21 February 2017

Personhood

'When and How Corporations Became Persons under the Criminal Law, and Why It Matters Now' by W. Robert Thomas comments
The [US] Supreme Court concluded in 1909 that a corporation, like an individual, can be held criminally responsible for its misconduct. Yet even now, corporate-criminal liability has yet to overcome the same skeptical argument it faced then — and, for that matter, for centuries prior. The skeptic’s challenge appears as simple as it is persistent: Lacking a mind distinct and independent from its constitutive stakeholders, a corporation cannot produce the sorts of intentional attitudes needed to satisfy the law’s mens rea component. In other words, a corporation is straightforwardly incapable of satisfying one of criminal law’s most basic requirements. Accordingly, to the skeptic the very idea of corporate-criminal liability is, and always has been, pure nonsense.
Though it presents as a simple, common-sense challenge to a corporation’s ability to intend — criminally or otherwise — unpacking the skeptic’s critique quickly implicates profound considerations regarding the nature of personhood and proper methods of attribution. Animating the dispute between skeptics and proponents of corporate-criminal liability is a disagreement over how to evaluate personhood, and further how one’s conception of personhood licenses attributions of actions, attitudes, and ultimately responsibility to the entity in question. This brand of disagreement is nothing new: These themes recur throughout Western thought and extend far beyond corporate law, from Plato’s Phaedo to Boethius and Bartolus of Sassoferato, from Thomas Hobbes to John Locke. Given the intellectual lineage behind what is otherwise an ordinary policy disagreement, perhaps it should not be terribly surprising that skepticism about corporate-criminal liability was never put to rest.
I don’t expect that we can break this conceptual stalemate all at once, if at all, to solve the challenge facing corporate crime. More to the point, we don’t need to. As it turns out, in taking up this very dispute at the turn of the 20th century, courts and legislature sided with the proponents of corporate crime in a way that the skeptic cannot, or at least should not want to, unwind. The proponents of corporate-criminal liability did not just win the policy fight; they did so in a way that rendered the skeptic’s position incompatible with broader theoretical commitments that are now instrumental to the modern corporation.
This Article offers two contributions to the debate over corporate-criminal liability: one conceptual, and one practical. First, the same argument embraced by today’s skeptics was tried but rejected in the late 1800s, when the practice of holding corporations responsible first developed. Courts previously receptive to the skeptic’s reasoning abandoned the view — and more importantly, the relationship between personhood and attribution underwriting it — as increasingly untenable amidst a changing economic environment in which commercial corporations transformed from tiny, narrowly constrained, quasi-state entities to sprawling, sophisticated, dominant participants in the national marketplace. Meanwhile, the gradual embrace of corporate liability, both in tort and crime, is intimately connected to the simultaneous demotion of corporate law as a regulatory tool. The turn towards corporate-criminal liability thus reflects a broader abandonment both of a long-dominant conception of personhood and of an approach to corporate regulation rendered ineffective by the development of what has become the basis for our modern corporate law. In a slogan, corporations today are persons under the criminal law not because they have always been eligible, but rather because they became eligible.
Second, a clear theoretical understanding of how and why courts first held corporations criminally responsible has profound consequences for how and why we continue to hold them responsible today. Most directly, recognizing the conditions under which corporations became persons for the purposes of criminal law removes from contemporary debates one complaint with modern practice, and does so without having to resolve some deep metaphysical truth about the ultimate nature of personhood. Today’s skeptic of corporate capacities presupposes an outdated premise about how capacities should be attributed to a person, the abandonment of which is pivotal to creating and maintaining modern corporate law and today’s commercial corporation. Taking seriously the skeptic’s position, on this discovery, threatens to undermine the conceptual foundation integral to a regulatory framework making commercial corporations what they are today. In addition, taking seriously courts’ actual reasoning in holding corporations criminally responsible unearths both a method and rationale for continuing to do so, which is rooted in a constellation of fairness considerations towards individuals that, although mostly lost to history, nevertheless applies more strongly today than ever before. Commitment to this qualified anti-discrimination norm applies at least as powerfully today as it did a century ago: Far from being a once-excusably incoherent, now-superfluous practice, corporate-criminal liability has as much reason to exist today as it did upon inception.

17 February 2017

Privacy Taxonomy and the GDPR

'Property and (Intellectual) Ownership of Consumers’ Information: A New Taxonomy for Personal Data' by Gianclaudio Malgieri in (2016) 4 Privacy in Germany – PinG 133 comments
This article proposes a new personal data taxonomy in order to determine more clearly ownership and control rights on different kinds of information related to consumers. In an information society, personal data is no longer a mere expression of personality but a strong economic element in the relationships between companies and customers. As a consequence, the new General Data Protection Regulation recognises different levels of control rights to consumers in accordance with a ‘proprietorial’ approach to personal data. Moreover, existing data taxonomies (based on a subject matter approach) are anachronistic. In an IoT world, the information industry is interested in any data related to consumers: not only their commercial preferences or habits, but also their health conditions, their family and financial status, their sports habits, friendships, and so on. At the same time, there exists a great conflict between privacy concerns and IP interests of companies regarding customer data processing.
This article proposes to change the perspective on personal data taxonomy and to classify personal information in accordance with its ‘relationship’ to the data subject and to reality, and with intellectual activity of businesses in acquiring and processing such data. Three categories are identifiable in this respect: strong relationship data (data provided directly by customers), intermediate relationship data (data observed or inferred and related to the present life of consumers), and weak relationship data (predictive data). Each category reflects different individuals’ rights under the EU General Data Protection Regulation. Data portability is provided just for strong relationship data, whereas no control rights are provided by weak relationship data. At the same time, other rights rebalance information asymmetries between consumers and enterprises (right to information, right not to be subjected to automated profiling, etc.). Therefore, the best balancing approach in order to both respect the IP rights of companies and the information privacy rights of consumers is to distinguish ‘control rights’ (access, portability, oblivion) from ‘reaction rights’ (right to information, opposition to automated profiling, etc).

