Duncan, Poole & Anor, Atkinson v Independent Commission Against Corruption

[2016] HCATrans 305

[2016] HCATrans 305

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney   No S182 of 2016

B e t w e e n -

TRAVERS WILLIAM DUNCAN

Applicant

and

INDEPENDENT COMMISSION AGAINST CORRUPTION

Respondent

Office of the Registry
  Sydney   No S183 of 2016

B e t w e e n -

RICHARD JONATHAN POOLE

First applicant

JOHN VERN McGUIGAN

Second applicant

and

INDEPENDENT COMMISSION AGAINST CORRUPTION

Respondent

Office of the Registry
  Sydney   No S184 of 2016

B e t w e e n -

JOHN CHARLES ATKINSON

Applicant

and

INDEPENDENT COMMISSION AGAINST CORRUPTION

Respondent

Application for special leave to appeal

FRENCH CJ
BELL J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 16 DECEMBER 2016, AT 10.01 AM

Copyright in the High Court of Australia

MR N.C. HUTLEY, SC:   If your Honours please, I appear with my learned friend, MR G.E.S. NG, for Mr Duncan, the applicant in S182/2016.  (instructed by Yeldham Price O’Brien Lusk)

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR J.C. CONDE, for the applicants in S183, Messrs Poole and McGuigan.  (instructed by Tresscox Lawyers)

MR D.P. ROBINSON, SC:   If the Court pleases, I appear for Mr Atkinson in S184/2016.  (instructed by Hall & Wilcox Lawyers)

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friends, MR S.J. FREE and MS Z.C. HEGER, for the respondent in each of those matters.  (instructed by Crown Solicitor (NSW))

FRENCH CJ:   You have an agreed order?

MR HUTLEY:   Yes, your Honour.  Your Honours, can I hand up a proposed amended application for special leave?  Can I tell your Honours the basis of it – it is quite simple.  It seeks merely to adopt, in effect, the point taken on behalf of Mr McGuigan and Mr Poole, which is a pure question of law which, if your Honours grant leave and it was upheld, would endure for our basis.  I do not intend to add anything by way of submission.  I notified my learned friend this was the proposal some little while ago, and he has the document.  I do not propose to say anything further about it, your Honour.

FRENCH CJ:   This goes to the 192E point?

MR HUTLEY:   And the section ‑ ‑ ‑

BELL J:   The criminality point.

MR HUTLEY:   The criminalities point.  I do not wish to say anything, but if your Honours are minded to give special leave, I think they endure for our basis.

FRENCH CJ:   Do you have any objection, Mr Walker?

MR WALKER:   Your Honour, the only question is one which need not be addressed by reference to the amendment of an application.  If things were to go further, there may – it is a possibility – be some Coulton v Holcombe argument.  That is not one that is sufficiently obvious to justify opposing leave.

FRENCH CJ:   Yes, all right.  Yes, you have leave to amend your application in those terms.

MR HUTLEY:   Thank you, your Honours.  In the reasons of the Chief Justice at application book 202, paragraph 282, the Chief Justice posed the question whether a decision such as a finding by ICAC that conduct falls within the definition of “corrupt conduct” can be reviewed if that finding was based on reasoning that was:

illogical or irrational, even though the same result could have been reached by a process of reasoning not subject to the same difficulty –

In our submission, the question of general importance that arises in this application for special leave is exactly that, where his Honour, in effect, found no reasoning in the reasons before ICAC supporting the conclusion that the conduct found – namely, the conduct or failing to disclose the matters to the IBC – would have come to the attention of the public.  It can be supplanted by the process of reasoning which the court adopted in his Honour’s reasons.

The findings against my client are reproduced in the reasons of the Chief Justice at paragraph 109 commencing at application book 148.  Your Honour, the crucial paragraphs dealing with what might be called the causation point will be found between lines 34 and 46 on page 149.

Crucially, as your Honours know, the conduct which was said to be corrupt was a failure to disclose information not to the New South Wales Government, but, rather, to the IBC.  That being so, it was necessary for ICAC to have found that if the relevant facts had been disclosed to the IBC, that information could have found its way to the New South Wales Government.

There is no such finding in the report.  There are findings referred to by the Court of Appeal at paragraph 301, application book 209, to the effect that Mr Duncan and his fellow Cascade shareholders feared that if the Obeid previous joint venture interest became known to the New South Wales Government, this would pose a risk to Cascade’s prospects of converting the exploration licence into the mining lease.  Indeed, ICAC found that such a risk did exist, and your Honours will find that at application book volume 2, page 502, the bottom right‑hand corner of the second column on that page, over to the top of 503.

However, this only goes to establish that if the Obeid involvement had become publicly known, Cascade’s interests could have been adversely affected.  It does not establish how, if at all, that involvement could have become publicly known.  Less still, it is a finding as to what the IBC might have done in response to the disclosure of the information.  ICAC thus failed to carry out what the Chief Justice described at paragraph 310 on page 211 as its task, namely:

to deal with the hypothetical effect of disclosure to the IBC of the individual appellants’ knowledge of the Obeid involvement.

As for what finding was in fact open on the evidence, it is necessary to refer to the evidence of Mr Cubbin, who was the chairperson of the IBC, which is relevantly produced in the reasons of the Court of Appeal at paragraph 88 ‑ ‑ ‑

FRENCH CJ:   We have to focus, do we not, on the findings of the facts of the Commission said to constitute corrupt conduct ‑ ‑ ‑

MR HUTLEY:   Yes.

FRENCH CJ:   ‑ ‑ ‑ and whether that conduct so found was capable of constituting criminal offences.

MR HUTLEY:   And capable of having the relevant causative relationship to proper administration.

FRENCH CJ:   Yes.

MR HUTLEY:   Even as construed pre‑Cunneen ‑ ‑ ‑

FRENCH CJ:   We are reading 8 and 9, yes.

MR HUTLEY:   We are not in 9; we are in 8 here, of course, your Honours – 8(2), which has a relationship between the illegality…..and the interference with due administration.  It is an essential element that there was the capacity – the word is “could”, 8(2) – could it have had the adverse consequence?

