R v Evans & Doyle
[1999] VSC 488
•15 November 1999
SUPREME COURT OF VICTORIA
CAUSES JURISDICTION
Do not Send for Reporting
Not Restricted
| R | Plaintiff |
| v | |
| ALAN BARTLE EVANS and GREGORY JAMES DOYLE | Defendants |
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JUDGE: | McDonald J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | In the course of trial which commenced on 5 October 1999 | |
DATE OF RULING: | 15 November 1999 | |
MEDIA NEUTRAL CITATION: | [1999] VSC 488 | |
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Criminal Law – "no case" submission – "insider trading" – agreement to purchase securities – authorisation of broker to purchase shares not the entry into an agreement to purchase securities within s.1002G(2)(a) of Corporations Law - Corporations Law s.1002B(1),(2),(3): 1002G(1)(a),(b), 2(a).
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr I.D. HILL QC with Mr G.T. Chettle | Director of Public Prosecutions (Commonwealth) |
For the Defendant Evans | Mr M. Rozenes QC with Mr T. Thomas | Corrs, Chambers Westgarth |
For the Defendant Doyle | Mr P.J. O'Callaghan QC with Mr P.D. Santamaria | Freehill Hollingdale & page |
HIS HONOUR: The accused Evans and Doyle are presented before this court on their trial on an indictment signed by a duly authorized delegate on behalf of the Director of Public Prosecutions for the Commonwealth. The indictment was filed with the court on 13 August 1999. The accused are jointly charged on two counts on the indictment of the crime of "insider trading", it being alleged that as "insiders" (see s.1002G(1) of the Corporations Law) they jointly acted in breach of s.1002G2(a) of the Law which by s.1311(1) of the law constitutes the commission of an offence. Those particulars of the sections of the Law as constituting the crimes with which the accused are charged are endorsed on the indictment.
On each count the accused are jointly charged that on 20 November 1995 they entered into an agreement to purchase shares in Mt Kersey Mining NL at a time when they were in possession of information which was not generally available, but which if it had been so available would have been expected by a reasonable person materially to affect the price or value of shares in Mt Kersey Mining NL and that they knew or ought to have reasonably known that the information was not generally available and that if it had been so available that it might have a material effect on the price or value of those shares.
In respect of count 1, it is alleged that the accused entered into an agreement to purchase 30,000 shares in Mt Kersey Mining NL. On count 2 it is alleged that the accused entered into an agreement to purchase 136,000 shares in Mt Kersey Mining NL.
Previous to the indictment before the court which was filed on 13 August 1999 the accused were each charged on an indictment filed on 7 December 1998. That indictment contained 3 counts. Again, by that indictment, the accused were charged with crimes of "insider trading". It was alleged against each accused that at the relevant times they were each "insiders" as defined by s.1002G(1) of the law and that they had committed offences in that they had each acted in breach of s.1002(2)(b) of the Law.
By count 1 it was alleged that Doyle had on 20 November 1995 procured another to purchase 226,000 shares in Mt Kersey Mining NL. By counts 2 and 3 it was alleged that on 20 November 1995 Evans had respectively procured another to purchase 30,000 and 136,000 shares in Mt Kersey Mining NL.
On 13 August 1999 it was ordered by the court that the indictment filed on 7 December 1998 be permanently stayed. Thereafter the prosecution has proceeded against the accused on the indictment filed on 13 August 1999. It is by that indictment and on each count that it is alleged that the accused are jointly guilty of the crime of "insider trading" in that they acted in breach of s.1002G(2)(a) of the law. That section provides [an] "insider" must not (whether as principal or agent) "(a) subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell any such security". "Such securities" are those referred to in s.1002G(1). In this case they are shares in Mt Kersey Mining NL.
By counts 1 and 2 of the indictment before the court, it is in each case alleged that the accused have acted in breach of s.1002G(2)(a) in that as "insiders", as alleged, they entered into an agreement to purchase shares in Mt Kersey Mining NL. As referred to by count 1, it is alleged that the agreement to purchase shares was in respect of 30,000 shares; by count 2 the alleged agreement, the agreement alleged to be entered into by the accused, is to purchase shares in Mt Kersey in respect of 136,000 shares.
