Kizon v The Queen; Mansfield v The Queen

[2011] HCATrans 331

[2011] HCATrans 331

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P28 of 2011

B e t w e e n -

JOHN KIZON

Applicant

and

THE QUEEN

First Respondent

NIGEL CUNNINGHAM SWIFT MANSFIELD

Second Respondent

Office of the Registry
  Perth  No P29 of 2011

B e t w e e n -

NIGEL CUNNINGHAM SWIFT MANSFIELD

Applicant

and

THE QUEEN

First Respondent

JOHN KIZON

Second Respondent

Applications for special leave to appeal

HAYNE J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 9 DECEMBER 2011, AT 9.47 AM

Copyright in the High Court of Australia

__________________

MR S.A. SHIRREFS, SC:   If the Court pleases, I appear on behalf of the applicant in matter No 28 and the second respondent in matter No 29.  (instructed by Holborn Lenhoff Massey)

MR M.L. BENNETT:   If it please, your Honours, I appear for the applicant in matter No 29 and the second respondent in matter No 28.  (instructed by Bennett & Co)

MR W.B. ZICHY-WOINARSKI, QC:   If your Honours please, I appear with my learned friend, MS R.V.C. FOGLIANI, on behalf of the first respondent in both matters.  (instructed by Commonwealth Director of Public Prosecutions)

HAYNE J:   Yes.  Is there any reason not to hear the matters, in effect, together?

MR SHIRREFS:   No, they are the same matters, in effect, your Honour.

HAYNE J:   Yes, Mr Shirrefs.

MR SHIRREFS:   Your Honour, this application raises an important question the answer to which, we submit, is central to the operation of the insider trading provisions of the Corporations Act and that is, what is information within the concept of insider trading?  According to the judgment of his Honour Justice of Appeal Buss, any information about a company is sufficient, irrespective of whether it actually exists beyond the fact that it was said and that the questions as to falsity and the like go to the test with respect to materiality.  We submit that this is an erroneous approach and has broadened the concept of insider trading beyond that contemplated by the legislation and, indeed, in terms of the history of insider trading.

HAYNE J:   Now, the case was taken away from the jury at trial, was it not?

MR SHIRREFS:   It was taken away upon a no case submission, yes. 

HAYNE J:   On the footing that?

MR SHIRREFS:   On the footing that with respect to the information alleged by the Crown there was no evidence before the jury that if they can conclude that, in fact, the information actually existed and, more importantly, was, in fact, information of the company.  In a number of instances the evidence indicated that they were misrepresentations made by a company director for personal gain and did not correspond or correlate to any information of the company.  Certainly they were statements of information about a company, but they were demonstrably false.

CRENNAN J:   What was the provenance of the phrase “factual reality” which keeps being repeated?

MR SHIRREFS:   The provenance of the phrase “factual reality” comes from when one considers the meaning of information in an ordinary sense, which includes the conveying of a knowledge of a fact or occurrence.  That factual reality is the other side of the coin of talking about actually existing and ‑ ‑ ‑

HAYNE J:   What you are saying is it has no textual hook in the definition, does it?

MR SHIRREFS:   It has no textual hook in the definition, yes. 

HAYNE J:   It is a construct that is applied.

MR SHIRREFS:   It is the construct that was applied to make sense of what her Honour President McLure said were evidently difficult sections of an act in terms of trying to, as she said ‑ ‑ ‑

HAYNE J:   How can the notion of factual reality apply when the definition includes matters of speculation – a supposition?

MR SHIRREFS:   If the matters of speculation were speculation from within a company, in other words, a prediction as to what might be occurring on a tenement or something of that nature.  That is something that is within the company.  Here, we had not matters of speculation ‑ ‑ ‑

HAYNE J:   Yes, matters of supposition as the statutory ‑ ‑ ‑

MR SHIRREFS:   Matters of supposition, yes.  Matters of supposition could be something that a board has, in relation to prospects with respect to a tenement or prospects in relation to a future takeover, depending upon whether A or B or C occur.  But the central issue and the critical factor is whether it comes from within the company.  That was the point of distinction that was reached by the President in her analysis of the way in which the legislation operates, that it really has to have a connection with the company, so that it comes from within the company, is information of the company ‑ ‑ ‑

CRENNAN J:   Who was Mr Day?  Was he not the source of this information?