16 February 2017

Marriage

This week's report of the Senate Select Committee on the Exposure Draft of the Marriage Amendment (Same-Sex Marriage) Bill notes
The committee embarked on this task cognisant of the deeply held beliefs and aspirations of people engaged in this national debate, regardless of how they view the institution of marriage. Debate surrounding previous bills introduced, and associated inquiries undertaken, into the issue of same-sex marriage have drawn on advice and evidence garnered from key stakeholders and the broader Australian community and have been informed by legal cases and legislative changes across the world. Often this evidence was presented in the context of a contested debate, with stakeholders expounding and defending their positions rather than seeking to engage in a balanced and respectful exploration of the issues at hand.
The committee considers that this inquiry into the Exposure Draft (released by the Attorney-General for consultation alongside the proposed legislation for a same-sex marriage plebiscite) provides an opportunity to consider much of this evidence in a more collegiate and coordinated manner and to identify where there may be areas of agreement, and to better understand and narrow those areas where there are differences of approach.
It is a matter of record that the enabling legislation for a plebiscite was voted down in the Senate. Despite this, the associated Exposure Draft released by the Attorney-General as part of the preparatory work for a proposed plebiscite, was deemed to be a useful vehicle to seek consensus on agreed elements of the proposal, and to better identify the substantive issues that remain contested as a result of people's varying political or philosophical perspectives. It is the hope and intention of the committee that this body of evidence will prove a valuable and instructive foundation, identifying the scope of issues to be addressed by a parliament considering legislative changes to the definition of marriage in this area.
The issues discussed below, and expanded on in the report, have been developed from provisions in the Exposure Draft, from the evidence received through the written submission process, and from the committee's three public hearings. With regard to the evidence, the committee is grateful for the quality of the written submissions and the constructive engagement of all witnesses over the course of the public hearings, despite the very short time frame available to all parties.
In the event that the Parliament passed the Plebiscite Bill, the Government proposed the establishment of a Joint Select Committee to review and report on the Exposure Draft.
The composition of that committee would be as agreed by the Government, the Opposition, and Crossbench parties.
Areas of consensus
There was broad agreement that any future legislation to amend the Marriage Act should ensure religious freedoms are appropriately protected when considering changes that extend access to marriage to all adult couples. In addition, such legislation should exercise caution around the terminology it employs.
The committee notes from evidence from witnesses that if care is taken in describing groups of people and legislative concepts, then opposition to different parts of any future legislation can be more easily avoided.
Two notable examples raised during the inquiry were the terms 'same-sex' in the Short Title of the Exposure Draft and the description of provisions to allow ministers of religion and others to opt out of solemnising same-sex weddings as exemptions.
• In the first example, same-sex couples are unnecessarily singled out, by providing exemptions for situations that are 'not the union of a man and a woman'. For those in support of same-sex marriage, this was seen to increase the perception that this group of people were being discriminated against. For others, this narrow definitional approach failed to protect all aspects of their religious and doctrinal view of marriage. 
• In the second example, many submitters voiced concern that the right to have and exercise religious freedom is sometimes considered as an 'exemption'. This labelling of a fundamental right as in some way a departure from the norm concerned many who offered the term 'protection' as more appropriate terminology. Supporters of same-sex marriage generally recognised this concern and agreed that amendments could be made to more positively frame the expression of this right.
In a similar vein, careful drafting to clarify the definitional boundaries of some of the key concepts would go a long way to dispelling some concerns about scope and intent. 'Religious body or religious organisation', as well as 'reasonably incidental to', should be clearly defined as this will determine the providers and the types of goods and services where discrimination will be permitted. Many witnesses held the term 'conscientious belief' lacked definition and could potentially have an unlimited scope. Similarly, the use of the expression ' persons' will enable the inclusion of persons of any sex or gender.
On a general note, the committee observed considerable consensus for a continuation of exemptions for ministers of religion, and for religious celebrants involved in the solemnisation of same-sex marriages.
Areas for further discussion
There were also a number of areas where views differed. These concerned matters contained in the detail of the Exposure Draft and particularly in respect to how competing rights should be balanced in Australian law.
Balancing these rights is the central task for a Parliament's consideration of this legislation. As one witness surmised, 'balancing' does not mean that one right is crushed under the weight of the other. The right to marry; the right to freedom of thought, conscience and religion; the right to equality; and the right to freedom from discrimination are all rights engaged in this debate. The committee heard contrasting views on how these competing rights could be respected. There was broad acknowledgement throughout the inquiry of the importance of striking an appropriate balance between these rights in any future legislative proposal so as to minimise any concerns that may exist in the community. The essential nature of marriage and its role in society is a philosophical discussion and goes to the core of one's identity. This was explored by a number of submitters and witnesses. These different perspectives were practically illustrated in evidence on whether the right to choose to provide services only for the marriages between a man and a woman on the grounds of a religious or conscientious belief is available to individuals as well as members of recognised religious groups. The committee heard evidence from a range of contributors on possible remedies on how these issues could be addressed.
As discussed above, there was consensus in the evidence received that the right to religious freedom should be positively protected. The nature of possible protections will continue to be debated. The committee heard of various potential remedies to this issue, such as an anti-detriment provision or a distinct legislative instrument to protect religious freedom.
Many witnesses submitted that the introduction into the Australian legal context of a protection for freedom of religion was regarded as being most appropriately placed within anti-discrimination legislation. Necessarily, this would require consideration of any future anti-discrimination laws interactions with existing state and territory provisions.
It is however clear that should legislation be enacted to change the definition of marriage, careful attention is required to understand and deliver a balanced outcome that respects the human rights of all Australians if the nation is to continue to be a tolerant and plural society where a diversity of views is not only legal but valued.
The Committee summarises  'issues requiring careful consideration' -
Definition of 'marriage'
The committee supports the use of ' people' as an appropriate term to facilitate access to marriage for all Australian adults. An Explanatory Memorandum should confirm that inclusion of this term in the definition of 'marriage' is intended to encompass transgender and intersex persons. This inclusive approach should be reflected also in the title of a bill.
Exemption for ministers of religion
Based on the evidence presented, the committee acknowledges that there is broad agreement for ministers of religion to have a right to refuse to solemnise a marriage that is not in accordance with their religion.
However, the committee notes that some submitters and witnesses did not support legislative exemptions based on a marriage not being the union of a man and woman. The committee considers that such grounds would explicitly discriminate against same-sex couples, while limiting also the doctrinal reasons for discrimination. At the same time, some submitters highlighted that such a provision would effectively limit the current protection for ministers of religion. The committee recognises that section 47 of the Marriage Act 1961 (Cth) (Marriage Act) provides the broadest and strongest protection of religious freedom for ministers of religion. This provision, for example, already allows ministers of religion to refuse to marry people who are divorced, or who have undergone gender transition and legally changed their sex. The committee heard that there are inconsistencies between proposed exemptions in the Exposure Draft and exemptions in the Sex Discrimination Act 1984 (Cth) (SexDiscrimination Act). In particular, proposed new paragraphs 47(3)(b) and 47B(1)(a) would not be consistent with section 37 of the Sex Discrimination Act. The committee considers that the intersection of laws is a complex matter that requires further expert consideration beyond the ambit of the Exposure Draft.
Exemption for marriage celebrants
The committee notes that there is some confusion about marriage celebrants and their current ability to refuse to solemnise a marriage. In addition, the committee acknowledges that Part IV of the Marriage Act is structured in a complex fashion, including in relation to the marriage celebrants category (Subdivision C of Division 1). The committee heard that there are two classes of celebrant within this category, who should be clearly distinguished as civil celebrants or as independent religious celebrants. In particular, the committee proposes the creation of a new Subdivision D (Religious Marriage Celebrants) to accommodate independent religious celebrants.
Having found support for protecting the religious freedom of ministers of religion, the committee believes this principle should be extended to independent religious celebrants in new Subdivision D (Religious Marriage Celebrants) of Division 1 in Part IV of the Marriage Act.
The committee notes that there are a range of views about whether the Marriage Act should provide civil celebrants in general with a right to refuse to solemnise a marriage. The committee considers that such celebrants perform a function on behalf of the state and should be required to uphold Commonwealth law (including anti-discrimination laws). That said, the committee heard that some civil celebrants would feel compromised at having to solemnise a same-sex marriage, if the law were changed. The committee respects this position and proposes the inclusion of these celebrants in new Subdivision D (Religious Marriage Celebrants) of Division 1 in Part IV of the Marriage Act.
Exemption for a religious body or organisation
The committee recognises that there is a range of views on whether a 'religious body or a religious organisation' should have a right to refuse to provide facilities, goods or services for, or 'reasonably incidental to', same-sex marriages. The committee suggests that some of these broad terms should be defined, to properly set out the scope of a protection. For example, would commercial entities owned by religious organisations be entitled to protection? In this regard, the committee notes that the phrase 'reasonably incidental to' needs to connect the provision of goods or services to a marriage ceremony.
The committee notes also that some submitters were of the view that the reference to 'a man and a woman' in proposed paragraph 47B(1)(a) may not be necessary, as paragraph 37(1)(d) of the Sex Discrimination Act already provides an exemption for religious bodies.
International jurisprudence on the introduction of same-sex marriage
The committee notes that evidence presented to the inquiry consistently recognises that, under current human rights instruments and jurisprudence, there have been no decisions that oblige Australia to legislate for same-sex marriage. That said, there has been no suggestion that there are any legal impediments to doing so.
Goods and services
The committee notes that Commonwealth law already allows organisations established for religious purposes to discriminate in the delivery of goods and services, including marriage related services and the hiring of facilities, where this discrimination accords with religious doctrine, tenets or beliefs or is necessary to avoid injury to the susceptibilities of adherents to their religion. However the committee also notes that Australia's obligations under international human rights law apply to individuals as well as groups.
The International Covenant on Civil and Political Rights, the traveaux préparatoires, the Siracusa Principles and United Nations General Comment together require that there are circumstances where broader considerations can be taken into account.
Whether this principle could be applied to achieve an appropriate balance of rights is worthy of further consideration.
A right to refuse on the grounds of a conscientious belief
The committee notes that providing ministers of religion and civil celebrants with a right to refuse to solemnise a marriage based on 'conscientious belief' was controversial, including due to a lack of precedent under Australian law.
The committee is guided by the limited legal usage of 'conscientious belief' but observes that it would be unprecedented to allow 'conscientious belief' to be used to discriminate against a class of persons. The committee is not inclined to disturb established anti-discrimination law and practice. Overall, the weight of evidence suggests that there are philosophical questions that go to the very definition of religion, marriage, and a democratic society that require full consideration.
In human rights law, the freedom to thought or conscience, or to have a religion or belief, are protected unconditionally, but the manifestation of religion or belief are subject to some limitations under the International Covenant on Civil and Political Rights. Extending protections in the context of same-sex marriage on conscientious grounds would introduce the complex question of whether the manifestation of a non-religious conscientious belief has the same level of protection as religious belief under international human rights law in this specific area.
The committee notes international authority that equal protection is afforded to conscience, and any attempt to differentiate on the rights of an individual based on conscience vs religion may be contested (noting that as far as the committee is aware, this has been considered in the courts). However the weight of evidence received in this inquiry suggests there are schools of thought that go to the very definition of religion, marriage, and a democratic society that require full consideration.
A broader protection of the right to freedom of conscience and religion
The committee is cognisant of previous attempts to reform federal anti-discrimination law. Such reforms are unavoidably complex, requiring expert consideration of international human rights obligations and federal, state and territory laws, as well as relevant jurisprudence. While the Australian Government has progressed some reform on a case-by-case basis, the committee considers that broader reform should be reconsidered to advance protections for religious freedom.
In the short term, the evidence supported the need to enhance current protections for religious freedom. The committee suggests that this could most appropriately be achieved through the inclusion of 'religious belief' as a protected attribute in federal anti-discrimination law. However, in future, the committee considers that the concept of a 'no detriment' clause could be further examined.

