Federal Court Justice Antony Nicholas has refused an application for judicial review of a ministerial decision to deny an injured man an act-of-grace payment after he could not enforce a $4 million judgement against unlicensed insurers.

Luke Quintano was shot in the head in a 2002 Sydney nightclub fight. The court heard he became paralysed on the right side of his body, lost an eye and continued to experience seizures. He became “permanently incapacitated” with “no capacity for remunerative employment”.

Mr Quintano sued nightclub owner BW Rose Pty Ltd and the NSW Supreme Court awarded him $4,063,802.50 in damages in June 2009.

BW Rose went into liquidation during the proceeding. Its insurer was Solomon Islands-based International Unity Insurance (General) Ltd (IUIG), through its Australian agent International Unity Insurance Pty Ltd (IUI).

IUIG was incorporated in the Solomon Islands and, until April 2002, licensed to provide insurance in that country.

The Australian Securities and Investments Commission (ASIC) had successfully applied to the Federal Court to wind up both insurers in 2004. It was common ground Mr Quintano could not recover any damages from BW Rose or IUIG.

In 2011, Mr Quintano’s application to the federal finance minister for an act-of-grace payment under section 33 of the Financial Management and Accountability Act 1997, which gives the minister discretion in “special circumstances”, was rejected.

Justice Nicholas said what constituted “special circumstances” justifying an act-of-grace payment was “for the minister to determine having regard to any matter he or she considers relevant consistent with the subject, scope and purpose of the Act.

“In exercising the discretion under s33 the minister must not make a decision that is unreasonable in the legal sense ... It must not be capricious, plainly unjust or otherwise involve an abuse of power.” Justice Nicholson said Mr Quintano did not suggest the minister’s decision was “unreasonable in the legal sense”.

Mr Quintano’s principal argument was the minister did not question whether special circumstances existed to justify the payment because he “did not recognise there may be a moral (as opposed to a purely legal) dimension in deciding whether or not to make an act-of-grace payment”.

But he said the minister seemed to have proceeded “on the basis that, in the absence of legal liability, there was no reason for the government to accept any moral responsibility for what occurred such as to justify making an act-of-grace payment to Mr Quintano”.

Mr Quintano alleged ASIC and the Australian Prudential Regulation Authority (APRA) had failed to act in any “positive and meaningful sense” against IUIG or IUI “despite being aware they were unable to meet their commitments and liabilities and may have engaged in criminal activity”.

A letter from Mr Quintano’s solicitors to the minister said: “APRA was aware in March 2002 that IUIG was experiencing financial and other problems and ASIC had received complaints regarding the companies not paying their insurance liabilities.

“The scheme in relation to carrying on insurance business in Australia without the appropriate licences by IUIG and IUI, as found by the court, should have been prevented and detected by APRA and ASIC much earlier. This would have had the effect of preventing insurance policies of this nature being sold in this country from March 2002 onwards.”

Mr Quintano sought a declaration the minister’s decision was affected by an error of law, and an order setting the decision aside so his application might be considered “afresh and in accordance with law”.

The minister’s statement of reasons said he did not accept Mr Quintano’s submission the Federal Government should reimburse him because the government’s regulatory regime had failed in relation to IUIG.

“I do not consider the Australian Government has assumed responsibility for every situation arising because a person or organisation evades a regulatory regime,” he said.

Justice Nicholas said: “I am not persuaded [the minister] failed to have regard to what [Mr Quintano] described as regulatory failure, whether it be one which might be attributed to either the legislature, the relevant government agencies, or some combination thereof.”

He said the minister found Mr Quintano’s argument BW Rose might have had adequate cover in place if the regulators had acted earlier was “speculative”.

He said the minister found Mr Quintano was “essentially in no different position” to any other innocent person who had been injured but could not enforce a damages award because of the guilty party’s lack of assets or insurance.

“One may agree or disagree with that characterisation of [Mr Quintano’s] plight but it was one the [minister] was entitled to adopt and act on when exercising the very broad discretion conferred by s33.”

He dismissed the application with costs.

(Quintano v Minister  for Finance and Deregulation [2014], FCA 531, 23/05/2014)

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