MR SHIRREFS:   Mr Day was treating AdultShop.com as his own private company.

CRENNAN J:   Was he an officer?

MR SHIRREFS:   He was the managing director.  The evidence revealed that he was inventing profit and loss statements of his own volition and making them up for personal gain.  In relation to My Casino, for instance, the managing director, Michael O’Donnell, was in a situation where My Casino had no business and it was looking for a business.  His position on the board was tenuous.  There were moves to oust him.  He had to find a business, so he was going around trying to find a business that My Casino could operate.

He was approached by a man, a third party called Fabio…..in Melbourne who said, “I have got some prospects of some business involving Europcar”.  The company secretary, Asquith, and O’Donnell travelled to Melbourne and discovered the whole thing was a fraud, it did not exist, and yet weeks later or days later O’Donnell is spruiking this is a business that My Casino was going to be going into when they had five similar deals on the table and telling people about something that was factually, indeed, incorrect.  Indeed, those utterances were untruthful.

CRENNAN J:   Do you say it is not within the company because somehow he was not authorised to do what he was doing?

MR SHIRREFS:   He had authority – you could never say that a managing director has authority to tell lies.

KIEFEL J:   Is a concern of the insider trading provisions the effect upon the market?

MR SHIRREFS:   One rationale, it is but one rationale, and ‑ ‑ ‑

KIEFEL J:   Does that give some clue to the width with which definitions of information might be understood?

MR SHIRREFS:   It could never be to the benefit of the market that lies be spread to the market.

CRENNAN J:   No, but lies might influence a person thinking about either acquiring or disposing of a parcel of shares.

MR SHIRREFS:   It might, but in terms of that lie, if it is not a lie that comes from within the company – and our submission is the fact that it comes from a managing director does not make it information of the company when you have a rogue director such as we had here with Malcolm Day.

HAYNE J:   The orders of the Court of Appeal direct retrial in respect of the allegations concerning ‑ ‑ ‑

MR SHIRREFS:   AdultShop only.

HAYNE J:   ‑ ‑ ‑ AdultShop only.

MR SHIRREFS:   Yes.

HAYNE J:   Our concern if we were to take this matter would be only with the correctness of that order?

MR SHIRREFS:   Yes.

HAYNE J:   Therefore we are concerned only, are we, with the position where the managing director of a company has – as the defence case was – told lies ‑ ‑ ‑

MR SHIRREFS:   For personal gain.

HAYNE J:   That is why he told the lies, but has told lies about the future prospects of the company?

MR SHIRREFS:   Yes.

HAYNE J:   To the two accused persons?

MR SHIRREFS:   To one accused.

HAYNE J:   To one accused.

MR SHIRREFS:   Yes, to Mansfield.

HAYNE J:   Who then traded on ‑ ‑ ‑

MR SHIRREFS:   There is no evidence of the conversation that took place, if it did take place, as to the subject matter between Day and Mansfield because it was not the subject of any recording.  It is open to imply that they actually met.  There is a telephone conversation on 4 January, I think it is 2002, in which Mansfield informs Kizon that he had met with Day, and this is the information that he got.

Mansfield’s position was that he was acting as a broker in relation to companies associated with Kizon and wanted to maintain that position and, indeed, the more he invested, the more commission that he made.  So as to whether or not Day ever uttered these words or gave these predictions again was a matter of inference that was ultimately never tested by the jury.

It is evidence against Mansfield, it is hearsay against Kizon.  But in terms of what was said by Day, said to have been said by Day, as a prediction, the evidence revealed had no basis in fact in terms of anything other than the fact that Day was prepared to make up any figure provided that it indicated that the company was doing well. 

