Director of Public Prosecutions (Cth) v JM

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCR 2011 0260 S APCR 2011 0272 S APCR 2011 0274
DIRECTOR OF PUBLIC PROSECUTIONS (CTH)	Applicant
v
J M	Respondent

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JUDGES	WARREN CJ, NETTLE and HANSEN JJA
WHERE HELD	MELBOURNE
DATE OF HEARING	8 December 2011
DATE OF JUDGMENT	14 June 2012
MEDIUM NEUTRAL CITATION	[2012] VSCA 21
JUDGMENT APPEALED FROM	[2011] VSC 527R (Weinberg JA)

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CRIMINAL LAW – Market manipulation – Artificial price – Whether transaction having or likely to have effect of creating artificial price for shares on ASX – Whether, if transaction entered into for sole or dominant purpose of creating or maintaining price of shares on ASX, transaction likely to have effect of creating artificial price for shares – Meaning of ‘artificial price’ in s 1041A of the Corporations Act 2001 (Cth) (‘the Act’) informed by American juridical conceptions of ‘cornering’ and ‘squeezing’ – Statutory concept of ‘artificial transaction’ in s 1041C of the Act based on earlier State and Commonwealth legislative proscriptions of false trading and market rigging – Consequent distinction between meaning of ‘artificial’ for purposes of s 1041A and ‘artificial’ for purposes of s 1041C of the Act – Sole or dominant purpose test inapplicable for purposes of s 1041A of the Act but of apparent continuing significance for purposes of s 1041C of the Act – Observations as to fault element of offence under s 1041A of the Act and as to fault element of offence under s 1041C of the Act – Australian Securities and Investments Commission v Soust (2010) 183 FCR 21, not followed; North v Marra Developments Ltd (1981) 148 CLR 42; R v Saengsai-Or (2004) 61 NSWLR 135, considered; Cargill, Inc v Hardin 452 F 2d 1154 CA, referred to – Corporations Act 2001 (Cth), ss 1041A and 1041C; Criminal Code Act 1995 (Cth) ss 4.1(1) and 5.6(1) and (2).

CRIMINAL PROCEDURE – Referred question of law and case stated – Whether open to judge to find disputed facts for limited purpose of case stated – R v Assange [1997] 2 VR 247, followed – Civil Procedure Act 2009, ss 302 and 305.

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Appearances:	Counsel	Solicitors
For the Applicant	Mr J W Rapke QC with Mr C J Winneke	Solicitor for Public Prosecutions (Cth)
For the Respondent	Mr M K Moshinsky SC with Mr M I Borsky	Clayton Utz

WARREN CJ:

TABLE OF CONTENTS
Table of contents
Introduction
Background facts
The accused’s interlocutory appeal
The accused’s challenge to the questions
The statutory provisions
If a question ‘arises’ it can be answered within the judicial power constraints
Analytical framework
The reserved questions are questions of law
A case stated may include questions arising out of disputed facts
Logic suggests question of law may arise on disputed facts
Authority does not support the accused’s position
Changes introduced by the CPA militate against the accused’s position
Conclusion on the threshold issue
Question 1 ‘arises’
Questions 2 and 3 ‘arise’
Conclusion on the accused’s interlocutory appeal

The Crown’s interlocutory appeal
Additional question about the fault element
Question 1
Parties’ submissions on the meaning of ‘artificial price’
The legislative history
The scope of s 1041A
Section 1041A is not narrower than its securities law predecessors
The original futures law offence broadened the securities law offence
The difference between ‘artificial price’ and ‘artificial transaction’
An ‘artificial price’ is not the ‘false or misleading appearance’ of a price
Conclusion as to Question 1

Questions 2 and 3
Question 4
Orders

INTRODUCTION

This matter is a case stated under s 302 of the Criminal Procedure Act 2009 (‘CPA’). The learned trial judge has reserved three questions for determination by the Court of Appeal. The questions concern the construction of s 1041A of the Corporations Act 2001 (Cth) — the provision under which the accused is charged.

In summary, s 1041A prohibits a person from carrying out or taking part in a transaction that has or is likely to have the effect of creating or maintaining an ‘artificial’ price for a financial product. The parties are in dispute about the meaning of ‘artificial price’. The Crown contends that for a price to be ‘artificial’ it is enough that the price is the result of a transaction entered into for the sole or dominant purpose of setting a particular price. The accused disputes this construction. He contends that ‘artificial price’ is an economic concept related to abuse of market power. The reserved questions, in effect, ask whether the Crown’s construction of s 1041A is correct.

The case stated was heard together with two applications for leave to appeal against an interlocutory decision. The first application is brought by the accused. It seeks leave to appeal the decision of the learned trial judge to state the case. In summary, the accused contends that it was not open to the trial judge to state a case in circumstances where the relevant facts were disputed. The dispute about the underlying facts renders the questions hypothetical and puts them outside of the scope of 302 of the CPA. He contends that if the Court of Appeal were to answer the questions, it would impermissibly be giving an advisory opinion.

The second application for leave to appeal is brought by the Crown. It seeks leave to appeal the decision of the trial judge to refuse to state a fourth question sought by the Crown.

For reasons that follow, I would dismiss both applications for leave to appeal. I would order, pursuant to s 305(3) of the CPA, that the case stated be returned to the trial judge for amendment so as to add a fourth question concerning the fault element of the provision under which the accused was charged (see below).

I would answer the amended questions as follows:

Question 1: For the purpose of s 1041A of the Corporations Act 2001 (Cth), is the price of a share on the ASX which has been created or maintained by a transaction on the ASX that was carried out for the sole or dominant purpose of creating or maintaining a particular price for that share on the ASX an ‘artificial price’?

Answer: Yes, provided that, as a result of the impugned transaction, genuine buyers and sellers altered the price at which they were willing to trade in the shares (as against the price at which they would have been willing to trade but for the impugned transaction).

Question 2: Was the closing price of shares in [X Ltd] on the ASX on 4 Ju1y 2006 an ‘artificial price’ within the meaning s 1041A(c) of the Corporations Act 2001 (Cth)?

Answer: Only if, as a result of the bid(s) placed by Ms N, genuine buyers and sellers altered the price at which they were willing to trade in the shares on 4 July 2006.

Question 3: Was the price of shares in [X Ltd] on the ASX on 4 July 2006 maintained at a level that was ‘artificial’ within the meaning of s 1041A(d) of the Act?

Answer: Only if, as a result of the bid(s) placed by Ms N, genuine buyers and sellers altered the price at which they were willing to trade in the shares on 4 July 2006.

Question 4: To establish the fault element of the offence against s 1311(1) of the Act constituted by a breach of s 1041A of the Act, what, if anything, does the Crown need to prove with respect to the accused’s state of mind as to the effect (or likely effect) of the transaction (or transactions) to create an ‘artificial price’ or maintain the price at a level that is ‘artificial’?

Answer: Intention to take part in or carry out the impugned transaction(s) and recklessness as to whether the transaction(s) will have the effect (or are likely to have the effect) of creating an ‘artificial price’ or maintaining the price at a level that is ‘artificial’.

BACKGROUND FACTS

The accused was at all material times the CEO and a director of X Ltd, a company listed on the Australian Securities Exchange (‘ASX’). In March 2005, Z ApS, a Danish company associated with the accused, exercised a large number of call options for X Ltd shares. As a result, Z ApS acquired the corresponding number of shares and became liable to pay X Ltd about $10m for the shares.

To finance the acquisition, Z ApS entered into a financing agreement (the ‘Opes facility’) with Opes Prime Securities Pty Ltd (‘Opes’). In April 2005 Z ApS owed in excess of $10m on the Opes facility.

Z ApS used X Ltd options and shares as collateral for the Opes facility. The accused was required to maintain collateral of value equal to or exceeding the current loan amount times four. Opes would undertake a daily valuation of the collateral using that day’s closing price of X Ltd shares. If the value of the collateral declined below the required amount, Opes would issue a ‘margin call’ requiring the accused to provide additional collateral in the form of cash or shares.

By July 2006, the price of X Ltd shares had declined by about 30 per cent. During that period, Opes made a number of margin calls requiring the accused to provide over $2m in additional collateral.

In May 2006, Mr N, the husband of the accused’s daughter, Ms N, sent a fax to the accused, who was overseas. The fax proposed an arrangement whereby Ms N would ‘watch the shares daily and maintain a floor price’ by buying shares ‘at arms length’. The accused would finance the purchase of the shares by ‘gift[ing] funds’ to Ms N. The fax listed the ‘benefits of this arrangement’ as follows:

1. Funds are not seen as a loan by you to someone else for the purpose of buying shares on your behalf. 2. You have someone watching the market all day who is based in Australia and not charging brokerage other than online brokerage which is minimal…3. You have no disclosure issues…

The accused admits receiving this fax but denies acting upon it. He says that the fax was unsolicited and that he found it perplexing. He further denies any agreement or understanding with Mr N or Ms N in respect of trading in X Ltd shares. Between May and September 2006, the accused paid a total of $1.6m to Ms N and/or Mr N. However, it was not unusual for the accused to pay money to his family members, including his children and grandchildren.

As of July 2006, trading in quoted securities on the ASX was conducted through a computerised trading system known as the Stock Exchange Automated Trading System (‘SEATS’). SEATS enabled ASX-approved brokers to place orders to buy securities (known as a ‘BIDs’) and orders to sell securities (known as an ‘ASKs’). Each order would specify a price and a quantity of the security. SEATS used a certain algorithm to match BIDs and ASKs.

SEATS conducted trading in two phases known as ‘Normal Trading’ and ‘Pre-Open’. The ‘Pre-Open’ phase occurred for three hours before the opening of ‘Normal Trading’ and for fifteen minutes after the close of ‘Normal Trading’. During the ‘Pre-Open’ phase, brokers were able to enter, amend or cancel orders but no trading took place. Shortly after the end of the morning and afternoon ‘Pre-Open’ phases respectively, SEATS conducted the Open Single Price Auction and Close Single Price Auction (the ‘CSPA’). If at the time of the CSPA there were overlapping BIDs and ASKs for a security (ie BIDs at the same or higher than ASK prices), SEATS applied an algorithm to transact the greatest quantity of the security possible at a single price. That price then became the closing price of the security quoted on the ASX. If no trades occurred during the CSPA, the price at which the security last traded during ‘Normal Trading’ became the closing price.

On 28 June 2006, a representative of Opes sent an email to Mr N warning of a margin call in excess of $700,000 should the closing price of X Ltd shares drop to 33 cents.

On 4 July 2006 the X Ltd share price opened at 35.5 cents and traded in a range between 35 and 35.5 cents. The last traded price during ‘Normal Trading’ was 35.5 cents. At 4pm the market entered the ‘Pre-Open’ phase. There were no overlapping BIDs and ASKs for X Ltd shares. Accordingly, with no further activity, no trades would take place during the CSPA and the price of X Ltd shares would close at 35.5 cents.

At 4:00:02pm a broker acting on behalf of a person unrelated to the accused placed an ASK for 50,000 X Ltd shares at 34 cents. This created an overlap between BIDs and ASKs. The result was that, in the absence of further activity, the CSPA would trade at 34 cents, and that price would become then the closing price.

