McLachlan v Australian Stock Exchange Ltd & Anor No. Scgrg-98-573 Judgment No. S6834
[1998] SASC 6834
•4 September 1998
McLACHLAN v AUSTRALIAN STOCK EXCHANGE LIMITED & ANOR
[1998] SASC 6834
Civil: DOYLE CJ
Introduction
The plaintiff is the Managing Director of Thompson Brindal Ltd (“TBL”). TBL is a Member of the Australian Stock Exchange Ltd (“the ASX”). The plaintiff is also a member of ASX.
The plaintiff has been charged with Prohibited Conduct, such charge having been laid under the Articles Of Association of ASX. The particulars of the Prohibited Conduct include alleged breaches of the Rules of ASX. These Rules are made by the Board of ASX in exercise of power conferred by Article 70 of the Articles.
The transactions that gave rise to the charges against the plaintiff have resulted in charges against other persons as well.
The charges are to be heard by the National Adjudicatory Tribunal (“NAT”). The NAT is established pursuant to Article 55A of the Articles.
The plaintiff claims that the Final Inspection Report (“the FIR”), which led to the laying of the charges, is void and should be quashed. He submits that because of certain breaches of, or failures to comply with, the Articles and the Rules, the person who prepared the FIR lacked the power to do so. The plaintiff also claims that the procedures followed before the FIR was completed were not fair, and did not accord with the requirements of the rules of natural justice. The plaintiff claims an order quashing the charges laid against him. The plaintiff also claims an order prohibiting the NAT from hearing the charges.
Facts
ASX is a company limited by guarantee. The operations of ASX are governed by the Articles and by the Rules made under the Articles. By Article 2, the business of ASX is managed by the Board of ASX.
Article 57(1) provides:
“The Board may call upon any Member or Member Organisation to produce, without delay, for inspection by themselves or their duly appointed representatives, all books or copies thereof relating to the business of the Member or Member Organisation, and may also require Members and their partners, officers, employees, consultants or securities representatives to appear before the Board or its delegates at any time, and to give such information as may be required in connection with such business or to enable the Board to consider whether or not the Member continues to comply with admission requirements for the purposes of Article 38(5).”
I have referred already to the Rules. Rule 1.4.2 relevantly provides as follows:
“(1).. The Exchange shall appoint as exchange inspectors one or more persons who shall be suitably qualified for such appointment.
(2). The Exchange may at any time direct one or more of the exchange inspectors to determine whether or not a Broker selected by the Exchange is complying with the provisions of the Rules and Articles or has conducted itself in a manner considered to represent Prohibited Conduct. Any such Broker shall make available or cause to be made available to the exchange inspector any account and other records of, or relating to the Broker, which are within the power of the Broker to provide and which are relevant to the enquiry and are required by the inspector.
(3). For the purposes of complying with a direction given by the Exchange under Rule 1.4.2(2), the exchange inspector shall have such access as authorised by the Exchange to accounts and other records relating to the Broker or Brokers or the business of the Broker or Brokers or any associate of the Broker or Brokers or of a Settlement Agent of the Participating Broker, as are within the power of the Broker or Brokers to provide, including all accounts and other records held by the Exchange on behalf of the Broker, by the Broker or any associate of the Broker, by the auditors of the Broker, by the bankers of the Broker, by a Settlement Agent of the participating Broker or by the Exchange Examining Accountant.
(4). the Exchange shall furnish the Board with the report of any inspection carried out by the exchange inspector which, in the opinion of the exchange inspector, discloses:-
(a).. a failure by any Broker to comply with any provision of these Rules and Articles; or
(b). the existence of Prohibited Conduct.”
The Articles confer a wide power of delegation upon the Board. Article 6 relevantly provides:
“(1).. the Board may from time to time and upon any terms and conditions and subject to any restrictions that it considers appropriate:
(a).. confer on the Managing Director any of the powers of the Board (which powers may be conferred so as to be concurrent with, or to the exclusion of, the powers of the Board) and may authorise the Managing Director to sub-delegate any of the powers so delegated; and
(b). withdraw or alter any of the powers conferred on the managing Director under Article 6(1)(a).
