Mansfield v The Queen

Case [2012] HCA 49

HIGH COURT OF AUSTRALIA

HAYNE, HEYDON, CRENNAN, KIEFEL AND BELL JJ

Matter No P60/2011

NIGEL CUNNINGHAM SWIFT MANSFIELD  APPELLANT

AND

THE QUEEN & ANOR  RESPONDENTS

Matter No P61/2011

JOHN KIZON  APPELLANT

AND

THE QUEEN & ANOR  RESPONDENTS

Mansfield v The Queen
Kizon v The Queen

[2012] HCA 49

14 November 2012

P60/2011 & P61/2011

ORDER

Matter No P60/2011

Appeal dismissed.

Matter No P61/2011

Appeal dismissed.

On appeal from the Supreme Court of Western Australia

Representation

M L Bennett with L Ristivojevic for the appellant in P60/2011 and for the second respondent in P61/2011 (instructed by Bennett + Co)

S A Shirrefs SC with S P Gifford for the appellant in P61/2011 and the second respondent in P60/2011 (instructed by Holborn Lenhoff Massey)

W B Zichy-Woinarski QC with R V C Fogliani for the first respondent in both matters (instructed by Commonwealth Director of Public Prosecutions)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Mansfield v The Queen
Kizon v The Queen

Corporations law – Insider trading – Appellants allegedly possessed inside information concerning listed public company – Appellants allegedly bought or procured purchase of shares in that company – Information was false – Corporations Act 2001 (Cth) prohibits certain conduct by person who possesses inside information about company – Whether person in possession of false information can contravene insider trading prohibitions.

Words and phrases – "information".

Corporations Act 2001 (Cth), Pt 7.10.

  1. HAYNE, CRENNAN, KIEFEL AND BELL JJ. The Corporations Act 2001 (Cth) prohibits trading in securities by persons who possess information that is not generally available and know, or ought reasonably to know, that, if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of the securities. It will later be necessary to make more particular reference to the relevant provisions of the Act (which were altered during the times relevant to these matters) but the general tenor of the provisions is sufficiently captured by the description just given.

  2. It was alleged in these matters that, in January 2002, Mr Malcolm Day, the managing director of a listed public company (AdultShop.com Limited – "AdultShop") told one of the appellants (Mr Mansfield) that AdultShop's expected profit for the then current year had risen from $3 million to $11 million and that its expected turnover had risen from between $30 million and $50 million to about $111 million.  It was alleged that Mr Mansfield then told the other appellant (Mr Kizon) what Mr Day had said.

  3. It was alleged that Mr Day and Mr Mansfield later had other conversations in which Mr Day gave optimistic assessments of AdultShop's financial performance and that Mr Mansfield told Mr Kizon what Mr Day said in those conversations.  It was alleged that there were other conversations between the men but what was said in all these other conversations need not be described.  It is useful, however, to refer…

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AGLC
Mansfield v The Queen [2012] HCA 49
Case
[2012] HCA 49
Decision Date

CaseChat Overview and Summary

In Mansfield v The Queen, the appellants appealed to the High Court of Australia against convictions for conspiracy to contravene section 1002G of the Corporations Act 2001 (Cth) and for substantive insider trading offences. The core of the dispute concerned whether the appellants possessed "inside information" as defined by the Act, given that the information they allegedly held and acted upon was false.

The central legal issue before the Court was whether a person in possession of false information could contravene the insider trading prohibitions under section 1002G of the Corporations Act. Specifically, the Court had to determine if the statutory definition of "information" encompassed statements that were factually incorrect, or if it required a correspondence with factual reality. The appellants argued that a falsity or a lie could not constitute "information" for the purposes of the Act.

The High Court dismissed the appeals, finding that the appellants had failed to establish their central proposition regarding the ordinary usage of the word "information". The Court reasoned that the statutory language did not require information to be factually true to fall within the definition of "inside information" under section 1002G. The Court concluded that the appellants' submissions that a lie or falsehood could not constitute information were not supported by the text of the legislation. Consequently, the appeals were dismissed.

Orders

Orders of the court

Matter No P60/2011

Appeal dismissed.