Nine minutes later, Ms N, acting on behalf of a company controlled by her husband, directed a broker to enter a BID for X Ltd shares at 35 cents. The BID had the effect of lifting the CSPA price of X Ltd on 4 July 2006 shares from 34 cents to 35 cents. Later that day, Ms N sent an email to the accused, who was overseas at the time. The email said:

I have had to buy 65k shares today on close, just to keep it at 35 as someone dumped 70k [sic] at 34c when the market was in settlement.
This – coupled with the few yesterday and the 75k I had to buy a couple of days ago, I am now almost completely out of funds once again.
…
I can keep doing my job but will need funds within the next 24 hours, otherwise I won’t be able to provide any support…
Please confirm … to my email before the market opens tomorrow so I know what you need me to do.
… Taz xx

The accused admits receiving this email but denies acting upon it. He says that the email was unsolicited and that he found it to be perplexing. He admits annotating the email with a handwritten note that said ‘150k – Taz From [Accused’s Initials] (→ Bal =150K)”. And on 5 July 2006, the accused caused a cheque for $150,000 payable to Ms N to be drawn on his bank account. The cheque was paid into a bank account held in the name of Mr and Ms N. However, the accused says that the note (and presumably the cheque) did not relate to market manipulation.

It appears that the accused does not deny the trading activity described above. However, he denies the Crown’s allegation that Ms N placed the 4 July 2006 BID for the sole or dominant purpose of manipulating the closing price of X Ltd shares and on his behalf.

On 2 September 2011 the accused was arraigned on 39 charges of market manipulation contrary to s 1041A of the Corporations Act and two charges of conspiring with Mr N and Ms N to take part in transactions contravening that provision. The accused pleaded ‘not guilty’ to all charges.

A dispute arose between the Crown and the accused as to the meaning of the words ‘artificial price’ in s 1041A. The Crown initially sought, pursuant to s 199 of the CPA, to have the trial judge hear and decide this issue before trial. The learned trial judge raised with the parties the possibility of reserving the question for determination by the Court of Appeal pursuant to the case stated provisions of the CPA. The Crown embraced that suggestion. The accused did not. He contended that the case stated procedure was unavailable because the facts giving rise to the question about the meaning of ‘artificial price’ were disputed. He contended that the dispute as to the facts meant that a case stated would, in effect, be seeking an advisory opinion of the Court of Appeal.

After hearing submissions from the parties, the trial judge decided to state a case and reserve three questions of law for determination by the Court of Appeal. His Honour declined to state an additional question sought by the Crown to the effect of: ‘What are the elements of the offence of market manipulation under s 1041A of the Corporations Act?’. His Honour published written reasons for his decision.[1]
[1]Director of Public Prosecutions (Cth) v [Accused] [2011] VSC 527 (restricted) (‘Ruling’).

The trial judge both found and assumed each of the facts I have set out above[2] ‘for the limited purpose of the case stated’.[3] His Honour also found and assumed that Ms N placed the 4 July 2006 BID for the sole or dominant purpose of ensuring that the closing price of X Ltd shares on that day was not less than 35 cents.
[2]Paras [7]–[19].
[3]Ruling [80].

The learned trial judge made no findings or assumptions regarding any arrangement between the accused, Ms N and Mr N in respect of trading in X Ltd shares because he considered it unnecessary to do so for the purposes of the case stated.

THE ACCUSED’S INTERLOCUTORY APPEAL
The accused’s challenge to the questions

The accused contends the learned trial judge erred in reserving the questions and stating the case. He submits that the questions fall outside of the case stated provisions of the CPA because the questions are based on disputed facts, that is, facts that are neither agreed nor finally determined for the purposes of the proceeding. The accused contends that because the questions are based on disputed facts, they are hypothetical and, in effect, seek an advisory opinion of the Court of Appeal. Under the CPA, in order for a question to be reserved in a case stated, the question must ‘arise’. The accused submits that reserved questions do not ‘arise’ in his case because the underlying facts are disputed.

The accused makes five principal submissions in support of his contentions. In summary, they are as follows.

First, the accused makes submissions concerning what he refers to as ‘fundamental principles’ relating to the limitations of judicial power.[4] He submits that ‘courts will not answer hypothetical questions, give advisory opinions or determine abstract questions of law’.[5] This submission is uncontroversial and I accept it.
[4]Applicant’s Summary of Contentions (17 November 2011) [11].
[5]Applicant’s Summary of Contentions (17 November 2011) [13].

Secondly, the accused submits that if the facts giving rise to a question of law are disputed, the question is hypothetical and answering it is tantamount to giving an advisory opinion.[6] For reasons that follow, I consider that this submission should be rejected.
[6]Applicant’s Summary of Contentions (17 November 2011) [17]–[25], [35]; Appeal Transcript 8–11.

Thirdly, the accused submits that the CPA does not authorise the Court of Appeal to answer hypothetical questions and give advisory opinions.[7] For reasons that follow, I accept this submission.
[7]Applicant’s Summary of Contentions (17 November 2011) [26]–[28]; Appeal Transcript 8.

Fourthly, he submits that the current case stated provisions in the CPA do not relevantly differ from the predecessor provisions that, prior to the enactment of the CPA, existed under the Crimes Act 1958 (the ‘Crimes Act’). The accused submits that the changes in the case stated procedure effected by the CPA have no bearing on whether a case may be validly stated on disputed facts.[8] I consider that the amendments to the case stated procedure brought about by the CPA make it clear that Parliament did not intend to confine the case stated procedure to circumstances where all the relevant facts are agreed. In my view it is unnecessary to decide whether the position under the Crimes Act was any different.
[8]Applicant’s Summary of Contentions (17 November 2011) [31]–[33]; Appeal Transcript 17, 23.

Fifthly, the accused turns to the facts of this case. He submits that there are two aspects of the case that make the reserved questions hypothetical. The learned trial judge found that the questions arose out of the Crown’s allegation that Ms N purchased a parcel of X Ltd shares on 4 July 2006 for the sole or dominant purpose of ensuring a certain closing price for the shares on that date. Yet the accused denies that Ms N purchased the shares for that purpose. Further, the only charge on the indictment that refers to Ms N is charge 1, which alleges that the accused conspired with Ms N and her husband to take part in share purchases which were likely to have the effect of creating or maintaining an artificial price. Yet the case stated does not include any facts linking Ms N’s conduct and purpose to the conduct and purpose of the accused.[9] The accused appears to deny that, insofar as Ms N engaged in any market manipulation contrary to s 1041A, that he was in any way involved in that manipulation.[10]
[9]Applicant’s Summary of Contentions (17 November 2011) [34], [42]–[43].
[10]Case Stated, Appendix B [48], [60]–[61].

The accused submits that the existence of this factual dispute means that the reserved questions did not ‘arise’. He further submits that the trial judge erred in attempting to overcome this difficulty by making factual findings for the limited purpose of stating the case.

For reasons that follow, I consider that the reserved questions do arise.

The statutory provisions

The case stated provisions of the CPA are found in ss 302–308 of the Act.

Section 302 of the CPA provides:

302 Reservation of question of law
(1)This section applies to a proceeding in the County Court or the Trial Division of the Supreme Court for the prosecution of an indictable offence.
(2)In a proceeding referred to in subsection (1), if a question of law arises before or during the trial, the court may reserve the question for determination by the Court of Appeal if the court is satisfied that it is in the interests of justice to do so, having regard to—
(a)the extent of any disruption or delay to the trial process that may arise if the question of law is reserved; and

(b) whether the determination of the question of law may—
(i) render the trial unnecessary; or
(ii)substantially reduce the time required for the trial; or
(iii)resolve a novel question of law that is necessary for the proper conduct of the trial; or
(iv)reduce the likelihood of a successful appeal against conviction in the event that the accused is convicted at trial.

(3)The court must not reserve a question of law after the trial has commenced, unless the reasons for doing so clearly outweigh any disruption to the trial.

Section 305 requires the trial court that has reserved a question of law to ‘state a case, setting out the question and the circumstances in which the question has arisen’ and to transmit the case stated to the Court of Appeal. It also empowers the Court of Appeal to return the case stated for amendment by the trial court. Section 306 provides:

306 General powers of Court of Appeal on case stated
(1)The Court of Appeal may hear and finally determine a question of law set out in a case stated.
(2)In the case of a question of law reserved under section 302 or 304, the Court of Appeal may remit the question and the determination of the Court of Appeal back to the court which reserved the question.
…

Section 304, 307 and 308 are not presently relevant.

If a question ‘arises’ it can be answered within the judicial power constraints

The accused submits that ss 302 and 305 ‘are to be construed in the context of fundamental principles concerning the limits of “judicial power” and the requirement that there [be] a “matter”.[11] He contends that the provisions do not empower the Court of Appeal to answer hypothetical questions or give advisory opinions. I will loosely refer to these constraints as the ‘judicial power constraints’.[12] The accused points out that in this matter the Court is exercising federal jurisdiction and submits that this highlights the need to ensure compliance with the judicial power constraints.
[11]Applicant’s Summary of Contentions (17 November 2011) [11].
[12]Cf Pearce v Commissioner of Taxation (Cth) (1978) 37 FLR 296, 300 (Brennan J).

I accept these submissions. Nothing in the CPA or the extrinsic materials suggests that case stated provisions were intended to confer a non-judicial function on the Court of Appeal or empower the Court to give advisory opinions. I accept that the case stated provisions were intended to operate within the judicial power constraints. As the judicial power constraints are implicit in the statutory requirements of the CPA, a valid question does not pose any constitutional issues concerning separation of powers even if the Court is exercising federal jurisdiction. Nothing turns on whether the trial court is exercising federal or State jurisdiction.

However, in my view, if a reserved question ‘arises’ before the trial judge, then the Court of Appeal may answer it within the judicial power constraints. A question ‘arises’ if, at the current stage of the proceeding, it would be proper for the trial judge to determine it. In order to be acting properly, the trial judge must be acting within the judicial power constraints. The question cannot be too hypothetical and the answer could not constitute a mere advisory opinion — otherwise, it would not be appropriate for the trial judge to decide the question at that point in the proceeding.

If, instead of answering the question, the trial judge reserves it for the Court of Appeal through a case stated procedure, how can that make the question hypothetical? If the trial judge can answer a certain question within the judicial power constraints, then so can the Court of Appeal provided that all of the factual context giving rise to the question before the trial judge is sufficiently set out in the case stated.[13] The accused did not provide any arguments that would counter this proposition.
[13]This proviso is important because the Court of Appeal cannot look outside of the case stated: see [87].

It follows that the judicial power constraints add nothing to the express criterion that the question of law must ‘arise’, so long as the case stated places all of the relevant factual context before the Court of Appeal. The judicial power constraints are subsumed in, and form part of, the issue of whether the question ‘arises’ before the trial judge.

In this case, the whole of the factual context giving rise to the questions is set out in the case stated. Therefore, if the questions reserved by the trial judge properly arose before him, then the Court of Appeal may answer the questions within the judicial power constraints. I leave aside for now the issue of whether a question of law may properly arise before the trial judge if some of the relevant facts are disputed.

Analytical framework

Section 302 empowers a trial judge in a criminal matter to refer a question for the determination of the Court of Appeal. The section sets out a number of criteria that must be satisfied before a question can be referred. Where the validity of a question or the correctness of the decision to refer a question is in issue, the Court of Appeal must determine whether the trial judge erred in holding that the question satisfies the statutory criteria.

There are six criteria prescribed by s 302. First, a question may only be reserved in a proceeding of the kind described in sub-s (1). Secondly, the question must be a ‘question of law’. Thirdly, the question must ‘arise’. Fourthly, the question must arise before or during the trial. Fifthly, the trial judge must be satisfied, having regard to certain factors, that it is ‘in the interests of justice’ to reserve the question. Sixthly, an additional criterion in sub-s (3) applies if the question is to be reserved after the trial has commenced. If these criteria are satisfied, the trial court may reserve the question.