(2). A power of the board unless it has been conferred exclusively under Article 6(1) or delegated exclusively under Article 6(3), is exercisable only:
(a).. by resolution at a meeting of the Board at which a quorum is present; or
(b). by a resolution of the directors under Article 17.
.....
(5). A delegate to which any powers have been delegated under Article 6(3) shall exercise the powers so delegated to it in accordance with any directions of the Board and a power so delegated when exercised by the delegate in accordance with this Article 6(5) shall be deemed to have been exercised by the Board.”
Article 57 refers to a Member and to a Member Organisation.
“Member” is defined to mean:
“...a member of the Exchange and includes a Member Corporation.”
“Member Organisation” is defined to mean, among other things,
“... the business entity constituted by:-
...
(b). a Member Corporation carrying on business on its own account and not in partnership”
Both the plaintiff and TBL are Members of the Exchange. TBL is a Member Corporation and a Member Organisation.
Rule 1.4.2 refers to a Broker. The Rules define “Broker” to mean a Member Organisation. It follows that TBL is a Broker, but the plaintiff is not. However, Rule 1.4.2(5A) contemplates the Board taking action against a Member after considering a report made under this Rule. It should also be noted that Rule 1.4.2(4) which is set out above, refers to a report that discloses the existence of Prohibited Conduct. That reference is not limited to Prohibited Conduct on the part of a Broker.
In 1997 Mr Kinsky was the National Manager, Market Intermediaries Division of ASX. On about 13 April 1997 information came to his attention which suggested that irregularities may have occurred in connection with dealings between TBL, Retireinvest Pty Ltd (“Retireinvest”) and a large number of investors on whose behalf TBL and Retireinvest had acted.
On 15 April 1997 Mr Kinsky, exercising powers sub-delegated to him, gave an oral direction to Mr Francese. Mr Francese was an exchange inspector for the purposes of Rule 1.4.2. The oral direction was to the effect that Mr Francese should investigate and determine whether, in his opinion, any breach of the ASX Articles or Business Rules, or any Prohibited Conduct, had occurred in relation to the matter just referred to.
Mr Francese was also the Manager, Membership of ASX for the State of South Australia. In that capacity a power under Article 57 had been sub-delegated to him. The power sub-delegated was expressed as follows:
“ARTICLE 57 - to call upon any Member to produce without delay for inspection by the Sub-delegate or his duly appointed representatives all books or copies thereof relating to the business of the Member, to require Members and their partners, officers, employees, consultants or securities representatives to appear before the Sub-delegate at any time, and to give such information as may be required in connection with the business of the Member to enable the Sub-delegate to consider whether or not the Member continues to comply with admission requirements for the purposes of Article 38(5) and for other matters referred to in Article 57(2).”
That power has been sub-delegated to Mr Kinsky, subject to him
“...obtaining prior written approval of the National Director, Supervision or National Manager, Membership.”
Despite the slight differences in title, Mr Kinsky was the National Manager, Membership.
On 7 May 1997 Mr Kinsky wrote to Mr Francese, giving
“... approval under the delegation arrangements for you to require representatives of Thompson Brindal Limited to appear and give you information under Article 57, in respect of your investigations concerning certain trading activities of this Broker.”
On 7 May 1997 Mr Francese wrote to “the Board of Directors” of TBL. It is apparent from documents exhibited to affidavits that there had already been discussions between Mr Francese and representatives of TBL, and that TBL was aware, in a general way, of the concerns of ASX. The letter of 7 May began as follows:
“As you know ASX is currently inspecting aspects of the business of Thompson Brindal Limited, including the trading activities of Mr Hamish McLachlan/Thompson Brindal Limited in respect of clients associated with Mr Ken Laming/Retireinvest in South Australia. As part of its enquiries, ASX requests that representatives of Thompson Brindal Limited attend the Board Room on Level 19, 91 King William Street, Adelaide to provide information pursuant to Article 57 as set out below:”
The letter set out a timetable for interviews. It is to be noted that the letter referred to only Article 57. The plaintiff was one of fourteen people requested to attend to provide information.
On 8 May 1997 solicitors for TBL replied to the letter from Mr Francese. The letter sought a deferment of the proposed interview, and it sought particulars identifying the topics upon which each representative of TBL would be questioned. The letter said:
“You are also aware that our client and its directors may be exposed to the threat of civil and possibly even criminal penalties involving issues arising out of the various investigations underway. This merely highlights the need for any interviewees to be afforded natural justice.”