13 February 2017

Beneficial Interests

The Treasury Department has released a consultation paper regarding the beneficial ownership and control of companies.
As part of Australia's first Open Government National Action Plan the Government committed to improve transparency of information on beneficial ownership and control of companies available to relevant authorities. A key milestone for this commitment was the release of a public consultation paper seeking views on the details, scope and implementation of a beneficial ownership register for companies.
The consultation paper states
Companies play an essential role in both the Australian and the global economy. They are a vehicle to facilitate private sector investment and growth.
At times these vehicles can be used to disguise the identity of those involved in illicit activities, including tax evasion, money laundering, bribery, corruption and terrorism financing. This is achieved through mechanisms such as the use of shell companies, the use of complex ownership and control structures, the use of bearer shares and share warrants and of nominee shareholders where the nominator is not disclosed. The exploitation of these vehicles results in gains for criminals and financial losses to the Australian economy. It may also affect public confidence and the perceived legitimacy and validity of business and company regulatory processes and requirements. It also risks confidence in the tax system.
To ensure compliance with the relevant laws against such illicit activities, relevant authorities (including law enforcement and prosecutorial authorities, supervisory authorities, tax authorities and financial intelligence unit) need to be able to identify the entities and individuals that can control and benefit from the financial activities of a company and how those individuals and entities are connected to each other. This objective is inhibited by deficient information collected on the beneficial ownership of companies, and as a result the individuals involved in such illicit activities are able to disguise the true source or use of funds or property behind company structures.
Improving the collection and utilisation of beneficial ownership information will significantly contribute to authorities’ efforts to combat and prevent these activities. This, in turn, will promote greater integrity and transparency within the domestic and global financial system. Internationally, there is a focus on increasing transparency of beneficial ownership information within the global financial system.
International bodies such as the G20 view transparency as playing a key role in combating illegal activities such as money laundering, bribery and corruption, insider dealings, tax fraud and terrorism financing. This was reflected in the G20 High-Level Principles on Beneficial Ownership Transparency (the G20 Principles), the development of which was a key outcome for the Australian G20 Presidency in 2014. Other international organisations such as, the Financial Action Task Force (FATF), the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes and the World Bank also have a strong interest in progressing work towards increasing beneficial ownership transparency.
In 2016, international focus on the availability of beneficial ownership information of entities and legal arrangements (for example, trusts) increased following the leaks of incriminating data in April from a large law firm. In May 2016 beneficial ownership transparency was a key issue for discussion at the Anti-Corruption Summit in London, where several countries including Australia made commitments to increase the transparency of beneficial ownership.
It goes on
Legal and Beneficial Ownership Information for Companies which is currently available 
Australian companies currently collect some legal and beneficial ownership information, with much of it provided to the Australian Securities and Investments Commission (ASIC). There is, however, scope to increase the transparency of beneficial ownership, because while shares are often held non-beneficially in Australia there is no legal obligation for all companies to collect and report shares held in this manner or the identity of the beneficial owners to ASIC. The following section discusses how information on legal ownership and beneficial ownership is currently recorded and disclosed in Australia.
A company’s share register
Under the Corporations Act 2001 (the Corporations Act), companies are required to establish and maintain a register of members. The register of company members must record for each member the member’s name and address, the date on which the entry of the member’s name in the register is made, and if a company has share capital, the specific details of the shares held by each member. All companies other than listed companies must record if shares are beneficially held or not. The identity of the beneficial owner is not required to be recorded.
The register must be kept within Australia – either at the company’s registered office, its principal place of business or another place approved by ASIC.
A member of the public can access this register either by:
• inspecting it at the company’s registered office (or other place it is kept); or  
• making an application to be given a copy of the register or part of the register.
A fee may apply for both types of access. In applying for a copy of the register the applicant must state each purpose for which they are accessing a copy and access will not be permitted where it is a for an improper purpose.
Information given to ASIC and kept on the ASIC register
Although the details of company members must be lodged with ASIC by all companies on registration of the company only proprietary companies must report to ASIC any subsequent changes to member details. If a proprietary company has more than 20 members the company must inform ASIC of changes affecting the top 20 members in each class of share, including any change as to whether the shares are held beneficially by the legal owner or not. If the shares are non-beneficially held, there is no requirement to disclose the beneficial owner to ASIC.
These documents which have been lodged with ASIC are then stored on the ASIC register. A company extract setting out current and historical information on membership, and each separate document notifying of changes, may be obtained by the public for a fee.
Listed Companies
Certain disclosure obligations apply to beneficial owners of shares in listed companies under Chapter 6C of the Corporations Act.
A person must notify a listed company if the person has, or ceases to have, a ‘substantial holding’ in the company, and any change in their substantial holding of more than 1 per cent. This means they or their associates have a relevant interest in 5 per cent or more of the total number of votes attached to voting shares in the body. The concept of ‘association’ is used to group together interests which are aligned and should be treated as forming a single voting bloc.
A person or their associates who holds a relevant interest can be:
• holders of securities; or 
• persons with the power to exercise, or control the exercise of, a right to vote attached to the securities; or 
• persons with the power to dispose of, or control the exercise of a power to dispose of, the securities.
For the purpose of identifying which persons have relevant interests, ‘power to exercise’ and ‘control the exercise of’ include where the power or control is indirect, or can be exercised as a result of a trust, agreement or practice. The concept is discussed in further detail in ASIC Regulatory Guide 5 Relevant interests and substantial holding notices (RG 5).
The person(s) with the substantial holding must also give the relevant information to each relevant financial market operator, such as the ASX. In the case of ASX, this form is made publicly available through the market announcements platform and can be accessed on the ASX’s public website. This information is also provided to ASIC and is available to the public from the ASIC register for a fee.
Under the ASX listing rules, companies must also include in an annual report which they provide to the ASX information about the substantial holdings of the company as disclosed in substantial holding notices given to the company. This provides an account of all of the substantial holders of the company as at the date of the annual report and is also available to the general public at no cost via the ASX website.
Operation of Tracing Provisions For Listed Companies 
For listed companies there is an additional process which can increase the transparency of ownership information. ASIC has the power to trace ownership information for listed companies by issuing a person with a tracing notice. Listed companies themselves can also issue tracing notices. This notice requires the person who receives it to disclose details about the ‘relevant interest’ they have in certain securities, the relevant interests of any other persons as well as details of persons who have given them instructions in relation to the holding. Notices can be issued either to a registered member of the company or a person who has been named in a prior tracing notice relating to those shares. The current tracing notice regime requires disclosure of all relevant interests, whether or not the beneficial owner has a holding of five per cent or more.
Disclosure in response to a tracing notice must be made within two days. Where a listed company receives beneficial ownership information in response to a tracing notice they are required to include those details in a register maintained by the company which is available and accessible to the general public (a fee may apply). A member of the public can either inspect the register where it is held or request a copy. This information is not stored on the ASIC register.
Other Requirements to Collect Beneficial Ownership Information
Anti-Money Laundering and Counter-Terrorism Rules
Under Australia’s Anti-Money Laundering and Counter-Terrorism Financing legal framework reporting entities must collect and take reasonable measures to verify beneficial ownership information in relation to certain customers as part of their customer due diligence obligations, unless certain exemptions apply. Reporting entities are financial, remittance, gaming and bullion businesses that provide designated services as prescribed in the legislation. These obligations could potentially apply to all types of Australian companies.
The beneficial owner of a customer is an individual who ultimately owns or controls (directly or indirectly) the customer. Ownership will only be made out where more than 25 per cent of that customer is owned by the individual. This information can be requested by AUSTRAC, law enforcement and regulatory agencies.
These requirements contribute towards Australia’s implementation of Principle 7 of the G20 Principles and FATF Recommendation 10 which relates to countries requiring financial institutions to identify and take reasonable measures to verify the beneficial ownership of their customers.
Common Reporting Standard (CRS)
The CRS is a single global standard for the automatic exchange of financial account information (including beneficial ownership information) on account holders who are foreign tax residents. It includes requirements for reporting of that information to the financial institution’s tax authorities and the exchange of that information with the foreign residents’ home tax authorities.
The beneficial ownership information required to be collected includes the name, address, jurisdiction(s) of residence, tax identification number (for jurisdictions that allow tax identification numbers to be collected) and date and place of birth of each foreign resident controlling person (beneficial owner).
Treasury asks the following questions
1. Should listed companies be exempt from any new requirements to report on its beneficial owners in light of existing obligations on such companies? If so, should an exemption apply to companies listed on all exchanges or only to specific exchanges? 
2. Does the existing ownership information collected for listed companies allow for timely access to adequate and accurate information by relevant authorities? 
3. How should a beneficial owner who has a controlling ownership interest in a company be defined? 
4. In light of these examples given by the FATF, the tests adopted by the UK (see Part 3.2 above) and the tests applied under the AML/CTF framework and the Corporations Act, what tests or threshold do you think Australia should adopt to determine which beneficial owners have controlling ownership interest in a company such that information needs to be collected to meet the Government’s objective? a. Should there be a test based on ownership of, or otherwise having (together with any associates) a ‘relevant interest’ in a certain percentage of shares? What percentage would be appropriate? b. Alternative to the percentage ownership test, or in addition to, should there be tests based on control that is exerted via means other than owning or having interests in shares, or by a position held in the company? If so, how would those types of control be defined? 
5. How would the natural persons exercising indirect control or ownership (that is, not through share ownership or voting rights) be identified (other than through self-reporting) and how could such an obligation be enforced? 
6. Should the process for identification of beneficial owners operate in such a way that reporting must occur on all entities through to and including the ultimate beneficial owner? 
7. Do there need to be special provisions regarding instances where the relevant information on a beneficial owner is held by an individual who is overseas or in the records of an overseas company and cannot be identified or obtained? 
8. Should there be exemptions from beneficial ownership requirements in some circumstances? What should those circumstances be and why? 
9. What details should be collected and reported for each natural person identified as a beneficial owner who has a controlling ownership interest in a company? 
10. What details should be collected and reported for each other legal persons identified as such beneficial owners? 
11. In the case of foreign individuals and bodies corporate, what information is necessary to enable these persons to be appropriately identified by users of the information? 
12. What obligations should there be on a company to make enquiries to ascertain who their beneficial owners are and collect the required information? What obligations should there be on the beneficial owners themselves? 
13. Should each company maintain their own register? 
14. How could individual registers being maintained by each company provide relevant authorities with timely access to adequate and accurate information? What would be an appropriate time period in which companies would have to comply with a request from a relevant authority to provide information? 
15. Should a central register of beneficial ownership information also be established? 
16. What do you see as the advantages and/or disadvantages of a central register compared with individual registers being maintained by companies? 
17. In particular, what do you see as the relative compliance impact costs of the two options? 
18. Who would be best placed to operate and maintain a central register of beneficial ownership? Why? 
19. What should the scope of the register operator’s role be (collect, verify, ensure information is up to date)? 
20. Who should have an obligation to report information to the central register? Should it be the company only or also the persons who meet the test of being a relevant ‘beneficial owner’? 
21. Should new companies provide this information to a central registry operator as part of their application to register their company? 
22. Through what mechanism should existing companies, and/or relevant beneficial owners, report? 
23. Within what time period (how many days) should any changes to previously submitted beneficial ownership information have to be reported to a company (where registers are maintained by each company) or the registry operator (where there is a central register)? 
24. If reporting to a central register is required, should this information be included in the annual statement which ASIC sends to companies for confirmation with an obligation to review and update it annually? 
25. What steps should be undertaken to verify the information provided to a central register by companies or their relevant beneficial owners? Who should have responsibility for undertaking such steps? 
26. Should beneficial ownership information be provided to one relevant domestic authority and then shared with any other relevant domestic authorities? Please explain why you agree or disagree. 
27. Should beneficial ownership information be automatically exchanged with relevant authorities in other jurisdictions? Please explain why you agree or disagree. 
28. What sanctions should apply to companies or beneficial owners which fail to comply with any new requirements to disclose and keep up to date beneficial ownership information? 
29. How long should existing companies have from when the legislation commences to report on their beneficial owners? What would be an appropriate transition period? 
30. Do you foresee any practical implementation issues which companies or beneficial owners may face in collecting and reporting additional information? 
31. What types of compliance costs would your business incur in meeting any new requirements for record-keeping and reporting of beneficial ownership information? 
32. If you are already required to comply with AML/CTF obligations, how do you see any new requirements to collect beneficial ownership interacting with those existing obligations? 
33. If companies had access to the additional beneficial ownership information collected, could this reduce companies’ compliance costs by making it easier for them to comply with other existing reporting obligations such as those under the AML/CTF legal framework? 
34. Could any changes be made to streamline or merge existing reporting requirements in order to reduce the compliance costs for businesses? 
35. In order to improve and incentivise compliance with the tracing notice regime should ASIC have the ability to make an order imposing restrictions on shares the subject of a notice until the notice has been complied with? 
36. What other changes could be made to improve the operation of these provisions? 
37. Who uses nominee shareholding arrangements, and for what purpose? 
38. How often are nominee shareholding arrangements used?  
39. What do you see as the benefits of nominee shareholding arrangements? Are there any negative aspects of their use? 
40. Should further obligations be introduced in order to increase the transparency of the beneficial owners of shares held by nominee shareholders? 
41. Are you aware of practical obstacles which would make increased reporting in respect of shares held by nominee shareholders problematic? 
42. Who uses bearers share warrants, and for what purpose? 
43. How often are bearer share warrants used? 
44. What do you see as the benefits of bearer share warrants? Are there any negative aspects of their use? 
45. Should a ban be introduced on bearer share warrants?

