Clements v Bower, Barry, Dwyer, NCSC and Caswell
[1990] TASSC 33
•7 August 1990
Serial No 28/1990
List "A"
COURT: SUPREME COURT OF TASMANIA (FULL COURT)
CITATION: Clements v Bower, Barry, Dwyer, NCSC and Caswell [1990] TASSC 33; A28/1990
PARTIES: CLEMENTS
v
BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
YAXLEY
v
BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
ROUSE
McQUESTIN
v
BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
FILE NO/S: 133/1989
134/1989
135/1989
DELIVERED ON: 7 August 1990
DELIVERED AT: Hobart
JUDGMENT OF: Neasey and Cox JJ
Judgment Number: A28/1990
Number of paragraphs: 30
Serial No 28/1989
List "A"
File Nos 133/1989134/1989
135/1989
CLEMENTS v BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
YAXLEY v BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
ROUSE AND McQUESTIN v BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
REASONS FOR JUDGMENT FULL COURT
NEASEY J
COX J
7 August 1990
Order of the Court
Appeal dismissed
Serial No 28/1989
List "A"
File Nos 133/1989134/1989
135/1989
CLEMENTS v BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
YAXLEY v BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
ROUSE AND McQUESTIN v BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
REASONS FOR JUDGMENT FULL COURT
NEASEY J
7 August 1990
These three appeals arise out of the same set of facts. The appellants (plaintiffs) were each former directors of a meat company, Richardsons Meat Industries Ltd ("RMI"), which found itself in financial difficulties. They, or some of them, were also directors of four wholly owned subsidiaries of RMI, Holmans Consolidated Pty Ltd, Tas Meats Limited, The Master Butchers Ltd, and SP Holman & Sons Proprietary Limited. The latter four companies, together with RMI, have been referred to throughout the proceedings as "the RMI Group", or "The Group". (The appellant McQuestin was an alternative director of RMI for appellant Rouse).
The respondents (defendants) in each of the appeals are the same. The fourth respondent, the National Companies and Securities Commission ("NCSC"), is the incorporated body set up under the National Companies and Securities Act 1979 of the Commonwealth, and the fifth respondent ("the Commissioner") is the Commissioner for Corporate Affairs for the State of Tasmania. In November 1987 all of the Companies in the RMI Group were ordered by the court to be wound up. In the same month, following a delegation of relevant power by NCSC, the Commissioner authorised the first three respondents, Messrs Bower, Barry and Dwyer, to make an investigation into the affairs of RMI and the four subsidiary companies; such investigation to include the question whether any of the directors had contravened sections of the Companies (Tasmania) Code; and in particular, ss 556 and 229.
Part of the background to these events is that in about April 1985 Messrs Clements, Yaxley and Rouse had either personally or through companies which they influenced effected the acquisition of most of the shares in RMI On 27 May 1985 they were appointed as directors of that company. The evidence makes clear that RMI was at the time of that share acquisition heavily in debt and carrying on business under substantial financial difficulties. The extent to which the appellants knew the details of those financial difficulties at that time and later was intended by the Commissioner to be one of the crucial issues involved in the investigation. After the appellants became directors, RMI and the RMI Group, in so far as it was managed as a group and the operations of its constituent companies were integrated, continued to trade until in early July 1986 the directors engaged Messrs Crawford and Cook, accountants and practised company liquidators, to consider and advise on the trading and financial position. After this was done, Messrs Crawford and Cook were on 22 July 1986, at the request of the appellants, appointed by a major secured creditor, the ANZ Bank, as receivers of the property of RMI.
In November 1987, NCSC delegated to the Commissioner its powers, pursuant to ss7 and 8 and 10(7) of the National Companies and Securities Commission (State Provisions) Act 1981 of Tasmania, to conduct a hearing, and make an investigation under s16A of the Companies (Tasmania) Code, relating to the five companies who made up the RMI Group. In turn, the Commissioner in December 1987 appointed the respondents, Messrs Bower, Barry and Dwyer, to conduct this hearing and investigation. They commenced to take evidence in the same month.