There was material released which showed that Day had released to the market a report – a statement in March of 2002 that contained false figures and he knew of it and did nothing about it.  There was evidence from a man called Dean Shannon who ran the online pornography site that had been taken over by AdultShop that he got a telephone call in 2002 from Day asking what the projections were for the profits in relation to that side of the company.

Shannon said he just jotted them down on an envelope, did not know they were anything official, sent it back to Day and Day rang back and said, “They are not good enough, I have changed them, well, here they are” and virtually made them up.  That is the evidence of the way in which Malcolm Day was operating, that he was disseminating lies, and the reason he was disseminating lies is that Today’s Success had been purchased by AdultShop and the two directors and substantial shareholders of Today’s Success had been allocated shares in AdultShop and they were about to sell them. 

One of them was about to sell a huge parcel in the course of 2002, the effect of which would have sent the share price down, so he was doing all he could to push the share price up, certainly in terms of disseminating lies of this level to Mansfield, that is that they came from Day.

The judgment of her Honour the President analyses the history of the legislation. If one looks to section 128 of the Securities Industries Act which was the precursor to the amendment in 1991, what one sees there is that the connection with the company is twofold.  For a person to be an insider, they have to have come into possession of information as a result of their position as an officer within the company. 

Now, that has two aspects to it:  firstly, that the person to be charged with insider trading has to be an officer of the company, but secondly, they came into the possession of information as a result of them being in that position.  The only change that was made in 1991 was to remove the limitation that the person, the insider, had to be connected with the company.  But the second aspect which is that the information comes from within the company and is connected to the company did not alter.  Support for that is found in the Griffiths Report when they say that the essence and genesis of insider trading is the use of the information derived from within the company.

HAYNE J:   Why is this information not derived from within the company?

MR SHIRREFS:   Because it is information that is not company information.  The fact that it is said by a managing director does not make it company information.  As her Honour the President said, there is absolutely no – there was no evidence of any correlation, any support for any of the trading figures at AdultShop that could provide any support for these predictions.  In fact, the evidence went entirely the opposite way, indicating that there could be no support or basis for the predictions that were being made by Malcolm Day. 

Now, to simply say it comes from within a company because an officer of the company says it, in our submission, does not make it inside information from within the company.  If one considers how, in terms of insider trading, the notion of confidential price sensitive information came to be in that concept, it is confidential because it is information within the company that is confidential to the company and price sensitive.  What is lacking in terms of the lie told by a director is the confidentiality aspect of it, in other words, that it is information of the company that is confidential to the company.  Yes, it is price sensitive because it is a lie talking up the share price by giving false estimates of profits.

HAYNE J:   Again, what is the textual hook on which you rely to say it is information of the company?

MR SHIRREFS:   When one looks at the meaning of information ‑ ‑ ‑

HAYNE J:   Yes.

MR SHIRREFS:   ‑ ‑ ‑ which is a fact, when one looks at knowledge of a fact or occurrence, when one looks at the case that was put against us.  The case that was put against us was not the fact that it was said by Malcolm Day.  That was expressly disavowed by the prosecutor at trial.  What was put against us were the nominations in paragraphs (a) and (b) of the particulars, being the statements as to predictions.  That was the alleged inside information.

When one considers the history of the legislation, starting conveniently at section 128 of the Securities Industry Act, which makes it clear that the information is information of the company but the other addition at that stage was, in terms of the legislation, that it comes from a person who was an officer of the company, that was removed but the essential essence of insider trading that it is information of the company, we submit, has not, when one considers the legislation as a whole including the fact that in the earlier division of the Act a person who disseminates false or misleading information knowing or intending that a person will trade on that information is guilty of a criminal offence.  That is what should have occurred here with respect to Malcolm Day.  That we say is the hook, your Honour, when one ‑ ‑ ‑

HAYNE J:   Mr Shirrefs, if you go for a moment to the definition of “inside information” in 1042A and the offence in 1043A in the Act, I am just not, at the moment, following how you relate this argument to the text of the Act.

CRENNAN J:   The matter of supposition about future profitability ‑ ‑ ‑

MR SHIRREFS:   Yes.