Now, the evidence which your Honours will see at paragraph 88 – if the previous Obeid involvement had been disclosed to the IBC and if White Energy’s proposed acquisition was to proceed, the Obeid involvement would have been required to be disclosed to shareholders, thus attracting adverse publicity.  But that point would never have been reached because Mr Cubbin would not have recommended that the deal proceed, hence the remark of the Chief Justice at – could I take your Honours to paragraph 309 at application book 211 ‑ his Honour’s remark is:

there is force in the submission that the evidence of Mr Cubbin was to the effect that White Energy would terminate the transaction rather than disclose the Obeid involvement.

In other words, even if Duncan had advised the IBC of the previous Obeid involvement, there would not have been further disclosure to the New South Wales Government or the public.  In fact – and I will come to it in a little while – when the transaction was actually terminated with knowledge of the circumstances – or suspicion of the circumstances – the disclosure to the stock exchange made by the company was false.  They did not disclose the true circumstances which drove their decision not to continue with the transaction.

So, in other words, we say there was essentially no evidence to conclude that in the hypothetical circumstances required by the section – to support a conclusion that there would have been disclosure.  Certainly, the Commissioner engaged in no reasoning to support that.

Now, we say it followed from that that the conclusion that my client’s conduct could have produced the adverse effect required by section 8(2) of the Act was irrational, illogical and not based on findings of inference or fact supported by logical grounds.  To quote the language of this Court in Minister for Immigration and Multicultural Affairs – sorry, the Full Federal Court in Ex parte Applicant 2020/2002 – which is the Full Federal Court decision – ICAC’s finding against Mr Duncan was unreasonable in both senses described by this Court in Li at paragraph 76 – that is, it lacked “evident and intelligible justification” – or was attended by one of the more specific errors encompassed in the notion of unreasonableness, namely, a failure to undertake the requisite inquiry.

BELL J:   What is wrong with the Chief Justice’s analysis at paragraph 311 on application book 212 ‑ ‑ ‑

MR HUTLEY:   I was just about to come to that very paragraph, your Honour.  The Chief Justice at 311 said that there were a number of possible inferences open to ICAC which was said to purport the conclusion that IBC might well have publicly disclosed the previous Obeid involvement.  In particular, he said that it was open to conclude:

that a truthful communication to the market of the reason for terminating the transaction would disclose that it was terminated because of discovery –

We accept that.  That was, in effect, the risk.  But if one then goes on in his Honour’s reasoning, his Honour said – the next proposition:

In those circumstances, it was open to the decision‑maker to infer that disclosure of that material would lead to further inquiries –

Well, that is just the consequence of the first premise.  With respect to his Honour, his Honour has replaced a reasoning process without addressing the fundamental interim step:  what was the evidential basis for concluding that there would or could have been – not “could” in some logically possible way, but “could” on the basis of real evidence – such a disclosure.  Of course, it is logically possible that there could.  It is logically possible that if a corrupt person tells another corrupt person something, the second corrupt person might disclose it, but there is no evidence that they were going to.  The word “could” is not satisfied by that.

So, in other words, we say his Honour the Chief Justice, with respect, engaged in two steps which raise fundamental questions:  firstly, can one replace the reasoning process of a decision‑maker – a process of decision reasoning – which the court recognises finds no reflection in the decision itself; none.  Therefore, it is, with respect, a matter of speculation whether the decision‑maker went through that process.

FRENCH CJ:   Now, at paragraphs 5 and 6 of the respondent’s submissions, it is put that it is implicit in the findings that the – I know you tend to be a bit dismissive of the term “implicit”, but how do you ‑ ‑ ‑

MR HUTLEY:   With respect, your Honour, the implicit step has to be – and it is very unclear what it is – that Mr Cubbin would have acted in a certain way; that some of the decision‑makers on the committee may have acted in a way which overruled Mr Cubbin; that a majority of them would have or might have acted differently to that which they did at the end of the day.  When one speaks of “implicit”, the problem with “implicit” is it assumes the best of all possible worlds when it is totally unclear that there is any world of reasoning which has been applied at all.

BELL J:   The Chief Justice also said at paragraph 312 that:

The Commission, in effect, relied on the evidence of the [applicants] themselves –

that they subjectively entertained the fear that the matter would become known, and his Honour points out it is hardly irrational, as a process of reasoning, to take into account those subjective views of the applicants; namely, if the people involved in the deal feared public disclosure, there might have been a basis for it.

MR HUTLEY:   With respect, their fears were not the material inquiry; their fears led them to withhold.  The material inquiry is the persons of whom they feared, namely, the IBC, and merely because we know that Mr Cubbin says the deal would not have gone forward – they feared disclosure the moment one knew the deal would not have gone forward.  We know, in fact, that when they came to make the disclosure which they made to the marketplace, they did not disclose the real reason.

It is, with respect, getting to the point where, absent a process of some disclosed reasoning, the court is, in effect, speculating upon a possible process of reasoning which finds no reflection in the reasoning process at all.  We say that raises a point of importance in relation to the approach of assessment of reasons of administrators.

KEANE J:   Why is it not just the same process of inference – an obvious inference – that one has in cases like Gould v Vaggelas, where a positive statement is made conveying information intended to achieve a result?  It can be inferred from that circumstance that it is apt to achieve that result objectively.  Here, if one has an ugly truth, an ugly secret, and one deliberately suppresses it, why can it not be inferred as an obvious inference that it has been suppressed because it is apt to produce an adverse result?

MR HUTLEY:   I accept every step of that.  It was suppressed because it was concerned that if it got out, it would have a bad result on the achievement – “if”.  That is a reason sufficient in itself to suppress, and it was so found.  It is no evidence about the decision‑maker, which is relevantly the IBC, as to what they were likely to do.

As Mr Cubbin made perfectly clear, it was in their interest not for it to come out.  It was in their interest to make a decision on the basis of it, but it was in their interest to suppress its disclosure forward, which was the necessary requirement for the conduct to become conduct which was corrupt conduct.  That is why the reasoning process of ICAC was wholly deficient and irrational, and it was incumbent upon them to confront that.