The evidence makes plain that the State Corporate Affairs Commission had engaged Messrs Barry and Bower to assist its officers in the investigation of the affairs of these five companies, and that they and Mr Dwyer were well advanced with their own investigation, well before the commencement of the hearing. The Commission had seized the records of the RMI Group in April 1987, following which the respondent Mr Dwyer, an officer of the State Commission, had produced a report which recommended that a s16A investigation should take place. The respondent Mr Bower wrote a letter to the Commissioner dated 2 November 1987, in which he referred to a "review" of the affairs of the companies comprising the RMI Group, which he and the respondent Barry had made in Tasmania recently, presumably at the Commission's offices, and the result of that review. Mr Bower therein stated in effect that he agreed with a report contained in a letter written by an officer of the Commission, Mr Lovett, (who was also junior counsel in this appeal), to the respondent Mr Dwyer, which suggested that offences may have been committed against various sections of the Code. In that letter Mr Bower also stated his concern that "the people which (sic) whom I shall be dealing" were "powerful and influential people in Tasmanian business circles" who might try to frustrate his involvement in the hearings, and asked for an indemnity against any litigation or claim. This indemnity was in due course provided. Later in December 1988, after several hearing days had passed, Mr Bower wrote another letter to the Commissioner, in which he reported on the hearings so far, and said that the issues were now "fairly well advanced", and that consideration should be given to those issues before deciding on the next phase of the investigation.
It can be taken unless otherwise stated that the witnesses referred to hereafter appeared and gave evidence at the hearings as a result of having had summonses served upon them requiring them to do so and to produce documents specified in the summons.
The first of the appellant witnesses examined was Mr Yaxley. The three respondents, Messrs Bower, Barry and Dwyer were present, with Mr Bower acting as chairman. Mr Ritter appeared of counsel for the appellant Mr Yaxley. Mr Bower informed the hearing of the nature of the proceedings and the formal documents by which they were set up, and stated the investigators' intention of observing the principles of natural justice. Counsel was allowed the fullest freedom of intervention and exercised it. In answer to a question by counsel, the respondent Mr Bower said that the matters to be investigated were principally the possibility of offences having been committed under ss556 and 229 of the Companies Code. Before beginning the actual questioning of Mr Yaxley, the respondent Mr Bower made the following statement, which is of some importance:
"Let me say this, that it is a fact that on the 22nd, I think it was, of July, 1986 receivers were appointed to a number of companies including the five to which we have been appointed. At that particular time as I understand it there was a substantial deficiency in all of the companies. And I think it must obviously raise the possibility of breaches against Section 556 of the Companies Code. My understanding is at least two years before that and probably even longer, the companies speaking generally traded at loss, had losses, loss situations increasing loss situations and as a consequence it is roughly that time period that I wish to explore. Perhaps one can go back even further but nevertheless, I would suggest Mr Ritter that the principal area of concern, particularly this afternoon, I suppose and we won't proceed all that far this afternoon, will be another matter of 556 and of course insofar as Mr Yaxley's concerned, if — well that matters will be put to him can only relate to time from when he became a Director. And so what we're talking about essentially is" – (interruption by Mr Ritter).
After that, Mr Yaxley was questioned about the following subject matters. The list is not intended to be exhaustive:
1The extent to which he as a director, and from his appointment as such on 27 May 1985 until the companies went into receivership on 22 July 1986, was chairman of directors of RMI (p139), was supplied with copies of minutes of directors' meetings, agenda for such meetings, and reports and other statements tabled thereat. His knowledge of that material.
2The extent to which the management of the five RMI Group companies was integrated. Mr Yaxley stated that separate minutes of directors' meetings of the four companies other than RMI were not kept, because "the group of companies were really managed from a directors' point of view as one company" (p000134)). He was questioned at some length about that matter. During the course of this questioning and thereafter during the hearing, counsel for the appellant Mr Yaxley, who afterwards also appeared as counsel for Mr Clements, was allowed to intervene in the questioning, ask questions of his own, and engage in discussions with both his client and the questioners, to a much greater extent than the investigators need have allowed. It was clear he would have had a full opportunity to question his client when the investigators had finished. The way in which it was done made for a disjointed and uneconomic use of the available time, and produced a rather scrambled appearance of the evidence in the transcript. In consequence, it is necessary to examine the transcript carefully and at length to appreciate the range of matters which was discussed with the witnesses.