Some of the criteria are themselves questions of law. One such criterion is the requirement that the question reserved for determination by the Court of Appeal be a question of law. In relation to these criteria, the Court of Appeal must consider for itself whether the criteria are satisfied and must substitute its own opinion for that of the trial judge. Other criteria involve the exercise of what may be loosely called a discretion.[14] The requirement that referring the question be ‘in the interests of justice’ is a criterion of that kind. Any challenge to the trial judge’s findings in relation to these criteria is governed by House v The King[15] considerations.
[14]Norbis v Norbis (1986) 161 CLR 513, 518–519 (Mason and Deane JJ).
[15](1936) 55 CLR 499.

The criterion that the question must ‘arise’ is, in my view, a criterion of the former kind. It seems to me that a question either arises or it does not; if a question of law does not in truth arise, it cannot determined without venturing outside the judicial power constraints. Accordingly, this Court must consider for itself whether the reserved questions properly arose before the trial judge.

The accused contends that the reserved questions do not ‘arise’ but does not challenge the learned trial judge’s conclusions in relation to the other criteria in s 302.

When this analytical framework is applied to the reserved questions in this case, the accused’s challenge to the questions fails.

The reserved questions are questions of law

The accused contends that the reserved questions are mixed questions of law and fact.[16] He does not submit that this of itself renders the questions invalid. However, the accused’s submissions draw a distinction between pure questions of law and mixed questions of law and fact.[17]
[16]Appeal Transcript, 15, 30.
[17]See [76] eq seq of these reasons.

In my view, all three of the reserved questions are pure questions of law. Accordingly, it is unnecessary to consider whether a mixed question of law and fact is a ‘question of law’ within the meaning of s 302 of the CPA.

Question 1 asks whether, in certain circumstances, the price of a share is ‘artificial’ within the meaning of s 1041A of the Corporations Act:

Question 1: For the purpose of s 1041A of the Corporations Act 2001 (Cth), is the price of a share on the ASX which has been created or maintained by a transaction on the ASX that was carried out for the sole or dominant purpose of creating or maintaining a particular price for that share on the ASX an ‘artificial price’?

The question whether particular facts fall within a statutory expression is a pure question of law, provided that the words of the statutory expression are used in a technical legal meaning. If the words are used in either their ordinary English meaning or in some non-legal, technical or trade meaning, the meaning of the words is a question of fact. If so, the question whether particular facts fall within the statutory expression is a mixed question of law and fact. But the question whether particular facts necessarily fall within or necessarily fall outside of the statutory expression is still a pure question of law.[18]
[18]NSW Associated Blue-Metal Quarries Ltd v Federal Commissioner of Taxation (1956) 94 CLR 509, 511–2 (Kitto J); Hope v Bathurst City Council (1980) 144 CLR 1, 7–8 (Mason J, Gibbs, Stephen and Aickin JJ agreeing); Vetter v Lake Macquarie City Council (2001) 202 CLR 439, [24]–[27] (Gleeson CJ, Gummow and Callinan JJ); Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389, 394–396.

The words ‘artificial price’ in s 1041A have a legal meaning.[19] Accordingly, the question whether price of the kind described in Question 1 is an ‘artificial price’ is a pure question of law.
[19]See my reasons at [203]–[260].

Questions 2 and 3 seem to concern the application of the answer to Question 1 to the present case:

2.Was the closing price of shares in [X Ltd] on the ASX on 4 Ju1y 2006 an ‘artificial price’ within the meaning s 1041A(c) of the Corporations Act 2001 (Cth)?
3.Was the price of shares in [X Ltd] on the ASX on 4 July 2006 maintained at a level that was ‘artificial’ within the meaning of s 1041A(d) of the Act?

At first blush, Question 2 may seem to be asking the Court of Appeal to finally determine whether the ‘artificial price’ element of the offence is made out. This interpretation of Question 2 only needs to be stated to be rejected. Obviously it will be a question for the jury whether the Crown has proved beyond reasonable doubt that the closing share price of X Ltd on 4 July 2006 was an artificial price. Rather, Question 2 must be asking whether, assuming the facts be as set out in the case stated, the closing share price was an ‘artificial price’ within the meaning of the Act. Question 3 should also be interpreted accordingly.

Question 3 appears to involve an additional issue of whether the price was ‘maintained’. There does not appear to be any dispute between the parties as to the meaning of the word ‘maintain’ in s 1041A and no argument was directed to this issue. The word may or may not be used in its ordinary English meaning. In these circumstances, it seems unlikely that the question was intended to address the issue of whether the price level was ‘maintained’. The better view is that, like Questions 1 and 2, Question 3 was aimed solely at the real dispute in this case — the meaning of ‘artificial price’ and ‘artificial’ level. It follows that Question 3 is really asking whether the level of the price of the shares on 4 July 2006 was a level that was ‘artificial’. It is not asking whether a particular price level was ‘maintained’ within the meaning of 1041A.

When interpreted in this way, Questions 2 and 3 ask, as Question 1 does, whether certain facts fit within a statutory term. Unlike Question 1, Questions 2 and 3 do not specify these facts within the question itself but implicitly refer to the facts in the case stated. However, this is merely a drafting technique. In substance, Questions 2 and 3 are questions of the same kind as Question 1. They too are pure questions of law.

A case stated may include questions arising out of disputed facts

The accused points out that the facts said to give rise to the reserved questions are not agreed or finally determined. The facts ultimately found may differ from the facts alleged by the Crown and the facts found by the learned trial judge for the limited purpose of stating the case. In particular, the Crown might fail to prove that Ms N purchased the shares for the sole or dominant purpose or creating or maintaining a price. Further, the Crown might fail to prove that the accused was sufficiently complicit in Ms N’s activities as to be guilty of conspiracy. If so, the answers to the reserved questions would not affect the liability of the accused.

In this case the learned trial judge made both an assumption of fact and a finding of fact concerning Ms N’s purpose in buying the shares. Both were made ‘for the limited purpose of the case stated’ and ‘upon the understanding that any such findings of fact, or any such assumptions of fact, do not, and cannot, give rise to any estoppel against [the accused]’.[20] His Honour did not make any factual findings or assumptions on the issue of conspiracy.
[20]Ruling, 80.

I accept that, insofar as a factual dispute creates a difficulty for the case stated procedure, that difficulty cannot be resolved by making factual findings for the limited purpose of the case stated. This is so because the ultimate facts proved at trial may turn out to be different. A witness may not swear up or may give evidence inconsistent with prior statements. It follows that a finding of fact made for the limited purpose of the case stated is, in substance, an assumption of fact. No criticism may be levied at the trial judge for making the factual findings. However, in my view, facts found for the limited purpose of the case stated should be treated as assumed facts.

The accused contends that because the relevance of the questions depends on assumed facts, the questions are ipso facto invalid. The underlying proposition seems to be that, as a threshold matter, a reserved question is necessarily invalid if its relevance is contingent on disputed facts. I would reject this threshold proposition for three reasons. First, I consider that, as a matter of logic, a question of law can arise on disputed facts. Secondly, the cases relied on by the accused do not support his threshold proposition. Thirdly, the amendments to the case stated procedure brought about by the CPA make it clear that, whatever may have been the position previously, Parliament did not intend to confine the new case stated procedure to circumstances where the relevant facts are agreed

I explain each of these three reasons in turn.

Logic suggests question of law may arise on disputed facts

As a matter of logic, it seems plain that a question of law may properly arise in a proceeding even if, at that stage of the proceeding, the relevance of the question is contingent on facts that are not agreed or finally determined. This can be seen most clearly in the context of a criminal jury trial, such as this case. In a criminal jury trial, the judge cannot defer the determination of the applicable law until after the fact-finding is complete. The jury is the finder of fact. It cannot make preliminary findings of fact — all of the fact-finding is done at the end of trial by virtue of the verdict. Further, the precise findings made by the jury will never be known; the jury simply returns a verdict of guilty or not guilty. Of course, before it does so, the judge must charge the jury on the law that applies to the case. Suppose that the Crown alleges that a certain fact exists and claims that proving this fact is enough to establish a particular element of the offence. The accused denies the alleged fact but also denies that the alleged fact, if proved, is sufficient to establish the element. There is a dispute as to a question of fact and a question of law. The relevance of the question of law is contingent on the question of fact — the question of law will prove irrelevant if the Crown ultimately fails to prove the fact. Yet, in a criminal jury trial, the question of law must clearly be determined before the question of fact.

Of course, it could hardly be suggested that a trial judge making rulings on such a question of law is straying outside the judicial power constraints. If that were so, a Chapter III court would be effectively precluded from conducting criminal jury trials because the trial judge could not determine any disputed question of law about the elements of the offence if the relevant facts were not agreed.

Another example of a question of law clearly arising out of disputed facts is demurrer. The demurrer is: a ‘a form of procedure which assumes the truth of a particular set of facts’ pleaded by one party and ‘enables a court to declare whether or not they provide a cause of action or a defence or reply to another party's pleading’.[21] The demurrer involves a court determining a question of law on the basis of assumed facts. However, it cannot be doubted that in doing so the court is acting with the judicial power constraints.
[21]Bass v Permanent Trustee Company Ltd (1999) 198 CLR 334, [50] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ).

It follows that, as a matter of logic, a question of law is not hypothetical merely because the relevance of the question depends on the existence of a fact that is disputed. Answering a contingent question of this kind does not necessarily amount to giving an advisory opinion.

Authority does not support the accused’s position

The accused refers to a number of cases in an attempt to make good his proposition that the reserved questions are ipso facto invalid because they are contingent on disputed facts. The accused’s submissions in relation to these cases are somewhat difficult to decipher. What follows is my attempt to extract the accused’s submissions, taking them at their highest.

The accused places particular reliance on the decision of this Court in R v Assange,[22] a case counsel described as ‘critical’.[23] The accused in that case, Assange, was charged with, inter alia, offences against ss 76B and 76D of the Crimes Act 1914 (Cth). These sections made it an offence for a person to obtain, intentionally and without authority, access to data stored in certain computers. After the accused had been arraigned in the County Court, an agreed summary of facts was tendered in evidence. The trial judge then reserved two questions for determination by the Court of Appeal. The first question asked whether a person obtains access to data stored in a computer if the person ‘whilst having the ability to view the said data, has not in fact either viewed or attempted to view the said data?’.[24] The second question asked whether certain terms used in the relevant provisions of the Crimes Act 1914 ‘are words of common English usage’ or ‘words which need to be interpreted according to a technical meaning?’.[25]
[22][1997] 2 VR 247 (‘Assange’).
[23]Appeal Transcript 19.
[24]Assange [1997] 2 VR 247, 247.
[25]Ibid.

The Court of Appeal declined to answer the questions. Hayne JA, with whom Vincent and Coldrey AJJA agreed, gave three principal reasons for doing so. First, the case stated did not ‘set out any facts which are said to relate specifically to particular counts on the indictment’.[26] The agreed summary did do so but the summary was not incorporated into the case stated and the Court of Appeal could not refer to materials that were not part of the case stated.[27] Secondly, the first question was ambiguous because it was not clear what was meant by the word ‘view’. Hayne JA referred to a number of different meanings that the word ‘view’ could have in the context of the charges.[28] Thirdly, and significantly for the present case, Hayne JA considered that the case suffered from a more fundamental defect that could not be cured by simply incorporating the agreed summary into the case stated and re-drafting the questions to remove ambiguity.[29] His Honour held that questions about the construction of the provisions under which Assange was charged did not arise until the facts have first been ‘identified’:[30]

[I]t seems to me that, at least in this case, a question of the generality which is presented for us, a question which is, in effect, “What does a particular section of the Commonwealth Crimes Act mean?”, is not a question that arises on the trial of the accused. The particular question, whether the relevant sections apply to facts that may be admitted or proved in evidence, no doubt will arise but it will arise only once the facts have ﬁrst been identiﬁed. Where, as here, the parties do not and cannot bind themselves to offer no further factual material than is set out in the statement of agreed facts, it is not possible to say what point of law either will arise on the trial of the accused or has now arisen before a jury is empanelled. Until the particular facts are known the court is asked to give no more than an advisory opinion of more or less general application. The perils of that course are well known and need not be repeated.

