VBN and Ors and Australian  Prudential Regulation Authority and Ors contains a detailed analysis of APRA’s powers to decide that a director is not "fit and proper". In the decision the AAT reviewed decisions by the Australian Prudential Regulation Authority (APRA), to disqualify seven of nine former directors of a Trustee of a superannuation fund (Trustee) as a director of the Trustee.

APRA had made its decisions on the basis that the Trustee had contravened the Superannuation Industry (Supervision) Act 1993 (SIS Act) and that the nature or seriousness of the Trustee’s contraventions provided grounds for the disqualification of each of them.

In relation to two of them, APRA also decided that two of them were not fit and proper persons to be responsible officers of a body corporate that is a trustee and disqualified them under s 120A(3).

The AAT set aside the decisions after finding that the Trustee had not contravened the SIS Act and that it was not satisfied that two of them were not fit and proper persons to be responsible officers of a body corporate that is a trustee. The effect of the setting aside all of APRA’s decisions is that none of the applicants is a disqualified person within the meaning of the SIS Act.

In respect of the 2 directors deemed not fit and proper the AAT said there were 2 issues:

• what is meant by the expression “fit and proper”?
• did the 2 directors, or either of them, have a conflict of the duties they owed to the Employer and those they owed as Directors of the Trustee?

The decision analyses the investigatory powers of APRA and the construction of the section which deals with disqualification of a person who is not fit and proper:

Section 120A(3) of the SIS Act encompasses two steps. The first is to decide whether or not either VBN or VBW is a fit and proper person
to be a trustee, investment manager or custodian or a responsible officer of a
body corporate that performs one of those functions. If we decide that they are not, we must take
the second step to decide whether or not they, or either of them, should be
disqualified. We must take that second
step because there is, inherent in the use of the word “may” in s 120A(3) a discretion. [para 519]

a person who was a
responsible officer of a trustee at the time that it contravened the SIS Act,
and the nature, seriousness or number of the contraventions provided grounds
for disqualification of that person under s 120A(2), would not be a fit and
proper person. A similar analysis would
mean that a person who had contravened the SIS Act in circumstances justifying
disqualification under s 120A(1) would not be a fit and proper person.[para 528]

That there is a
potential for conflict between the interests of the directors and their role is
an integral part of the scheme established by the SIS Act. … The potential
for conflict by virtue of their appointment alone does not mean that there is a
conflict of the sort that means that an individual director is in breach of a
fiduciary duty. There must be something
more that shows that there is in fact a conflict of duty between the interests
of the directors of a trustee of a fund. This must be determined by reference to the circumstances and not by
reference to a formula or recitation of principle. Do the circumstances show that a director was
in a position in which that director’s interests or those of another for whom
he or she had responsibility or to whom he or she owed a duty conflicted with
the interests of the trustee?…

Having regard to all
of these matters, we are satisfied that VBW disclosed his interest and the
nature of his interest as a result of his position with the Employer. Taken in the context of their appointments
and their decisions to give him and others the task of dealing with the
Employer, he did so in sufficient detail to reveal his position and to ensure
that the Directors were fully informed of all the information that they needed
to make a proper decision. We are
satisfied that he was not in a position of conflict of interest…

the Trustee’s
Board had all of the information that they needed in order to make a decision
about what it should do about the Employer’s Offer. VBN was not in possession of any information
that it did not have but that it should have known or that could have assisted
it with its deliberations. There is no
evidence that satisfies us that he influenced, or attempted to influence, the
course of the Board’s deliberations.