ensure that previous
engagements of ASIC staff, and the exercise of powers by those staff, have a
valid legal foundation by retrospectively curing technical irregularities in
those appointments that may cast doubt upon their validity.
While the extrinsic materials to the Bill do not identify
any specific issues or cases of concern that led to the identification of the
need for the proposed amendments, the proposed measures are fairly described as
purely technical. They do not appear to substantively change the legal
rights or liabilities of regulated entities—that is, either the ASIC personnel
whose engagements are validated; or the entities that are the subject of any
delegated regulatory powers exercised or functions performed by the relevant
ASIC personnel.
As such, the Bill appears to be a sensible and prudent
step to remediate a legal risk that otherwise valid exercises of regulatory
powers (such as powers of enforcement) could be invalidated purely on the
grounds of technical defects in the appointment of the person or persons to
whom those powers were delegated.
The Bill also contains some safeguards in relation to its
retrospective commencement that would appear to minimise the potential for
arbitrary consequences for regulated entities. These include the exclusion from
the scope of the validation provisions of court proceedings that are finally
determined (such as decisions on proceedings at first instance where the appeal
period has expired, or decisions on appeal in which the period for any further
appeal has expired).[24]
Further, the ‘historic shipwrecks’ clause in item 2
(new section 250 of the ASIC Act) will ensure that the
Commonwealth is liable to pay compensation on just terms, if a court were to
decide that the amendments effected an acquisition of property (for example, by
extinguishing the right of a regulated entity to rely on the invalidity of the
agreements under which an ASIC officer was engaged, as the basis for
challenging enforcement action).[25]
[1]. M
McCormack (Minister for Small Business), ‘Second
reading speech: Treasury Laws Amendment (2017 Measures No. 3) Bill 2017’, House of Representatives,
Debates, 14 June 2017, p. 14. See also: Explanatory
Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017,
pp. 5–6.
[2]. Explanatory
Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, pp. 6–7.
[3]. McCormack,
op. cit.; and Explanatory
Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p. 6.
[4]. Corporations
(Repeals, Consequentials and Transitionals) Act 2001, Part 2 and
Schedule 1, item 1.
[5]. McCormack,
op. cit.
[6]. Ibid.
[7]. Ibid.
[8]. Senate
Standing Committee for the Selection of Bills, Report,
6, 2017, The Senate, Canberra, 15 June 2017, p. 4.
[9]. Explanatory
Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p. 3.
[10]. The
Statement of Compatibility with Human Rights can be found at page 12 of the Explanatory
Memorandum to the Bill.
[11]. Ibid.
[12]. Note
that items 1 and 3 are definitional and consequential (with respect to
the meaning of the term ‘old ASIC Act’). Items 4–7 are validating
provisions of similar effect to new section 249 (item 2) in relation to
staff members who were engaged under agreements made pursuant to the old ASIC
Act, and the affected staff members purported to exercise delegated functions
and powers of ASIC prior to the commencement of the current ASIC
Act. Items 4–7 amend existing transitional provisions in sections
276 and 277 of the ASIC Act. See further: Explanatory Memorandum,
Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, pp. 8–10.
[13]. The
relevant employment provisions in both the ASIC Act and old ASIC Act are
sections 120 (staff) and 121 (consultants).
[14]. Explanatory
Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p.10.
[15]. Such
clauses are sometimes referred to colloquially as ‘historic shipwrecks clauses’
reflecting their first use in the Historic
Shipwrecks Act 1976, section 21. Contemporary Commonwealth drafting
policy with respect to the use of these clauses is set out in: Office of
Parliamentary Counsel, Drafting direction
no. 3.1—constitutional law issues, reissued January 2017, pp. 2–3. A
useful summary of these clauses is also provided in: Australian Law Reform
Commission (ALRC), Traditional
rights and freedoms: encroachments by Commonwealth laws, Interim report,
127, ALRC, Sydney, July 2015, paragraph [7.33]. Importantly, these clauses do
not concede that the legislation to which they apply amounts to an acquisition
of property within the meaning of section 51(xxxi) of the Constitution,
but rather impose an obligation upon the Commonwealth to provide just terms, in
the event that a court held that the relevant legislation effected an
acquisition of property.
[16]. The
High Court has generally held that legislation that provides for the payment of
‘reasonable compensation’ as determined by a court is legislation that provides
for ‘just terms’ within the meaning of section 51(xxxi) of the Constitution.
See, for example: Wurridjal v Commonwealth (2009) 237 CLR 309, [2009] HCA 2,
389 (Gummow and Hayne JJ) and 429 (Heydon J).
[17]. New
subsection 250(4) defines a ‘validation provision’ to mean new section
249 (item 2) and the proposed amendments to provisions of sections
276 and 277 implemented by items 4–7.
[18]. Explanatory
Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p. 11.
[19]. Ibid.
[20]. Sections
1400 and 1401 of the Corporations Act effectively preserve the substance
of rights and liabilities that existed under repealed or carried over
provisions of the old corporations legislation, which was repealed and replaced
by the Corporations Act. They do so by creating new, equivalent rights
or liabilities.
[21]. New
paragraphs 1400(1)(a) and (b) (item 8), new subsections 1400(5)
(item 9), new paragraphs 1401(1)(a) and (b) (item 10), and
new subsection 1401(5) (item 11). See further: Explanatory
Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017,
pp. 9–10.
[22]. New
subsection 1400(6) (item 9) and new subsection 1401(6) (item
11). See also: Explanatory
Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017,
p. 10. (Note that items 9 and 11 also insert new subsections
1400(7) and 1401(7) (respectively) that provide that sections 1400 and 1401 (as
amended) do not limit the operation of new section 249 of the ASIC
Act. This appears to be an ‘avoidance of doubt’ styled clause to prevent
unintended interpretive consequences.)
[23]. Explanatory
Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p. 11.
[24]. Schedule
1, items 2, 5, 7, 9 and 11. See also Explanatory
Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, p. 10.
[25]. See
also, Explanatory
Memorandum, Treasury Laws Amendment (2017 Measures No. 3) Bill 2017, pp. 10–11.
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
Creative Commons
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.
Disclaimer: Bills Digests are prepared to support the work of the Australian Parliament. They are produced under time and resource constraints and aim to be available in time for debate in the Chambers. The views expressed in Bills Digests do not reflect an official position of the Australian Parliamentary Library, nor do they constitute professional legal opinion. Bills Digests reflect the relevant legislation as introduced and do not canvass subsequent amendments or developments. Other sources should be consulted to determine the official status of the Bill.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Enquiry Point for referral.