Moreton Bay Mikes

The Queensland Information Commissioner has responded to revelations that Moreton Bay Regional Council, a large local government in that state, is operating audio-equipped CCTV, by stating
Queensland’s Privacy Commissioner will be seeking clarification from Moreton Bay Regional Council about their use of CCTV cameras that record audio to determine Council’s compliance with the Information Privacy Act 2009 (Qld).
This follows Councils recent deployment of upgraded CCTV cameras. Council operate a network of 874 CCTV cameras throughout the Moreton Bay Region and over one third now have the capability to play back audio.
Privacy Commissioner Phil Green said, “I have written to Moreton Bay Regional Council seeking clarification about how these upgraded cameras are being used and managed so I can determine whether Council is complying with Queensland’s Information Privacy Act.”
“Council have indicated their willingness to work with us on this issue and that’s a positive step in the process.”
“While I have concerns about the upgraded cameras’ ability to record audio it’s vital to have all the facts before proceeding further.”
“Technology is challenging many aspects of our laws, including privacy. When this occurs and citizens’ rights might be affected it’s important to gather the facts and keep the public informed”, Privacy Commissioner Green said.
Moreton's mayor is reported as commenting
the council was not eavesdropping but recording the audio to supply to police who already sought CCTV for criminal investigations. 
“We don’t listen on a daily basis to conversations, this is as requested, if police come along and say can we have the footage,” he said.

08 February 2017

Reidentification

The Senate Standing Committee on Constitutional &  Legal Affairs has released its report on the problematical Privacy Amendment (Re-identification Offence) Bill 2016 (Cth), recommending that the bill be passed.

In late September last year Attorney-General Brandis foreshadowed amendments to the Privacy Act 1988 (Ctht) to strengthen the protections of data published by the Australian government, given that the Government "recognises that the privacy of citizens is of paramount importance" and that "with advances of technology, methods that were sufficient to de-identify data in the past may become susceptible to re-identification in the future".

The stated intention of the Bill is to protect privacy by creating a new criminal offence of re-identifying de-identified government data, retrospective from 28 September. Brandis' second reading speech stated that publication of major datasets is an important part of the Government's Digital Transformation Agenda (so far distinctly underwhelming) and the "21st century government" vision noted here.

The Attorney-General subsequently stated
The recently identified vulnerability in the Department of Health's Medicare and Pharmaceutical Benefits Scheme dataset brought to the Government's attention the existence of a gap in privacy legislation regarding the re-identification of de-identified data. Once aware of this gap, the Government acted immediately to strengthen protections for personal information against re-identification by introducing these offences.
The Bill deals with personal information that has been de-identified by an agency and generally made available. It would prohibit intentional conduct by an entity that re-identifies personal information de-identified by the responsible agency (proposed subsection 16D(1)) or discloses the re-identified personal information (proposed subsection 16E(1)).The sanction is a criminal penalty of up to two years imprisonment or 120 penalty units, or a civil penalty of 600 penalty units.

Irrespective of the re-identifying entity's intentions, where de-identified personal information has been re-identified the entity must notify the responsible agency that the information is no longer de-identified, cease any use or disclosure of the re-identified information, and comply with the directions of the agency about the handling of the information (proposed section 16F). The Bill provides for a civil penalty of up to 200 penalty units for failing to notify the responsible agency in writing, or for using or disclosing the information after it becomes aware that the information is no longer de-identified (proposed subsections 16F(3) and (4)).