CRENNAN J:   ‑ ‑ ‑ surely satisfies the definition.

MR SHIRREFS:   Absolutely.

CRENNAN J:   Your simple point seems to be that Mr Day was a rogue managing director and for that reason alone the information being a lie was not information within the company.  I must say I am struggling to follow that.

MR SHIRREFS:   It is not – the fact that it is said by a company officer, in our submission, does not make it information of the company.  It is information about the company.

HAYNE J:   But information of the company is a concept which you have, at least as far as I see, imposed on the Act.

MR SHIRREFS:   Well, that is the analysis that is provided by President McLure and it is supported, in our submission, when one considers the history of the legislation.  This amendment that was made was made on the recommendations of the Griffiths Report that it relates to information derived from within a company.  On the analysis of the court below in Justice Buss, the result of it, we submit, has broadened the reach of insider trading.

HAYNE J:   Yes.

MR SHIRREFS:   Substantially, and broadened it to the extent that anyone, be they office or any person who makes an utterance about a company which is price sensitive because of its nature – said to be price sensitive because of its nature regardless of whether it is true, false, whatever, is brought within the provisions and the only test then is whether it is generally available.  But one can hardly expect a lie to be something that would be generally available.  Her Honour the President deals with that in her judgment.

The history of insider trading from 1970 when it was first introduced had as its central concept that it was confidential price sensitive information.  Confidentiality was an essential component of it.  The judgment of the court below removes that aspect.  Confidentiality is relevant, we say, because it gives a connection to the information coming from within the company. 

There have been no pronouncements by this Court on insider trading.  All cases that we are aware of insider trading in this country to date have involved cases where there has been absolutely no doubt that the information was a factual reality or true, and indeed was information of the company.  The only time falsity has ever been raised to our knowledge was in the defence of Mr Rivkin who said he did not believe the information to be true and that is why he ‑ ‑ ‑

CRENNAN J:   By way of contrast, did Mr Kizon conduct the case on the basis that he did believe it to be true?

MR SHIRREFS:   We did not have to run a defence because it was taken away at the end of the Crown case.

CRENNAN J:   Yes, I appreciate that.

MR SHIRREFS:   That was not raised at that stage.  What was demonstrated was that it was clearly evidence that was truly false in a number of instances.  Or, when I say truly false, the evidence revealed that in a number of instances it was open to infer that there were false representations and, indeed, more than that, that in relation to the others there was absolutely no factual or actual connection with anything within the company.

Within the company, we submit, means that it is in terms of a prediction as to profits - that there is within the company, in terms of its accounts, information that gives a basis for a prediction.  If the company accounts reveal that these are the expected profits but notwithstanding they may be meagre profits, notwithstanding if the company director or managing director then says well the profits are going to be substantially more than that because he wants for personal gain to spruik the company, it cannot be said, in our submission, that that is information of the company when it clashes with what the actual information in possession of the company reveals.  That was the case here.

We submit this is an important issue with respect to not just this case, but future insider trading cases, as to the breadth of the meaning of “information” and “inside information” for the purpose of this scheme, a scheme introduced by the recommendations of the Griffiths Report, which included the essential characteristic and that is that it become information derived from within a company. That comes from the meaning of section 128, which is that it is confidential information. A lie being spruiked by a managing director cannot be, by definition, confidential information. We submit this is an appropriate vehicle for that analysis. If the Court pleases.

HAYNE J:   Thank you, Mr Shirrefs.  Yes, MrBennett.

MR BENNETT:   Can I start by answering your Honour’s question as to the provenance of the term “factual reality”?  You will find this in the application book for my client.  His Honour, the trial judge, Judge Wisbey in the District Court of Western Australia, dealt with a submission of no case to answer and you can pick up the commencement of his reasons at page 30, at line 32.  Then if your Honours flick across to page 34 and read the paragraph that is from 18 to 23, his Honour adopted the term to distinguish it.  Can I add to what ‑ ‑ ‑

CRENNAN J:   Is that picking up from something put in argument?