3A report by accountants Messrs Coopers and Lybrandt (hereinafter the "CL Report", Ex. 6), which was dated 6 February 1985 and supplied to the Tasmanian Development Authority. This report stated inter alia, "The security position indicates that the group is insolvent, not being capable of paying its debts as and when they fall due". Mr Yaxley was examined about when he first became aware of the contents of that report.
4The acquisition by RMI of the red meats division of a company called Blue Ribbon Meats (or the like, often referred to in the evidence as "Blue Ribbon"), the shares in which were substantially owned by a Mr Chromy.
5A series of documents referred to as "Chief Executive Report", said to have been produced at various directors' meetings over the relevant period.
On 14 December, 1987, the hearing of evidence from Mr Yaxley was adjourned sine die, it being indicated to him that the questioning would need to be resumed at a later date. Counsel asked leave to attend at the examinations of other witnesses which were to proceed on the following day, but the investigators refused this, Mr Bower saying:
"...there is no base for that. This is a private hearing and that means private." Mr Ritter was however promised a copy of the transcript of the evidence taken from his client as soon as it was ready.
During several following days in December several more witnesses were examined, including Mr Chromy, and several former RMI company officers. On 18 December 1987, the examination of the appellant, Mr Clements, began. He was represented by Mr Ritter of Counsel. Mr Bower explained the nature of the proceedings, and said there was reason to suspect that persons involved in the management of RMI and the other Group companies "may have committed offences against the Companies (Tasmania) Code", and in particular ss556 and 229. In a brief review of relevant company circumstances he pointed out that in the period between Mr Clements becoming a director and the institution of receivership, "the companies as a whole had been trading with experiencing (sic) losses and particularly towards the time of receivership increasing losses". He told Mr Clements that where any question was based upon documentary evidence, he would as far as he possibly could, show it to him.
Questioning of Mr Clements then followed, with many interruptions by counsel permitted. Amongst other matters Mr Clements was asked about the following:
1Minutes of directors' meetings during the relevant period, Mr Clements' knowledge of them, and the contents of the minutes in relation to the actions of the directors.
2Documentary evidence of "advances" made to RMI by directors or their companies to enable RMI to continue in business, and the terms of such advances.
3The CL Report, and his knowledge of it.
4Legal advice concerning the directors' obligations in a time of growing losses. Mr Ritter interspersed this questioning with a number of long statements about such matters as the significance of the CL Report, the position of his clients in relation to the loss of their own investments in RMI, the actions of the previous board of directors, and the like.
5The circumstances in which Mr Clements and his fellow directors, or their companies, had acquired their shares in RMI
6Documentary material available to the directors, such as ongoing reports as to the current financial state of RMI, chief executive's reports, and so on.
7The purchase of the red meat division of Blue Ribbon.
8The position of trade creditors, and whether payment of their accounts was being delayed.
9When Mr Chromy confirmed his refusal to put further money into RMI, and the financial position of the company at that stage.
By the end of the day, Mr Bower was expressing regret that the examination had gone much slower than expected, and in a rather piecemeal fashion. The hearing was adjourned sine die, and was resumed on 13 July 1988. Mr Ritter again represented Mr Clements. At the resumed hearing there was much discussion between the investigators, counsel and the witness about documentary material concerning the financial position of the RMI Group in the relevant period, the terms upon which trade creditors were entitled to payment, and proposed injection of further capital into the Group. The appellant, Mr Clements, was questioned further about matters most of which had been discussed with him at the earlier hearing. Eventually Mr Barry on behalf of the investigators made the following statement to him:
"MR BARRY: We are to prepare an internal report to the Commissioner for Corporate Affairs in relation to this Hearing. In this report we are to give certain views based on the evidence presented and adduced to the Hearings. We have conferred on this matter and we have reached the view that the RMI group could not pay its debts as and when they fell due for the period from the 1st February, 1986 till the 22nd July, 1986 on which latter date a receiver was appointed. Furthermore we have reached the preliminary view that debts were incurred with your express or implied authority or consent and (2) that you did not have reasonable cause from the 21st March, 1986 to expect that the group would be able to pay all its debts as and when they became due. Before finalising this report to the Commissioner, we invite your submission on our views. Do you wish to make a submission now or would you prefer to make a submission verbally or in writing at some later date?"
Mr Ritter said he wished to consider his clients' position, and then asked whether similar findings had been made and pronounced in relation to other witnesses. Mr Barry replied that they were not obliged to give that information, and, in answer to a question, that the statement was made upon the basis of all the evidence heard to date, and which had, wherever it was prejudicial to him, been outlined to Mr Clements.
