Doyle v Australian Securities and Investments Commission & Anor

[2005] HCATrans 562

[2005] HCATrans 562

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P7 of 2005

B e t w e e n -

ALAN DAVID DOYLE

Applicant

and

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

First Respondent

DEREK WILLIAM SATTERTHWAITE

Second Respondent

Application for special leave to appeal

GUMMOW J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

FROM PERTH BY VIDEO LINK TO CANBERRA

ON FRIDAY, 5 AUGUST 2005, AT 10.32 AM

Copyright in the High Court of Australia

MR M.J. McCUSKER, QC:   May it please your Honours, I appear with my learned friend, MR K.L. CHRISTENSEN, for the applicant.  (instructed by Christensen Vaughan)

MR K.J. MARTIN, QC:   May it please the Court, I appear with my learned friend, MS C.H. THOMPSON, for the first respondent.  (instructed by Australian Securities and Investments Commission)

GUMMOW J:   There is no appearance I think for the second respondent, is that right?

MR McCUSKER:   No there is not.

GUMMOW J:   We will hear I think from Mr Martin.

MR MARTIN:   May it please your Honours.  As we apprehend the first special leave point raised by our friends, it is essentially that they challenge what her Honour Justice McLure said at paragraph 70 in the Full Court at application book page 127 when she accepted the respondent’s submission essentially as to the relevance and honesty belief by Mr Doyle in regard to the propriety of the transaction.

Now, your Honours, in our respectful submission, what her Honour said at paragraph 70 at page 127 preceded her analysis of two significant High Court decisions, firstly that of the Court in Chew and then subsequently the Court’s decision in Byrnes.

GUMMOW J:   If I can just say this to you, Mr Martin.  This word “improper” is difficult obviously and there are cases on it, but what is put against you I think is encapsulated in the written submissions at page 159, paragraphs 30 and 31, and your response at page 166 in paragraph 23.  That seems to be where you meet.  The question is does that generate a special leave point.

MR MARTIN:   Your Honours, I cannot deny the novelty of the point.  What I am respectfully submitting is that her Honour was absolutely correct and that there is essentially three High Court judgments in my favour saying that there is absolutely no merit in the contention that one determines the question of one element of the breach, namely impropriety, which is an objective test, by reference to asking about the honesty and reasonableness of the belief.  Our respectful submission is that even your Honours Justices Gummow and Hayne in the recent Carabelas decision where ‑ ‑ ‑

GUMMOW J:   The word “even” is a rather dangerous piece of advocacy.

HAYNE J:   We will take it in the spirit in which it is offered, Mr Martin.

MR MARTIN:   In the nicest possible way, your Honours.

HAYNE J:   No, in the spirit in which it is offered.

MR MARTIN:   Your Honours, at paragraph 65 of that recent decision referred to in our friend’s reply, delivered only in I think April of this year, your Honours having referred to Byrnes go on to say:

An officer who honestly believed his or her actions did not amount to improper use could nevertheless be found to have improperly used his or her position.

That passage, in my respectful submission, is precisely on all fours with what four Judges of the Court said in Chew, namely Chief Justice Mason and Justices Brennan, Gaudron and McHugh, at the foot of page 634.  They were analysing the trial judge’s charge to the jury and ultimately found it to be correct, save in respect of purpose, which they corrected in Chew, but they said:

The judge also told the jury that the conduct alleged to have been an improper use of that position need not be illegal and that conduct could amount to improper use of that position even if the person concerned believed it to be in the interests of the company.

Now, that passage was referred to by Justice McHugh who was one of the majority when he sat in the subsequent decision of Byrnes 183 CLR 501. He referred to that at page 523 and endorsed it again. He then also went further in Byrnes at page 522 to say:

It will often be difficult to determine whether or not a particular use of a position is improper.  But, in my opinion, officers or employees who act in breach of their fiduciary duties to secure a gain for themselves or others or to cause detriment to the corporation always make improper use of their position unless they are honestly and reasonably mistaken as to the facts which give rise to the duties or their breach.  In the absence of a mistake of that kind, it is difficult to see how officers or employees [could] use their positions in breach of fiduciary duty to secure such a gain . . . Certainly, they cannot escape a finding of improper use of position merely because they believed that what they were doing was in the interests of the corporation.

Your Honours, Sir Daryl Dawson in Chew said exactly that at page 640 when he said:

It is clear enough that a director of a company may act improperly with no intention of acting dishonestly or otherwise than in the best interests of the company as a whole.