MR BENNETT:   No, it was a term, I think, coined by his Honour.  Can I say, lest you think that all the AdultShop counts are matters of potential supposition, 13 of the charges relate to a palpably false statement by Day.  They are charges 20 through to 21a.  If you turn up page 220 of my client’s application book the material lie was that:

a.        Packer had bought 4.9 per cent of AdultShop –

Can I say that the evidence revealed that a company that is associated with the late Mr Kerry Packer about a month earlier had gone into the stock, bought a small amount, a rumour then sparked a rise in the stock and they sold out within five days.  This is said to have been a statement made – this was in May of 2002 – these statements by Day were on the period from 9 June to 8 July.  Your Honours will appreciate the significance of 4.9 per cent as it falls under the threshold for disclosure of substantial shareholding, but also suggests potentiality for a takeover launch.

But the synergy to the objective investor of the managing director saying somebody with an interest in television and magazines was acquiring a substantial stake in an online pornography adult entertainment business is obvious.  Now, that was just a palpable lie and Day knew it.  Day was never called by the Crown as part of this case.  So 13 charges relate to that.

Your Honour Justice Hayne asked for the connection with the company issue and the starting point, your Honours, is the word “information” in itself.  The primary judgment against us by Appeal Justice Buss in paragraph 105 which you find at page 140 of our application book sets out – there is no definition of “information”.  Your Honours know that in the preceding provision, 1002G and 1042A, “information” is defined in an inclusive fashion but the common and ordinary meaning of “information” is set out and “information” is:

knowledge communicated or received concerning some fact –

Fact is the antithesis of fiction.  The statement that Packer had bought 4.9 per cent was a fiction, not a fact.  It could never have been information.  It was make‑believe.

The structure, your Honour, of the Corporations Act is to give a civil right of damages for a person who is misled in the acquisition of securities by misleading conduct, a strong contraindication to the proposition that for somebody to say a falsity and a person to trade on it thereby commits a criminal offence because they have a civil right for damages for conduct in reliance upon a misleading statement.

HAYNE J:   Why does the fact that Mr Day may have committed several offences on the basis on which you would argue the case bear upon whether there has been an insider trading?  He may have engaged in market manipulation, he may have made false statements.

MR BENNETT:   If he made false statements and we relied upon them and had a civil right of damages it would be fundamentally inconsistent with us being engaged in a criminal act because it should disentitle us, as a matter of proper principle, to recover damages for being engaged in such an act.  Of the four rationales for insider trading law that was identified by President Mason in R v Firns and picked up and articulated by Appeal Justice Buss, the fiduciary duty, the market efficiency, the market rationale, those propositions, none of those have any application to falsities being disseminated.

HAYNE J:   But at some point you have to wrestle with the Act.  Yes, we can understand what the general purposes of insider trading offences - you have to tackle the text.  Now, where in the text is there any root for the argument you advance?

MR BENNETT:   I would adopt and say to your Honour that it is clearly expressed in President McLure’s reasons for decision, page 114, paragraphs 13, 14 and 15.  Her Honour, we say correctly, starts with the meaning of “information” and as her Honour says, in a technical sense, “confidential”, belonging to somebody.  It “is not a retreat to the ‘misappropriation theory’” but it is evident when her Honour considers the proper statutory construction of 1043H, 1043I and 1043J that it has to belong to a third party.

You cannot be liable for insider trading if you know what you are going to do yourself, for example, make a takeover bid, so it has to belong to somebody other than the person who trades.  What her Honour says is on

a proper “evident statutory intention” it must be “in the possession of the entity entitled to” have it or act on it.

Now, we would accept an extension of that where, for example, a mining company’s core samples are sent to an analytical laboratory and the analyst at the laboratory, seeing a presence of gold, tips or buys himself but that is acting on behalf of the company.  But if a stranger to the company, a Warren Buffett of Australia, for example, identifies an opportunity and tells somebody that is not inside information, it may be his supposition, it may be his analysis of matters, but it is not inside information because it is of a third party not connected to the company in the relevant sense.