The hearing so far as it concerned Mr Clements was then adjourned, but on the following day, when the Yaxley hearing was due to resume, his counsel Mr Ritter, with leave raised the subject of the Clements hearing for further consideration. Mr Ritter then made the following requests:
1That Mr Clements be supplied with copies of the transcript of all evidence and all documents relied upon as being and in fact adverse to Mr Clements.
2That he on behalf of Mr Clements have the opportunity of examining all persons who had given evidence adverse to his client, and whose evidence had been relied upon by the investigators.
3That Mr Clements be given reasons for the statement made to him on the previous day (which is set out earlier). Mr Barry replied that the answers would be given later, and the Yaxley inquiry then resumed. Thereupon, Mr Ritter made a further statement immediately, to the effect that he and his clients had discovered since the previous day that the adverse statement made to Mr Clements had already been made and announced during the previous week to witnesses Messrs Munns and Chromy. This, Mr Ritter submitted, was contrary to the rules of natural justice, and meant that any inquiry concerning Mr Yaxley could not be impartial because the investigators had pre–judged the issue. Mr Bower denied that the investigators had pre–judged the issue. Shortly after, the hearing was adjourned.
Upon resumption of the hearing on 20 July, Mr Chirnov QC and Mr Ritter appeared to represent Messrs Clements and Yaxley. Mr Barry announced that following legal advice the investigators would refuse the requests made by Mr Ritter at the previous hearing. A discussion then occurred along the following lines.
1In answer to questions by counsel, the investigators confirmed that they would not provide a statement of the factual basis upon which they had reached the views announced in their statement to Mr Clements.
2They confirmed that they had formed their view as to RMI being unable to pay its debts at the relevant time about a fortnight earlier; that they had not disclosed that view to Mr Clements before 13th July; that that view was held notwithstanding that some director witnesses had not yet been called before them.
3That their "preliminary" view stated to Mr Clements, that debts (which the company was unable to pay as and when they became due) were incurred with his express or implied authority or consent, and that he did not have reasonable cause from 21 March 1986 to expect that the Group would be able to pay them as and when they became due, did not apply to the directors who had not been heard.
4Counsel (Mr Ritter) restated his request "to have the basis and the factual basis albeit in general terms as to how you have formed that conclusion so we can assist you and assist our client in seeking to rebut that".
5After a short adjournment, Mr Barry upon reconvening said:
"You have sought, in general terms, details of the basis and factual basis as to how we have reached a view that the RMI Group could not pay its debts as and when they fell due for the period from 1st day of February, 1986 until 22nd day of July, 1986.
In general terms, but not exclusively, the basis for this view being reached substantially is detailed in the transcript of the examinations of your client Mr Clements, held on 18th December, 1987 and 13th July, 1988, together with the exhibits considered whilst your client was being examined on those days. As he is therefore familiar with this material we do not propose to provide any further detail. To do so at this stage would be onerous to say the least. As you are no doubt aware
MR RITTER: Sorry, was the word "onerous"?
MR BARRY: As you are no doubt aware, we have had to consider a significant volume of material during the course of this enquiry. We should point out that we are only inviting your clients to make submissions, and if possible, assist us. If he is in a position to make submissions and provide further evidence in rebuttal of the view which we have reached, we invite him to assist us by presenting that evidence, or making those submissions. We had expected that our comments made on 13th July last, would have encouraged him to do so."
6Mr Chirnov replied with "a rhetorical question", namely, "How can we provide you with assistance when we have absolutely no idea, notwithstanding the words you have uttered, as to how it is that you've reached your conclusions, on both points."
7Mr Chirnov submitted that the investigators should disqualify themselves from proceeding further with the inquiry on account of their failure to accord natural justice. Upon their refusing to do so, he secured an adjournment for the purpose of testing the matter in court.
Upon the basis of the material summarised above, the appellants commenced three actions in this court, claiming that the authorisation of the investigators to conduct a hearing was contrary to natural justice in that at the time of commencement they had already formed views adverse to the plaintiffs, and that the investigators had conducted the hearing in ways contrary to natural justice. They sought appropriate declarations and injunctions, including a permanent injunction restraining the investigators from making any further investigation. The trial before Wright J was conducted wholly on the basis of an agreed set of documents, no oral evidence being called on either side. Wright J found for the respondents.