Matter No P61/2011

Appeal dismissed.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

HAYNE, CRENNAN, KIEFEL AND BELL JJ (dissent) HEYDON J
The practice of other jurisdictions is interesting, and may be of interest to the legislature. Indeed, as noted by counsel for Mr Mansfield, "the Griffiths Report urged the legislature to consider" the "full panoply of international regulation[s]" (emphasis added). But it was not shown that the legislation now under consideration was based on any particular legislative model. General reference of the kind made by Mr Mansfield to other statutory regimes does not assist in the resolution of the question of construction raised by these appeals for determination in this Court.Conclusion and orders The appellants have failed to establish their central proposition about the ordinary usage of the word "information" and each of their secondary submissions in support of that central proposition. The appeals to this Court should be dismissed. Each appellant was charged with crimes arising out of, inter alia, their conduct on or about 4 January 2002. On that day, s 11.5(1) of the Criminal Code (Cth) provided that a person who conspired with another person to commit an offence punishable by imprisonment for more than 12 months, or by a fine of 200 penalty units or more, was guilty of conspiracy to commit that offence. At that time, s 1002G(2)(b) of the Corporations Act 2001 (Cth) created an offence of that kind. Commission of the offence depended on the accused being an "insider". "Insider" was defined as "a person [who] possesses information that is not generally available but, if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of securities of a body corporate." Section 1002G(2)(b) provided that an insider:"must not (whether as principal or agent):…(b)procure another person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities." It is convenient to analyse the legal issues in these two appeals by reference to s 1002G(2)(b). Though it has now been repealed and replaced by similar legislation, it was the relevant provision in force at the time part of the conduct alleged against the appellants took place. The prosecution alleged that the appellants had two pieces of information. The first was that for the 2002 financial year the expected profit for a particular business had risen from $3 million to $11 million. The second was that the expected turnover of that business had risen from $30-50 million to about $111 million. In fact, neither the expected profit nor the expected turnover had risen. The question in this appeal is whether the propositions about profit and turnover were prevented from being "information" because they were false. The appellants submitted that to be "information" a proposition had to "correspond with the factual reality", or "be a factual reality", or exist as "a matter of fact or precise circumstances as opposed to a falsity." It was said that "one cannot be 'informed' by a falsity", that "a lie cannot constitute information", that one must not read the statutory language "to include lies", and that information "does not include lies and falsehoods".

Ratio Decidendi

Legal Principle Established

Established by: HEYDON J

By special leave the appellants appealed to this Court.Relevant provisions of the Corporations Act At the time of the earliest of the alleged offences, the Corporations Act dealt with certain prohibited conduct in relation to securities in Div 2 of Pt 7.11 (ss 995‑1001D) and dealt separately with the subject of "insider trading" in Div 2A of Pt 7.11 (ss 1002‑1002U). Division 2 of Pt 7.11 prohibited[5] misleading or deceptive conduct in or in connection with any dealing in securities and created various offences, including stock market manipulation[6], false trading and market rigging transactions[7] as well as offences depending upon a fraudulent intent[8], an offence of disseminating information about illegal transactions[9] and offences in connection with continuous disclosure requirements[10]. [5]s 995.[6]s 997.[7]s 998.[8]ss 999 (False or misleading statements in relation to securities) and 1000 (Fraudulently inducing persons to deal in securities).[9]s 1001.[10]ss 1001A‑1001D. For present purposes, the central provision of Div 2A of Pt 7.11 was s 1002G, which prohibited certain conduct by persons in possession of "inside information". The appellants were charged with conspiracy to commit a contravention of s 1002G (contrary to s 1311(1) of the Corporations Act) and Mr Mansfield was charged with committing the substantive offence. Sub‑section (1) of s 1002G identified when the other provisions of the section were to apply. It provided:"Subject to this Division, where:(a)a person (in this section called the insider) possesses information that is not generally available but, if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of securities of a body corporate; and(b)the person knows, or ought reasonably to know, that:(i)the information is not generally available; and(ii)if it were generally available, it might have a material effect on the price or value of those securities;the following subsections apply." Sub‑section (2) of s 1002G relevantly provided that the insider must not (whether as principal or agent) buy or sell, or procure another to buy or sell, the securities. Sub‑section (3) relevantly provided that the insider must not, directly or indirectly, communicate the information or cause it to be communicated to another, if the insider knows or ought reasonably to know that the other person would be likely to buy or sell or procure another to buy or sell the securities. Sections 1002A‑1002D gave further content to four of the elements of s 1002G: "information" (s 1002A(1)); what is information that is "generally available" (s 1002B); when a reasonable person would be taken to expect information to have a "material effect on the price or value of securities" (s 1002C); and trading and procuring trading in securities (s 1002D). For present purposes, it is important to refer to only s 1002A(1) and its provision about "information", and s 1002C and its provision about material effect on price or value.