He cited Whitehouse v Carlton Hotel where a director thought it was in the interests of the corporation to support the issue of further shares.  It was an entirely lawful transaction but it was done for the improper purpose of securing control in the face of a takeover and, therefore, the fact that the intention was honourable, as it were, did not justify the fact that it was objectively classed as impropriety.

HAYNE J:   Can I take you to the applicant’s summary at application book 159, paragraph 31.

MR MARTIN:   Yes, your Honour.

HAYNE J:   It is there implicitly asserted that the decision below establishes a principle that:

presence of a director at a meeting in which it is resolved to do something which the company is obliged to do –

can constitute improper use and will constitute improper use if the director has an interest in the matter, even though it is fully disclosed.  Now, is that a proposition that follows from what the Full Court held in this matter?  It seems to me it is.

MR MARTIN:   Well, we would take some issue in regard to the question of fully disclosed.  I think the highest that it could be put was that the other director, or directors, knew of the fact that Mr Doyle was a director of the company that had in fact issued the demand.

HAYNE J:   Yes, knew of the interest.

MR MARTIN:   Yes.  The other point ‑ ‑ ‑

HAYNE J:   But regardless of the facts, is the principle which the Full Court establishes, or acts on, the principle I have described?

MR MARTIN:   Well, “obliged”, I think, puts it too highly, with respect.  The position that prevailed was at the time the decision was made there had been a demand and the legal advice had been uncertain in regard to whether the demand was legitimate or not.  But subject to that qualification, that is the proposition.  We would say, in our respectful submission, that your Honours ‑ ‑ ‑

GUMMOW J:   You may ultimately be perfectly right, Mr Martin, but it does seem to me there is a point.

MR MARTIN:   Yes.

GUMMOW J:   It is not our task to make up our minds finally one way or the other, but the question is whether there is a serious question.

MR MARTIN:   Yes.  I cannot dispute that there is novelty.  My respectful submission is that the point is wrong.

GUMMOW J:   Yes, thank you.

MR MARTIN:   I can say no more.  Do your Honours wish to hear me on the other two points?

GUMMOW J:   Namely?

MR MARTIN:   The second point was that there was an issue in regard to whether there could be an advantage for the purposes of section 232(6) in relation to essentially a company getting paid ‑ ‑ ‑

GUMMOW J:   Yes.

MR MARTIN:   What we would say in regard to that is that there is nothing novel in regard to what constitutes an advantage.  The law is established that in fact one does not have to, as a matter of causation, obtain an advantage in the end result; rather, the question is a question of purpose, of intention.  Was it the infringing director’s use of position?  Was it his purpose to in fact confer an advantage?  Of course, the question of whether one obtains an advantage is a question of fact from case to case.  It would hardly be controversial, in my respectful submission, that to obtain payment for the debt which was uncertain in terms of whether it was owed, notwithstanding demand had been made, does not actually raise any particular novelty about it as a proposition.  What constitutes an advantage is obviously going to vary from case to case on the facts.

The third special leave point that is advanced is in regard to the question of the issue of the 400,000 shares being voidable.  As to that, her Honour Justice McLure explicitly decided not to get involved in that on the basis ‑ ‑ ‑

GUMMOW J:   Whereabouts is this in the draft notice of appeal?  That is what we have to ‑ ‑ ‑

MR MARTIN:   I do not think it is in the draft notice.

GUMMOW J:   Exactly.  Well, it is not in the draft notice.

MR MARTIN:   Yes.  I address it because it ‑ ‑ ‑

HAYNE J:   It is not to be added later without some ‑ ‑ ‑

GUMMOW J:   What you have just been saying to us about advantage seems to be ground D on page 150.

MR MARTIN:   Yes.  I noticed there was some disparity between ‑ ‑ ‑

GUMMOW J:   Do not encourage your friend to supplement what is not there.

MR MARTIN:   Unless there is anything else, your Honours, those are our submissions.

GUMMOW J:   Yes, thank you, Mr Martin.  Now, perhaps we should ask Mr McCusker this.  What is the position about stays?

MR McCUSKER:   There is a stay, your Honour, and the stay would continue, if special leave were granted, until the resolution of the matter.

GUMMOW J:   So that would not require any further order by us now?

MR McCUSKER:   No, it would not, your Honour.

GUMMOW J:   Yes, thank you.  I should have noted that the second respondent has in fact sent in a submitting appearance.  There will be a grant of leave in this matter in accordance with the draft notice of appeal at pages 149 and 150 of the application book.  The appeal will be a one‑day matter.

AT 10.44 AM THE MATTER WAS CONCLUDED