In response to a request made on behalf of each of the accused to the Director of Public Prosecutions, to be provided with particulars of the present indictment, the Director furnished to the solicitors for each accused further particulars of each of counts 1 and 2. The further particulars were provided to Evans's solicitors on 13 September 1999 and to Doyle's solicitors on 26 August 1999. In each case the particulars provided was prefaced with a statement that they were "subject to any rulings made by the learned trial judge and as at presently advised". In each case it was stated that the parties to the agreement the subject of count 1 were "Alston Falls Pty Ltd and Were Stockbroking Limited trading as J.B. Were & Son". Again in each case the particulars furnished with respect to count 2 as the agreement therein alleged it was stated to be between MPI Trustees Pty Ltd and Were Stockbroking Ltd trading as J.B. Were & Son.
There is evidence on this trial, and it has not been put in issue, that at all relevant times Evans was a director of Alston Falls Pty Ltd, which was his private company; that he was a director of MPI Trustees Pty Ltd which was a company in respect of which employees and shareholders of MPI Pty Ltd held shares; that MPI Pty Ltd was a private company which was engaged in the business of exploring for minerals including nickel in Australia. Again, evidence on the trial is that Evans is and was at all relevant times the financial director of that company. There is evidence that at all times relevant to the offence, alleged to have been committed by Doyle, he was an employee of Weres and worked as an institutional dealer for that broker at its Melbourne office.
On 5 October 1999 the trial of the accused commenced. On 13 August 1999 each accused had been arraigned and each had pleaded not guilty to each count. The first period of the trial was occupied in determining issues of admissibility of evidence sought to be led by the prosecution in support of its case. The prosecution sought to lead in evidence recordings of telephone conversations had between Evans and Doyle before and on 20 November 1995 and subsequent to that date and recording of telephone conversations also had between Doyle and others also on 20 November 1995 and before and after that date. Objection was taken to the admissibility of the recording of these telephone conversations, it being contended that the recordings of the same breached the provisions of the Telecommunication (Interception) Act 1979 (CT-H).
After taking evidence on a voir dire and hearing submissions on 13 October 1999, I delivered my decision in which I held the recording of the telephone conversations did not constitute "interceptions" under s.6(1) of that Act and that accordingly s.63(1) of the Act did not prevent the recording of the conversations being admitted in evidence.
On 14 October 1999 the accused were each arraigned again. Each pleaded not guilty to each count. On that day the jury was empanelled and the trial of the accused commenced. On 5 November 1999 the prosecution closed its case. Senior counsel for the first accused informed the court that the first accused would give evidence and that other evidence would be adduced on behalf of his client Evans. Senior counsel for the second accused, Doyle, informed the court that on behalf of that accused he desired to make a "no case" submission. In such circumstances I permitted counsel for the second accused to defer announcing what course his client proposed to follow.
The case of the first accused closed during the afternoon of 10 November 1999. Thereafter, senior counsel for Doyle commenced to make submissions to the court that on three grounds, as identified during the course of argument, there was no case for the accused Doyle to answer on the evidence on his trial. To this matter I shall return.
It is the prosecution case that the information possessed by each accused at the relevant time was that before 20 November 1995 MPI Pty Ltd had discovered a shoot of high-grade nickel sulphide on a mining lease (M27/200) over which it had control in an area which was known as "Black Swan" and which was situated some 45 km north east of Kalgoorlie. The location of the discovery was said by Evans in evidence to be about 950 metres west of tenements in respect of which Mt Kersey Mining NL had made applications for mining leases, some 2 km east of tenements in respect of which Mt Kersey Mining NL had exploration leases, and north of tenements in respect of which Mt Kersey Mining NL had made application for mining leases. There was evidence on which it would be open to the jury to be satisfied that Evans and Doyle possessed this information at times relevant to each count.
The evidence of Evans was that before 17 November 1995 he met Doyle at a luncheon on 10 November 1995. He was introduced to Doyle by one Dr Peter Woodford, a senior employee of Weres. At that time MPI, on the evidence before the court, were planning to make an announcement concerning their discovery of the nickel sulphide shoot on Monday 20 November 1995. Woodford gave evidence that he introduced Doyle to Evans because should Evans seek to buy shares, he would utilize Doyle to do so. There is evidence that before this time Evans had used Woodford as a broker for some share transactions that he had entered into. Woodford identified in evidence the shares that Evans may wish to purchase as "shares in any of the companies which had tenements surrounding the MPI discovery". In identifying those companies, one was Mt Kersey Mining NL. His evidence was further that as he and Doyle walked back from the lunch, Doyle said to him "it sounds an interesting discovery" and that he said that it was a very high grade, it was the highest grade ever made known and it was going to cause a lot of interest. Woodford further gave evidence on the trial that he had arranged for Doyle to be the dealer to deal with requests of MPI and in particular Evans. He said that he had made it clear to Doyle that there was to be a public announcement and that after that, trading in the shares could take place. It would be open to the jury, and there is evidence on which the jury could infer, that the announcement was a reference to the announcement to be made on 20 November 1995 as to the nickel discovery by MPI Pty Ltd, and that trading in shares referred to trading in shares in companies including Mt Kersey Mining NL.