The dissenting report by the ALP and Greens Senators argues that the Bill is a disproportionate response to the gap in the Privacy Act 1988, does not achieve the stated objectives and accordingly should not be passed -
The privacy of Australians is of paramount importance; however, a careful balance must be achieved between maintaining privacy, ensuring that government agencies properly de-identify datasets prior to its publication, and encouraging research into the areas of information security, cryptology and data analysis. The bill fails to provide a holistic response and neglects to consider the de-identification process and consequences for agencies for releasing datasets that have been poorly de-identified. As outlined by the NSW Office of the Privacy Commissioner:
...it places a disproportionately high onus on external recipients to be aware which released datasets are considered to have undergone a de-identification process. The proposed provisions do not appear to create corresponding obligations on the releasing entities to certify each released dataset as deriving from personal data or the treatment used to achieve the outcome of non-identifiable data.
Rather, if passed, the bill adopts a punitive approach towards information security researchers and research conducted in the public interest. In contrast, government agencies that publish poorly de-identified information do not face criminal offences and are not held responsible. While the Privacy Act does not apply to most Australian universities, as outlined by Melbourne university researchers, the implications of the bill are not clear for researchers at the Australian National University, students, and individuals acting on their own initiative who happen to be university employees. Additionally, no consideration has been given as to whether an individual who re-identifies their own information, or their dependent's or client's information, should also be subject to the bill. The bill discourages research conducted in the public interest as well as open discussion of issues which may have been identified.
Labor and Greens Senators are opposed to the retrospective application of the bill and agree with the concerns raised by the Senate Scrutiny of Bills Committee and the Law Council of Australia that retrospective provisions offend a fundamental principle in the rule of law and that this is particularly acute in the case of criminal offences.
Moreover, while the Attorney-General has claimed that the retrospective application of this bill was made clear in his announcement on 28 September 2016, the submission by the Melbourne university researchers indicates a level of ambiguity. They explain that they had interpreted a commitment that 'all legitimate research would be allowed to continue [as opposed to] some designated research should be exempt'.
Labor and Greens Senators also disagree with reversing the evidential burden of proof. As justification for reversing the burden of proof, the Explanatory Memorandum noted that it would not be difficult for the entity to demonstrate that one of the exemptions apply and that it also reflects the seriousness of the prohibited conduct. However, as outlined by the Senate Scrutiny of Bills Committee, the fact that it would be easy for an entity to provide evidence that one of the exemptions apply, or conversely, that it may be difficult for the prosecution to prove that the exemption does not apply, is not sufficient justification for reversing the burden of proof.  Also, it is not apparent that it would be particularly onerous for the prosecution to prove that the exemption did not apply. As such, the justification for reversing the burden of proof is neither reasonable nor appropriate.
The bill provides a disproportionate reaction to the identified gap in the Privacy Act. It neglects the initial process of de-identification and does not hold government agencies responsible for publishing poorly de-identified datasets. Instead it penalises public interest research and discourages open investigation and discussion of potential issues relating to information security. The disproportionate response is also evidenced through the retrospective application of the bill as well as the reversal of the burden of proof.
The Coalition Senators commented
The government has outlined its view that the benefits of open data outweigh the risks of re-identification. This view was shared by the Productivity Commission in its draft report Data Availability and Use. This report stated that the risks of re-identification of data and harm to an individual were real and should not be trivialised, however noted that many of these risks could be managed with the right policies and processes. The report also noted that increasing data use does not necessarily put individuals at a greater risk of harm. It concluded that Australia stands out among other developed countries where information, particularly in the area of health, is poorly used and suggested that fundamental change was needed with the introduction of new legal and policy frameworks. These frameworks would work towards four key elements:
  • giving individuals more control over data held about them; 
  • encouraging and enabling broad access to government datasets; 
  • increasing the usefulness of publicly funded identifiable data among trusted users; and 
  • creating a culture where non-personal and non-confidential data is released as a default
The Office of the Australian Information Commissioner (OAIC) agreed that a careful balance is needed between open data and privacy protections and warned that the bill, in and of itself, would be unlikely to eliminate the privacy risks associated with the publication of de-identified datasets. OAIC outlined the need to consider whether the risk of re-identification is sufficiently low for the data to be published openly, or whether other safeguards should be applied, such as making the data available only to trusted users with contractual or technological safeguards in place