The Chief Justice sought to deal with it, in the ways at 311 and 312; we have made our submissions as to the criticisms of it.  We say, one, it is not an appropriate approach for a court to supplant its reasoning process for that which is in the decision‑makers, or the absence of it, because my client, if it is to be determined to be corrupt or have an administrative decision made against them, is entitled to the administrator’s determination of the relevant question, not a court’s determination of what might have happened before the administrator in circumstances where he has no entitlement to challenge findings of fact made by a court because the court cannot make relevant findings of fact.

That is why we say it raises a fundamental question as to judicial process to the assessment of administrative decisions.  Those are our submissions, if your Honours please.

FRENCH CJ:   Thank you, Mr Hutley.  Yes, Mr Jackson.

MR JACKSON:   Your Honours, as the Court will have seen, it is contended the appeals in the case of the two applicants for whom we appear would give rise to the classes of issue which are referred to in the application book at page 379, paragraphs 7 to 12.  They relate to different issues.  Two of the classes relate to elements of the offence in section 192E of the Crimes Act, namely deception, which is referred to in paragraphs 7 and 8, and financial advantage, referred to in paragraphs 9 and 10.  The third, paragraph 11, arises only in the case of Mr McGuigan, and that concerns section 184(1) of the Corporations Act.  The fourth, which is paragraph 12, deals with the ambit of section 8(2) of the Independent Commission Against Corruption Act.

Your Honours, could I spend just a moment to indicate the nature of the case so far as these applicants are concerned.  The report made findings of corrupt conduct against them.  Those against Mr McGuigan can be seen at pages 163 to 165 with the findings notably at the top of page 165.  Those in respect of Mr Poole can be seen on page 167 at the top of that page, and your Honours will see them set out there.

Your Honours, the background circumstances concerning these two applicants – I will come back to those in just a moment, if I may.  The background circumstances in relation to both these applicants can be seen in the primary judge’s reasons at paragraph 6 on page 10.  Both applicants were directors and shareholders of Cascade Coal.  Both owned or controlled shares in White Energy Company Ltd.  Mr McGuigan was, but Mr Poole was not, a director of White Energy.  That is why section 184 arises only in relation to Mr McGuigan.

White Energy signed an option to acquire all the shares in Cascade.  A Cascade subsidiary, Mount Penny Coal, had an exploration licence over significant coal deposits.  White Energy established the Independent Board Committee to consider the transaction.  Your Honours, one might think, reading some of the reasons below, that it was Mr Cubbin alone who was involved, but, in fact, there were three board members – Mr Mende and Mr O’Rourke as well as Mr Cubbin.  You will see that at paragraph 10 in the Court of Appeal, page 122.  It also had advisers such as Deloitte’s – it was not a one‑man band.  You will see that reference to Deloitte at page 155, paragraph 88.

Could I return, then, to the findings against the applicants at page 165 and 167?  You will see that, in each case, the findings fall into two categories.  There are the findings listed in each case as (a) and (b), and, on the other hand, finding (c).  They relate to different things.  By the (a) and (b) findings, the respondent found that each applicant as to (a) deliberately failed to disclose to the Independent Board Committee the fact of previous involvement of the Obeid family, and, as to (b), made statements or took steps to ensure that answers were not given to the committee which hid the Obeid family’s past involvement.  The (c) findings, your Honours, relate to a different matter:  the exit of the Obeid family interest ‑ ‑ ‑

FRENCH CJ:   That is their extraction which effectively terminated their involvement?

MR JACKSON:   Yes, your Honour, extraction.  Now, your Honours, in order to make findings of corrupt conduct, there were three provisions of the ICAC Act – if I can so describe it – which made it necessary for the respondent to be satisfied that the conduct amounted to a criminal offence.  Your Honours will see the provisions set out at page 127 and following.  They are section 8(2)(e) and 8(2)(s) first, section 9(1)(a) and section 13(3A).  I do not think I need to take your Honours to the detail of them, but your Honours will see that.

FRENCH CJ:   When you say the conduct amounted to a criminal offence, the criterion is that it could constitute a criminal offence, is it not?

MR JACKSON:   Yes.  Your Honour, if one goes to section 13(3) – if I could just go to page 127 for a moment ‑ ‑ ‑

FRENCH CJ:   Yes.

MR JACKSON:   ‑ ‑ ‑ your Honours will see that, for example, section 13(3A), which is in paragraph 20 on page 130, puts it a little differently:

only if satisfied that a person has engaged in or is engaging in conduct that constitutes or involves an offence –

It goes a little further in its tone, your Honour, if I may say so, than 8(2).

FRENCH CJ:   There is a tension.

MR JACKSON:   Sorry, your Honour?

FRENCH CJ:   A bit of a tension.

MR JACKSON:   Yes.  Your Honours, in the case of Mr Poole, the relevant criminal offence for each of the three (a), (b) and (c) findings was section 192E of the Crimes Act.  Section 192E, your Honours will see set out at page 232 – I will come back to its terms in just a moment.  In the case of Mr McGuigan, section 192E was the relevant offence in the case of finding (c), but for findings (a) and (b), the relevant offence was section 184 of the Corporations Act.  That is set out, your Honours, at pages 247 and 248.

Your Honours, I am sorry to have taken so long to introduce the complications of the matter, but could I turn first to deception.  As I said, the terms of section 192E are set out at page 232.  Your Honours will see that it is clear that the terms of the provision, in subsection (1), require that there be a deception.  “Deception” is defined, I should say, in section 192B, which is set out at paragraph 316, but your Honours, I do not really think that that adds to the ordinary concept.

The second aspect of 192E(1) is that the deception has brought about the obtaining of a financial advantage.  “Obtaining a financial advantage” is a term itself defined by section 192D, which you will see set out in paragraph 315 ‑ ‑ ‑

FRENCH CJ:   Now, in this case, the argument is that that is retention of value of the shares?