On the trial, John Goodall has given evidence that in 1995 he was employed by Weres as a director in charge of institutional dealing. He gave evidence that on 17 November 1995 Doyle spoke to him when no one else was present. He said that Doyle told him that Woodford had taken him over the "Chinese wall". He said that Doyle told him that MPI had made a major nickel find, that announcements were going to be made the following Monday, and that after the announcement, Weres were to receive a telephone call and that there would be some orders placed and that the information would then be public and that they could tell their clients about it. He said that Doyle said he was telling him because Woodford would be away on the following Monday to take instructions from the people of MPI. He said that Doyle said further that he had told him this as he was worried something might happen to him over the weekend.
As to the public company that those involved in MPI might be interested in, Goodall said that he thought that he and Doyle had talked about Mt Kersey being the nearest property in the vicinity of the find. There is evidence that as the week after 10 November 1995 progressed, the decision was made by MPI Pty Ltd to inform the Western Australian Minister for Mining and Energy of the discovery by MPI of the nickel sulphides at Black Swan at 12 noon Melbourne time on 20 November 1995, to inform the four companies with whom MPI had an arrangement to explore the Black Swan region, to commence to fax a press release to the various persons and press organizations at 2.00 p.m. that day and to make a press release available to an Age newspaper journalist at 2.00 p.m. that day.
There was tendered a recording of a telephone conversation that Evans had with Doyle on 17 November 1995. In that conversation Doyle asked Evans if the announcement would be around 2.00, to which Evans responded, "The announcement will be ... they can buy from 2.00 on." Also during the conversation Evans said to Doyle that persons from MPI would ring in between 2.00 and 4.00. Evans further in the conversation said, "It will be public from 2.00 on." It would be open to the jury to infer that "it" was a reference to information concerning the MPI nickel discovery. In his telephone conversations Evans said that he would ring Doyle on Monday morning and that they were going to leave it to him to go to 65 cents at his option. On this evidence it would be open to the jury to infer that with respect to any order that Evans was to give Doyle to purchase shares on the Monday, Doyle had the discretion to purchase such shares up to 65 cents a share.
There was also tendered recordings of telephone conversations that were had between Evans and Doyle at 2.00 p.m. and 2.07 p.m. on Monday 20 November 1995. In the first conversation Evans gave Doyle orders to purchase 128,000 shares in Mt Kersey on account of MPI Trustees and 30,000 shares on account of Alston Falls Pty Ltd.
During the course of that conversation Doyle said, "So you'll come on to me at 2.30 and give us a green light", to which Evans replied, "Well, I'll tell you now that at 2.30 I'm gunna come on to you." Evans said further, "If I don't get to you at 2.30 for some reason then you know I rang at 2.30" to which Doyle replied, "Yep, okay" and Evans said, "Otherwise I'll ring you at 2.30." In the second conversation the order for 128,000 shares was increased to 136,000. Evidence is further that at those times Doyle had received an order from a director of MPI to purchase on his behalf 100,000 shares in Mt Kersey Mining NL.
It is the prosecution case against Evans and Doyle that they each committed the crimes charged as principals acting together in the commission of the offences. It was made clear by the prosecution during the course of the trial that the prosecution case is that by the telephone conversations had between Evans and Doyle at 2.00 p.m. and 2.07 p.m. on 20 November 1995 they committed the crimes with which they are charged, that is as "insiders" they at that time entered into the agreements alleged to purchase the identified number of shares in Mt Kersey Mining NL.
Without setting out the statements made by senior and junior counsel for the prosecution to the effect as previously referred to, I make reference to the statements made by senior counsel for the prosecution as recorded at p.1344 of the transcript and by Mr Chettle, junior counsel for the prosecution, as recorded at pp.1353-6 of the transcript.