Originalism

In Palmer v Marcus William Ayres, Stephen James Parbery and Michael Andrew Owen in their Capacity as Liquidators of Queensland Nickel Pty Ltd (in liq) & Ors; Fergusaon v Marcus William Ayres, Stephen James Parbery and Michael Andrew Owen in their Capacity as Liquidators of Queensland Nickel Pty Ltd (in liq) & Ors [2017] HCA 5 Gageler J states
 [42] "The framers of a Constitution at the end of the nineteenth century may be supposed to have known that there have been in this world many forms of Government, that the various incidents and attributes of those several forms had been the subject of intelligent discussion for more than 2,000 years, and that some doctrines were generally accepted as applicable to them respectively". The framers of the Australian Constitution selected, adapted and melded elements of the substantially overlapping constitutional traditions of the United Kingdom and the United States as those traditions were understood to have developed to the end of the nineteenth century. They did so to produce a framework for the creation, at the beginning of the twentieth century, of a distinctly Australian system of national governance. That framework the Australian people, themselves acquainted with the manner in which representative and responsible government under the rule of law had come to be established and to operate in each of the colonies which were to become States, chose to approve. The objectively discernible mutual intentions of the framers and of the people would miscarry, and the system of national governance which the framers laboured to see created would be diminished, were the product of their labour sought to be "construed merely by the aid of a dictionary, as by an astral intelligence … without reference to history".
[43] Nowhere is an appreciation of the historical context within which the Australian Constitution was brought into existence more important than in seeking to understand the "judicial power of the Commonwealth", which s 71 vests solely in this Court, in federal courts which the Commonwealth Parliament chooses to create in accordance with s 72 and in courts which the Commonwealth Parliament chooses to invest with "federal jurisdiction" with respect to one or more of the nine categories of "matter" specified in ss 75 and 76. The difficulty and the danger of attempting to formulate some all-encompassing abstract definition of the judicial power of the Commonwealth was acknowledged from its inception, was repeatedly recognised in judicial pronouncements throughout the twentieth century and has been reiterated in this century.
[44] For present purposes, an understanding of the nature and scope of the judicial power of the Commonwealth is enhanced by close attention to the reasoning of the plurality of this Court in R v Davison. Dixon CJ and McTiernan J (with whom Fullagar J agreed) there pointed out that many functions have traditionally been undertaken by courts of law and equity from which elements of various definitions of judicial power formulated for differing purposes in the early twentieth century are "entirely lacking". They added that there are also many functions which can be committed to a court which might equally be committed to an administrator.
[45] Dixon CJ and McTiernan J continued: "The truth is that the ascertainment of existing rights by the judicial determination of issues of fact or law falls exclusively within judicial power so that the Parliament cannot confide the function to any person or body but a court constituted under ss 71 and 72 of the Constitution and this may be true also of some duties or powers hitherto invariably discharged by courts under our system of jurisprudence but not exactly of the foregoing description. But there are many functions or duties that are not necessarily of a judicial character but may be performed judicially, whether because they are incidental to the exercise of judicial power or because they are proper subjects of its exercise."
[46] Their Honours went on to explain, by reference to the analysis of Holmes J in Prentis v Atlantic Coast Line Co, that where the legislature has prescribed that a particular act or thing be done through the application of a judicial process, "the character of the proceeding or of the thing to be done becomes all important" in that "[t]he nature of the final act determines the nature of the previous inquiry".
[47] Within that exposition of principle lie two important conceptions. Each had been the subject of earlier judicial articulation and each came to be developed more fully in later cases. The first is of the existence of an area of judicial power within which a particular act or thing done is directed to an ultimate end that can be achieved only through the exercise of judicial power. At the centre of that exclusive area is what has subsequently been described as the "unique and essential function" of the judicial power of "the quelling of … controversies [as to legal rights] by ascertainment of the facts, by application of the law and by exercise, where appropriate, of judicial discretion". Also within that exclusive area of judicial power and more difficult to catalogue are some, but by no means all, other functions that have in the past been exercised only by courts. The second conception is of an area of judicial power, within "[t]he borderland in which judicial and administrative functions overlap", and within which a particular act or thing done by a court through the application of a judicial process is directed to an ultimate end that might equally be achieved through the application of a non-judicial process. Beyond those two conceptions lies the area of non-judicial power.
[48] Where the Commonwealth Parliament confers a power to do a particular act or thing on a court, it must be assumed in the absence of some indication to the contrary that the Parliament intends and requires that power to be exercised by that court through the application of a judicial process. If the act or thing is capable of being done through the application of a judicial process, the question whether the power to do it is within the judicial power of the Commonwealth turns on the end to which the act or thing is directed. 
[49] Where what the court is empowered to do is to make an order requiring or permitting the conduct of an inquiry or investigation, the question whether the power to make that order is within the judicial power of the Commonwealth therefore turns on the end to which the inquiry or investigation is directed. That is so notwithstanding that the mere making of the order might in a technical, but artificial, sense be said to quell a controversy about whether the order itself should be made.
[50] Of the import of the endorsement in Davison of the analysis of Holmes J in Prentis, Mason J explained in Pioneer Concrete (Vic) Pty Ltd v Trade Practices Commission that the exercise of a power to compel the provision of information is not inherently an exercise of judicial power but that: "It may constitute an element in the exercise of judicial power when the power is part of the proceedings of the court, its object being to aid the court or the parties to obtain and present evidence in those proceedings. Then the exercise of the power by the court or the parties in proceedings in the court is for the purpose of enabling the court to hear and determine the lis and is, accordingly, incidental to, if not an element in, the exercise of judicial power." 
[51] The position is no different in principle where the power conferred on a court to compel the provision of information has as its object to assist an applicant for the exercise of that power in the pursuit of a claim of legal right which is the subject of a proceeding in another court or which may not yet have become the subject of a proceeding at all. A power of that kind was traditionally exercised by the Court of Chancery in issuing bills of discovery and is now often enough exercised by courts making orders for preliminary discovery in accordance with modern rules of civil procedure. The making of an order for preliminary discovery, as the Full Court of the Federal Court demonstrated in Hooper v Kirella Pty Ltd, fits comfortably within the paradigm case of an exercise of judicial power in that it is directed ultimately to the resolution of a claim of legal right. That is so notwithstanding that the information sought is essential to the pursuit of the claim and notwithstanding that the claim might well be shown by that information when obtained to be incapable of being established.
[52] It is at this point in the analysis that there arises an important question of principle. What if the power conferred on the court to make an order compelling the provision of information is exercisable without any requirement for there to be a lis – in the sense of a claim or controversy as to legal right – in aid of the resolution of which the making of the order is directed? What if, to adopt language used by Gaudron J in Gould v Brown to describe the power to order the examination of an examinable officer in relation to the examinable affairs of a corporation then conferred by ss 596A and 596B of the Corporations Law, it is "simply a power to obtain information"?
[53] Questions of that kind arose in this Court in the exercise of its appellate jurisdiction in Cheney v Spooner and again in Rees v Kratzmann.
[54] In Cheney v Spooner, the appeal was from an order made under s 16 of the Service and Execution of Process Act 1901 (Cth) giving a liquidator leave to serve in Victoria a summons for examination concerning the affairs of a company in voluntary winding up which had been issued by a Master in Equity of the Supreme Court of New South Wales under s 123 of the Companies Act 1899 (NSW). In the course of holding the summons for examination to answer the statutory description in s 16 of a "summons … requiring any person to appear and give evidence … in any civil or criminal trial or proceeding", Isaacs and Gavan Duffy JJ referred to the winding up, which had been initiated by petition to the Supreme Court, as "a distinct judicial proceeding". They said that the summons required the giving of "evidence" in that proceeding on the basis that it provided the liquidator with "the means of obtaining information, that is evidentiary facts, enabling him to come to a conclusion as to ultimate facts" in the discharge of his "responsibility of working out the affairs of the company". No constitutional issue was raised, however, and s 16 was subsequently held not to be confined to process judicial in nature.
[55] In Rees v Kratzmann, the appeal was from a decision of the Full Court of the Supreme Court of Queensland dismissing an appeal from a direction of a single judge of that Court that the respondent, a former managing director, not be allowed to answer a certain question in the course of being publicly examined in relation to the affairs of a company pursuant to an order which had been made under s 250 of the Companies Act 1961 (Q). Preliminary objection was taken to the jurisdiction of this Court to hear the appeal on the ground that, the appeal arising only in the course of a public examination, there was no lis between the parties and that the order appealed from was for that reason not a decree, order, judgment or sentence within the meaning of s 73 of the Constitution. The objection was overruled. Without giving reasons, the Court directed that the hearing of the appeal proceed, thereby treating the order of the Full Court of the Supreme Court as one made in the exercise of judicial power.
[56] One explanation for the outcome of the preliminary objection in Rees v Kratzmann might be that, irrespective of whether the making of the order under s 250 of the Companies Act had been an exercise of judicial power, the question which arose in the course of the examination as to the scope of the order involved a justiciable controversy. The same explanation might be given of the basis on which an application for special leave to appeal was entertained without objection in Mortimer v Brown, and of the basis on which appellate jurisdiction was exercised without objection in Hamilton v Oades, where the issue was whether the common law privilege against self-incrimination was abrogated by the equivalent provision in s 541 of the Companies (New South Wales) Code.
[57] The question of whether a power legislatively conferred on a court to order an examination in relation to the examinable affairs of a corporation is judicial in nature was raised squarely for the consideration of this Court for the first time in Gould v Brown. The issue was whether the power to make such an order, then conferred by ss 596A and 596B of the Corporations Law applying as State legislation under the Corporations (New South Wales) Act 1990 (NSW), was validly conferred on the Federal Court. Only three members of the Court of six – Brennan CJ and Toohey J and (in a separate judgment) Gaudron J – found it necessary to address whether the power was judicial in nature, and all three found it necessary to do so only to the extent that the power was available to be exercised in respect of a corporation that had been the subject of a winding-up order made by the Federal Court. The view of Brennan CJ and Toohey J was that "[t]o the extent that the power to order and conduct examinations is available for exercise in the course and for the purposes of a winding up, it is an incident of the judicial power of winding up and has a judicial character". The view of Gaudron J, more sceptical and tentatively expressed, was to substantially similar effect save that her Honour took the view that the power could only be exercised by the court which had ordered the winding up.