[26]Ibid 250.

[27]Ibid.

[28]Ibid 251-2.

[29]Ibid 250, 252.

[30]Ibid 254.

Here, the accused submits that this passage ‘emphasise[s] the advisory nature of answering questions of law without agreement as to all the facts’.[31] In my view, this submission misapprehends the passage. Hayne JA did not say that the question of law will only arise once the facts have been proved or agreed. Rather, his Honour said that the question will arise once the facts have been ‘identified’. Earlier in the judgment his Honour pointed out that the agreed summary, even if it were incorporated into the case stated, described Assange’s conduct in very broad and ambiguous terms, such as ‘gained access’ or ‘obtained unauthorised entry’. The summary did not actually ‘say what it is that Assange did’.[32] His Honour held that the question of the legal significance of viewing or not viewing the data would only arise once the facts were known:[33]

Did he, for example, obtain entry by identifying a password or passwords that were intended to provide protection from unauthorised access? ... Did he in some way bypass the password protections? If he did not identify passwords, how did he obtain unauthorised entry to the computer? What is meant in this context by him obtaining “entry”? In my view, it is only when these facts are known that there can be useful debate about what, if any, signiﬁcance is to be attached to whether the accused did or did not “view” the data concerned.

[31]Applicant’s Summary of Contentions (17 November 2011) [20].

[32]Assange [1997] 2 VR 247, 252.

[33]Ibid 252.

In Assange there was no dispute as to the facts. The problem was not that the facts were disputed but that the agreed facts were not sufficiently specific. When Hayne JA referred to ‘facts’ being ‘known’ or ‘identified’, he was not referring to facts that were proved or admitted as distinct from facts that were disputed. Rather, his Honour was referring to the need to specify facts giving rise to the question with sufficient precision.

The ‘facts’ that needed to be ‘known’ are the specific actions of the accused that were alleged by the prosecution to constitute the commission of the offence. Because the alleged conduct was not identified with sufficient precision, questions about the construction of the provisions under which the accused was charged were hypothetical. For example, suppose that what the prosecution meant by ‘gaining access’ to a computer was merely discovering the password without ever attempting to use that password to log in to the computer. It might be that merely obtaining the password without ever using it would not amount to a commission of the relevant offence. If so, that would be the end of the matter. No question would arise about whether, had the accused actually logged in to the computer, some legal significance would attach to viewing or not viewing data stored on the computer. For this reason the alleged conduct needs to be ‘identified’ with sufficient precision. But nothing in Hayne JA’s judgment suggests that once the alleged conduct has been ‘identified’, anything turns on whether that conduct is admitted or disputed by the accused.

My view that ‘identified’ does not mean agreed or finally determined is supported by the judgment of Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ in Bass v Permanent Trustee Company Ltd.[34] The plurality referred to demurrer as ‘a form of procedure which assumes the truth of a particular set of facts’ and then, in the same paragraph, explained that a ‘demurrer proceeds upon identified facts’.[35]
[34](1999) 198 CLR 334 (‘Bass’).
[35]Ibid [50] (emphasis added).

Next, the accused refers to the judgment of Brooking J in Jacobson v Ross[36] and the joint judgment in Bass. He submits that these judgments stand for four propositions. First, that a mixed question of fact and law can be decided as a preliminary question only if the underlying facts are agreed or finally determined (or will be finally determined as part of the process of answering the preliminary question). Secondly, that a pure question of law may be capable of being answered without reference to facts. Thirdly, that even a pure question of law can only be answered within a specific factual context which informs and illuminates the consideration of the question. Fourthly, that this factual context must be agreed or finally determined.[37]
[36][1995] 1 VR 337 (‘Ross’).
[37]Appeal Transcript 30–34, 97.

Applying these propositions to the present case, the accused submits that the questions are mixed questions of law and fact and hence cannot be answered if facts are disputed.[38] He submits that even if the questions were re-formulated as pure questions of law (eg ‘What is the meaning of “artificial price” in s 1041A?’), they could not be answered in a disputed factual context.[39]
[38]Appeal Transcript 29.
[39]Appeal Transcript T15.

I reject the submission that questions of the kind reserved in this case cannot be determined on the basis of assumed facts.

It is correct that Brooking J in Ross expressly held that a mixed question of law and fact cannot be answered on assumed facts:[40]

Care must be taken to distinguish between cases in which the relevant facts, once identiﬁed, are to be mutually admitted or are to be judicially determined on the one hand and, on the other hand, cases in which the relevant facts are merely assumed by one party to be correct for the purposes of the preliminary determination. In the latter case, one party is in effect demurring or taking an objection in point of law. He says: ’Let it be assumed that the facts are as alleged by my opponent. Still they give rise to no cause of action [or defence, or as the case may be].’ This approach is possible only where the question to be determined is one of law, not one of mixed law and fact. In such a case the party objecting in point of law remains free to dispute the facts concerned at the trial.

[40]Ross [1995] 1 VR 337, 342. It may be that his Honour did not intend the principle that a mixed question of law and fact cannot be decided on the basis of assumed facts to apply to a question of the kind where the disputed factual component of the question concerns not the facts of the case itself but the meaning of a statutory phrase used in its ordinary English meaning. It is unnecessary to consider this issue.

However, this principle does not assist the accused because, as I have already explained, the reserved questions in this case are all pure questions of law.[41] It may be that the accused’s submissions simply use the term ‘mixed question of law and fact’ in an imprecise way. Perhaps what the accused refers to as a ‘mixed question of law and fact’ includes pure questions of law of the kind that are asked in this case — questions whether certain facts fall within a statutory description. If so, this is not what Brooking J meant by ‘mixed question of law and fact’. Take the example that his Honour gives of a pure question of law that, unlike a mixed question of law and fact, can be determined on the basis of assumed facts. That example is the question whether, assuming certain facts be as alleged by one party, these facts give rise to a cause of action or a defence. The question is: assuming certain facts to exist, do these facts have some specified legal significance? This example is, of course, on all fours with the reserved questions in this case. It follows that Brooking J considered that a pure question of law that requires reference to facts may be capable of being determined on the basis of assumed facts.
[41]See above at [52]-[58].

The accused submits that Ross ‘was a civil case in which different principles and procedures are to be applied’.[42] To make good this submission, he refers to the following passage from Ross:

It may be that a question of law can be determined in a preliminary way without regard to the facts. So if a judge is satisﬁed that the question whether ’person‘ in a particular section of a given Act includes ’corporation‘ is a ’question in a proceeding‘ to be ’tried‘ within the meaning of r. 4.07 [sic] ... he may see ﬁt to order the preliminary determination of that question without stating any factual basis on which it is to be determined. He will do this on the footing that the abstract question can be answered without regard to the facts of the particular case. But where the preliminary question cannot be properly answered without reference to the facts of the case (and this will be so with any question of mixed law and fact), the order for the preliminary trial of the question should show how the relevant facts are to be identiﬁed for the purposes of that preliminary trial and whether the relevant facts are merely to be taken as assumed for the purposes of the determination of the preliminary question or on the other hand are either to be mutually admitted or proved. Where the preliminary issue to be determined is one of law or of mixed law and fact and there are relevant facts which are in dispute, the court may in its discretion make an order for the trial of the preliminary issue on the footing that relevant disputed questions of fact will be resolved by the court in the course of determining the preliminary issue...

[42]Accused’s Reply Submissions (6 December 2011) [8]. See also Appeal Transcript 31, 97.

The accused focuses on the last sentence in this passage, which discusses the possibility of having disputed facts judicially determined as part of the trial on a preliminary issue of mixed law and fact. He submits that this procedure is not possible in a criminal context, where the tribunal of fact is the jury.[43] It follows, in the accused’s submission, that in a criminal context facts need to be agreed.
[43]Ibid.

I reject this submission. Obviously in the context of a criminal jury trial it is not possible to have a hearing on a preliminary question that would, as part of that hearing, involve the judge finally determining disputed facts going to the guilt or innocence of the accused. But this has no logical bearing on the issue of whether disputed facts can be assumed for the purposes of deciding a preliminary question. Justice Brooking held that they can be, provided that the preliminary question is a pure question of law. I see no reason why the same principle cannot be applied in the criminal context where the tribunal of fact is the jury. On the contrary, in the criminal context there is no other option but to assume any disputed facts because the determination of a disputed question of law must precede the fact-finding.

Next, the accused submits that when Ross refers to ‘assumed’ facts, it is referring solely to ‘a demurrer or demurrer-like situation’.[44] It is unnecessary to consider the correctness of this submission because, in any event, it does not assist the accused. First, demurrers are not confined to the civil context. In the criminal context, an accused can object to the indictment on the basis that the facts pleaded in the indictment, assuming them to be true, do not amount to an offence.[45] Secondly, the situation in this case is, in effect, demurrer-like. The accused denies factual allegations set out in the Summary of the Crown Opening but contends that the alleged facts are, in any event, insufficient to establish the offence charged.
[44]Appeal Transcript 31–32.
[45]See R v Boston (1923) 33 CLR 386, 396 (Isaacs and Rich JJ); Richard Fox, Victorian Criminal Procedure (2010) ¶8.2.4.

Of course, with a demurrer, the demurring party in effect agrees that the facts alleged by the other party should be assumed for the purposes of determining the demurrer. The accused seeks to draw a distinction between facts that are assumed by agreement — which he says is ‘sort of more or less agreement of substance’[46] — and facts that are assumed over objection of one of the parties. I see little merit in this distinction. The alleged vice of assuming facts — that facts ultimately proved may end up being different from the assumed facts — is the same in either case.
[46]Appeal Transcript 16.

It is necessary to make two further observations about Ross. First, Brooking J pointed out that in order for a question to be determined at a preliminary trial, the question must be a ‘question in the proceeding’ ‘to be tried’.[47] This is, in substance, the same as the requirement under s 302 of the CPA that the question ‘arise’.
[47]Ross [1995] 1 VR 337, 340.

Secondly, Brooking J held that where a pure question of law can be determined without reference to facts, it is possible to ‘order the preliminary determination of that question without stating any factual basis on which it is to be determined’.[48] Of course, this was said in the context of an order for preliminary trial under the then Supreme Court Rules.[49] The case stated procedure is different because under that procedure ‘the court to whom the case is stated must conﬁne itself to the facts that are stated and to the questions that are reserved’.[50] ‘[T]he court should not refer to any material not set forth in the case itself’[51] and generally ‘is not at liberty even to draw inferences from the facts that are stated’.[52] It follows that if a preliminary question is to be determined through a case stated procedure, the case stated needs to sufficiently set out the facts giving rise to the question. This is necessary even if the question is a pure question of law of the kind that can be determined without reference to facts. First, a factual context is often necessary to illustrate and illuminate a question of law. Secondly, some questions of law are too broad to be capable of having an exhaustive answer and a factual context is necessary to enable the court answering the question to give a partial answer that is relevant to that factual context. Thirdly, the factual context is necessary so that the court answering the question is able to verify that the question arises and that it can be answered without transgressing the judicial power constraints. However, none of these three points require that all of the relevant facts be agreed or finally determined.
[48]Ibid.
[49]Ibid 337.
[50]Assange [1997] 2 VR 247, 253 (Hayne JA, Vincent and Coldrey AJJA agreeing).
[51]Ibid 250.
[52]Ibid 353.