There is evidence before the court by the witness Fleskens, a SEATS operator employed at Weres on 20 November 1995, that on that day he received orders from Doyle to purchase shares in Mt Kersey Mining NL. These were identified by him on Exhibit P37, the All SEATS report. The first BID entered by Fleskens on SEATS to purchase shares in Mt Kersey was at 14:31:53. It was a BID to purchase 150,000 shares in Mt Kersey Mining NL at 55 cents per share. It was matched almost immediately against an offer for 6,000 shares. As is demonstrated by the All SEATS report and Exhibit P4, the broad sheet computer printout reconciliation statement of Weres trading in Mt Kersey on 20 November 1995, in consequence of BIDS entered by the SEATS operator Fleskens, they were matched against offers and trades on SEATS that were made for the purchase by Weres and by selling brokers in the amount of 266,000 shares in Mt Kersey Mining NL during the period from and including 14:31.53 to 15:11:52.
In a telephone conversation had between Evans and Doyle, at 2.32 p.m. on 20 November 1995, the recording of which is tendered in evidence, Doyle said, "We've actually done about just under a hundred-odd thousand so far up to 55." Doyle, in the course of that conversation, stated, "So it's public information and I can go and have a word to our analyst now who should be in possession of something I think." Evans responded, "It's been public information for a while now."
There is evidence on the trial that the journalist who was to be briefed as to the discovery by Mr Fletcher, a director of MPI, did not attend at the MPI office on 20 November 1995 until between 2.30 and 2.40 that day. There is further evidence on the trial that Fletcher's secretary did in fact not commence to send faxes, being copies of the media release published by MPI Pty Ltd concerning its discovery of the nickel sulphide mine at the Black Swan region until 14:49 on 20 November 1995. There is no evidence that Doyle was aware of these two matters on the afternoon of 20 November 1995.
I now return to the specific submissions made by senior counsel for Doyle that on the evidence there is no case to answer. On such a submission being made, "The question to be decided is not whether on the evidence as it stands the defendant ought to be convicted, but whether on the evidence as it stands he could lawfully be convicted" - May v. O'Sullivan (1995) 92 C.L.R. 654. In
R v Doney (1990) 50 A.Crim.R. 157 the principles applicable to the question of law that must be considered by the court at this point are succinctly stated. The Court at p.162 stated:
"If there is evidence (even if tenuous or inherently weak or vague) which can be taken into account by the jury in its deliberations and that evidence is capable of supporting a verdict of guilty, the matter must be left to the jury for its decision. Or, to put the matter in more usual terms, a verdict of not guilty may be directed only if there is a defect in the evidence such that, taken at its highest, it will not sustain a verdict of guilty."
In R v. Smith (unreported 12 February 1993), Coldrey, J. said:
"The power of a trial judge does not extend to the directing of an acquittal on the basis that a verdict of guilty would be unsafe or unsatisfactory. This is the preserve of the Appellate Court. In Attorney-General's Reference (No. 1 of 1983) 2 1983 V.R. 410, the Victorian Court of Criminal Appeal, after affirming that in a case involving circumstantial evidence, the Crown must ultimately exclude every reasonable hypothesis consistent with innocence (a principal based on a requirement that guilt must be established beyond reasonable doubt) went on to state at p.415:
'The question whether the Crown has ultimately excluded every reasonable hypothesis consistent with innocence is a question of fact for the jury and, therefore, if the Crown has led evidence upon which the accused could be convicted, a trial judge should not rule that there is no case to answer or direct the jury to acquit simply because he thinks that there could be formulated a reasonable hypothesis consistent with the innocence of the accused which the Crown has failed to exclude. Similarly, a trial judge should not rule that there is no case for the accused to answer because he has formed a view that if the decision on the facts were his and not the jury's, he would entertain a reasonable doubt as to the guilt of the accused.'"
For convenience I do not deal with the grounds relied on by Mr O'Callaghan in the order in which he made the same.