[58] The question was not raised in the appeal to this Court in Spinks v Prentice, in which other issues were raised as to the validity of the conferral on the Federal Court of power under the Corporations Law set out in s 82 and applying as Territory legislation under s 5 of the Corporations Act 1989 (Cth). Gummow and Hayne JJ[85], with whom Gleeson CJ relevantly agreed, expressly declined to address the issue. Gaudron J reiterated[87] the view she had expressed in Gould v Brown
[59] The question was raised again in this Court in Saraceni v Jones, on an application for special leave to appeal from a decision of the Court of Appeal of the Supreme Court of Western Australia. The Court of Appeal had formally answered a question referred for its consideration to the effect that the exercise of power by the Supreme Court to make an order for examination under s 596A of the Corporations Act 2001 (Cth) and to conduct an examination under s 597 in relation to a corporation in receivership and where the property of the corporation is in the possession of a mortgagee or its agent under Pt 5.2 of the Corporations Act constitutes an exercise of the judicial power of the Commonwealth. Refusing special leave to appeal, three members of this Court expressed the view that the actual orders of the Court of Appeal were not attended by doubt. That expression of view is of persuasive value but it does not have precedential effect.
[60] The question of whether the power to make an order for examination under s 596A of the Corporations Act is judicial in nature returned to be squarely raised in this Court in these proceedings in its original jurisdiction, which challenge orders made by the Federal Court for examinations into the examinable affairs of a corporation in voluntary liquidation. At the conclusion of the hearing before the Full Court of this Court, I joined in making orders which included an order formally answering in the negative a question reserved for the consideration of the Full Court asking in unqualified terms whether s 596A of the Corporations Act is invalid as an attempted conferral of non-judicial power on a federal court or on another court exercising federal jurisdiction.
[61] My reasons for considering s 596A of the Corporations Act to be a valid conferral of judicial power embrace neither of two somewhat extreme positions advanced in the course of argument by the defendants and by some who intervened to support validity. The argument at one extreme was that it was sufficient to characterise the power as a judicial power that the examination might yield some information that might be used to pursue some claim of legal right. The argument at the other extreme was that it was sufficient to characterise the power as a judicial power that a broadly analogous power of examination can be seen to have been exercised by courts in the Australian colonies in 1900 under provisions modelled broadly on s 115 of the Companies Act 1862 (UK). The first pays insufficient attention to the importance of constitutional history. The second relies on a misinterpretation of what was said by Kitto J in Davison, which results in a conception of constitutional history that is too narrow.
[62] The separate reasons for judgment of Kitto J in Davison contain the following statement: "It may ... be said that when the Constitution of the Commonwealth prescribes as a safeguard of individual liberty a distribution of the functions of government amongst separate bodies, and does so by requiring a distinction to be maintained between powers described as legislative, executive and judicial, it is using terms which refer, not to fundamental functional differences between powers, but to distinctions generally accepted at the time when the Constitution was framed between classes of powers requiring different 'skills and professional habits' in the authorities entrusted with their exercise."
[63] The statement too readily misinterpreted is that which immediately follows. His Honour said: "For this reason it seems to me that where the Parliament makes a general law which needs specified action to be taken to bring about its application in particular cases, and the question arises whether the Constitution requires that the power to take that action shall be committed to the judiciary to the exclusion of the executive, or to the executive to the exclusion of the judiciary, the answer may often be found by considering how similar or comparable powers were in fact treated in this country at the time when the Constitution was prepared. Where the action to be taken is of a kind which had come by 1900 to be so consistently regarded as peculiarly appropriate for judicial performance that it then occupied an acknowledged place in the structure of the judicial system, the conclusion, it seems to me, is inevitable that the power to take that action is within the concept of judicial power as the framers of the Constitution must be taken to have understood it."
[64] The significance of the second of those statements of Kitto J lies in its connection with the first and in the weight properly to be accorded to his Honour's reference to what had come "by" 1900 "consistently" to be "regarded as peculiarly appropriate for judicial performance". His Honour was writing in the context of considering the characterisation of the power to order sequestration, which had been exercised judicially for centuries.
[65] What Kitto J can be taken to have meant in Davison can only fully be understood by considering what he there said together with what he said subsequently in R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd, to which it will be appropriate in due course to turn. There is no inconsistency.
[66] The appropriate perspective on what Kitto J said in Davison is that adopted by Jacobs J in R v Quinn; Ex parte Consolidated Food Corporation. An argument advanced in that case, relying on what Kitto J had said in Davison, was that the particular function of removing a trademark from a register fell within the exclusive area of judicial power because it had in practice been conferred only on courts between 1875 and 1938.
[67] Rejecting that argument, Jacobs J (with whom Barwick CJ, Gibbs, Stephen, Mason and Murphy JJ relevantly agreed) said: "The historical approach to the question whether a power is exclusively a judicial power is based upon the recognition that we have inherited and were intended by our Constitution to live under a system of law and government which has traditionally protected the rights of persons by ensuring that those rights are determined by a judiciary independent of the parliament and the executive. But the rights referred to in such an enunciation are the basic rights which traditionally, and therefore historically, are judged by that independent judiciary which is the bulwark of freedom."
[68] His Honour continued: "On the other hand the course of legislation in comparatively recent times does not, in itself, provide a foundation for the historical approach. If the legislation requires the exercise of a power to determine questions the determination of which will affect what are traditionally regarded as basic legal rights, the judicial nature of the power springs from the effect which the exercise of the decision-making function under the legislation will have upon the legal rights rather than from the history of similar legislation reposing the function in a judicial tribunal."
[69] The perspective on the significance of history adopted by Jacobs J in Quinn is as important to determining whether a particular function is inherently non-judicial (so as to lie beyond that which is capable of being conferred on a court) as it is to determining whether a particular function is exclusively judicial (so as to be capable of being conferred only on a court). The primary question in each case is not as to how the function might have been exercised in practice at or around 1900. The answer to that narrow temporal question will be relevant, but it cannot be determinative. The aim is not simply to take a snap-shot of the historical position at a moment in time. The fundamental question is as to how the particular function is now to be characterised having regard to the systemic values on which the framers can be taken to have drawn in isolating the judicial power of the Commonwealth and in vesting that power only in courts. The aim is to be faithful to those values.
[70] The task of assigning content to the judicial power of the Commonwealth "is one of construing the Constitution as it stands", Windeyer J explained in Tasmanian Breweries, yet that task of construing the Constitution as it stands is one which it is "impossible to do … on the assumption that Montesquieu had never lived … or that those who framed our Constitution did not copy s 71 from s 1 of Art III of the Constitution of the United States". Of the concept of judicial power to which s 71 refers, his Honour went on to state: "The concept seems to me to defy, perhaps it were better to say transcend, purely abstract conceptual analysis. It inevitably attracts consideration of predominant characteristics and also invites comparison with the historic functions and processes of courts of law."
[71] Windeyer J was explaining that the concept of the judicial power of the Commonwealth needs to be understood by reference to the reason for that power being separated and reposed only in courts of law. He was also explaining that the reason for the judicial power of the Commonwealth being separated and reposed only in courts of law needs to be understood against the background of the at first common and then divergent constitutional histories of the United Kingdom and the United States, and the powerful ideas which that history generated.
[72] That explanation by Windeyer J in Tasmanian Breweries is wholly consistent with the frequently quoted statement of Kitto J in the same case that "a judicial power involves, as a general rule, a decision settling for the future, as between defined persons or classes of persons, a question as to the existence of a right or obligation, so that an exercise of the power creates a new charter by reference to which that question is in future to be decided as between those persons or classes of persons". That description was of what I have already described as the paradigm case of an exercise of judicial power. Importantly, Kitto J added that "[i]t is right, I think, to conclude from the cases on the subject that a power which does not involve such a process and lead to such an end needs to possess some special compelling feature if its inclusion in the category of judicial power is to be justified".
[73] By framing his description of judicial power in Tasmanian Breweries in "general and ahistorical terms", Kitto J cannot be taken to have been ignoring the importance of what he had described in Davison as "distinctions generally accepted at the time when the Constitution was framed". Nor can he be taken to have been ignoring or marginalising the lessons of history. With reference to his Honour's description of the paradigm case of an exercise of judicial power, and similar descriptions that are to be found in other cases, Professor Zines observed: "Indeed, in a sense, the concept of judicial power referred to above is itself derived from historical examination, that is, of what courts have done. From this has been distilled those features that are pre-eminently or exclusively judicial, which have been arrived at by having regard to social values and the reasons for preserving the separateness of judicial power." His Honour's requirement, outside the paradigm case, for "some special compelling feature" to justify inclusion in the category of judicial power expressly invokes a normative frame of reference.
[74] Of similar effect to the observations of Windeyer J in Tasmanian Breweries and Jacobs J in Quinn is an observation of Cardozo CJ which was quoted by Mason and Deane JJ in Hilton v Wells and (in part) by French CJ and Kiefel J in Wainohu v New South Wales as applicable to the Australian Constitution: "From the beginnings of our history, the principle has been enforced that there is no inherent power in Executive or Legislature to charge the judiciary with administrative functions except when reasonably incidental to the fulfilment of judicial duties. ... The exigencies of government have made it necessary to relax a merely doctrinaire adherence to a principle so flexible and practical, so largely a matter of sensible approximation, as that of the separation of powers. Elasticity has not meant that what is of the essence of the judicial function may be destroyed". Not unimportant for present purposes is that Cardozo CJ made that observation in the context of holding invalid, as incompatible with the separation of powers under the Constitution of the State of New York, a statutory provision which allowed the Governor, in any proceeding for the removal by him of a person from public office, to direct that evidence be taken before a justice of the Supreme Court.
[75] What then does history relevantly teach about the relationship between a power of investigation or inquiry and the essence of the judicial function?