I now turn to Bass. The accused relies on a number of passages in that case. The first of these passage deals with the concept of a ‘judicial determination’:[53]

The purpose of a judicial determination has been described in varying ways. But central to those descriptions is the notion that such a determination includes a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy.

[53]Bass (1999) 198 CLR 334, [45] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ).

Next, the accused refers to a passage explaining why a declaratory judgment is not an advisory opinion:[54]

[O]ne crucial difference between an advisory opinion and a declaratory judgment is the fact that an advisory opinion is not based on a concrete situation and does not amount to a binding decision raising a res judicata between parties. Thus, the authors of one recent text on declaratory judgments emphasise that, where the dispute is divorced from the facts, it is considered hypothetical and not suitable for judicial resolution by way of declaration or otherwise.

[54]Ibid [48] (footnotes omitted).

Further, the accused refers to a passage in Bass where the High Court held that the Full Court of the Federal Court erred in answering certain preliminary questions reserved by the trial judge. The questions ‘were formulated as questions of mixed law and fact’ ‘[b]ut the relevant facts were neither agreed nor found’.[55] The High Court held that the questions were hypothetical:[56]

As the answers given by the Full Court and the declaration it made were not based on facts, found or agreed, they were purely hypothetical. At best, the answers do no more than declare that the law dictates a particular result when certain facts in the material or pleadings are established. What those facts are is not stated, nor can they be identified with any precision. They may be all or some only of the facts. What facts are determinative of the legal issue involved in the question asked is left open. Such a result cannot assist the efficient administration of justice. It does not finally resolve the dispute or quell the controversy. Nor does it constitute a step that will in the course of the proceedings necessarily dictate the result of those proceedings. Since the relevant facts are not identified and the existence of some of them is apparently in dispute, the answers given by the Full Court may be of no use at all to the parties and may even mislead them as to their rights. Courts have traditionally declined to state — let alone answer — preliminary questions when the answers will neither determine the rights of the parties nor necessarily lead to the final determination of their rights. The efficient administration of the business of courts is incompatible with answering hypothetical questions which frequently require considerable time and cause considerable expense to the parties, expense which may eventually be seen to be unnecessarily incurred.

[55]Ibid [54].

[56]Ibid [49].

Finally, the accused refers to a passage in Bass where the High Court appears to hold that it is contrary to the judicial process to apply the law to disputed facts:[57]

Judicial power involves the application of the relevant law to facts as found in proceedings conducted in accordance with the judicial process. And that requires that the parties be given an opportunity to present their evidence and to challenge the evidence led against them. It is contrary to the judicial process and no part of judicial power to effect a determination of rights by applying the law to facts which are neither agreed nor determined by reference to the evidence in the case.

[57]Ibid [56] (footnotes omitted).

The accused’s submissions in relation to these passages are difficult to decipher. The thrust of his argument appears to be this: a mixed question of law and fact is hypothetical if it is based on facts that are assumed rather than agreed or finally determined. Answering such a question does not ‘quell a controversy’ because the facts ultimately proved may end up being different from the assumed facts. If so, the answers will be of no or little use to the trial judge and may even be misleading. Hence, it is said that answering such a question would be contrary to the judicial power constraints.[58] The accused seems to accept that a demurrer procedure falls within the judicial power constraints. But he dismisses it as a ‘special procedure’, a ‘unique process which has some different principles’.[59]
[58]Appeal Transcript 28-30 and Applicant’s Summary of Contentions (17 November 2011) [35].
[59]Appeal Transcript 29.

Again, the reserved questions in this case are pure questions of law, not mixed questions of law and fact. The accused may be using the expression ‘mixed question of law and fact’ to refer to questions of the kind reserved in this case. But as the following passage shows, that is not how the plurality was using the expression ‘mixed question of law and fact’ in Bass:[60]

Preliminary questions may be questions of law, questions of mixed law and fact or questions of fact. Some questions of law can be decided without any reference to the facts. Others may proceed by reference to assumed facts, as on demurrer or some other challenge to the pleadings. In those cases, the judicial process is brought to bear to give a final answer on the question of law involved. Findings of fact are made later, if that is necessary. Where a preliminary question is a pure question of fact that, too, can be answered finally in accordance with the judicial process if the parties are given an opportunity to present their evidence and, also, to challenge the evidence led against them.
Special problems can arise where the preliminary question is one of mixed fact and law. ...

[60]Bass (1999) 198 CLR 334, [52] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ).

This passage makes two things clear. First, contrary to the accused’s submissions, the joint judgment held that questions of law that require reference to facts can be determined on the basis of assumed facts.

Secondly, the joint judgment refers to demurrer as an example of a question of law in contra-distinction to a question of mixed law and fact. Of course, like the reserved questions in this case, a demurrer is concerned with determining the legal effect of particular identified facts that are assumed to be true for the purposes of determining the question.

In contrast, preliminary questions 2 and 3 in Bass — questions that the joint judgment referred to as mixed questions of law and fact and held to be inappropriate to answer — were questions of a different kind. Question 2 asked whether, ‘having regard to the matters pleaded in the amended Statement of Claim and the material contained in the agreed bundle of documents’, certain respondents were immune from the applicants’ claims. Question 3 was similar.[61] This was not a situation where questions were asked by reference to particular, identified factual allegations made by one party and, although they were denied by the other party, assumed to be true for the purposes of determining the preliminary questions. At the time the questions were reserved, respondents in Bass had not yet put in a defence.[62] They had not made any factual allegations that could be assumed for the purposes of determining the particular legal questions. Rather, the preliminary questions were to be answered by reference to the facts pleaded by the applicants and an ‘agreed bundle’ of documents. The bundle of documents was extensive and controversial.[63] It was essentially a bundle of documents that might be led as evidence at the trial by one or other of the parties. The ‘assumed facts’ in Bass were the ‘facts’ that the Full Court of the Federal Court itself inferred from the ‘agreed bundle’ of documents as facts likely to be established at trial if the bundle was led in evidence.[64] In other words, unguided by a specific set of facts alleged by the respondents, the Full Court in Bass examined for itself a bundle of documents that might or might not be led at the trial. Based on that bundle, it expressed a preliminary view as to what facts might ultimately be alleged by the respondents and then proved or admitted at trial. It then assumed these facts as the basis for determining the preliminary questions. Further, these facts were not identified with any precision. Rather, the Full Court merely stated the legal conclusion — that the respondents ‘seem to have been acting as mere agents of the government’ — that it drew from these unidentified facts.[65]
[61]Ibid [39].
[62]Ibid [5].
[63]Woodlands v Permanent Trustee Co Ltd (1996) 68 FCR 213, 217 (being the decision of the Full Court of the Federal Court subject of the High Court appeal in Bass).
[64]Ibid 237.
[65]Ibid.

This process for identifying the facts is very different from the demurrer-like approach, used in this case, of assuming a set of specific factual allegations made by one of the parties. The plurality of the High Court in Bass expressly recognised this difference when it contrasted the Full Court’s approach with a demurrer:

The procedure adopted in the present case is far removed from that concerned with demurrers, a form of procedure which assumes the truth of a particular set of facts. If the “facts” which are the basis of an answer to a legal question are identified, that answer will have utility for the parties provided that no other evidence could add to or qualify those “facts”. In such a case, the parties' rights will be determined when the evidence finally determines the existence or non-existence of those “facts”. Because that is so, demurrers have been much used in determining the rights of parties to litigation. The demurrer proceeds upon identified facts and enables a court to declare whether or not they provide a cause of action or a defence or reply to another party's pleading. Unlike the present case, however, a demurrer assumes that the pleadings exhaust the universe of relevant factual material. The utility of demurrers is, however, heavily dependent on the pleadings containing all the relevant facts. When the parties are uncertain whether further investigation will reveal further factual material, the utility of the demurrer is diminished.

The passages from Bass relied on by the accused for the proposition that facts must always be determined or agreed only appear to support that proposition if the passages are taken out of context. That context includes the unique process of ‘assuming’ facts adopted by the Full Court in that case. The context also includes the express statements elsewhere in the joint judgment[66] about determining a question of law on the basis of assumed facts. These statements make it plain that there is no blanket prohibition on determining a pure question of law, including a question about the legal significance of particular facts, on the basis of assumed facts.[67]
[66]Extracted at [93] and [97] of these reasons.
[67]It is unclear and unnecessary to consider whether the joint judgment in Bass endorses Brooking J’s conclusion in Ross that a mixed question of law and fact cannot be determined on the basis of assumed facts.

The passage discussing demurrers[68] suggests that three conditions may need to be satisfied before a pure question of law can be determined on the basis of assumed facts. First, the assumed facts should be alleged by a party. Secondly, the assumed facts should be identified with sufficient specificity and precision. Thirdly, the court should determine the question on the basis that these facts ‘exhaust the universe of relevant factual material’. However, for present purposes, it is sufficient to conclude that Bass directly contradicts the proposition that the reserved questions fail at the threshold merely because they are based on disputed facts.
[68]Set out at [97] of these reasons.

The next case on which the accused relies is the decision of the Full Court of the Federal Court in Harts Australia Ltd v Commissioner of Taxation.[69] Harts was an appeal against an interlocutory judgment where the trial judge answered certain questions as a preliminary issue.[70] The questions involved an issue of construction of a statutory provision and then the application of that provision to certain tax-related agreements that themselves needed to be construed.[71] The Full Court allowed the appeal and ordered the questions be answered ‘Inappropriate to answer’.[72] The accused relies on the following passage from the judgment of Merkel J, with whom Lee and Finn JJ agreed:

I have set out the problems I see arising in relation to the construction of the agreements as they lead to a fundamental difficulty with the procedure adopted by the parties and the primary judge in determining the questions as a preliminary issue. Of course, if the parties unconditionally agreed upon the facts necessary to finally determine the issue of construction as a preliminary question, the question of whether further or other facts might also be relevant would be of no moment.
However, that is not the present case. While the primary judge endeavoured to overcome that difficulty, in part, by proceeding on the basis of certain agreed facts, those agreed facts were limited and provisional. They were provisional in the sense that they were agreed solely for the purpose of determining the preliminary issues and were not to be treated as agreed facts for the purpose of determining any substantive issues arising on the income tax appeals. Thus, the facts that might emerge at trial, including facts that could be relevant to the construction of the agreements, may be quite different to the facts agreed to solely for the purpose of determining the preliminary issues. The utility of questions being answered as a preliminary issue is lost if the facts upon which those questions are to be answered might ultimately be found to be different at trial. In such circumstances there is a real danger of the Court providing answers to hypothetical questions or giving no more than an advisory opinion
...
While the difficulties arising in the present case are different from those identified [in Director of Fisheries (NT) v Arnhem Land Aboriginal Land Trust [2001] FCA 98] by Sackville J (with whom Spender J and I agreed on this issue), the absence of a ’conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy‘ is common in each case. The terms on which the facts were agreed to in the present case meant that no conclusive or final decision could be made on the basis of those facts.

[69]Harts Australia Ltd v Commissioner of Taxation (2001) 109 FCR 405 (‘Harts’).

[70]Ibid [2].

[71]Ibid [2]–[6].

[72]Ibid [28].

The accused refers to this passage but makes no express submissions about it. Presumably, he contends that it stands for the proposition that a question that requires reference to facts cannot be answered by reference to facts that are merely assumed for the purposes of determining the question. If that is the accused’s submission, I reject it.