Mr O'Callaghan submitted that there was no evidence to establish a necessary element of the crimes with which Doyle was charged, namely that he knew or ought reasonably to have known that the information possessed by him as to the MPI Pty Ltd discovery of nickel was not generally available at the time that it is alleged he committed the offences charged. On the prosecution case that time was at 2.00 p.m. and at 2.07 p.m. on 20 November 1995. Section 1002-B(2) and (3) of the Law set out the circumstances in which information is "generally available", as are applicable, inter alia, to s.1002-G(1). In his conversation with Doyle on 17 November 1995 at 3.22 Doyle said: "So you think the announcement will be around 2.00?" to which Evans replied, "The announcement will be ... they can buy from 2.00 on. Not very many people are gonna know about the announcement." Doyle: "No. I know, yeah." Evans: "It will be public information from 2.00 on, serious public information from 5, 6 in the night."
Again, in a conversation between Doyle and one McKenzie at 3.13 on 20 November 1995 it was said by Doyle, "G'day Will, it's Greg. I know Newton was telling you a little bit about this MPI thing." to which McKenzie replied, "Yeah." Doyle said: "But I know a little bit more. What they're going to announce tomorrow is 'it will be the world's highest graded, highest recorded graded nickel' in a find. And, you know, it's not actually huge in tonnage that they've got." McKenzie said, "H'mm?" Doyle said, "But it actually could start off a bit of a nickel burn in that area." later Doyle said, "H'mm, it's a big - it's a good discovery." McKenzie said, "H'mm, who owns all of MTK?" Doyle: "M'mm?" McKenzie: "A lot of Jews?." Doyle: "Yeah. Centaur." McKenzie: "Oh, Centaur does?" Doyle: "They don't know about it yet." McKenzie: "What?" Doyle: "These guys don't know about it." McKenzie: "The Jews?" Doyle: "They don't know about it. They do not know that this discovery has been made. This is the thing. I'm certain that they don't know and it's gonna get a fall into their lap. Because it's not on their ground. They are right next door."
The evidence of the recording of a further conversation had between Doyle and Dr Woodford at 3.20 on 20 November 1995 included Doyle saying, "That's good. Well, I think - I think actually we should get cracking on it and maybe get them under our belt." Woodford: "Yeah. What has CT-R - Centaur - has it moved?" Doyle: "Done, done nothing on the back of it - 70, 74." Woodford: "Yeah, well, people don't realize." Doyle: "They don't, they don't know. And the thing is the selling is coming from the Jewish people." Woodford: "That's good." Doyle: "All right. So, they don't know." Woodford: "Oh, well, beat them at their own game." Doyle: "Yeah. So where are you?" Woodford: "It's all public. I'm in Auckland."
Again, in a conversation had between Doyle and Frost as appears from a recording of a conversation tendered on the trial and had on 20 November 1995 at 3.23 p.m. Frost says, "We're not buying any of these Mt Kersey anywhere, right?" Doyle says: "No one knows." Frost: "Okay." Doyle: "I don't know that." Frost: "No, I'm talking about, you know." Doyle: "I do not know. I don't know." Frost: "But you be very careful with that, won't you?" and later Frost said, "No, we're not actually even involved, we haven't asked you about the stock. We haven't done anything, have we" to which Doyle responded "No".
The conclusion that I have reached on this evidence, that I have referred to, is that it could be concluded by the jury and there is evidence on which a jury could conclude that at the relevant time Doyle knew or ought to have reasonably known that the information possessed by him was not generally available within the meaning of that phrase as identified in s.1002B(2)(a) and (b) at the time relevant to the charge brought against him, that is at 2 p.m. and 2.07 p.m.
However, it was further submitted that there was no evidence that the information in possession of Doyle was not generally available within the meaning of s.1002B(3). By that section it is provided that: "Information is also generally available if it consists of deductions, conclusions or inferences made or drawn from either or both of the following: (a) information referred to in paragraph 2(a); (b) information made known as mentioned in sub-paragraph 2(b)(i)."
In my view, it would not be open to the jury to conclude that the information possessed by Doyle was information consisting of deductions, conclusions or inferences drawn from "readily observable matter" so as to give an extended meaning to "generally available" beyond that contained in s.1002-B(2). In submitting that there was no evidence that the information was not generally available within the meaning of s.1002-B(3) and in particular that information referred to s.1002B(3)(b), it was submitted that if that sub-section applied it was not necessary that the provisions of s.1002B(2)(b)(ii) be satisfied before the information was generally available. That such is the case does not advance the argument whether s.1002B(3)(b) has application. For that sub-section to have application "information is generally available" if it consists of deductions, conclusions or inferences made or drawn from information which "has been made known in a manner that would or would be likely to bring it to the attention of persons who commonly invest in securities of bodies corporate of a kind whose price or value might be affected by the information".