It is an important principle of construction, we would say, to look at the defences to reach the position adopted by her Honour the learned President.  That is why this is a suitable vehicle for consideration by this Court because it will involve an analysis of the statute in a manner that the statute is unclear.  Her Honour says it is devilishly difficult to discern.  His Honour President Mason in Firns talks of the legislative astigmatism in the drafting of these provisions.

There is a difficulty because political agendas interfered with a clear adoption of the Griffiths Report in the manner that was identified in Firns.  So we would say that it is important to determine whether or not, if you have some computer whiz who can analyse a trend and predict something, is he engaging in insider trading if he then buys or if he informs somebody who is engaged in the offence in the vernacular called as tipping when he is unrelated to the company. 

Equally, information must have its grounding in fact, so if the managing director, for whatever reason, invents a total falsehood – Packer has bought 4.9 per cent of the company – then that should not be the basis for a prosecution against my client.  We would otherwise adopt what my friend, Mr Shirrefs, says.

HAYNE J:   Thank you, Mr Bennett.  Yes, Mr Zichy‑Woinarski.

MR ZICHY-WOINARSKI:   If the Court pleases.  Your Honours, may we just answer something your Honour Justice Crennan raised with our learned friend, Mr Shirrefs.  The taped conversations between the applicants clearly demonstrated that both applicants believed the truth of what they had been told and acted upon that.  Now, we know you do not have to be an insider trader to act on the information but they both possessed the information believed to be true. 

The second matter is this, your Honours, that my learned friend, Mr Shirrefs, is wrong about the remaining counts concerning AdultShop.  Mr Kizon was clearly in relation to the counts that Mr Bennett concentrated on so far as AdultShop is concerned a recipient of some of that information.  I have an exact transcript if I may just read part of that to the Court.  It demonstrates the nature of the material that the jury had before them.  On 9 June 2002 Kizon and Mansfield spoke on the phone and I quote:

“…went and had a chat with Mal the other day…he [Day] says fuck I’m flying he says better than expectation I said yeah we were thinking about coming in um if it dropped to about twenty eight or twenty nine or if some were thirty he says ah I don’t think it will get there he said listen between me and you he says forecasts for next month are bigger than we thought I said are they he says yeah he says mate you’ve got to keep this quiet he says Packer bought four point nine percent”. 

Now, that is the nature of what was before the jury throughout all these charges.  Secondly, can we just say this about the references to the Griffiths Report?  Your Honours have been taken to the passage quoted by Justice McLure – referred to the passage quoted by Justice McLure about the genesis of insider trading.  If one goes to the book of materials at page 514 ‑ ‑ ‑

HAYNE J:   What are we going to get out of this, Mr Woinarski?

MR ZICHY‑WOINARSKI:   Your Honour, the simple point is this, that what is being said about the genesis – the word “genesis” there really means the beginning and it is said in the context of who is an insider, not what is inside information, and that is the point we wish to make, that you cannot take that genesis comment as her Honour did and transfer it to what is inside information, and inside information is the very next thing that was dealt with in the Griffiths Report. 

Your Honours, we submit – and I am not going to repeat what is in our written submissions in both matters – that the judgment of Appeals Justice Buss as supported essentially by Justice Murray is correct, and we say ‑ ‑ ‑

KIEFEL J:   Is the question of construction one of general importance?

MR ZICHY‑WOINARSKI:   Your Honour, we could not sit here and say that it is not a matter of general importance because the meaning of “inside information” – it would be futile for me to try and suggest the other, but we do say that the judgment of the majority below is not sufficiently attenuated with doubt for a grant of special leave to be granted. 

The real basis, if I may put it this way, of the application – and I am not sure that it would not be here anyhow – is an attempt to hang their hats on the judgment of President McLure, and we say there are some problems with the judgment of President McLure and if I may take the Court to that, and if I may use the application book of Kizon?  If the Court could go to page 47 of his – I am sorry, your Honour, my reference is wrong; it is page 47 of Mansfield’s application – pages 46 and 47 of Kizon’s application?  At page 46 her Honour refers in paragraph 12 to:

I will refer to information ‘not generally available’ as ‘confidential’ information.  Such information must be confidential (available) ‘to’ someone or, in a broad non‑technical sense, ‘belong to’ someone.

