In the recent decision of the Full Federal Court of Australia in Walker v Members Equity Bank Ltd  FCAFC 184 (per Wigney, Lee and Abraham JJ), the Full Court dismissed an appeal against the first instance decision of Mortimer J finding that s 12GB(6) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) imposed a restrictive three year limitation period. This decision confirms that criminal prosecutions against corporations under the ASIC Act for false or misleading representations must be commenced within three years after the offence occurred.
Key takeaways from Walker v Members Equity Bank
For conduct contravening s 12DB of the ASIC Act and like provisions:
- a criminal prosecution must be commenced within three years after the commission of an offence under s 12GB(1) of the Australian Securities and Investments Commission Act 2001 (Cth);
- ASIC will likely be under significant time pressure to complete its investigations where it is contemplating a criminal prosecution; and
- where three or more years have elapsed since the commission of the offence, ASIC will be forced to pursue civil penalty proceedings if those proceedings are commenced within six years.
Recap of Walker v ME Bank case
On 25 May 2021, 62 criminal charges were filed against Members Equity Bank Limited (ME Bank) in the Federal Court of Australia alleging that ME Bank had made false and misleading representations and failed to give written notice to home loan clients in relation to annual interest rates and minimum repayment amounts between 2016 and 2018.
On 15 September 2021, the Court at first instance made orders including reserving a separate question which required it to consider whether some of the alleged offences by ME Bank were statute-barred by reason of s 12GB(6) of the ASIC Act.
The issue for determination by the Court at first instance was whether s 12GB(6) imposed a hard limitation period or whether it was merely facultative. In a decision dated 15 December 2021 the Court found that s 12GB(6) was not facultative and imposed a restrictive time limit.
On appeal the Full Court considered whether s 12GB(6) imposed a three-year limitation period in respect of any prosecution for an offence against s 12GB(1) or whether it was merely facultative or permissive, in the sense that it extended any shorter limitation period that would otherwise apply by virtue of some other statutory provision to three years, but did not impose any limitation period where the limitation period that would otherwise apply is longer than three years.
The sole ground of appeal was that the primary judge “erred in construing s 12GB(6) of the [ASIC Act] as requiring, in every case to which the section applies, a prosecution to be commenced within three years after the commission of an offence”.
The Full Court held that the separate question was correctly answered by the primary judge, the effect of s 12GB(6) of the ASIC Act, properly construed, was to create a limitation period of three years in respect of offences against s 12GB(1) of the ASIC Act and it is not open to ASIC to commence a prosecution for an offence against s 12GB(1) of the ASIC Act if the offence is alleged to have been committed more than three years before the commencement or purported commencement of the prosecution ().
In so finding the Full Court:
- rejected the prosecutor’s submission and heavy reliance on the fact that s 12GB(6) used the word “may”, not “must”, “must only”, or “may only” and its apparent suggestion that because of the use of the word “may”, a prosecutor could, but need not, commence the prosecution within three years (, - and ).
- considered the legislative history of s 12GB(6) (-) and found it was “a particularly important contextual consideration in construing the provision” because it offered “no support whatsoever for the differential operation of s 12GB(6) suggested by the prosecutor” and supported “the proposition that the predecessor to s 12GB(6) was intended to provide the applicable limitation period for all prosecutions to which the provision applied” (). The Full Court held (at ) it was:
“tolerably clear from the legislative history that s 79(6) [of the Trade Practices Act] was originally intended to provide a three-year “hard” limitation period which applied to all offences against Part V of the Trade Practices Act in lieu of the 12-month limitation period which would otherwise have applied by reason of s 21 of the Crimes Act. There is nothing to suggest that s 79(6) of the Trade Practices Act was intended to have the more restricted operation contended for by the prosecutor – that it would cease to apply if s 21 of the Crimes Act was amended to provide a longer limitation period than that which would otherwise apply by virtue of s 79(6), or that it would only continue to apply in circumstances where there was a shorter limitation period in some other legislation which would otherwise apply to offences under s 79(1) of the Trade Practices Act. There is nothing to suggest that s 12GB(6) of the ASIC Act, which essentially mirrored the terms of s 79(6) of the Trade Practices Act, was intended to have any different effect or operation to s 79(6) when it was transplanted into the ASIC Act as part of the broader amendments enacted in 1998.”
- had regard to several other potentially relevant contextual considerations including that s 12GB is effectively a “self-contained” provision (-) and the identical wording in s 12GB(6) and s 12GBC(2) of the ASIC Act and the fact that the latter section had been construed as providing a “hard” limitation period together with the improbable legislative intention that s 12GB(6) would have a different meaning or operation to s 12GBC(2) ().
The Full Court also considered, but did not accept, the prosecutor’s contention that her construction would best achieve the purpose or object of sub-division D of division 2 part 2 of the ASIC Act, which was said to be “about consumer protection” and “prosecuting those who contravene the norms of conduct in Subdivision D” (). The Court considered that focussing on a general legislative purpose did not assist and may even be a distraction in resolving questions of construction in respect of specific provisions (). The Court was also not persuaded that it could be said that the ASIC Act could be said to pursue “at all costs” the general purpose identified by the prosecutor () and, in any event, it did not “greatly assist” in construing s 12GB(6) ().
The Full Court also considered the other authorities that were advanced at first instance in support of the prosecutors case (namely, Oates, Parker, Seeto, Sadie Ville and on appeal Deloitte Touche Tohmatsu) and found that the primary judge was correct to find that those decisions were distinguishable and did not materially assist the prosecutor’s case (- and ).
Final decision on 3 year time limitation period
The Full Court’s decision in Walker v Members Equity Bank Ltd  continues the line of authority that s 12GB(6) of the ASIC Act is a “hard” or restrictive time limit on the bringing of a prosecution under s 12GB(1) of the ASIC Act. Unless and until appealed further, the practical consequences of this decision continue to include:
- that corporations cannot be criminally prosecuted for contraventions of the conduct to which s 12GB(1) refers if those alleged contraventions occurred three or more years ago; and
- ASIC must now conclude any investigation into alleged contraventions of the conduct to which s 12GB(1) refers promptly or risk being time barred.