MR JACKSON:   Yes, your Honour, I am going to come to that in dealing with that aspect of it in just a moment.  Could I deal first with deception and the finding (c), arranging for the exit?  Your Honours, this gives rise to really a very short question.  We have set out the issue in our application at paragraph 33 and immediately following at page 385.  The short position, your Honours, is this, that the reasoning of Chief Justice Bathurst in relation to this aspect appears in paragraphs 359 to 361 which are at page 244.  At page 244, his Honour expresses the view in those paragraphs that there had to be actual deception.  You will see in paragraph 359 that he says – and your Honours will see the first two lines, he is dealing with the extraction question:

the difficulty is that there was no evidence to suggest that the NSW Government or any of its officers were deceived as a result of the transaction.  It may be that the transaction was carried out with –

to put it shortly:

the intention . . . but unless and until such deception actually occurred, the necessary element . . . was not made out.

Now, your Honours will see he expands upon that in paragraphs 360 and 361.  Your Honours will see, if I could go back for just a moment to page 165 where the actual findings by the Commission are set out, in each case the intention – about line 20 on page 165 ‑ your Honours will see there described.  Now, in the Court of Appeal at paragraph 502 at page 284, Justice Beazley said that she agreed with the reasons of the Chief Justice.  At paragraphs 350, 355, the deception requires that some person or entity be deceived.

I also agree for the reasons the Chief Justice gives at the paragraph to which I referred a moment ago that there was “no evidence that the New South Wales Government”, et cetera, was deceived.  Then your Honours will see that she said:

Accordingly, I agree with the Chief Justice that the appeals of Messrs McGuigan and Atkinson’s in respect of the s 192E(1) findings should be upheld.

Poor old Mr Poole, with respect, exactly the same thing applied to him in relation to finding (c) and it is very difficult to see why she did not hold that his appeal in respect of that finding should be allowed.  Your Honours will see there is a question of financial advantage which arises also in relation to finding (c).  May I deal with that when I come to the other deception findings?

Your Honours, could I come then to Mr Poole’s deception in relation to paragraphs (a) and (b) – finding (a) and (b) concerning Mr Poole?  Your Honours, this contention relates to the dealings of course with the IBC.  Now, in the Court of Appeal there were three different views on the requirement that a false belief be induced.  As already mentioned, Chief Justice Bathurst and Justice Beazley proceeded on the basis that inducing a false belief was necessary, but they differed on whether that had occurred.  Justice Basten, on the other hand, held that it was not necessary that such a false belief be induced.

Justice Basten, if I could go first to him, his reasoning is at page 340 in paragraphs 645 to 647.  Essentially, your Honours will see what he says is in paragraph 647.  There are, with respect, some difficulties, we would submit, with his Honour’s reasoning.  True it is that the relevant effect is obtaining the financial advantage, but that must have occurred, if one has regard to the terms of section 192E, not by an attempt to deceive but by the deception, and as Chief Justice Bathurst had said at paragraph 371 at page 247, this was not a case of an attempt.  Your Honours will see that, paragraph 371, at the top of page 247.  So this is not an attempt case.  It is one of deception.

Now, your Honours, the remaining two judges, as I said, approached the matter correctly, but were divided about what could be inferred from the evidence.  As Justice Basten – I am sorry, your Honours – as Chief Justice Bathurst had noted at paragraph 368 at page 246, there was no finding that Mr Cubbin had in fact been misled by the statements made to him.  As he says in that paragraph, page 246, paragraph 368, the evidence was equivocal and it did not rise above the extract from Mr Cubbin’s evidence which is quoted at pages 288 to 289, paragraph 513.  Now, the question that your Honours will see there put to him was:

if any of those men had ever told you of an involvement by the Obeid family in the mining venture what would you have done?

But the question did not specify when the Obeid family involvement was because at the time that the IBC was making its inquiries there was not an Obeid family involvement in the mining venture, so the temporal detail was all important.  As Chief Justice Bathurst noted at paragraph 368 on page 246, Mr Cubbin:

sought further protection for White Energy and ultimately determined there was too much downside risk –

Now, your Honours, we would submit that the Chief Justice’s view or his conclusion at paragraph 368 was, with respect, correct when he said that:

It does not seem to me open to conclude on that evidence that Mr Cubbin was deceived into believing that there never was an Obeid involvement in the tenement.

The President’s view can be seen at paragraph 508 at page 286.  Your Honours, I see that the lights are going out all over Europe, as it were, but may I have three or four more minutes?

FRENCH CJ:   Yes.

MR JACKSON:   At page 286, paragraph 508, her Honour relied on the evidence of Mr Cubbin from the evidence set out at paragraph 513.

KEANE J:   So, are we dealing with anything more than reasonable minds coming to different views on the evidence?

MR JACKSON:   Well, your Honour, in relation to the former question of does there need to be a – or does it need to mislead in fact, that is one, in our submission, where a majority should have been in our favour.  On this question it is not, with respect, a question really of reasonable minds taking a view.  Of course that issue is involved, but what one does have is a situation where you find that one is looking to see in the Court of Appeal whether the view taken by the Commission was one that was reasonably open to it.

In our submission, one has to look to see what the evidence was in that regard, and the evidence in that regard is finite and, we would submit, it is not just a case of that.  It is a case that goes to see whether the findings were open and whilst no doubt one can say views can differ on this, it is an issue that is ultimately in any event tied up, we would say, with the first point.

FRENCH CJ:   But would you dispute the proposition in I think paragraph 8 of the respondent’s submissions that it does not involve a point of principle, but inferences to be drawn from evidence concerning a particular state of affairs?  You say there is just no evidence to support the inference really?

MR JACKSON:   Yes, your Honour, that is what we say.  We say the evidence could not support the inference.  In any event, your Honour, we would say that this issue is ultimately very much tied up in the whole matter and if the Court were otherwise minded to give special leave, it would be appropriate to take it into account, particularly bearing in mind the effect on the reputations of people involved.