The letter also said:
“We can only assume from the terms of Article 57(1) and the lack of any statement in your letter that the attendance of the representatives of our client is required to enable the Board to consider whether or not our client continues to comply with the admission requirements of the Articles for the purposes of Article 35(5).”
From time to time the letter referred to “our client and its representatives”.
On 8 May 1997 Mr Francese replied. He said that the representatives of TBL who provided information to him were “... more than welcome to bring their legal representatives with them when they appear.” As to the purpose of the enquiry, his letter said:
“As indicated in our letter dated 7 May 1997, the purpose of the requests to appear is to enable your client’s representatives to provide information to ASX in connection with the trading activities of Mr Hamish McLachlan/Thompson Brindal Limited in relation to clients associated with Mr Ken Laming/Retireinvest in South Australia. At present, ASX’s intention is to seek to inform itself as fully as possible in relation to these matters.
To date, ASX has not formed a view on whether any action on its part may be required in relation to these matters. If ASX does form such a view, it will notify your client accordingly and afford your client an opportunity to be heard.”
Although I will have to return to this later, in my opinion this letter makes it clear that the purpose of the enquiry was not limited to continued compliance with admission requirements. This is made clearer by the fact that the letter then went on to identify specific topics in relation to which information was required. The letter makes it clear that TBL’s trading activities, internal controls and like matters were under scrutiny. The letter proposed a new timetable for the interviews.
In due course the interviews took place. When the plaintiff was interviewed a solicitor from the firm acting for TBL was in attendance. The plaintiff did not take up the offer to attend with his own legal representative. I proceed on the assumption that the plaintiff was aware, in general terms, of the correspondence that had passed between Mr Francese and the solicitors for TBL. He was, after all, the Managing Director of TBL. No suggestion was made at the hearing before me that that assumption is not soundly based. Before the plaintiff’s interview began, Mr Francese said that he was conducting an inspection pursuant to Article 57 of the Articles in relation to the business of TBL. He told the plaintiff that he was at liberty to consult with the solicitor in attendance, whom he described as “your legal representative”. That was probably a mistaken assumption on the part of Mr Francese.
On 12 September 1997 Mr Francese sent a draft Inspection Report to the plaintiff and to the Directors of TBL. I assume that copies were sent to other persons concerned. The letter offered access to confidential annexures to the report, subject to appropriate undertakings. The letter said:
“Your attention is specifically drawn to Section 8 of the draft report which sets out management comment concerning the issues raised in the report which may lead to disciplinary action being taken by the Exchange.”
The letter invited written comments and corrections of any errors of fact. A response by 24 October 1997 was requested.
By letter dated 19 September 1997 TBL’s solicitors said that the draft raised “serious allegations against our client and its Member Directors.” They asked for more time to comment on the draft. By letter of 22 September 1997 the solicitors for ASX said that any reasonable request for an extension of time would be considered. They asked for a written request for an extension, and an indication of the date by which TBL would be able to respond to the draft.
There was some correspondence about the attachments to the draft report. The attachments were voluminous. By letter dated 3 October 1997 the solicitors for TBL complained that the draft report failed to differentiate between TBL and its Member Directors “... in terms of any breach of the Business Rules or Prohibited Conduct.” By letter dated 9 October 1997 the solicitors for ASX replied that the draft report set out the facts as ASX understood them. It said that there were no proposed charges at that stage. It said:
“Our client is awaiting comments from the relevant parties before deciding what action, if any, to take.”
The letter again asked TBL’s solicitors to indicate when they would be able to respond to the draft report. On 21 October 1997 the solicitors for ASX again sought a prompt request for an extension of time, if TBL wanted an extension.
On 21 October 1997 TBL’s solicitors again wrote to the solicitors for ASX. They said that they could not deal with the draft report, and with other things raised by the solicitors for ASX, until they had a response to the following questions:
“1..... For what purpose is the report produced;
2.... Upon what authority does your client produce such a report (draft or otherwise);
3.... What status does your client claim any final report may or will have;
4.... What is the status of the witness statements, that have been produced subsequent to the interviews referred to above. For what purpose were they produced and what future use or purpose, if any, is proposed for them.”