On appeal to this court, it was submitted, first, that the respondent investigators were guilty of bias or perceived bias against the appellants. In support of this proposition it was argued that by reason of their having participated actively in the setting up of the investigation and hearing they were disqualified from conducting the investigation itself, and in particular the hearing. That submission is erroneous in my opinion, and misconceives the nature of the investigators' task and duty, which is not judicial or quasi–judicial but administrative. Although administrative and within that category investigative, they are bound to obey the rules of natural justice. Section 38(1)(d) of the National Companies and Securities Commission Act 1979 ("NCSC Act") and s9 of the National Companies and Securities Commission (State Provisions) Act 1981 have the effect of so providing, and any case the fact that persons may be placed in serious jeopardy as a result of any adverse report would most probably have the same result – In re Pergamon Press Ltd (CA) (1971) 1 Ch 388, per Lord Denning MR at p399; Sachs LJ at p402. The content of the rules of natural justice may vary widely according to the circumstances, and in a case like the present they come down to a requirement that the investigators act fairly towards persons whom they propose to or may affect adversely by their report – National Companies and Securities v The News Corporation Limited and Others (1984) 156 CLR 296.
It follows from the nature of an investigation made in pursuance of these statutory powers that a person who is involved in giving preliminary advice as to the desirability of holding an investigation in the circumstances of the case, and who assists in making the arrangements for setting it up, as these appointees did, may nevertheless be delegated by the Commission to conduct or take part in the investigation. Section 16A of the Companies (Tasmania) Code authorises the NCSC to conduct such investigation as the Commission thinks expedient for the due administration of the Code where the Commission has reason to suspect that a person has committed an offence under one of the Code provisions. The NCSC, believing in the present case it had such reason to suspect concerning the five companies comprising the RMI Group, and having power to do so under s45 of the National Companies and Securities Commission Act (Commonwealth) and s12 of the National Companies and Securities Commission (State Provisions) Act (Commonwealth), delegated to the Commissioner for Corporate Affairs for Tasmania power to hold an investigation under s16A and a hearing pursuant to s7 of the National Companies and Securities Commission (State Provisions) Act. The Commissioner has in turn, pursuant to s45(4) of the National Companies and Securities Commission Act and s12(4) of the National Companies and Securities Commission (State Provisions) Act, authorised the investigators to carry out such investigation and hearing. In carrying out those functions, therefore, the investigators are exercising powers of the Commission.
Thus, in exercising the powers of the NCSC to carry out a s16A investigation, the investigators start off with the proposition that the Commission, whose powers of investigation it is exercising, has reason to suspect that a person, that is, the person or persons whose conduct it is investigating, has committed an offence under one or more provisions of the Code. The manner in which they are entitled to perform the investigation is described in the joint judgment of Mason J (as he was then) and Wilson and Dawson JJ in National Companies and Securities Commission v News Corporation (supra) as follows:
"It is of the very nature of an investigation that the investigator proceeds to gather relevant information from as wide a range of sources as possible without the suspect looking over his shoulder all the time to see how the inquiry is going. For an investigator to disclose his hand prematurely will not only alert the suspect to the progress of the investigation but may well close off other sources of inquiry. Of course, there comes a time in the usual run of cases when the investigator will seek explanations from the suspect himself and for that purpose will disclose the information that appears to require some comment. Having regard to the express statutory injunction of s 38(1)(d) of the NCSC Act, it would clearly be a denial of natural justice if the Commission in the present hearing received evidence adverse to News Corporation without providing an opportunity to News Corporation to be heard. An effective examination of such persons would require that the substance of the adverse information received during the investigation be disclosed to them. Legal representation would be permitted to such witnesses with the opportunity for their further examination by counsel and for submissions to be made touching matters covered by the examination. There is no reason why the Commission should not welcome, time permitting, any request by News Corporation that further persons be called to give evidence. A hearing conducted along these lines, subject to what we have to say in a moment about the publication of the Commission's views, would in our opinion be fair in all the circumstances."