Your Honours, could I move then to the question of financial advantage and, your Honours, it is central to section 192E that a financial advantage be obtained by the dishonest deception and – be obtained by the dishonest deception.  That is what it says.  The ordinary meaning of that concept is expanded upon by section 192D, namely, to keep a financial advantage that one has.

There was a difference of view between the Chief Justice and the other members of the Court of Appeal as to the meaning of those provisions.  We would submit, your Honours, that two members of the court ‑ the President and Justice Basten – did, with respect, misconstrue the concept of financial advantage.  In that regard, your Honours will see that the President held there was – and this is paragraph 517, page 290 – held that there was a:

prevention in loss in value of the shareholdings in Cascade.

Justice Basten held – and this is page 343, paragraph 657 – that:

the value of the mining tenement which was the principal asset of Cascade Coal would be maintained if the involvement . . . were concealed ‑

and that was a direct financial advantage.  Your Honours, in our submission, there are significant difficulties with these views and they appear from what was said by the Chief Justice at paragraphs 362 to 366 on page 244.  In that regard, as we have mentioned already, this was not a case of an attempt.  The shares in Cascade were always subject to the defect of the Obeid involvement.  It might result in no grant of mining lease.  It remained throughout the dealings with the IBC.  Had they succeeded ‑ ‑ ‑

KEANE J:   But is that not the point though, that if one keeps the Obeid involvement secret, one avoids the problem that when the Obeid involvement becomes known, the value of the Cascade shares plummet because of the likely consequences?

MR JACKSON:   You have to have something, your Honour, which is the value of the Cascade shares, and the value of the Cascade shares is a value which carries with them inherently the risk.

KEANE J:   Yes, but as long as the risk is managed, that is to say, by suppressing the ugly fact, the market, uninformed as it is, continues to value the shares as if the ugly fact does not exist.

MR JACKSON:   Well, your Honour, the point we would seek to make, to put it shortly, is that at all times the shares that were to be sold remained subject to the risk, the risk being the risk that there might not be the grant of a mining lease.  If the mining lease had been obtained, then a financial advantage might have been obtained.  If the contract had gone ahead – contract to sell – again the financial advantage might have been obtained.  But this is only a step on the way and that, in our submission, is why his Honour’s view was a better view of the section.  Your Honour, could I just conclude?  I am sorry, I know I have taken some time with this, but I need to go to section 184, if I may.

FRENCH CJ:   Yes.

MR JACKSON:   Your Honours will see that, dealing with Mr McGuigan in this regard, the findings (a) and (b) against him were made on the basis that the relevant criminal offence was section 184(1) of the Corporations Act which your Honours can see set out at page 247.  Section 184(1) requires that the directors who have failed to exercise their powers and duties in the manner set out in, if I could take your Honours to it, section 184(1)(c) and (d) and, as I said, your Honours can see the provision at 247.  The powers and duties there referred to are those as a director and your Honours will see that it says:

A director . . . commits an offence if they:

. . . 

fail to exercise their powers and discharge their duties –

in our submission, your Honours, as a director.  The primary judge, we would submit, posed the question correctly at page 197 – I am sorry, at page 78, paragraphs 197 to 198.  You will see in paragraph 198 that he said:

it is necessary to understand how it was that each of those men could be said to have been exercising his powers or discharging his duties . . . at the relevant time.

Your Honours, the judge noted at paragraph 199 a concession on behalf of ICAC that:

none of the directors was acting in his capacity as a director in connection with the transaction between White Energy and Cascade Coal.

Now, your Honours, one might have thought that in one sense would be the end of the matter.  The Commission, however, relied on a director’s fiduciary duty which it was contended involved proactive disclosure.  You will see that referred to in paragraph 201 on page 79.  It may be accepted that the fiduciary obligations of a director are proscriptive and include not being in a position where the exercise of director’s powers takes place in a position of conflict.  But that was the very point made by the primary judge at paragraphs 205 through to 207 and we would submit that he was correct in doing so.  Your Honours, otherwise we rely on our written submissions.

FRENCH CJ:   Yes, thank you, Mr Jackson.  Yes, Mr Robinson.

MR ROBINSON:   Your Honours, Mr Atkinson’s case is now only concerned with the factual finding which can be found at application book 149 at line 36, that is:

deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with such involvement ‑

The consequential formulation of the offence under 184(1) can be found at application book 150 at lines 18 to 22.  That recites a charge of:

intentionally dishonest . . . failed to discharge his duties in good faith and in the best interests . . . by withholding information about the Obeid family involvement so that the value of his holding in Cascade Coal would not be adversely affected.

One matter may be significant, and that is that there is no time or temporal limitation in the formulation of that notional charge so as to say when the disclosure should have been made.  Your Honours, the facts and the circumstances that Atkinson contends did not compel him to make this voluntary disclosure are set out at the special leave application which can be found at application book 346 to 347.  They are listed there.  I would not propose to read them to your Honours, but they are set out there to show that Mr Atkinson was in a different factual position than the other people concerned with the transaction.

The first proposition is that it would be a different situation if Atkinson himself was the only person who possessed the information sought ‑ that would be in the nature of Fitzsimmons Case – or if it came to Atkinson’s knowledge that the persons whom the IBC actually called upon to assist them did not in fact assist the IBC, but neither of those two eventualities occurred.

Your Honour, Mr Atkinson takes issue with whether there was in fact the obligation to make such a disclosure to the IBC until such time as the IBC asked him for the information.  That was not the way the three judges in the Court of Appeal saw the matter.  Justice Bathurst at application book 240 and Justice Beazley at 253 did not seek to distinguish in any way Mr Atkinson’s position from the rest of the directors.  Justice Basten took the matter up in some fashion at application book 327, line 26.  He said:

In principle, it is difficult to see that the distinction relied upon by Mr Atkinson could be material; the fact that two directors had the relevant knowledge could not abrogate the duty of either to speak out.