By letter dated 24 October 1997 the solicitors for ASX replied to that letter. It suffices to set out the answer to the first of the four questions. That was as follows:
“The Report is being prepared by the Exchange Inspector for the purpose of determining whether or not your client and the Members named in the Report are complying with the provisions of the ASX Rules and Articles of Association or have conducted themselves in a manner considered to represent prohibited conduct. The Report is presently in draft form only as furnished to your client. The Report, once finalised, is a matter which ASX would take into account in considering whether to commence any disciplinary action against your client or the Members named in the Report, including consideration of whether or not to bring charges pursuant to Articles 51 or 52.”
The letter concluded by again asking that a request for an extension of time be made as soon as possible.
On 4 November 1997 the solicitors for TBL wrote to the solicitors for ASX as follows:
“We wish to know what use your client proposes to make of these reports. We presume that, as none of our client’s directors or officers were cautioned regarding the danger of self-incrimination, that your client is not proposing to use those records of interview in pursuance of any charges which it may lay in the future.”
By letter dated 14 November 1997 the solicitors for ASX responded to various points raised by the solicitors for TBL, giving details of various delegations that were relevant to the Report. They reminded TBL’s solicitors that an extension of time had not been sought, nor had any objection to the draft report been made.
By letter dated 24 December 1997 (Christmas Eve), the solicitors for TBL wrote to the solicitors for ASX raising a number of procedural matters. They said that until they received the draft report they had not realised that Rule 1.4.2 was being relied upon, nor had they realised that compliance with the Business Rules and Articles was in issue. The letter complained that the individuals interviewed had not been told that their conduct was being investigated. It made the point that they were entitled to separate representation. The letter said:
“It is one thing for your client to conduct an inspection pursuant to Article 57 and it is an entirely different matter to conduct an investigation into suspected violations of the Rules and Articles by a Member Organisation and its present and former Member Directors with a view to disciplinary proceedings by proceeding under Business Rule 1.4.2. Given that your client was in fact proceeding concurrently pursuant to Business Rule 1.4.2 and Article 57, ordinary principles of fairness require that the individuals interviewed by your client ought to have been informed by your client that it was open to them to decline to answer questions on the grounds that they either might incriminate themselves or that they might render themselves liable to an adverse finding in disciplinary proceedings”
The letter concluded by saying that a response to the draft report would be provided by 30 April 1998.
On 13 January 1998 the solicitors for ASX replied. They responded to the points made by TBL’s solicitors. They referred to the fact that TBL had had the draft report for some four months, and had not responded to it. They said that Mr Francese had finalised his report and that a Notice of Charges was being forwarded to TBL. They made the point that this did not prevent comments being provided to ASX on the report.
By letter dated 12 January 1998 a copy of the FIR and a Notice of Charges were forwarded to the plaintiff.
Basis of submissions
The correspondence to which I have referred indicates the general nature of the objections to the procedure followed by Mr Francese, that were raised in these proceedings.
I proceed on the basis that the Articles, and the Rules, operate as a contract between ASX and the plaintiff: Corporations Law s180(1).
The submissions for the plaintiff proceeded on the footing that any act by ASX or by Mr Francese that was contrary to the Articles or Rules, or not authorised by them, was void and ineffective. I doubt whether this is correct. Or, to be more precise, the footing for the plaintiff’s submissions probably requires a number of qualifications.
At the end of the day the issue is whether the charges against the plaintiff should be allowed to proceed to a hearing, and whether information gathered by Mr Francese can be used as evidence to support those charges. The legal significance of a breach of the Articles or Rules, affecting the process that preceded the laying of the charges, was not explored in any detail in the submissions before me. The submissions were directed mainly to the issue of whether breaches of the Articles or Rules had occurred.
I merely record that, in my opinion, the assumption that a breach of the Articles or Rules makes void what follows, may not be well founded. The issue may be, rather, whether a breach of the Articles or of the Rules on the part of ASX is of such significance that, applying the principles of the law of contract, and the principles applicable to the grant of injunctions, an injunction should be granted to prevent an exercise by ASX of powers under the Articles which exercise is consequential upon an earlier breach of the Articles or Rules. I very much doubt whether it is a matter of simply identifying a breach of the Articles or Rules, or unauthorised action, and then reasoning that all that follows is void.
