directors counsel

Many occupations and business activities now require the person or company involved to satisfy a government official — either positively or negatively — that they are “fit and proper” to undertake them. These requirements range from providing financial services to using certain agricultural chemicals to acting as trustee of a self-managed superannuation fund. Professional bodies and associations — ranging from the Certified Practising Accountants to the National Rugby League — may have similar requirements.

Positive vetting requires proof the people concerned are fit and proper at the time a licence or approval is sought. Negative vetting allows an official to remove or ban the person or company involved if they become aware of facts or circumstances indicating they are not fit and proper for the relevant activity.

This is where someone’s criminal past can become relevant. In deciding whether a person is fit and proper to undertake an activity, or to be a director or officer of a company that does so, administrative decision-makers are routinely required to investigate the person’s criminal record. But the law — specifically Part VIIC of the Crimes Act 1914 (Cth) — requires the decision-maker to disregard “spent convictions”. Criminal convictions are treated as spent if, among other circumstances, the person was not sentenced to imprisonment or was sentenced to imprisonment for 30 or fewer months, and the statutory “waiting period” — 10 years in the case of an adult offender — has passed.

The relevance of spent convictions in occupational licensing was examined in May by the High Court of Australia in Frugtniet v Australian Securities and Investments Commission [2019] HCA 16.

In 2014, a delegate of the Australian Securities and Investments Commission (ASIC) had made an administrative decision banning the applicant, Mr Frugtniet, from engaging in credit activities under the National Consumer Credit Protection Act 2009 (Cth) (NCCPA).

The applicant had a criminal record. In 1978, he had been convicted in the United Kingdom on numerous counts of handling stolen goods, forgery, obtaining property by deception and theft, and had served two years in prison. In 1997, he was found guilty in the Broadmeadows Magistrates’ Court, Victoria, of obtaining property by deception in relation to the issue of airline tickets and was fined without a conviction being recorded.

In making the original banning decision, the ASIC official had not taken his criminal history into account. The official was bound by Part VIIC of the Crimes Act, which provides that a person whose conviction is spent is not required in these circumstances to disclose the fact that the person has been charged with or convicted of the offence to any Commonwealth authority, and a Commonwealth authority which knows or could reasonably be expected to know that the person is not required to make that disclosure is prohibited from taking account of the fact that the person was charged with or convicted of the offence.

Criminal convictions are treated as spent if, among other circumstances, the person was not sentenced to imprisonment or was sentenced to imprisonment for 30 or fewer months.

The applicant applied to have ASIC’s decision reviewed by the Administrative Appeals Tribunal (AAT). The AAT is empowered to review the decisions of Commonwealth officials under more than 400 pieces of legislation, including many requiring officials to apply a fit and proper test as in the NCCPA.

The process of administrative review by the AAT is not always well understood. The AAT’s legislation requires it, in effect, to re-exercise the functions of the original administrative decision-maker. The AAT must determine whether the original decision is the correct or preferable one. It does so on the material before it, not on the material before the original decision-maker — which means it may sometimes take into account new evidence. This includes evidence of events subsequent to the original decision, but only if and to the extent it is relevant to the question before the original decision-maker. The effect is that the decision is remade as at the time it is before the AAT. But the AAT is subject to the same general constraints as the original decision-maker and should ordinarily approach its task as though it were performing the relevant function of the original decision-maker in accordance with the law as it applied to the decision-maker at the time of the original decision.

On review of Frugtniet’s matter in 2015, the AAT found on the material before it that it had reason to believe the applicant was not a fit and proper person to engage in credit activities and affirmed the decision of the delegate. In reaching that decision, the AAT took into consideration matters of history that included his spent convictions.

This raised an interesting question of law about whether, in reviewing the ASIC official’s decision, the AAT was entitled to consider matters that ASIC was not. It arose in part because the Crimes Act includes a provision to the effect that the requirement not to ask about, and to disregard, spent convictions does not apply to “a court or tribunal established under a Commonwealth law, a state law or a territory law, for the purpose of making a decision, including a decision in relation to sentencing”.

At first instance in the Federal Court and again on appeal in the Full Court of the Federal Court, the applicant was unsuccessful in having the decision of the AAT overturned. However the seven judges of the High Court held, in two separate judgments, that the AAT was wrong in taking his spent convictions into account. In so doing, the court relied in part on an earlier decision of the NSW Court of Appeal concerning a decision to refuse an applicant a gun licence — Kocic v Commissioner of Police, NSW Police Force (2014) 88 NSWLR 159. In their view, the function of the original decision-maker was to decide whether the person was fit and proper having regard to the matters he or she was permitted by the legislation to consider, which expressly excluded spent convictions. It was seen as “counterintuitive” that an applicant for merits review of an administrative decision should be placed in a more disadvantageous position in relation to spent convictions than when before the original decision-maker.

So the High Court sent Frugtniet’s matter back to the AAT to redo its review of ASIC’s banning decision, to see whether the banning should stand without taking his criminal history into account.

When the rules on spent convictions were introduced into the Crimes Act in 1989, the parliament said it was to “give people a chance to live down a minor criminal conviction”. The regime has since been wound back to permit criminal history information to be disclosed and taken into account in assessing the suitability of persons for work with children or people with disabilities.

The steady expansion of “fit and proper” requirements across the economy means that many businesses and not-for-profits will confront them at some stage. The developing law on their application is always worth watching.