Now, with respect, that is of course a true statement.  One could not stop.  But it does not take account of the difference in circumstances where to Mr Atkinson’s knowledge one person had been asked to speak out, and that person that was asked to speak out had more knowledge than Mr Atkinson did on the issue which was the subject of the IBC’s consideration.  The submission is that the approach taken by the judges in the Court of Appeal was not appropriate, it was not an abstract question to determine and it is, with respect, an important question of corporate governance.

The submission is that the proper approach to section 184 requires the Court to evaluate the prevailing circumstances in just the same way as the Court evaluated the circumstances as to the accommodation of the scope of the fiduciary duty and the special leave application calls attention to the case of Howard v Commissioner of Taxation at paragraph 34 where that accommodation is set out.

Your Honours, the duty of Mr Atkinson was to declare an interest, to take no part in the company deliberations regarding the transaction, to take steps to inform himself that the company had identified the problem and the risk in the proposed transaction ‑ ‑ ‑

KEANE J:   Mr Robinson, is your submission that a director of a company discharges his duties as a director if, knowing of an ugly fact that the company needs to know about suppresses that information – does not provide that information on the footing that he is entitled to expect that someone else will?

MR ROBINSON:   No, somebody was asked to do it.

KEANE J:   Yes, and did he know that that person, having been asked, responded accurately?

MR ROBINSON:   There is no material on that.

KEANE J:   How could we possibly accept that what you are putting to us is a satisfactory statement of the obligations of a director to a company?

MR ROBINSON:   With respect, your Honours have to take into account that the company set up its own mechanism to deal with this, the independent board, and they asked people – the independent board was firstly acquainted with the problem and, secondly, they asked people to assist them.  Mr Atkinson, of course, had a duty to volunteer that as soon as he was asked.

KEANE J:   Quite.

MR ROBINSON:   As soon as he was asked, your Honour.

KEANE J:   But surely he had a duty to volunteer it as soon as he knew it, surely he owed at least that to the company.

MR ROBINSON:   He owed a duty to participate in the independent board inquiry, and, before that, to make sure that the independent board of inquiry knew what the issue was in the transaction which was difficult – a difficult one.  The submission is that he was not asked, he knew others had been asked, he was not the only one with the knowledge, and he stood ready to help them, assist them.

KEANE J:   Stood ready but acute – acutely reticent.

MR ROBINSON:   I cannot go – that is right, he stood ready to help them.

FRENCH CJ:   In the respondent’s submissions it is said that “the appeal was argued” – I am looking at paragraph 6:

on the basis that all parties accepted that there were circumstances in which a conflict will not be avoided simply by disclosure and abstention from deliberations.  It follows that the applicant’s proposed appeal would not raise any general issue of law or principle about the operation of s 184(1) –

MR ROBINSON:   Well, the general proposition, your Honour, is whether, first, before Mr Atkinson had to volunteer this information, whether it was appropriate to look at the circumstances that were then prevailing.  The majority do not say when it is said that Mr Atkinson should have made the disclosure.  We know that it is not at the point where he disclosed his interest because that is not in the formulation of the charge.  It is that he failed to disclose his interest – and that is how it is put – to the IBC.  The IBC was obviously set up after the transaction had been at least signed as an option.

Now, if the law is, or if the finding is that he did not have to disclose it prior to the IBC, at what point then, one asks rhetorically, is he made to disclose this voluntarily?  That is, of course, after the IBC has made its own inquiries.  That is the point that we seek to make here.  That, of course, is a more refined proposition than Mr Jackson put to you that it just does not arise because of the matters which the trial judge set out.  I will not go back over that.  I think your Honours are seized with those propositions.  It is clear that the question of intentional dishonesty is connected with that and I have set out everything I possibly can on that issue.  Those are my submissions, if your Honours please.

FRENCH CJ:   Thank you, Mr Robinson.  Yes, Mr Walker.

MR WALKER:   If it please the Court.  Your Honours, in relation to the matters urged by my friend, Mr Hutley, in relation to Mr Duncan, in our submission, this is a misreading ultimately of the way in which particularly the Chief Justice dealt with the matter in the passages you have already been taken to culminating in paragraph 312 of his Honour’s reasons.  But, of course, in the context one sees the way in which his Honour noted the approach of the Commission in paragraph 301, application book 209 at about line 28.  The Chief Justice there finds that:

The Commission took the same view ‑

in relation to what has been called the “risk”, and spelt out, of course, the risk is that disclosure to the IBC, which I interpolate is nowhere found to be a patsy, let alone a corrupt patsy, disclosure to the IBC would, on the evidence before the Commission, have produced the possibility – that is, the risk – of disclosure further including publicity, and publicity, readily translated into governmental attention, readily translated into administrative action to the detriment of the hoped‑for riches from coal mining, or from those who would buy a coal mining prospect.  So that is 301, to which attention has to be paid.  In 307 on page 211, the Chief Justice again said of the Commission that it:

seemed to have accepted these fears as well‑founded –

We interpolate that there is an air of unreality in departing from the common sense which may verge into cynicism about these arguments by these men.  They wanted the transaction to go through because it would be a very large, very rapid return on an investment.

In order to have it go through, they were determined that certain information not go from them to others – stay within their circle of investors.  Outside that circle of investors was the IBC because of the risk that revelation to the IBC would not see it buried – as my learned friend, Mr Hutley, is, in effect, suggesting – that it might not be buried and it might go further, not as a speculation but as an assessment of possibility which is, of course, the very calculation of risk which these people as forms of entrepreneurs were engaged in. 

That is why when one comes to the passage that starts at the foot of page 211 in paragraph 310, the Chief Justice, of course, points to the fact that there was already some material in the market.  And, there had already been the IBC device because of the manifest conflict, or I should say the announced conflict, the details of which have not been entirely spelled out, but there was also, of course, Deloitte’s a probative purposes.

So, in paragraph 311, the Chief Justice is not here supplying something that the Commission did not refer to but, rather, is saying of what the decision‑maker, the Commission, did infer that it was open.  Then, in paragraph 312, his Honour the Chief Justice, tests that by noting one of the ways – and they are multifarious, by the way – one of the ways in which revelation to the IBC may through continuous market disclosure have had a thunderclap effect on the hopes of these investors.