In that context, I note that the plaintiff has not sworn in his affidavit that, had he been aware earlier than he was of the alleged procedural deficiencies, he would have acted any differently. I note that the plaintiff has not alleged that he has in fact been disadvantaged, although such complaints are raised in the correspondence between solicitors. I recognise, however, that issues of fairness may give rise to different considerations.
In the end, these matters have not played a significant part in my conclusions. Accordingly, I am content to leave them there. I refer to the views expressed by Bryson J in Shaw Stockbroking Ltd v Australian Stock Exchange (1998) 16 ACLC 827 at 839. I respectfully agree with the general thrust of those remarks.
Scope of power delegated under Article 57
I have set out above the power that was delegated to Mr Francese. There is no dispute that that power was validly sub-delegated to him, subject to the requirement to obtain prior written approval from Mr Kinsky. That written approval was obtained.
When the terms of the delegated power are compared with the terms of Article 57, it is apparent that there is a difference in wording. In Article 57 the power to require persons to appear and to give information is expressed to be more or less at large. It is “... such information as may be required in connection with such business.” Then, introduced by “or”, is a more limited purpose. In the power sub-delegated to Mr Francese, the word “or” is not to be found where one would expect to find it. It was submitted that Mr Francese’s power, under Article 57, was only to seek information to enable him to consider whether or not TBL continued to comply with admission requirements. It is submitted that Mr Francese exercised his power for a different purpose. He considered whether TBL and others had been in breach of the Articles or of the Rules. Accordingly, it was submitted, his enquiry, the FIR and everything else that flowed from it were void. The point was made that Rule 1.4.2 did not confer a power to require a Member to attend and to give information. The direction to Mr Francese under that Rule (given orally on 15 April) did not, it was submitted, support what Mr Francese had done.
In support of the submission that the omission of “or” was intentional, the point was made that the wider power of enquiry was more intrusive, and that the Board must have reserved that wider power to itself. Counsel for the plaintiff pointed to the fact that the delegation to the Managing Director of ASX, and his sub-delegations, all omitted the “or”.
The evidence before me establishes that in November 1997 the Board resolved upon a fresh set of delegations. There were then fresh sub-delegations. In each of these the word “or” appears, making it clear that the full extent of the power under Article 57 has been delegated and sub-delegated.
I am satisfied that that was always the intention of the Board. I can think of no reason why such a limited delegation of power would have been made. I am not at all persuaded by the submission that the Board would not have wished to delegate the wider power. I consider that the Board of a body like ASX would have wished to delegate the fullest powers that it could delegate to investigate the conduct of Members. In a body such as ASX time will often be of the essence. It is most unlikely that the Board would want investigations to depend upon a resolution by the Board.
It is open to a Court, in construing a document, to supply a word or phrase if satisfied that, considering the document objectively, but in its context, it must have been intended that the relevant word or phrase appear there. In my opinion this is such a case. I conclude that the sub-delegated power is to be construed as a sub-delegation of all of the Board’s powers under Article 57. I am satisfied that the omission of “or” is an unintended slip. The only reliance that I place upon the events in November 1997 is that they undermine the submission that the Board would never have intended, for reasons of good government, to delegate its full powers under Article 57.
The very same issue came before Bryson J in Shaw Stockbroking (supra). He reached the same conclusion. I respectfully agree with him, and with his reasoning.
Bryson J considered that in any event, any lack of power, and hence invalidity, was cured by Article 18 of the Articles. Article 18 relevantly provides that:
“All acts done by ... any person acting ... as a delegate of the Board are, notwithstanding ... any failure to comply with any direction or delegation of the Board, as valid as if there were no such defect, disqualification, or failure.”
I prefer to express no opinion on that point. However, I agree with Bryson J that, if the primary submission had been made good, the purported ratification by the later varied sub-delegations would not assist ASX on the facts of this case. I am content to adopt his reasoning on that point.
I reject the submission that Mr Francese did not have power to require the plaintiff to appear before him to give information relating to the matter into which he enquired.