First, as I have explained, the preliminary questions in Harts involved two issues — a statutory construction issue and an issue of construction of certain agreements. It was only the issue of construing the agreements that was held to be inappropriate to answer. The Full Court addressed the statutory construction issue,[73] even though some of the facts were disputed. For example, the respondent contended that the agreements were executed after a certain date. If established at trial, this would mean that the agreements were invalid irrespective of the statutory construction issue and, therefore, that the statutory construction issue was irrelevant.[74]
[73]Ibid [16]–[19].
[74]Ibid [21].

Secondly, the issue of construction of the agreements that the Full Court in Harts found to be inappropriate to answer was quite different from the questions in this case. There, the agreements needed to be construed by reference to the underlying factual matrix. Yet there was no agreed factual matrix.[75] It followed that any construction of the agreements adopted in the course of answering the questions was necessarily preliminary. If the facts turned out to be different from the assumed facts, the construction issue would need to be considered afresh. So in Harts the problem was not that the answers to the preliminary questions could end up being irrelevant if the facts turned out to be different from what was assumed. Rather, the problem was that if the facts turned out to be different, the questions would need to be re-opened.
[75]Ibid [20]–[24].

The situation in Harts is quite different from a case where facts alleged by one party are assumed for the purposes of determining whether these facts have the legal effect that that party claims. In the latter situation, the question is in effect concerned with ascertaining the state of the law — be it the construction of a statute or the determination of the applicable principles of common law or equity — that will govern the rights of the parties if the facts are as assumed. If the facts turn out to be different from what was assumed, the answer may prove to be irrelevant. However, the state of the law itself does not depend on any facts. Bass makes plain that questions of this kind may be determined on the basis of assumed facts.

The next case to which the accused refers is a decision of the Full Court of the Supreme Court of South Australia in Question of Law Reserved by Trial Judge (No 3 of 2010).[76] In that case the Full Court declined to answer a question asking whether certain facts amounted to an offence against a particular statutory provision. There was a technical issue with the timing of the reserved question that is not presently relevant.[77] What is relevant is the following passage relied on by the accused in the present case:[78]

The factual background recited in the document reserving the question amounts to a summary of the prosecution case, as opposed to findings made by the judge. In certain instances this Court is asked to make assumptions about the facts. Those assumptions concern the state of mind of the defendant at times relevant to the alleged offences. It is specifically stated that the defendant makes no admission as to his state of mind. In considering the question it may well be necessary to discuss the factual circumstances of the charges.
Were there to be a trial on the charges, the evidence might depart from that foreshadowed in the depositions, or from the assumptions appearing in the recital. And, during the trial, the information might be amended. To that extent the reserved question appears to be hypothetical. There is a risk that, were the question addressed, the answer might amount to an advisory opinion.

[76][2010] SASCFC 77 (Vanstone, David and Peek JJ).

[77]Ibid [3].

[78]Ibid [4]–[5].

The judgment does not describe the facts in the case stated in any greater detail. In particular, it is unclear whether the assumed facts are the facts expressly alleged by the Crown or merely facts that the trial judge himself derived from the depositions. It is also unclear if the South Australian Full Court considered what it described as a ‘risk’ that ‘the answer might amount to an advisory opinion’ meant that the question did not arise or whether this ‘risk’ was seen to be merely a discretionary factor militating against answering the question. Because these things are unclear, it is possible that the case may be distinguishable. But I accept that, on its face, the passage above appears to be on all fours with the accused’s proposition that a question of law will be necessarily hypothetical if it is based on assumed facts.

However, the South Australian Full Court approach is inconsistent with Bass and Ross. It is also inconsistent with Harts where, as I have outlined, the Full Court of the Federal Court considered it appropriate to decide a statutory construction issue even though the issue arose out of disputed facts and, if the facts turned out to be different from what was assumed, the issue would become irrelevant. The South Australian decision did not consider these or any other authorities. To the extent that the decision supports the accused’s threshold proposition, I consider that it was decided per incuriam and I would decline to follow it.

The remaining cases referred to by the accused fall into two categories. The first category contains generic statements about the nature of judicial power and the impermissibility of advisory opinions.[79] It is unnecessary to consider these cases because they do not qualify or elaborate upon the specific principles in Bass and Ross. The second group of cases[80] is relevant not so much to the issue of whether a question based on assumed facts is ipso facto invalid but rather to the issue of whether the reserved questions ‘arise’ in the particular circumstances of this case. I will deal with the second category of cases shortly. For present purposes, it is sufficient to conclude that, of the authorities relied on by the accused, only the South Australian decision appears to support his threshold proposition.

Changes introduced by the CPA militate against the accused’s position

[79]Re Judiciary and Navigation Acts (1921) 29 CLR 257; R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361; Fencott v Muller (1983) 152 CLR 570; Mellifont v Attorney-General (Qld) (1991) 173 CLR 289; Re McBain; Ex parte Australian Catholic Bishops Conference (2002) 209 CLR 372; D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1.

[80]Director of Public Prosecutions (SA) v B (1998) 194 CLR 566; R v Garlick [2006] VSCA 127.

Whatever may have been the position previously, the changes to the case stated procedure brought about by the CPA make it clear that Parliament did not intend to limit the availability of the procedure to cases where the relevant facts are agreed.

Under the former Crimes Act procedure, a case could only be stated on application by the accused.[81] Of course, the Crown could always informally suggest to the accused that he or she make the application. Similarly, the judge could raise with the parties the issue of whether there may be benefit in using the case stated procedure. But unless the accused agreed and made the application, the case stated procedure could not be used.
[81]Crimes Act 1958 (Version No 215 incorporating amendments as at 31 December 2009) s 446(2). I leave aside the procedure for cases stated after conviction under sub-s (1).

The CPA removes this restriction and permits a case to be stated on application by the Crown or on the court’s own motion.[82] It seems clear that the intended effect of the change must be to enable the case stated procedure to be used without requiring the consent of the accused. Yet if a case may only be stated based on agreed facts, an accused who does not consent to the case stated procedure would be able to frustrate the procedure by simply refusing to agree to the underlying facts, no matter how strong the evidence of these facts.[83]
[82]Explanatory Memorandum, Criminal Procedure Bill 2008, 111; CPA s 337.
[83]In this case the learned trial judge found there was ‘overwhelming’ evidence of Ms N’s alleged purpose in placing the BID on 4 July 2006: Ruling, [77].

…
A squeeze is a less extreme situation than a corner…[265]

[263]McBride Johnson and Hazen, Commodities Regulation 2^nd Ed, Boston Little, Brown 1989, §§ 5.03–5.06.

[264]452 F.2d 1154 C.A. 8 (1971).

[265]Ibid 1162.

According to McBride Johnson and Hazen,[266] a ‘squeeze’ is similar to a corner in that it has all the attributes of ‘cornering’ except that the shortage of the commodity exists because of natural causes, such as flood, drought and heavy exports, and ‘the longs’ take advantage of the situation by demanding arbitrarily and thus artificially high prices. McBride Johnson and Hazen also observe that the existence of a price manipulation of either kind:

is largely a factual question involving determinations whether the requisite domination or monopoly exists, whether an artificial price is caused by the exercise of that power and whether the dominant party intended to bring about that artificial price.[267]

[266]McBride Johnson and Hazen, Commodities Regulation 2^nd Ed, Boston Little, Brown 1989, § 5.05.

[267]Ibid § 5.03.

As well as enacting s 130 to prevent the manipulation of futures markets by conduct of the kind typified by ‘cornering’ and ‘squeezing’, the Futures Industry Act 1986 introduced s 131 to proscribe in relation to futures markets the kinds of false trading and market rigging conduct which was proscribed in relation to securities trading by s 124 of the Securities Industry Act 1980 (Cth) (or, at a State level, by s 109 of the 1975 Act and, before that, by ss 70, 71 and 72 of the 1970 Act). Section 131 provided as follows:

(1) A person shall not, whether within or outside the Territory, create, or cause to be created, or do anything that is calculated to create, a false or misleading appearance of active dealing in futures contracts on a futures market within the Territory or a false or misleading appearance with respect to the market for, or the price of dealing in, futures contracts on a futures market within the Territory.
(2) A person shall not, by any fictitious or artificial transactions or devices, maintain, inflate, depress or cause fluctuations in, the price for dealing in futures contracts on a futures market within the Territory.
(3) For the purpose of determining whether a transaction is fictitious or artificial within the meaning of sub-section (2), the fact that the transaction is, or was at any time, intended by the parties who entered into the transaction to have effect according to its terms shall not be conclusive.

As Goldberg J noted in Soust, the purpose of s 131 was explained in the Explanatory Memorandum for the Futures Industry Bill 1986 thus:[268]

Cl. 131 : False trading and market rigging
286. False trading and market rigging will be prohibited. A person will be prohibited from creating a false or misleading appearance of active trading, or creating a false or misleading appearance with respect to the market for futures contracts (s-cl.131(1)).
287. A person will also be prohibited from maintaining, inflating, depressing or causing fluctuations in the price for dealing in futures contracts on any futures market in the Territory by any fictitious or artificial transactions or devices (s-cl.131(2)).
288. For the purpose of determining whether a transaction is fictitious or artificial within the meaning of s-cl. 131(2), the fact that the transaction is, or was at any time, intended by the parties who entered into it to have effect according to its terms will not be conclusive (s-cl. 131(3)) – cf North v Marra Developments Ltd (1981) 56 ALJR 106 at 112 per Mason J.[269]

[268][2010] 183 FCR 21, 39 [75].

[269]Emphasis added.

Finally, in the chain of statutory development:

a) The proscription of market manipulation creating an ‘artificial price’ (of the kind typified by ‘cornering’ and ‘squeezing’) which began life as s 130 of the Futures Industry Act 1986 was restated in almost identical terms as s 1041A of the Corporations Act 2001 (Cth);

b) The proscription of false trading and market rigging which began life as s 70 of the Securities Industry Act 1970, which later became s 124(1) of the Securities Industry Act 1980 (Cth) and then 998(1) of the Corporations Act 1989 (Cth) (and which, in relation to futures, was provided for in s 131(1) of the Futures Industry Act 1986); and in part the proscription of effecting market prices by fictitious transactions not involving a change in beneficial ownership or involving a counter-transaction (which began life as s 72 of the 1970 Act and was restated as s 124(2) and (3) of the 1980 Act and then s 998(3) of the Corporations Act 1989 (Cth)) (and which, in relation to futures, was provided for in s 131(2) of the Futures Industry Act 1986), were combined and restated as s 1041B(1) of the Corporations Act 2001 (Cth); and

c) The proscription of effecting market rigging transactions, which began life as s 71 of the 1970 Act, later became s 123(1), (2) and (3) of the Securities Industry Act 1980 (Cth) and then s 997 of the Corporations Act 1989 (Cth) (and which, in relation to futures, was provided for in s 131(2) of the Futures Industry Act 1986) was restated as s 1041C.

As was earlier noted, Goldberg J considered that the emphasised passage in paragraph 288 of the Explanatory Memorandum relating to s 131 of the Futures Industry Act 1986 provided ‘a guide to the legislative intention enshrined in the expression ‘”artificial price”’ in s 1041A of the Corporations Act. His Honour took the view that it signified that the ‘the draftsman and the Parliament had in mind [in relation to “artificial price” in s 130 of the Futures Industry Act] the observations of Mason J in North v Marra Developments Ltd [in relation to s 70 of the 1970 Act]’, and thus that the same applied to s 1041A of the Corporations Act.