That being the manner of an investigation, it is clear in my opinion that by the time investigators come to the stage where they seek explanations "from the suspect himself", and undertake the duty of disclosing to the suspected person the substance of evidence and factual material generally which may be adverse, so as to give him a proper opportunity to be heard in relation to it and to produce his own evidence if he wishes, they may well have formed strong provisional views upon various relevant issues. All that is part of the ordinary function of investigators. Much of the material which has already come to them, and which will have tended to influence their minds, will be adverse to the suspected person. These investigators are under a duty to hear relevant evidence which the person wishes to place before them, and to give it proper consideration and such weight and effect as they think it merits, but it is not required that their minds should at the stage of commencing the hearing be impartial in the sense required of one undertaking a judicial or quasi–judicial determination. Such a requirement would be misplaced and foreign to the task of investigation in this context.
If that view is correct, a number of conclusions follow. One is that there is no bar to an authorised person carrying out an investigation, including a hearing, even though he has been involved in earlier stages in considering the material and advising the Commissioner as to the apparent effect of the evidence and the like, and in setting up the investigation. King CJ considered the same question in Karounos and Anor v Corporate Affairs Commission (SA) (1989) 15 ACLR 363 at p367, and came to the same conclusion. His Honour said:
"The investigation is founded on a reasonable suspicion of the commission of an offence, which must have been the suspicion of Moen and Tank. They have pursued the investigation to the point at which they have decided upon a hearing. It was submitted that for Moen and Tank to preside over the hearing placed them in the position of both prosecutor and judge. I think that this argument misconceives the nature of a s16A investigation and s7 hearing. An explained in the passages cited above, the hearing cannot result in any determination of rights or of legal liability or any resolution of issues. It is purely investigatory in character. There is no judicial or quasi–judicial role to be performed at such a hearing and no question of the investigators being judges in their own cause."
I respectfully agree. It also follows that the two letters relied upon by the appellants in argument, written by the respondent Mr Bower to the Corporate Affairs Commissioner, in which Mr Bower reported on the progress of the investigation, his provisional views at that stage, and asked for an indemnity against possible claims by the persons to be investigated, and the like, were routine in an investigation of this kind, and did not, as was argued, show bias or perceived bias against the appellants such as to vitiate the investigation.
It was also argued that the following matters showed bias or perceived bias which should result in the investigation being terminated by the court. It was said that the investigators had, or would be perceived by a fair–minded person to have, pre–judged the question whether or not offences had been committed by the appellant Mr Clements, and the question whether or not the RMI Group could pay its debts as and when they became due, before hearing all relevant evidence including that of Mr Clements himself. The evidence supporting that proposition was said to be:
Mr Bower's two letters mentioned above;
the "findings" announced to Messrs Davis, Geard, Clark, Munns, Chromy and Clements on various dates that the RMI Group could not pay its debts as and when they became due at relevant periods during the first half of 1986;
the statement that that finding applied to Messrs Yaxley, Rouse and McQuestin as well;
the statement of a "preliminary view" to all the appellants except Mr McQuestin and Mr Rouse that debts were incurred with their express or implied authority when they did not at the relevant time have reasonable cause to expect that the Group would be able to pay all its debts as and when they became due;
and the refusal by the investigators to state the bases upon which they had reached their views in respect of Mr Clements.
It was seen in the passage set out above that the investigators told Mr Clements that they "had reached the view" that RMI could not pay its debts etc., and they told Mr Chirnov later that they "had concluded that view". Yet the announced purpose of stating that conclusion was to give the appellants the opportunity of making a submission concerning that issue. So, taking their statements at face value, which we must because by agreement no witnesses were heard or cross–examined, the result is I think that this conclusion should be regarded as a provisional view albeit firmly held, and not a final one because they were giving the appellants the opportunity of presenting submissions and, it should be inferred, further evidence on the question if they wished. Since they have not been heard or cross–examined, the court should give them the credit of assuming that had such further material been presented, they would have given it genuine consideration and such weight as they thought it deserved, in accordance with their duty.
I referred earlier to "a strongly held provisional view", and have said that in my opinion for investigators to hold such a view on an issue of fact in the investigation, as a result of considering relevant materials before they began to examine witnesses at a hearing, is not a breach of their duty to observe the rules of natural justice; which is to say, is not unfair to suspected persons whose relevant conduct is being investigated. A strongly held provisional view is, I agree, stronger than a "tentative" view or conclusion, if by "tentative conclusion" is meant a provisional conclusion formed experimentally – see OED.