Restriction on exercise of powers delegated under Article 57
I have set out the terms of Article 6 above.
A submission was advanced that the power under Article 57 that was delegated to the Managing Director, and sub-delegated to Mr Francese, was not delegated exclusively to the Managing Director. It was submitted that it follows, having regard to the terms of Article 6(2), the power that was sub-delegated to Mr Francese could be exercised only by a resolution of the Board. It is accepted that no such resolution has been passed.
The presence of Article 6(2) is somewhat curious. Article 12 regulates the making of decisions by Directors. Article 14 requires a quorum to be present. Bearing in mind the presence of those Articles, there seems to be no need to provide for the manner in which the Board is to exercise a power which has not been delegated exclusively. However, I am satisfied that that is the purpose of Article 6(2). I am satisfied that this provision applies to the exercise by the Board of powers that have been delegated, but not delegated exclusively. I am satisfied that the purpose behind this Article is to make it clear that such a power can still be exercised by the Board.
A delegated power that could be exercised only when supported by a resolution of the Board would not really be a delegated power at all. Such a delegation would not assist the efficient management of ASX. I consider it most unlikely that the Articles are intended to require the concurrence of the Board to the exercise of delegated powers, unless they are delegated exclusively.
I reject the submission advanced. Accordingly, in my opinion it matters not that there is no resolution by the Board to exercise the powers under Article 57 sub-delegated to Mr Francese.
It was open to Mr Francese to use powers delegated to him under Article 57 and, in my opinion, to use those powers in complying with the direction given to him under Rule 1.4.2.
Power to investigate the plaintiff’s conduct
Rule 1.4.2 provides for the making of a determination relating to a Broker. As I have already explained, TBL is a Broker. The plaintiff is not.
It is submitted that any exercise of powers under Rule 1.4.2, in the present case, could not support the making of a report that found evidence of breaches of the Rules and Articles, or of Prohibited Conduct by the plaintiff.
There are several answers to this submission. The first answer is that Mr Francese was, as I have found, exercising powers under Article 57. Those powers gave him power to require information from the plaintiff, and by implication to report to the ASX in relation to the plaintiff’s conduct. There is no reason why that power cannot be used to enquire into breaches of the Articles or of the Rules, or into possible Prohibited Conduct.
The second answer is that, assuming that Mr Francese’s enquiry was undertaken under Rule 1.4.2 alone (and I do not accept the assumption) there is no reason why, subject to questions of fairness, the report should not deal as well with the conduct of a Member. There is no reason why, if material relating to the conduct of a Member comes to light when the conduct of a Broker is being considered, that conduct should not be the subject of a report. Rule 1.4.2 confers a power to require documents and records to be made available. In my opinion, subject to questions of fairness, it does not restrict the use that may be made of information derived from such documents and records, to possible action against a Broker.
This conclusion is supported by the fact that Rule 1.4.2(5A) refers to the Board acting against a Member after considering a report provided to it under Rule 1.4.2. The Rule appears to contemplate that an examination of the conduct of Broker may lead to action being taken against a Member.
For those reasons I reject the submission that, in the present case, Mr Francese was authorised to examine only the conduct of TBL, and not the conduct of the plaintiff.
Even if the submission had succeeded, my tentative view is that the Board would be entitled to act upon information acquired by Mr Francese relating to the conduct of the plaintiff, provided that it was not unfair to do so. It is, in my opinion, artificial to suggest that disciplinary enquiries such as were undertaken here are as strictly limited as the plaintiff’s submission would suggest.
Observance of the requirements of procedural fairness
Under this head complaint is made that the plaintiff was required to attend before Mr Francese, and to provide information to him, without being notified that the true purpose of the interview was an investigation into the conduct of the plaintiff.
This submission proceeds on the premise that the purpose of the exercise of powers under Article 57 by Mr Francese was an investigation into the conduct of the plaintiff. In my opinion that premise is false. The affidavit of Mr Kinsky, filed on behalf of ASX, indicates that Mr Francese was investigating dealings between TBL and Retireinvest. It was known that irregularities may have occurred in the course of those dealings. It is those dealings, and the possible irregularities, that were under investigation. There is no reason to think otherwise.