He says, well, the Commission did not reason that but, rather, the Commission paying a backhanded compliment to people like Mr Duncan said, well, you think there is a risk and you have decided to behave dishonestly to hold back what you know would be material to the IBC because by holding it back, you obviate – you hope avoid forever ‑ the risk that your investment will not turn out.  And, to put it crudely, the Chief Justice and Commission, proceeding as it were along a well‑known commercial route of reasoning, those who invest in this fashion ‑ none of them is an amateur – those who invest in this fashion really, probably, should be listened to when they tell you by their conduct and later by their admissions that they held their tongue about this thing they appreciated was material because they feared that if they did not, things would happen.

So, against the test of whether there is an intelligible justification, something a reasonable decision‑maker in the Commission’s position could possibly use, against that test one asks, is really what this Court is being asked to consider in detail, pursuant to a grant of special leave on this point, something that boils down, simply, to whether or not Mr Duncan and his ilk – whose evidence was considered by the Commission on this point – had utterly unfounded fears, they being, presumably, babes in the wood, naïve and unworldly and not appreciating that there would have been an effective cover‑up, a complete cloak, effectively, cast over this dynamite information had it gone to the IBC.  There is no finding ‑ ‑ ‑

FRENCH CJ:   The term “irrationality” tends to take us into the field of review of discretion because here we are dealing with, essentially, a fact‑finding and conclusionary exercise and, really, that covers a sufficiency of evidence to support their finding.

MR WALKER:   It does, it does.  So, tested against no evidence, for example – which is the most familiar way of looking at a jury – tested against no evidence, it cannot be said, and for the reasons, with respect, the Chief Justice and then the President – see paragraph 518 – now, in another context but equally, plainly, at paragraph 518 which your Honours will find on page 266, will find that the view of another of these men, is called in aid, regarded appropriate, with respect, by her Honour as evidence before the Commission which could supply material from which that would be reasoned. 

In our submission, it is a piece of telling understatement by the Chief Justice in the last sentence of his paragraph 312 on application book 212, “in those circumstances”.  It just cannot be said there was no evidence there.  There is nothing, with respect, even beginning to resemble a principle, going beyond the particulars, the highly particular facts of this case which would be raised by that special leave point on behalf of Mr Duncan.

And there are on even a cursory look at the matters which are all that can be done in a special leave application, clearly insufficient prospects of this Court coming to the conclusion that there was simply no evidence contrary to the views that have been expressed in the Court of Appeal.  In our submission, it would be nothing other than a second go at something which could not be an appeal by way of rehearing but which, on this point, is coming dangerously to resemble it.

Could I then turn to the questions raised by my learned friend, Mr Jackson, in relation to Messrs Poole and McGuigan?  In particular in relation to deception, in our submission, there has been an elision of the difference between what I will call the “paradigm case of deception” and deception which goes beyond that paradigm case.  Of course, a paradigm case is the person who says this horse has never broken down and has just recovered from six months of limping on three legs. 

So, the buyer is led to believe that it has never broken down and that is known to be a lie.  That is the paradigm case of deception.  We accept that.  But, the cunning of, in particular, commercial and financial dealings to which the latter is the subject matter of this criminalisation of deception, the cunning goes way beyond raising a subject and engendering a false belief about it.

It also includes the misleading involved in understanding how material a particular item of information is and how, if known, it would radically affect and detract from the criminal’s likelihood of succeeding with the financial ambition and, therefore, remaining silent.  Whether one calls that silence or half‑lie, or whether one calls it the optimism that if its topic is not mentioned, there will be no thought given to it, does not matter.  The question for the jury is whether or not it is a deception.

As my friend puts it, with respect, correctly, nothing in the statutory gloss of that, for these purposes, throws any light one way or the other.  That is because the word “deception” is not confined to the creation of a positive, that is, conscious understanding, false as it happens, of a particular item of information.  It can, of course, include that false state of affairs which comes about because it never occurred to you that there is another item of information which casts an utterly different complexion on that which you do correctly understand.  That, in our submission, is the kind of jury question which the Commission got right in its approach to it and which, in our submission, no error appears in the approach taken by the majority in the Court of Appeal.

In relation to Mr Poole, by the way, it is to be recalled that there are different and extra factors – he has not been left out unaccountably.  At, I think – sorry, your Honours, three application books and three numbering systems, but your Honours will recall it.  He actually told lies to the IBC as the Commission saw it and that made the point rather strong with him. 

In relation to financial advantage, in our submission, there is nothing which constitutes a special leave point here.  In effect, one wonders whether the point is to raise a very important fundamental question but in a way which, surely, has no hope of succeeding, that is, to say that there is something – if I may dub it platonic – about value that there really is a true value somewhere out there and that it is all just a matter of perceptions or misperceptions and gradations in between as to what people would be prepared to offer you by way of a price.

But, value is a function of perception.  This Court’s key authority in Spencer’s Case is not going to be departed from and that is why concealing from a market, or from those who may be a conduit to a market or, in this case, from those who may be a conduit to an administrator – say, a Minister of planning or of mining – which would then feed into a devastating effect on a market, those are matters which affect value in the sense of what somebody will pay.

It may, no doubt, be in shorthand a false value of a kind which in civil law is dealt with by the comparison between fact and hypothesis that is the Potts v Miller measure of damages, had you not deceived me, what I paid the 100 pounds for would not be worth more than 20 pounds, damage is 80.  But, that does not show that there has not been a financial advantage gained by the person who got the unearned 80.

So, here, nothing in principle and nothing on the facts of this case suggest that there is no financial advantage so long as the market is static or falling but there might be a financial advantage if the market is rising because in all three cases, falling, static or rising – in all three cases, that which you already have, in this case the shares, stands to be maintained by the falsity which you are engendering in the price which people will be prepared to pay, that is, the value, by reason of the lack of information which you have falsely engendered.  There is the deception and there is the financial advantage.  There is, in our submission, nothing of principle involved in that but, rather, an entirely morally satisfying understanding of the utility of criminal provisions of that kind.