She goes on in paragraph 13 to say:

information is widely defined to include confidential information that ‘belongs to’ the person who trades in the relevant securities.  That is evident from the defences . . . The definition of inside information also includes confidential information ‘belonging to’ third parties.  However, those two categories must cover the field.

Now, she does say at the end of 12 that she is not retreating to the misappropriation theory but, in our submission she has unintentionally tried to breathe life back into the misappropriation theory.  The reason why we say that is that the offence of insider trading is not based on the fact that you possess the information – it is not an offence to possess inside information – the offence is trading whilst in possession of the information.

So it is not a question of to whom the information belongs to, it is a question of prohibiting or proscribing people who have that information and then choose to use that information to trade, hopefully, presumably, for their benefit.  Now, that is the essence and we say, in part, that is where she goes wrong.  The other area where she goes wrong, in our submission, is that her Honour says that the information has to actually exist within the company and she, in part, relies on in that by going back to paragraph 4 of her judgment at page 44 of the Kizon application book where she says:

Implicit in the trial judge’s reasons on the no case submissions is that the ‘inside information’ on which the Crown relied was the particularised information relating to the affairs of the bodies corporate in question –

That is paragraph 4 on page 44.  Now, it was always the Crown case and if I need to I will demonstrate it to this Court, because I have some extracts.  It was always the Crown case that the information was what was said by Day.  Sorry, it was contained in the statements made by Day to either Mansfield

or Kizon and the words that were particularised in the particulars are, in almost every case, an identical analysis of what is to be seen in the tape products. 

Both Appeal Justice Buss and Justice Murray worked on the basis that it was the statement could be information and it could be false.  Now, it is quite clear that that is the way it was put to the trial judge and in the course of argument between the trial judge there are a number of passages where he and I are discussing and I am saying the information is simply the statement that was made either to Mansfield or Kizon by Day and if that information is price sensitive and is not generally available then it is information for the purposes of the legislation.  His attitude and it is to be seen in his final statement, is but if it is false, in other words, if what is being said to the person, how can that be inside information? 

Now, in our submission information is very simply what you receive through the physical senses and it may be a false statement.  It may be a misleading statement.  It may be a truthful statement, but it is still information that you receive.  Indeed, the concept of false information is nothing new to the law.  It is a concept that has been used to define offences for a long time and the very fact that information can be described with the adjective “false”, in our submission, makes it very clear in general terms the word “information” can be false information.  I am not going to take the Court through our written submissions.  The Court has those, but those are the primary reasons why we say special leave should be refused.

HAYNE J:   Thank you, Mr Zichy-Woinarski.  Yes, Mr Shirrefs.

MR SHIRREFS:   Your Honours, by example of count 1 the Crown case was conducted on the basis that particulars in (a) and (b) comprised the inside information alleged; (c) was said to be the source.  It was never conducted on the basis of the fact that it came from Day which is said in (c) was part of the inside information.  That was made clear at the transcript at page 2459 by Mr Woinarski and I have set that out in paragraph 3 of my reply.

In section 128 of the Securities Industry Act which was amended in – picked up in 1989 and then amended in 1991, the essential characteristics of insider trading were that the person had to have been:

connected with a body corporate shall not deal in any securities of any body corporate if by reason of his so being, or having been, connected with the first-mentioned body corporate he is in possession of information that:

(a)      is not generally available –

That is to be found in the material folder at page 42 in the materials, which demonstrates two essential characteristics.  One is that the person is connected with the company, and the second is as a result of that connection they then obtain information.  Our submission is that is implicit that that is information coming from within the company.