There is no reason to think that the investigation was aimed primarily at the plaintiff, or at other officers or employees of TBL who were interviewed. It was an enquiry or investigation into certain dealings, and the officers and employees of TBL who were involved were required to give information.
Nevertheless, I accept that Mr Francese would have been alert to possible breaches of the Rules or Articles, or possible Prohibited Conduct, by the individuals whom he examined. I accept that an aspect of the enquiry into the conduct of TBL would have been the possible occurrence of conduct by individuals, including the plaintiff, that might warrant disciplinary action being taken.
However, as a Member of the ASX, and as Managing Director of TBL, in my opinion the plaintiff could not have been in any doubt that his own conduct would come under such scrutiny. The fact that the enquiry was into a course of dealings between TBL and Retireinvest in no sense concealed or disguised that fact. Far from it. In my opinion it must have been obvious to the plaintiff that, to the extent that he had played a part in the dealings between TBL or Retireinvest, or should have used his position in TBL or as a Member to exercise certain controls, his own conduct would come under scrutiny. It is unrealistic, I consider, to suggest that the plaintiff, and other persons interviewed, could have thought that their own conduct was not in question.
I consider that the letter of 8 May 1997 from Mr Francese to the solicitors for TBL makes it clear that the conduct of the persons interviewed would be subject to scrutiny. The topics identified in that letter should have made it clear. The letter makes it clear that what is in question is the course of dealings between TBL and Retireinvest. The reference to persons interviewed being at liberty to bring legal representatives with them is consistent with what I have said.
I accept that the plaintiff was entitled to fair notice that his conduct would come under scrutiny. In my opinion fair notice of that was given.
In my opinion fair notice was given, even though Mr Francese did not, in correspondence or before questioning the plaintiff, refer to the direction given to him under Rule 1.4.2. I note that in his affidavit the plaintiff does not claim that he was unaware of this correspondence. Nor does he claim to have been prejudiced in any particular manner.
Before me it was submitted that the plaintiff lost the opportunity to prepare properly for the interview, or to be legally represented at the hearing. I consider that the first point fails. The plaintiff knew that he was being interviewed about his role in the matter. He must have known that his own conduct was under scrutiny. As to the second point, knowing that, and knowing that he was at liberty to bring his own legal representative, the plaintiff was not disadvantaged. I proceed on the assumption that, as Managing Director of TBL, the plaintiff was generally aware of the correspondence that passed between Mr Francese and TBL’s solicitors, and knew that he could have had his own legal representative if he so wished.
There is a separate complaint that the draft report supplied to the plaintiff for comment did not adequately identify the matters in respect of which the plaintiff was at risk of charges being laid. I disagree. The draft report referred specifically to the plaintiff at various places. The draft report was made available to the plaintiff and to TBL’s solicitors. There is no reason to think that the plaintiff was unaware of his right to get legal advice on the draft report, or to seek more particularity. He chose to make no response. I find no unfairness in this respect.
I have not found it necessary to consider in any detail cases bearing on the duty to provide procedural fairness in a case like this. I am content to assume, for present purposes, that in conducting a formal investigation of this sort, involving possible disciplinary charges against a member of a body that can exclude a person from a field of employment, and exercising powers to compel disclosure of information, there is an obligation to proceed fairly: see Annetts v McCann (1990) 170 CLR 596. The requirements of fairness will depend upon the case. In the present case I am satisfied that the plaintiff knew the subject matter under enquiry; knew that his own conduct would be scrutinised; knew that disciplinary charges against him were a possibility; had the opportunity to get his own legal advice and legal representation; had an adequate opportunity to comment on the draft report before the FIR was prepared, and will still have an opportunity to answer the charges against him. In my opinion procedural fairness was accorded to the plaintiff.
Conclusions
In my opinion the challenges to the procedures adopted fail. I consider that Mr Francese had power to prepare the FIR. I consider that Mr Francese and the ASX accorded procedural fairness to the plaintiff.
I dismiss the claims for declarations that the FIR is void, that it should be quashed, and for orders that copies of the FIR and transcripts of interviews of the plaintiff and relating to the plaintiff be destroyed. I dismiss the claim for an order that the Notice of Charges be quashed, and that the NAT be prohibited from hearing the charges.
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