With respect, we do not think that to be correct. The emphasised passage in paragraph 288 of the Explanatory Memorandum was specifically directed to s 131(2) of the Futures Industry Act 1986 which was concerned with the sort of conduct proscribed in relation to shares and other securities by ss 71 and 72 of the 1970 Act. Logically, and in terms, paragraph 288 of the Explanatory Memorandum had nothing to say about s 130 which, according to paragraph 285 of the Explanatory Memorandum, was concerned with a different kind of illicit activity, not previously proscribed in Australia, constituted of market manipulation by conduct of the kind typified by ‘cornering’ and ‘squeezing’.

Nor does there appear to be anything else in the Explanatory Memorandum which suggests that Mason J’s conception of ‘artificial or managed manipulation’ the result of transactions undertaken for the sole or primary purpose of setting or maintaining a market price was intended to apply to conduct of the kind proscribed by s 130. Moreover, logically, it could not be so if, as the Explanatory Memorandum stated in paragraph 285, the focus of s 130 was upon conduct of the kind typified by ‘squeezing’ and ‘cornering’. For, as we have observed, market manipulation of the latter kind is not undertaken to create a false or misleading appearance in relation to the market price of securities or futures. It consists of the very different phenomenon of the misuse of monopoly or dominant market power, by the cornering of supply or taking advantage of short supply, in order to drive up or drive down true market prices to what is conceived of as being an ‘artificial’ level.

Consequently, as we see it, the two concepts of artificiality are very different. For the purposes of s 130, the concept of ‘artificial price’ is one of a price which in truth reflects market forces of supply and demand in a free and informed market but which is the result of a monopolist or party otherwise in a position of market dominance taking unfair advantage of market power in order to extract a price different to that which would apply in times of adequate supply. In contrast, for the purposes of s 131(2), the concept of ‘artificial transaction' is one which bespeaks the kind of market rigging activity, of which Mason J spoke in North, that is calculated, in the sense of adapted, to set or maintain prices at a level which does not truly reflect the forces of supply and demand in a free and informed market (whether monopolistic or informed by pure competition).

In the result, contrary to Goldberg J’s conclusion that the observations of Mason J in North v Marra Developments Ltd[270] are equally applicable to the interpretation of ‘artificial price’ in s 1041A of the Corporations Act, we conclude that what emerges from the history of the legislation is that ‘artificial price’ in s 1041A is used in a different sense of legal signification reflecting American jurisprudential conceptions of market ‘cornering’ and ‘squeezing’. And, according to those conceptions, the question of whether conduct amounts to ‘cornering’ and ‘squeezing’ is largely one of fact and degree involving determinations of ‘whether the requisite domination or monopoly exists, whether an artificial price is caused by the exercise of that power and whether the dominant party intended to bring about that artificial price’.
[270]As to the significance of the sole or dominant purpose of activities calculated to give a market for securities a false or misleading appearance.

We do not overlook the possibility that Parliament may have used the term ‘artificial price’ in s 1041A in a sense sufficiently protean to cover both market manipulation of the kind typified by ‘cornering’ and ‘squeezing’ and also one or more of the kinds of false trading, market rigging and artificial setting and maintenance of prices which were once the province of ss 70, 71 and 72 of the 1970 Act, and more lately its legislative successors in the form of s 109 of the Securities Industry Act 1975 , ss 123 and 124 of the Securities Industry Act 1980, s 131 of the Futures Industry Act 1980 and ss 997 and 998 of the Corporations Act 1989, and now, therefore, ss 1041B and 1041C of the Corporations Act. But we reject that as a realistic possibility. Given the history of the legislation to which we have referred, and because Parliament has specifically provided in ss 1041B and 1041C for churning and price rigging of the kinds previously dealt with in ss 70, 71 and 72 of the 1970 Act, s 109 of the 1975 Act and ss 997 and 998 of the 1989 Act, the presumption of statutory interpretation, expressed in the maxim specialia generalibus derogant implies that s 1041A is directed to different kinds of activities.[271] The Extrinsic materials support that conclusion.
[271]Perpetual Executors and Trustees Association of Australia Ltd v Federal Commissioner of Taxation (1948) 77 CLR 1, 29 (Dixon J); Pearce & Geddes, Statutory Interpretation in Australia, 6^th Ed, [4.32].

Conclusion as to Question 1

It follows from what we have said that, if Question 1 were restated as a pure question of law in the terms earlier suggested, we would answer it as follows:

a) The expression ‘artificial price’ in s 1041 A is used in the sense of a term having legal signification (as opposed to its ordinary English or some non-legal technical sense);

b) Its legal signification is of market manipulation by conduct of the kind typified by American jurisprudential conceptions of ‘cornering’ and ‘squeezing’.

Under s 305(3) of the Criminal Procedure Act we have power to return the case stated to the judge for amendment and then to deal with the case as so amended. Accordingly, we propose returning the case to the judge to amend Question 1[272] to the form we have suggested, and then answering Question 1, as so amended, in the terms we have stated.
[272]Under s 305(3) of the Criminal Procedure Act 2009.

The continuing significance of sole or dominant purpose

Before parting with Question 1, however, we wish to add that nothing which we have said about the meaning of ‘artificial price’ in s 1041A should be taken to suggest that Mason J’s conception of ‘artificial or managed manipulation’ the result of a sole or primary purpose of setting or maintaining market price may not apply to s 1041B or 1041C.

To the contrary, although s 1041B(1) is the direct lineal descendant of s 70 of the 1970 Act, and what was s 71 of the 1970 Act now appears in s 1041C, the latter expressly incorporates, in s 1041C(2), the conception of artificiality of which Mason J spoke in North.[273]
[273]Which was reiterated by Gleeson CJ in Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (1998) 28 ACSR 58 and Sheller JA in R v Manasseh (2002) 167 FLR 44.

That view of the section is supported by the statement in the Explanatory Memorandum which accompanied the introduction of s 131 of the Futures Industry Bill 1985 that, for the purpose of determining whether a transaction is fictitious or artificial within the meaning of s 131(2) of the Futures Industry Act 1986,[274] the fact that the transaction was, or was at any time, intended by the parties who entered into it to have effect according to its terms would not be conclusive; and, in that connexion, the express reference in the Explanatory Memorandum to the observations of Mason J in North v Marra Developments Ltd.
[274] See now s 1041C(1) of the Corporations Act.

If, therefore, the respondent had been charged with offences under s 1041C(1)(a) of the Corporations Act that, by the acts alleged against him, he engaged in fictitious or artificial transactions or devices which resulted in the price for trading in financial products on a financial market being maintained or inflated, and, if we had been asked whether a transaction which results in the price for trading in financial products on a financial market being maintained or inflated is fictitious or artificial within the meaning of s 1041C(1) if the transaction is carried out with the sole or dominant purpose of so creating or maintaining the price, we may well have answered that question: Yes.

Since we are not asked to express any conclusions as to the meaning of s 1041C, however, still less whether the facts alleged in the indictment would constitute an offence under that section, and, given that it remains to determine the respondent’s state of mind at the time of the transactions, we say no more about it.

Questions 2 and 3

Questions 2 and 3 suffer from the same defects as Question 1 in its present form. They depend upon the fact yet to be ascertained or agreed that the respondent acted with the sole or dominant purpose of creating or maintaining a particular price for shares in X Ltd on the ASX. Otherwise, what we have said about the meaning of ‘artificial price’ in s 1041A would apply with equal force.

Accordingly, we would answer Questions 2 and 3 in terms that they are inappropriate to answer.

The mental element of an offence under s 1041A

In the course of argument, it emerged that there is an issue between the Crown and the respondent as to the fault element of the offences with which the respondent is charged. Counsel for the Crown asked us to consider the question of the fault element as a pure question of law[275] and, if necessary, to return the case to the judge for amendment in order to state that question for decision.
[275]See and compare R v Quach (2010) 27 VR 310; The Queen v LK (2010) 241 CLR 177.

In view of the conclusions we have reached as to Questions 1, 2 and 3, we do not think it appropriate to adopt that course. Given what we have said about the meaning of ss 1041A and 1041C, it is possible that one or both of the parties may wish to reconsider their positions and make some further or other application to the judge. It is preferable that all such applications be before the judge at the one time, so far as possible, rather than proceeding piecemeal and thereby causing unnecessary fragmentation of the proceeding.

It does occur to us, however, that if a question is to be posed as to the fault element of an offence under s 1041A, a number of matters were mentioned in argument which the parties and the judge may wish to bear in mind. We restate them now in case they are overlooked.

First, unlike s 997 of the 1989 Act, s 1041A does not mention ‘intention’. It is couched in terms of a transaction having or being likely to have a proscribed effect. In the Corporate Law Economic Reform Programme Commentary on the Draft Provisions which preceded the enactment of s 1041A, the object of that change (so far as it was then understood by the Executive) was explained as follows:

11.8Sections 997 and 1259 [of the Corporations Act 1989] will be replaced by a new provision based on section 1259, but applying to all financial products traded on a financial market. The new provision will be a civil penalty provision so that contravention will attract both a civil penalty and, if the requisite intention is established, criminal consequences.
11.9As is currently provided in section 1259, the new provision will apply to a transaction, or two or more transactions, with the effect of creating or maintaining an ‘artificial price’.
11.10Section 997 currently contains an ‘intention’ element. A civil contravention of the new provision will not require that element of intention to be established. Criminal consequences will flow from a contravention only if the requisite intention is proved.

We note in passing that similar observations were made with respect to the combination of s 998 of the 1975 Act and s 1260 of the 1989 Act in order to create ss 1041B and 1041C:

11.11Sections 998 and 1260 will be replaced by a new provision based on section 1260, but applying to all financial products traded on a financial products market. The new provision will be a civil penalty provision.
11.12As the new provision will be based on section 1260, it will not include an intention element, as currently required by subsection 998(1), nor will it include either of the defences provided in subsections 998(6) or (8). However, as the provision is a civil penalty provision, a person will commit an offence and face criminal sanctions if the contravention involves the requisite intention.
11.13 The deeming provision of subsection 998(5) will be preserved in so far as it provides an example of what constitutes creating a ‘false or misleading appearance’.

Second, in Australian Securities and Investments Commission v Administrative Appeals Tribunal,[276] Dowsett J interpreted the expression ‘have or likely to have the effect’ in s 1041A as having a similar connotation to the expression ‘has or is likely to have’ in s 45 of the Competition and Consumer Act 2010. That is to say, the word ‘has’ requires the question to be tested against the established facts;[277] and the words ‘likely to have’ refer to the period at or about the time of the transaction and allow any reasonable inference to be drawn;[278] and ‘likely’ means that there is a real chance or possibility, but not necessarily ‘more likely than not’.[279] Thus, Dowsett J concluded that ‘in attacking participation in transactions which have a particular effect or likely effect, s 1041A goes well beyond the reach of s 70 ’[of the Securities Industry Act 1970]. His Honour was speaking there of course about civil liability. In passing, he added that he considered it was ‘probable that in criminal proceedings, absence of knowing involvement will be an answer to any charge’. With respect, that may be to understate the requirements of s 5.6 of the Commonwealth Criminal Code Act 1995 (Cth) (the Criminal Code).
[276](2010) 187 FCR 334, 350 [49].
[277]Trade Practices Commission v TNT Management Pty Ltd (1985) 6 FCR 1, 50.
[278]Ibid.
[279]Monroe Topple & Assocs Pty Ltd v Institute of Chartered Accountants in Australia (2002) 122 FCR 110, 140 [111]; Seven Network Ltd v News Ltd (2009) 182 FCR 160, 253 [423]–[425].