To that extent there may be a difference between the effect of the joint judgment of Mason, Wilson and Dawson JJ and that of Gibbs CJ, with which Brennan J on this aspect agreed, in National Companies and Securities Commission v News Corporation Ltd, (supra). Gibbs CJ in his judgment spoke of tentative conclusions, in terms which suggested his Honour supported the view that investigators in a case like the present should not form conclusions any more than tentatively before hearing all the evidence. Mason, Wilson and Dawson JJ in their joint judgment, however, did not deal with the question of what degree of finality if any investigators might reach in forming conclusions before hearing all evidence. Their Honours merely, as I understand the judgment, said that the rules of natural justice would be observed, in the case before them, if the opportunities were given which the passage earlier cited sets out. I have already said that it is implicit in that passage, in my view, that as a result of considering material from a wide range of sources before they come to examine any suspected persons, if they decide to do that, they may properly have reached firm provisional conclusions.
Such conclusions might be more readily reached in the case of objective issues of fact, such as whether a company during a given period had been able to pay its debts as and when they fell due, than in the case of more subjective issues such as whether, in the terms of s556 of the Companies (Tasmania) Code, a debt was incurred with the express or implied authority or consent of a director, or whether a director, at a time when a debt was incurred, had reasonable cause to expect that the company would not be able to pay all its debts as and when they became due, or, if the company incurred that debt, it would not be able to pay all its debts as and when they became due. Such an approach probably accounts for the "view" and "preliminary view" stated by the investigators in this case, and for the fact that the "preliminary view" was stated only to the directors whose evidence had been completed. In my opinion the statement of these views did not constitute or indicate a breach of the rules of natural justice. It follows from what I have written earlier that Mr Bower's letters do not either.
Further, I think the investigators were not under an obligation to state in any formal or complete manner the material upon which they relied in reaching the views they had indicated to the appellants individually. To do so would be to give chapter and verse, which they need not do – In re Pergamon Press Ltd (supra) at p.400, per Lord Denning. They had put the substance of the adverse material which was influencing them before Mr Clements, and gave him and his counsel ample scope to rebut and supply further information. So also with the directors heard earlier. The appellants were not treated unfairly in this respect.
The appellants presented their arguments in the further or alternative form that the investigators failed to accord procedural fairness to them in the following respects. They submitted that the failure to indicate to Mr Clements the bases upon which they had formed views adverse to him was compounded by a failure to distinguish between debts of the individual companies in the RMI Group, to identify particular debts of particular companies, and failure to take into account that some of the directors were directors of only one or some of the companies in the Group, and the like. I do not think there is substance in these complaints. Throughout the hearings there was indiscriminate use of the expressions, "the Group" and "the company", by investigators, witnesses and counsel, without any complaint. This was reasonable because the obvious understanding was that "the company" meant RMI, the other four being wholly owned subsidiaries, and there was uncontested evidence that the operations of the five companies were run in an integrated fashion, so that the two expressions were in reality interchangeable. Further, to specify individual debts of individual companies would have been otiose and impracticable in such an investigation as this; it being obvious that a broad range of debts during a given period was in issue. Again, counsel did not in any serious way make an issue of this question of individual debts during the hearing, as far as I am aware, but could have done so had it been practicable to address it. For reasons implicit in what has just been said, it was also not a serious issue whether a particular appellant was a director of one or more of the subsidiary companies as well as of RMI Of course, presumably when the investigators came to make their report they would have needed to take these aspects into account, and in any event they would certainly have had to be addressed if and when charges were laid. The failure to do so during the hearing was not a vitiating procedural defect. I would dismiss the appeals.
Serial No 28/1989
List "A"
File Nos 133/1989134/1989
135/1989
CLEMENTS v BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
YAXLEY v BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
ROUSE AND McQUESTIN v BOWER, BARRY, DWYER, NATIONAL COMPANIES AND SECURITIES COMMISSION and CASWELL
REASONS FOR JUDGMENT FULL COURT
COX J
7 August 1990
I have had the advantage of reading the Reasons for Judgment prepared by Neasey J I agree with his analysis of the facts in the appeals under consideration and with his conclusions and the reasons therefor. There is nothing I feel I can usefully add. I would dismiss the appeals.
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