In Australia’s heavily regulated economy, companies are increasingly the subject of the coercive information-gathering powers of regulators. The power of regulators to issue notices for the purpose of gathering information raises numerous important compliance issues for companies. Freehills has recently provided a submission to the Administrative Review Council (ARC) on a draft report which considers the need for reform in this area.
Regulators and Powers
It has been estimated that there could be ‘up to 600 regulators Australia-wide’, including Commonwealth, state and territory governments, specialist industry bodies, ministerial councils, standard-setting bodies and trade associations.
Many of the regulators have coercive information-gathering powers which allow them to:
- seek information
- require the provision of documents
- enter premises, and
- call people to attend and give evidence at examinations.
The Australian Competition and Consumer Commission (ACCC), the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO) have these types of powers.1
The ARC Inquiry
The ARC has prepared a draft report which considers the coercive information-gathering powers of six agencies including the ACCC, APRA, ASIC and the ATO. Click here to view the ARC’s draft report.
A submission has been made by Freehills to the ARC.
- argues that the minimum threshold statutory trigger test for issuing a coercive information-gathering power notice should be ‘a belief based on reasonable grounds’
- advocates the compulsory preparation of agency papers to assess if and when such a power is to be exercised by an agency
- stresses the importance of a consultative approach between an agency and an individual or corporation before a notice is issued
- details those matters which should be contained in any notice and legislative requirements in relation to examinations
- highlights the importance of legal professional privilege and the view that the right to claim this privilege should be confirmed by general legislation
- suggests that an agency ought not be able to rely on its powers if proceedings have been commenced (it having general access to the process of the court) and notes the importance of likely compliance costs in deciding to issue a notice
- describes those circumstances where information obtained via a notice can be exchanged between agencies
- notes that, consistent with freedom of information legislation, agency manuals should be publicly available, and
- discusses various matters that need to be taken into account in determining the accountability of agencies.
The Use of Information Obtained Coercively by an Agency
An important issue in this context is the extent of the restriction, if any, on a government agency using the information it has obtained by means of its coercive powers. If a regulator obtains information for general purposes can it then use that information to investigate a possible contravention of legislation or for some other purpose? When an agency has gathered information and considers that information to be relevant to the activities of another agency, can that information be passed to the second agency for its use? The answers to these questions involve a close consideration of the terms of the statutory powers.
A recent attempt to restrict the use of documents obtained by an agency, but one which failed, is to be found in the High Court decision of X v Australian Prudential Regulation Authority2. This case arose from the failure of the HIH Insurance Group and the royal commission which followed. Having obtained documents and the transcript of oral evidence presented to the HIH Royal Commission, APRA sought to use the material to embark on disqualification procedures under the Insurance Act against two members of the senior management of Z (a German corporation engaged in the business of insurance).
Z, and the two employees, sought to bring to a halt the APRA investigation. They did so by commencing proceedings under section 39B of the Judiciary Act asserting, amongst other things, that section 6M of the Royal Commissions Act prevented the use of any information obtained from the HIH Royal Commission by APRA. The High Court rejected this argument as a matter of statutory construction finding that what APRA proposed to do was for ‘the proper discharge of APRA’s statutory powers and functions’.
While this challenge failed, it is not the case that agencies are unfettered in their ability to use information obtained by them pursuant to their coercive information-gathering powers. Express and implied limitations can apply. Indeed, in some circumstances the power to issue a notice requiring the provision of information, or documents or to attend an examination may have been spent entirely. This can occur when an agency attempts to use its powers when there are relevant court proceedings already on foot: eg Brambles Holdings Ltd v Trade Practices Commission (No 2) (1980) 32 ALR 328.
Also, it is not necessarily the case that an agency may use information lawfully obtained through compulsion for any purpose within its powers and functions (albeit that the information has not been passed to a second agency). However, some agencies argue that they have the power to use information, once obtained, for any of their statutory purposes: eg in the case of ASIC, ASIC relies on section 127(3) of the ASIC Act. An express use entitlement is intended to be included in the proposed National Gas Law (section 61) and the National Electricity Law (section 28Z).
Some Matters to Think About
If an agency serves an notice which seeks information, or documents or requires someone to attend an examination questions may include:
- why has the notice been issued?
- what is the source of the power being used by the agency?
- has that power been used lawfully?
- is there room to debate or negotiate the terms of the notice? A notice might, for example, require the searching of back up computer tapes
- how might the agency use any material it obtains?
- what are the likely costs involved in complying with the notice?
- can privilege be claimed to prevent access to information or material or to limit its subsequent use?
1. The Commonwealth Taskforce on reducing regulatory burdens; Rethinking Regulation; Report of the Taskforce on Reducing Regulatory Burdens on Business (January 2006), 7.
2.  HCA 4 (21 February 2007).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.