As to the so‑called “concession”, the details of which are not apt for elucidation in a special leave application, we say this summarily, on any reading of that concession recorded by the trial judge in his paragraph 199, it has got nothing to do with what is necessary, we think, with respect, in order to justify his Honour’s erroneous approach to 184.  Nowhere does that

concession amount to, nor is it recorded by his Honour, as meaning that one ceases to be a director or one ceases to have director’s duties.  Of course, they were not engaged as directors in selling the thing to themselves.  That is why they stood aside ‑ ostentatiously one can say in hindsight – and allowed the IBC to do its work, although in hindsight we can say, not exactly – pace my friend, Mr Robinson ‑ being helpful to it. 

The error of the trial judge, with respect, was not truly to apply that which this Court in Howard emphasised, though obviously did not pronounce for the first time, but circumstances alter cases – that these things depend upon the facts and structures and relationships of a particular case.  None of the argument that is offered to this Court for a grant of special leave on this point will travel beyond the outcome in this case.  In our submission, it is impossible to see that people who have already put themselves in the position of conflict are, somehow, dispensed from preventing one of the companies to which they due owe duties, from proceeding to walk, blindfolded, over a precipice. 

Your Honours, that brings me finally to the position of Mr Atkinson as pressed by my learned friend, Mr Robinson.  It is to be recalled – you will find it at page 513 of the second volume of the Duncan application book where the report is reproduced – 513, foot of the left‑hand column, top of the right‑hand column – I do not need to read it, but there is the managing director – former managing director, I should say, Mr Atkinson – and everything in the Commission’s findings and the quotation of the transcript of evidence before the Commission in that passage demonstrates just how completely this is a point that simply turns on the particular facts of this particular case and no one has, with respect, proposed how principle – either underlying if there is such a thing or, to be found in the words of 184, will to the slightest degree be elucidated by this Court taking on a simple second appeal from a judicial review of a fact‑finding administrator.  In our submission, it is for those reasons that there is no special leave point on that issue either.  May it please the Court.

FRENCH CJ:   Yes, Mr Hutley.

MR HUTLEY:   Your Honours, just shortly, the point turns on paragraph 312 where it is evident that the Chief Justice considered that the reasoning process of ICAC was inadequate and needed supplementation by the process of reasoning which the approach which was observed by his Honour at paragraph 311.  That, as we have observed, had to confront the problem that all the evidence was to the contrary of the hypothesis, namely, that there ever would be a disclosure.

We say, that raises the point, it is a point of significance because one is, in effect, supplanting the decision‑maker’s process of reasoning or supplementing it, or augmenting it, by an additional process of reasoning divined by the Court, not exposed by the administrative body, in the face of material which we say had to be confronted, namely, that Mr Cubbin, the person who spoke for the IBC, made it perfectly clear that this was a matter which would be hidden – suppressed, not disclosed ‑ as, as we observed and was found when they did come to communicate with the stock exchange, they did not disclose their real reason for terminating the transaction.

If the reasoning process, which his Honour the Chief Justice considered inadequate, was merely to say, I intend to not disclose to X something for fear that X would disclose it further which would have implications, is sufficient evidence to conclude X for this and that is the end of it.  But, the Chief Justice did not think that was sufficient and, we submit, it is clearly not sufficient in the same way it is different to a case where I fraudulently induce – I say a statement to X fraudulently intending that X act, you can draw an inference that X acted in reliance upon it.  This is a completely different circumstance, as the Chief Justice recognised.

Here, one had to inquire because of the causal chain, would there be a communication?  His Honour held that the process of reasoning was defective and that is apparent from paragraphs 311 and 312 and, with respect, in the light of the evidence which was for the Commission, it had to be confronted to have a rational process of reasoning to an evaluative judgment of the “could” factor which exists in section 8(2).  Those are our submissions, if the Court please.

FRENCH CJ:   Yes.  Yes, Mr Jackson.

MR JACKSON:   Your Honours, may I just say first of all, in relation to the question of deception, the terms of the statute make it clear that deception was necessary.  Your Honours, if one goes to the findings at page 165 and 167, you will see that the essence of the finding against each of these applicants was that the deception that was, ultimately, relied on was deception of relevant public officials – I am sorry, that is the intention of deceiving relevant public officials, et cetera.  None of those persons was, in fact, deceived.  When one came, then, to the persons who are on the IBC and the matters in relation to the IBC, in our submission, it was just a case where there was, in fact, no deception of any of those persons.

Could I go, then, your Honours, to the question of section 184(1)?  If one looks at the terms of section 184(1), it is looking at the conduct of the person as director.  In our submission, one has to ask in what way, relevantly, was – in relation to the proposed transaction, was Mr McGuigan,

acting as a director when he did nothing in relation to it.  And, to rely on the question of a fiduciary obligation is to rely on something, in our submission, outside the terms of the statute.

Your Honour, Justice Keane, raised the question in relation to financial advantage of saying there is a maintenance of the market.  But, your Honours, there was, in a sense, no market or evidence of such a market, really, because the White Energy bid was conditional upon there being no Obeid involvement, and as Chief Justice Bathurst said at paragraph 362, at page 244, there was no valuation, of course, and the asset always remained subject to the same defect.  Your Honours, those are our submissions.

FRENCH CJ:   Thank you.  Yes, Mr Robinson.

MR ROBINSON:   The applicant, Atkinson, identifies the special leave problem as the proper approach to applying section 184 to the circumstances of any given case and that he requires a much more of an evaluative approach than was used in the Court of Appeal.  That is the matter I want to make.

FRENCH CJ:   Thank you.  The Court will adjourn briefly to consider what course it should take.

AT 11:22 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.29 AM:

FRENCH CJ:   Yes, we do not consider that any of the applications has a sufficient prospect of success to warrant the grant of special leave, noting that a number of the points made relate to inferences that might be open on the evidence.  In each case special leave will be refused with costs.

AT 11.30 AM THE MATTERS WERE CONCLUDED