On the evidence on the trial to this point, it would be open to the jury to be satisfied and it could conclude that the information possessed by Doyle at the relevant time did not consist of deductions, conclusions or inferences made or drawn from information made known in that manner. There is evidence on which the jury could be satisfied that s.1002B(3)(b) does not have application and in consequence the meaning of the phrase "generally available" is not extended beyond that provided by s.1002B(2). Accordingly, on this ground the application now made does not succeed.
Finally, it was submitted on behalf of Doyle that the indictments as particularized disclose no offence made known to law, that the agreements to which it is alleged that Doyle illegally entered were not agreements for the purchase of shares, but rather in law the agreements were "agency contracts". As applicable to a "no case submission", the submission advanced on this point is that it would be necessary for me to direct the jury, as a matter of law that if they accept the evidence of what was said in the telephone conversations between Doyle and Evans at 2.00 p.m. and 2.07 p.m. on 20 November 1995 then as a matter of law any consensus or arrangement reached between them was not an agreement entered into to purchase shares in Mt Kersey Mining NL.
Senior counsel for the prosecution stated that the manner in which the indictment was particularized and the basis on which the prosecution case was conducted was that what was said between Doyle and Evans in their conversation at 2.00 p.m. and 2.07 p.m. constituted them entering into an agreement to purchase securities within the meaning of s.1002G2(a).
Pursuant to s.109J(1) and s.109J(2) and (3)(e) and (f) of the Law, in interpreting a provision of the Law the court may have regard to any explanatory memorandum relating to the Bill containing the originating provisions and the Second Reading Speech made by a Minister. S.1002G(1) and (2) and other provisions of the Law relevant to those provisions were inserted by amendment to the Law by Act 110 of 1991.
In the explanatory memorandum to the Corporations Legislation Amendment Bill 1991 circulated by authority of the Commonwealth Attorney-General, it is stated at para.332:
"In addition, the existing insider trading provisions in -CL section 1002 prohibit 'dealing' in securities, with 'deal' being defined broadly in section 9. The proposed prohibition in section 1002-G prohibits subscribing for, purchasing or selling securities, or making an agreement or procuring a second person to do so. This is much narrower than 'dealing' although some aspects of dealing would be covered by the general aiding and abetting provisions in section 5 and the attempt provisions in section 7 of the Crimes Act 1914."
Further, in para.341 of the memorandum there is set out that which it is stated:
"In order to establish the offence, it is necessary to prove ..."
and thereafter there is set out a number of matters constituting a person in possession of the information being an "insider", and it is then stated, as is relevant.
"The person traded in or agreed to trade in the relevant securities or procured another person to do so."
Again as is relevant to s.1002G, it is stated in para.344 of the memorandum:
"Subsection (2) makes it clear that the prohibition on trading applies to a person as either principal or agent, and both subsections (2) and (3) clarify that the prohibition applies not only to dealing in securities, but also agreements to do so."
In his Second Reading Speech on the Bill (Hansard: 29 May 1991 Representatives at p.4215) the
Attorney-General stated the key elements:
"The key elements of the new provisions are as follows. The definition of an 'insider' will encompass corporations and partnerships as well as individuals. There will be no need for the prosecution to establish a connection between the person in possession of inside information and the company to which the information relates. Instead, any person, including a tippee, who is in possession of inside information, will be prohibited from using it to trade in or subscribe for securities of the company.
"A statutory definition of inside information is to be included, based on a 'reasonable person' test. A person will be prohibited from trading in securities while knowingly in possession of information that is not generally available and where if it were generally available a reasonable person would expect it to have a material effect on the price or value of securities."
In Bell Group Ltd v. Herald and Weekly Times Ltd [1985] V.R. 613 at 617 Kaye J said:
"... the consequences of a client (outsider) giving instructions to a stockbroker for the purpose of either buying or selling a security on the floor of the Exchange include the creation of two separate contracts. The first contract so created is one of agency between the client and his broker for the sale or purchase of a designated security, and which might properly be referred to as 'the agency contract'. The second contract is one for the sale and purchase of the security, being made by the broker, in the performance of his agency contract, with a broker for the other contracting party, acting under a similar agency contract. By the former contract, the client impliedly agrees to remunerate the broker for his services in carrying out the instructions to buy or sell a particular security."