Third, counsel for the respondent submitted that it is well established in Commonwealth restrictive trade practices law that, although intention may be inferred from effect, it is not possible to infer effect from intent. He attempted to support that proposition by reference to the following observation of O’Loughlin J in Australian Competition & Consumer Commission v Pauls Ltd,[280] concerning the purpose of a provision within the meaning of s 45A of the Trade Practices Act 1974 (Cth) (as it then was):

The very nature of s 45A and its deeming effect contradicts the presence of a subjective state of mind. The language of the section requires a dispassionate onlooker to stand back and make an objective assessment of all relevant facts and circumstances. If that assessment reveals a purpose or an effect, or a likely effect of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of prices then the provision shall be deemed to have the proscribed purpose, effect or likely effect. The words ‘likely to have the effect’ can only mean, in my opinion, that one has regard, objectively, to what has happened or is likely to happen, ignoring the subjective state of mind of the relevant parties.

[280]Australian Competition & Consumer Commission v Pauls Ltd (2003) ATPR 41–911, [104].

The latter part of that observation accords with decisions to which we have already referred that effect and likely effect for the purposes of Commonwealth restrictive trade practices legislation are to be discerned objectively.[281] In case it matters, however, the idea that s 45A was directed to an objectively discerned purpose as opposed to the subjective purpose of the perpetrator ill accords with Full Federal Court authority[282] and, as Carr J observed in Australian Competition and Consumer Commission v Australian Medical Association Western Australia Branch Inc,[283] was pronounced per incuriam. Even if that were not so, it does not appear to support the proposition for which counsel contended.
[281]Above n 275 and 276.
[282]ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460, 477.
[283](2003) 199 ALR 423, 471 [244]–[245].

Fourth, s 4.1(1) of the Criminal Code provides that a physical element of an offence may be conduct or a result of conduct or a circumstance in which conduct or a result of conduct occurs. Section 4.1(2) of the Criminal Code provides that ‘conduct’ means an act or omission to perform an act or a state of affairs.

Fifth, the Crown’s position as to the way in which s 4.1(1) of the Criminal Code applies to s 1041A of the Corporations Act appeared to change in the course of argument. In the end we understood it to be that entry into a transaction of the kind described in s 1041A of the Corporations Act would amount to conduct within the meaning of s 4.1(1) of the Criminal Code; the fact of the transaction having or being likely to have the effect of setting or maintaining an artificial price within the meaning of s 1041A would be a result of the transaction; and, consequently, the fact of the transaction having or being likely to have that effect would be a result of conduct within the meaning of s 4.1(1) of the Criminal Code. Thus, the effect or likely effect of a transaction being to set or maintain an artificial price would be a physical element that consists of a result within the meaning of s 4.1(1).

Counsel for the respondent opposed that conclusion. He submitted that the preferable view of s 1041A is that it proscribes a single physical element which consists of the entirety of what is forbidden to be done, namely, entry into a transaction which has or is likely to have the effect of setting or maintaining an artificial price.

Sixth, s 5.6(1) of the Criminal Code provides that, if the law creating an offence does not specify a fault element for a physical element of the offence that consists only of conduct, intention is the fault element for that physical element; and s 5.6(2) provides that, if the law creating the offence does not specify a fault element for a physical element that consists of a result, the fault element for that physical element is recklessness. ‘Recklessness’ is defined in s 5.4. It provides that a person is reckless with respect to a result if he or she is aware of a substantial risk that the result will occur and, having regard to the circumstances known to him or her, it is unjustifiable to take the risk.

It was common ground that s 1041A does not specify a fault element for any physical element of an offence against the section.

Seventh, the Crown contended that, because the offence proscribed by s 1041A consists of a physical element of conduct (entry into a transaction) and a physical element of a result of conduct (that the transaction have or be likely to have the effect of setting or maintaining an artificial price), the effect of s 5.6 of the Criminal Code is that the fault element for entering into the transaction is intention and that the fault element for the transaction having or being likely to have the effect of setting or maintaining an artificial price is recklessness.

Counsel for the respondent contended to the contrary that, because the offence proscribed by s 1041A consists of but one physical element of entry into a transaction which has or is likely to have the effect of setting or maintaining an artificial price, the effect of s 5.6 of the Criminal Code is that the fault element for entering into the transaction is intention and that the fault element for the transaction having or being likely to have the effect of setting or maintaining an artificial price is also intention.

Eighth, it was not in dispute that, if the Crown were correct in its contention as to the effect of s 5.6 of the Code, it would follow that, in order to obtain a conviction for an offence of engaging in conduct contrary to s 1041A of the Corporations Act, the Crown would need to persuade the jury beyond reasonable doubt that the respondent engaged in conduct that had or was likely to have the effect of setting or maintaining an artificial price, and that the respondent:

a) intended to engage in the conduct (being the fault element for a physical element of the offence that consists only of conduct);

b) was aware, at the time of engaging in the conduct, that there was a substantial risk that the transaction would have or be likely to have the effect of setting or maintaining an artificial price (being the fault element for a physical element of the offence that consists of a circumstance or result); and

c) having regard to the circumstances known to the respondent, it was unjustifiable to take the risk.

If, however, the respondent were correct in his contention, it would follow that, in order to obtain a conviction, the Crown would need to persuade the jury beyond reasonable doubt that the respondent engaged in conduct that had or was likely to have the effect of setting or maintaining an artificial price, and also that the respondent:

a) intended to engage in the conduct (being part of the fault element for a physical element of the offence that consists only of conduct); and

b) intended, at the time of engaging in the conduct that the transaction have or be likely to have the effect of setting or maintaining an artificial price (being part the fault element for a physical element of the offence that consists only of conduct).

Ninth, the principal authority relied upon in support of the respondent’s position as to the fault element for the offence was the decision of the New South Wales Court of Criminal Appeal in R v Saengsai–Or.[284] In that case, the court held that the fault element with respect to an offence of importing a prohibited import contrary to s 233B(1)(b) of the Customs Act 1901 (Cth) was intention to import a prohibited import, and thus that it was not sufficient for the Crown to establish that the respondent was reckless with respect to the nature of the thing imported. Bell J, who delivered the leading judgment, accepted that the fact that an import was a prohibited import could perhaps logically be conceived of as a circumstance of the importation.[285] But her Honour was persuaded that, when regard was had to the way in which s 233B(1)(b) had been interpreted before the coming into force of the Code (scil. it required proof of intention to import a prohibited import),[286] and to the fact that s 233B(1)(b) was amended in anticipation of the coming into force of the Code – but in a fashion which did not make clear that the offence was comprised of a physical element of conduct and a physical element of circumstance – it was to be concluded that Parliament did not intend by the introduction of the Code to make proof of an offence against s 233B(1)(b) less burdensome than it had been before.
[284](2004) 61 NSWLR 135.
[285]Ibid 145 [61] (Bell J).
[286]Ibid 147 [71]; Heh Kaw Teh v The Queen (1985) 157 CLR 523, 531; Kural v The Queen (1987) 162 CLR 502, 505.

The considerations here are not identical to those which proved influential in Saengsai–Or. For example, the fact that a transaction has or is likely to have the effect of creating an artificial price or maintaining a price at an artificial level may more readily be conceived of as a result of the transaction than the prohibited nature of an import would be conceived of as a circumstance of its importation. Additionally, there was no offence of the kind proscribed by s 1041A until s 1041A was enacted and, consequently, no judicial determination of the mental element of the offence before the coming into force of the Code. Further, if, as we think to be the case, the term ‘artificial price’ in s 1041A imports American jurisprudential conceptions of market manipulation constituted by conduct of the kind typified by ‘cornering’ and ‘squeezing’, the physical element of an offence under s 1041A consists of both conduct, namely, the exercise of market power in order to set or maintain a particular price; and result, namely, the setting or maintaining thereby of an artificial price.

If so, it suggests that the fault element for the physical element of conduct constituted by the exercise of market power in order to set or maintain a particular price is intention to exercise market power in order to set or maintain a particular price; and, perforce of s 5.6(2) of the Criminal Code, that the fault element of the physical element constituted by the result that the price be an artificial price (scil. so far deviate from the norm as to be regarded as ‘artificial’), is recklessness.

Different considerations appear to apply to s 1041C, because if, as we think to be the case, the notion of ‘artificial transaction’ in that section imports the sole or dominant purpose test identified by Mason J in North v Marra Developments, the offence proscribed by s 1041C would consist of but one physical element of entry into or engagement in a transaction with the sole or dominant purpose of maintaining or inflating the price of shares, which transaction results in the maintenance or inflation of the price of the shares. The situation would be akin to that which Bell J found to apply in relation to s 233B(1)(b) of the Customs Act. The effect of s 5.6 of the Criminal Code would be, therefore, that the fault element for entry or engagement into the transaction would be intention to enter into or engage in the transaction, and that the fault element for the transaction resulting in the maintenance or inflation of the price of the shares would be intention that it result in that outcome.

Conspiracy

Finally, as has been noted, the indictment alleges offences of conspiracy to take part in transactions of the kind proscribed by s 1041A, contrary to s 11.5(1) of the Code. It was not in dispute that the fault element for conspiracy, both common law conspiracy and conspiracy under s 11.5(1) of the Code, is intent.[287]
[287]The Queen v LK (2010) 241 CLR 177, 212 [75]–[79] (French CJ) and 224 [108]–[116] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).

The interlocutory appeal against the judge’s decision to refer the questions

It would follow from our decision to remit the case stated to the judge to amend Question 1, and to answer it as so amended, that the respondent’s application for leave to appeal against the judge’s decision to refer the questions for decision should be dismissed. There is also no need to say anything more about the questions posed in the certificate granted under s 295(3)(b) of the Criminal Procedure Act.

The Crown’s application for leave to appeal

Similarly, we would propose dismissing the Crown’s application for leave to appeal against the judge’s decision to refuse to reserve a question of law as to what are the elements of an offence under s 1041A. Although it would have been open to the judge to do so,[288] it was a matter for his Honour in the exercise of discretion whether or not to adopt that course. We are not persuaded that his Honour erred in the exercise of his discretion by declining to do so.
[288]R v Quach (2010) 27 VR 310 (Ashley and Redlich JJA and Hansen AJA).

We add for the avoidance of doubt, however, that we do not exclude the possibility of it proving appropriate at a later stage of the proceeding for such a question to be referred for determination. After all, the amplitude of the offences created by ss 1041A, 1041B and 1041C is so far largely unexplored. If, therefore, a judge had any doubt about the elements of any of the offences, he or she might think it appropriate to seek the guidance of this court before empanelling a jury; either by way of case stated or, more desirably, by way of determination under s 199 of the Criminal Procedure Act followed by an interlocutory appeal to this court under Division 4 of Part 6.3.

Conclusion and orders

For the reasons given, we would make orders as follows:

(1) The questions stated for decision are answered as follows:

· Question 1: In its present form, inappropriate to decide.

· Question 2: Inappropriate to decide.

· Question 3: Inappropriate to decide.

(2) The case stated is remitted to the judge for amendment of Question 1 to the form earlier set out and, upon it being so amended, it shall be answered in terms that the expression ‘artificial price’ in s 1041A of the Corporations Act 2001 (Cth) is used in the sense of a term having legal signification (as opposed to its ordinary English or some non-legal technical sense); and that its legal signification is of market manipulation by conduct of the kind typified by American jurisprudential conceptions of ‘cornering’ and ‘squeezing’.

(3) The respondent’s application for leave to appeal against the judge’s decision to refer Questions 1, 2 and 3 for decision is dismissed.

(4) The Crown’s application for leave to appeal against the judge’s decision to refuse to reserve a question of law as to what are the elements of an offence under s 1041A is dismissed.

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[2012] VSCA 21

14 June 2012