The amendment that was made was only insofar as the person had to be connected with the company.  The effect of the interpretation construction in the court below in a judgment of Justice Buss, we submit, has broadened it to also exclude that second aspect and that is that the information comes from within the company, indeed is company information.

HAYNE J:   That is a point which, I think, is not reflected in either draft notices of appeal, this notion of the information must come from within the company.  The draft notices of appeal in both matters fasten only on this notion of factual reality.

MR SHIRREFS:   It is ground 3 in our draft notice, which is at page 161.

HAYNE J:   Yes.

correspond in whole or in part with –

Is that the ‑ ‑ ‑

MR SHIRREFS:  

actual information in the possession of the entity entitled to have or use it.

HAYNE J:   I see, you are using it in that sense.

MR SHIRREFS:   I adopted the words of President McLure, because that is as she put it.

CRENNAN J:   It is the entitlement to use that is linked up with this notion of being information within the company, as I understand your reliance on President McLure.

MR SHIRREFS:   Yes, your Honour.  Well, entitled to have use of it, entitled to possess it.

CRENNAN J:   In other words, she was virtually saying that if it is fraudulent information it does not fall into that category of being information within the company which the company is entitled to use.

MR SHIRREFS:   That is right, it is real information, and even a rumour in a board meeting about something that is occurring, that it is information that the members of the board are possessed of.

CRENNAN J:   Well, it could be a supposition or a rumour which may develop ‑ ‑ ‑

MR SHIRREFS:   It may develop.

CRENNAN J:   ‑ ‑ ‑ and it may develop in a way in which the company is ultimately entitled to use it.

MR SHIRREFS:   Absolutely, and it is connected to what the company is engaged in and what the company is doing as opposed to what occurred here which was the spreading of lies for personal gain which had no connection on the evidence within the company with anything that the company was possessed of in terms of profit predictions and turnover.  For that prediction to have a connection it would have to correlate – to use the language of her Honour – correlate or correspond in some part or a material part with the actual profits and turnovers of the company to that date so that in terms of the prediction it has a grounding in fact, and that is the issue.

Now, there has been no appellate decision other than this decision of Kizon and Mansfield that has dealt with these provisions in this way and, as I said, the reason for that is that in all cases to date of prosecutions for insider trading this has not been an issue because the information has been company information which is within the company based in reality, be it a supposition, be it a rumour, or indeed it be a statement as it was in the Rivkin Case of a takeover by Qantas of Compass, Compass Airways.

Here we have something that is out in left field but it brings into stark reality a focus on these provisions and the constructional difficulties with them, and they cannot be seen in isolation from where they came which was the amendments in 1991 following on from the position that preceded it, and there was no intention both in the Griffiths Report or indeed in the debates in Parliament to extend it to the extent that it has been by their Honours in the court below.

HAYNE J:   Thank you, Mr Shirrefs.  Yes, Mr Bennett.

MR BENNETT:   I adopt what Mr Shirrefs says by way of reply and add only this, that the need for this Court to determine proper construction of

inside information is best illustrated by my friend, Mr Woinarski, telling you ignore the common law meaning of information, that is, about a fact, and it is anything received by the census.

HAYNE J:   The injection of the notion of common law meaning of information ‑ ‑ ‑

MR BENNETT:   Or the ordinary meaning.

HAYNE J:   ‑ ‑ ‑ makes me reach for the statute, Mr Bennett.

MR BENNETT:   The suggestion that if I watch a movie flying back to Perth tonight or read a novel I receive information is not a comfortable concept.  Fiction is divorced from fact.  Palpable lies are not information.  Her Honour the learned President was careful to say a false statement cannot constitute information and that is the issue that uniquely is raised by this matter.  The fact that it is said by somebody may be information, but as Mr Shirrefs said, that is not the way this case was run.

HAYNE J:   Thank you.  There will be a grant of special leave to appeal in this matter.  The case should take not more than a day, I would have thought.  I draw the attention of counsel to the timetable that cuts in at once, and I know what month we are sitting in and what month the grant is made in.  The timetable is to be observed.

AT 10.32 AM THE MATTERS WERE CONCLUDED