[76] Baron de Montesquieu's The Spirit of Laws was first published in 1748. "Of the Constitution of England", he then famously observed (according to an English translation of 1751): "Again, there is no liberty, if the power of judging be not separated from the legislative and executive powers. Were it joined with the legislative, the life and liberty of the subject would be exposed to arbitrary controul; for the judge would be then the legislator. Were it joined to the executive power, the judge might behave with all the violence of an oppressor."
[77] Borrowing from and providing "an essentially English interpretation of Montesquieu", Sir William Blackstone wrote in the first book of his Commentaries on the Laws of England, published in 1765: "In this distinct and separate existence of the judicial power ... consists one main preservative of the public liberty; which cannot subsist long in any state, unless the administration of common justice be in some degree separated both from the legislative and also from the executive power. Were [judicial power] joined with the legislative, the life, liberty, and property, of the subject would be in the hands of arbitrary judges, whose decisions would be then regulated only by their own opinions, and not by any fundamental principles of law; which, though legislators may depart from, yet judges are bound to observe. Were it joined with the executive, this union might soon be an overballance for the legislative. For which reason, by the statute of 16 Car I c 10 which abolished the court of star chamber, effectual care is taken to remove all judicial power out of the hands of the king's privy council; who, as then was evident from recent instances, might soon be inclined to pronounce that for law, which was most agreeable to the prince or his officers. Nothing therefore is more to be avoided, in a free constitution, than uniting the provinces of a judge and a minister of state."
[78] In Huddart, Parker & Co Pty Ltd v Moorehead Isaacs J referred to that passage, amongst other passages, in Blackstone as "a key" to the meaning of the judicial power of the Commonwealth. After quoting that passage in Blackstone, together with statements concerning the separation of the judicial power of the Commonwealth in R v Kirby; Ex parte Boilermakers' Society of Australia made by a majority of this Court and in R v Richards; Ex parte Fitzpatrick and Browne (the first made in the context of emphasising the role of the courts in maintaining the federal system and the second emphasising the role of courts more generally in determining whether the other arms of government had acted in "excess of power"), Deane J said in Re Tracey; Ex parte Ryan: "Therein lie the main point and justification of the doctrine of the separation of judicial from executive and legislative powers upon which the Constitution is structured. To ignore the significance of the doctrine or to discount the importance of safeguarding the true independence of the judicature upon which the doctrine is predicated is to run the risk of undermining, or even subverting, the Constitution's only general guarantee of due process."
[79] Blackstone's linking of the separation of judicial power to the dissolution of the Court of Star Chamber by the Habeas Corpus Act 1640 is for present purposes significant. There was a time, in the seventeenth century, when the Court of Star Chamber, a judicial arm of the Privy Council, acted as "the curious eye of the state and king's council prying into the inconveniencies and mischiefs which abound in the Commonwealth". Its procedures notoriously included the "oath ex officio" which the Puritan John Lilburne, who famously refused to take it in 1637, described as "the inquisition Oath". By that procedure, without necessity for prior particularisation of the subject-matter on which he was to be examined, a defendant would be told to swear at the outset of a proceeding "[t]hat you shall make true answer to all things that are asked of you" and would be punished for contempt if he refused. The Habeas Corpus Act 1640, after providing for the dissolution of the Court of Star Chamber, went on to provide that "from henceforth no Court, Council or Place of Judicature, shall be … constituted … which shall have, use or exercise the same or the like Jurisdiction" as well as to declare that neither the King nor his Privy Council were to have jurisdiction, power or authority "to examine or draw into question, determine or dispose of the Lands, Tenements, Hereditaments, Goods or Chattels of any the Subjects of this Kingdom; but that the same ought to be tried and determined in the ordinary Courts of Justice, and by the ordinary Course of the Law".
[80] From that time forward the general rule, to which it is possible that exceptions might be found were the books to be trawled, has been that courts administering common law do not exercise common law or statutory powers to inquire into subject-matters unconnected with the determination of some claim of legal right. A "court of justice" has been conceived of as distinct from a court of investigation, such as a coroner's court or a court of marine inquiry.
[81] The issuing of a search warrant, for example, has never been conceived of as an exercise of judicial power or as of a nature that is susceptible of becoming an exercise of judicial power even if it might be capable of being exercised judicially. Even the conduct of a preliminary inquiry to determine whether a sufficient basis exists to commit a prisoner for trial – a "plainly inquisitorial" feature of criminal process undertaken by justices of the peace since the middle of the sixteenth century having "the closest, if not an essential, connexion with an actual exercise of judicial power" – has been seen not itself to be an exercise of judicial power but rather to be the performance of an executive or ministerial function: the inquisitor acting not as a "Court of Justice" but as "an officer deputed by the law to enter into a preliminary enquiry"[129].
[82] In Rees v Kratzmann, Windeyer J explained: "There is in the common law a traditional objection to compulsory interrogations. … The continuing regard for this element in the lawyer's notion of justice may be, as has been suggested, partly a consequence of a persistent memory in the common law of hatred of the Star Chamber and its works. It is linked with the cherished view of English lawyers that their methods are more just than are the inquisitional procedures of other countries." His Honour immediately continued: "But, strong as has been the influence of this attitude upon the administration of the common law, of the criminal law especially, it must be admitted that in the Chancery Court it had less place: and in bankruptcy jurisdiction it has been largely displaced."
[83] The extent to which equity, administered by the Court of Chancery, was a counterpoise to the common law in this respect should not be overstated. A bill of discovery in equity, as I have already noted, was a process directed to the pursuit of a claim of legal right. It was not available to assist the prosecution or defence of a criminal action. There was, moreover, by 1736, "no rule more established in equity, than that a person shall not be obliged to discover what will subject him to a penalty, or any thing in the nature of a penalty".
[84] A unifying theme of the core area of equitable jurisdiction exercised exclusively by the Court of Chancery might well be said to have been supervision of administration. That is a particularly apt description of the role of a court administering equity in relation to the Court of Chancery's most significant creation – suggested by Professor Frederic Maitland at the turn of the twentieth century to be "the most distinctive achievement of English lawyers" – the trust. Fundamental to the law of trusts is that the court has jurisdiction to supervise, and in appropriate circumstances to intervene in, the administration of a trust. Indeed, a test of the validity of a trust is that it must be of such a nature that it can be administered by a court. Appurtenant to that jurisdiction is a capacity for a court on application in appropriate circumstances both to advise a trustee and to compel the provision of information by a trustee.
[85] Supervision of administration is also an apt description of the role of a court administering equity in relation to "one of the oldest remedies" in the Court of Chancery – the appointment of a receiver, who as an officer of the court and subject to its direction is "to take possession of, get in, or recover, property for the benefit of the persons who are ultimately determined to be entitled to it".
[86] The longstanding statutory jurisdiction of the Court of Chancery to supervise the administration of insolvent estates was of the same ilk. In In re Condon; Ex parte James, a trustee in bankruptcy was described as "an officer of the Court", having "inquisitorial powers", whose duty it was "to hold money in his hands upon trust for its equitable distribution among the creditors".
[87] The jurisdiction with respect to companies in winding up, which the Court of Chancery came to exercise in the middle of the nineteenth century, fitted much the same pattern. The winding up of a company has appropriately been described in generic terms as a process, "comparable to an administration in equity", that "consists of collecting the assets, realising and reducing them to money, dealing with proofs of creditors by admitting or rejecting them, and distributing the net proceeds, after providing for costs and expenses, to the persons entitled".
[88] The legacy of the jurisdiction so exercised by or conferred on the Court of Chancery, as Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ remarked in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia, is that in modern times "courts are well accustomed to the exercise of supervisory jurisdiction upon applications by trustees, receivers, provisional liquidators and others with the responsibility for the conduct of administrations".
[89] Within the context of administration, the statutory powers first reposed in the Court of Chancery in the middle of the nineteenth century to make orders for the examination of bankrupts and of officers and other persons in relation to the affairs of companies in winding up, which came correspondingly to be conferred on the Supreme Courts of the Australian colonies by the end of the nineteenth century, could not be regarded as anomalous. But they were regarded as "extraordinary" and could "only be described as being sui generis".
[90] Of the power to make an order for the examination of a bankrupt, Jessel MR said in In re Wright; Ex parte Willey: "Now that is a very grave power to entrust to any Court or any man, viz, power to summon any other man whom you suspect (for mere suspicion will do) to be capable of giving information, and to get any information from him, although that information may be extremely hostile to the interests of the man himself. It is a power which, so far as I know, is found nowhere except in bankruptcy and the winding-up of companies (which is a kind of bankruptcy); it is a very extraordinary power indeed, and it ought to be very carefully exercised." In In re Greys Brewery Co, Chitty J referred to s 115 of the Companies Act 1862 (UK) – the provision originally conferring power on the Court of Chancery to order an examination in relation to the affairs of a company in winding up – as the "'Star Chamber' clause".
[91] How then, in light of that history, should this Court approach the characterisation of a power to order an examination conferred on a court by what those who support its validity argue to be a modern equivalent of that "'Star Chamber' clause"?
[92] We must be careful not to slip into "Montesquieuan fundamentalism". We must bear in mind that the Constitution as a whole was framed as "an instrument of government meant to endure and conferring powers expressed in general propositions wide enough to be capable of flexible application to changing circumstances". We must recognise that "[t]he modern regulatory state arrived after 1900", with consequences which include that "modern federal legislation creates rights and imposes liabilities of a nature and with a scope for which there is no readily apparent analogue in the pre-federation legal systems of the colonies" and that "[d]eciding whether a governmental power or function is best exercised administratively or judicially is a regular legislative exercise". We must also be sensitive to the consideration that "the exercise of powers, independently, impartially and judicially, especially when such powers affect the liberty of the individual, would ordinarily be regarded as a good thing, not something to be avoided".
[93] Fidelity to the values which inform the separation of the judicial power of the Commonwealth nevertheless requires that we be extremely cautious about accretion to the judicial power of a power to inquire which is unrelated or tenuously related to the core judicial function of quelling controversies about legal rights. To admit that an inquiry into a subject-matter is in the public interest is very different from admitting that the conferral of a power to conduct such an inquiry on a court accords with the constitutional structure that has been created to secure the enduring interests of the Commonwealth. Our job is to take a long-term view.