In para.[805] p.233 which paragraph headed "The contracts involved in an on-market transaction" the authors of Securities Industry Law 5th Ed. (Baxt, Ford and Black) state:
"According to the conventional analysis of a transaction by which a broker buys securities on a stock market for a client, there are four contracts involved in the transaction. They are:
(i) the contract between the selling broker and the buying broker;
(ii) the contract between the buying broker and the buyer;(iii) the contract between the selling broker and the seller; and
(iv) the contract between the seller and the buyer.The 'four contracts' analysis was implicitly adopted in Bell Group Ltd v. The Herald and Weekly Times Ltd [1985] V.R. 613 at 617 -618."
The authors further state at p.234:
"Since a contract made on SEATS between a buying broker and a selling broker is made by each of them as agent for an undisclosed principal, the transaction creates a contract between the seller and the buyer of the shares. That contract allows the seller to proceed against the buyer of the shares, or vice verse, without having to proceed against its broker."
As is noted at p.236 of the text referred to in Bell Group Ltd, Kaye J held that when a client instructed a broker to conduct a transaction on the Exchange, the client authorized the broker to conduct the transaction in accordance with the rules and regulations of the Exchange and the client submitted himself or herself to those rules and regulations. Further, His Honour held that a broker's client could not acquire rights as a seller or buyer of securities on the Exchange until a contract had been concluded in conformity with the articles, rules and regulations of the Exchange.
In my opinion, it would be at that time that an agreement to purchase and sell the securities would be entered into by the buying and selling broker on behalf of their clients and thereby by the buyer and the seller.
One can readily think of circumstances where following a buyer instructing his or her broker to purchase shares on his or her behalf, matters may intervene which preclude a trade, an agreement to purchase, being entered into. For example, there may be no shares at the authorized price being offered for sale. Again, before the broker enters into the transaction, the broker's authority may be withdrawn.
The conclusion that I have reached is that by a person authorising, instructing, a broker to purchase securities in a company on the Exchange and thereby entering into an agreement with the broker for him or her to purchase such securities on his or her behalf, there is not entered into "an agreement to purchase any such securities" within the meaning of that phrase in s.1002G(2) of the Corporations Law. The agreement to purchase the securities is entered into by the buying broker on behalf of his client when such agreement is concluded with the selling broker, thereby causing the buying broker's client to enter into an agreement with the seller to purchase the securities. In my view, by a person instructing a broker to purchase shares on the exchange market on his or her behalf, that person does not enter into an agreement to purchase securities within the provisions of s.1,002G(2)(a) of the Law. In such circumstances the client is entering into an agency contract or agreement. It is only if and when a trade or agreement to purchase the securities has been achieved by the broker that as an agent the broker enters into an agreement to purchase securities causing the principal also to enter an agreement to purchase securities. Accordingly, on this trial, having regard to the indictment as particularized which by its terms charges Doyle with offences pursuant to s.1002G(2)(a) and s.1311(1) of the law, as a matter of law I would be obliged to instruct the jury that if they were satisfied that Doyle and Evans conversed together at 2 o'clock and 2.07 o'clock in the afternoon on 20 November 1995, as is recorded and forms part of the evidence before the court, they could not conclude that at that time Doyle entered into any agreement with Evans to purchase shares in Mt Kersey Mining NL as he is charged by the indictment as particularized.
The same situation would also prevail in the prosecution case against Evans. I add that during the course of debate relevant to this matter, at my invitation senior counsel for Evans informed the court that on the basis that he had standing at this time to make a submission, he adopted the submissions that Mr O'Callaghan made in respect of this matter. These conclusions do not, however, conclude the matter.
During the course of his submissions, senior counsel for the prosecution submitted that in the event that the particulars as furnished by the prosecution were in error, the indictment was not defective because on the evidence before the court as to the events which occurred after 2.07 p.m. and, in particular, the trading on the Exchange by Weres SEATS operator, as I have previously referred to, which evidence was led without objection, that there was evidence on which a jury could be satisfied that each accused were guilty as principals, acting in concert, and that pursuant to an agreement between them, Evans entered into agreements to purchase shares in Mt Kersey Mining NL as identified in counts 1 and 2, and that in achieving this end, Doyle had assisted him.
If this matter is to be pursued by the prosecution at this time, it will be necessary to consider any application to be made by the prosecution to amend the particulars of the presentment and to consider the attitude of each of the accused as to that matter. I so rule.
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