R v Frawley - [2005] NSWCCA 66

NEW SOUTH WALES COURT OF CRIMINAL APPEAL

CITATION: REGINA v FRAWLEY [2005] NSWCCA 66

FILE NUMBER(S):
2004/2538

HEARING DATE(S): 23 February 2005

JUDGMENT DATE: 23/02/2005

PARTIES:
Regina
Richard James Frawley

JUDGMENT OF: Spigelman CJ Mason P Santow JA

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): 70070/03

LOWER COURT JUDICIAL OFFICER: Grove J

COUNSEL:
N Perram (Applicant)
L P Robberds QC / M A Wigney (Respondent)

SOLICITORS:
Morgan Lewis Alter (Applicant)
D Bugg (Commonwealth Director of Public Prosecutions) (Respondent)

CATCHWORDS:
CONSTITUTIONAL LAW
Operation and effect of Commonwealth Constitution
Whether Commonwealth Parliament has power to create criminal liability by reference to previous liability under State law
CRIMINAL LAW
Jurisdiction, practice and procedure
Persons entitled to conduct prosecution
The Commonwealth
Director of Public Prosecutions
Prosecution for breaches of Corporations Act 2001 (Cth) s1311, 1002G
STATUTORY CONSTRUCTION
Explicatory words
Parentheses
Operative effect
WORDS AND PHRASES: equivalent.

LEGISLATION CITED:
Commonwealth Constitution: s 51(xx)
Corporations (Commonwealth Powers) Act 2001: s4.
Corporations (New South Wales) Act 1990
Corporations Act 1989 (Cth)
Corporations Act 2001 (Cth): Pt 10.1, s1002G, s1311, s1370, s1400, s1401.
Corporations Law
Criminal Appeal Act 1912: s5F.
Federal Courts (State Jurisdiction) Act 1999

DECISION:
Leave to appeal refused

JUDGMENT:

- 13 -

IN THE COURT OF
CRIMINAL APPEAL

2004/2538
SPIGELMAN CJ
MASON P
SANTOW JA
Wednesday 23 February 2005

REGINA v Richard James FRAWLEY

Judgment

SPIGELMAN CJ: This is an application under s5F of the Criminal Appeal Act 1912 for leave to appeal from an interlocutory judgment of Grove J. The Commonwealth Director of Public Prosecutions presented an indictment alleging that the Applicant committed insider-trading offences on 21 occasions between 21 May 1998 and 15 July 1998. The Applicant challenged the standing of the Director to institute the prosecution. Alternatively, the Applicant submitted that the indictment should be quashed on the basis it disclosed no offence known to the law.
Grove J rejected the applicant’s case on 9 September 2004. The Applicant seeks leave to appeal.
Each count in the indictment referred to the purchase of shares in a company known as JNA Telecommunications Limited. Each count alleges that the accused:
“...did commit an offence against section 1311(1)(a) of the Corporations Act 2001 in that contrary to section 1002G(2) of the Corporations Act 2001 he did purchase securities...”
The two sections of the Corporations Act 2001 (Cth) (“the Corporations Act”) referred to in the indictment provide:
“1311(1) A person who:
(a)          does an act or thing that the person is forbidden to do by or under a provision of this Act …
…
is guilty of an offence by virtue of this subsection, …”
“1002G(1)              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.

(2) The 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 securities; or

(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.

(3) Where trading in the securities referred to in subsection (1) is permitted on the stock market of a securities exchange, the insider must not, directly or indirectly, communicate the information, or cause the information to be communicated, to another person if the insider knows, or ought reasonably to know, that the other person would or would be likely to:

(a) subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell, any such securities; or

(b) procure a third person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities.”

At the time the alleged offences were committed, that is between May and July 1998, the relevant legislation relating to insider trading was contained in the Corporations Law, being ss1311(1)(a) and 1002G(2) of that Law, enacted by the Corporations (New South Wales) Act 1990 which adopted the Corporations Act 1989 (Cth) as a law of the State of New South Wales. Accordingly the charges in the indictment presented by the Commonwealth Director of Public Prosecutions were brought under a statute that was passed subsequent to the acts said to give rise to an offence.
The validity of the indictment turns on s1400 of the Corporations Act which provides:
“(1)        Subject to subsection (4), this section applies in relation to a right or liability (the pre-commencement right or liability), whether civil or criminal, that:
(a)          was acquired, accrued or incurred under a carried over provision of the old corporations legislation of a State or Territory in this jurisdiction; and
(b)          was in existence immediately before the commencement.
However, this section does not apply to a right or liability under an order made by a court before the commencement.
(2)          On the commencement, the person acquires, accrues or incurs a right or liability (the substituted right or liability), equivalent to the pre-commencement right or liability, under the corresponding provision of the new corporations legislation (as if that provision applied to the conduct or circumstances that gave rise to the pre-commencement right or liability).
Note:     If a time limit applied in relation to the pre-commencement right or liability under the old corporation legislation, that same time limit (calculated from the same starting point) will apply under the new corporations legislation to the substituted right or liability – see subsection 1402(3).
(3)          A procedure, proceeding or remedy in respect of the substituted right or liability may be instituted after the commencement under the new corporations legislation (as if that provision applied to the conduct or circumstances that gave rise to the pre-commencement right or liability).
Note:     For pre-commencement proceedings in respect of substituted rights and liabilities, see sections 1383 and 1384.
…”
Section 1400 is found in Pt 10.1 Div 6 of the Act. Chapter 10 is entitled “Transitional Provisions” and Pt 10.1 is entitled “Transition from the old corporations legislation”. The object of Pt 10.1 is set out in s1370 which provides:
“1370(1) Subject to subsection (3), the object of this Part is to provide for a smooth transition from the regime provided for in the old corporations legislation of the States and Territories in this jurisdiction to the regime provided for in the new corporations legislation, so that individuals, bodies corporate and other bodies are, to the greatest extent possible, put in the same position immediately after the commencement as they would have been if:
(a)          that old corporations legislation had, from time to time when it was in force, been valid Commonwealth legislation applying throughout those States and Territories; and
(b)          the new corporations legislation (to the extent it contains provisions that correspond to provisions of the old corporations legislation as in force immediately before the commencement) were a continuation of that old corporations legislation as so applying.
Note: The new corporations legislation contains provisions that correspond to most of the provisions of the old corporations legislation. Generally, the only exceptions to this are provisions of the old corporations legislation that related to the fact that the Corporations Law operated separately in each of the States and Territories (rather than as a single national law).
(2)          In resolving any ambiguity as to the meaning of any of the other provisions of this Part, an interpretation that is consistent with the object of this Part is to be preferred to an interpretation that is not consistent with that object.”
The Corporations Act relies, in part, for its constitutional validity on a reference of power by all States. The relevant enacting legislation in New South Wales is the Corporations (Commonwealth Powers) Act 2001 (the “State Referral Act”). Section 4 of that Act provides:
“(1)        The following matters are referred to the Parliament of the Commonwealth:
(a)          the matters to which the referred provisions relate, but only to the extent of the making of laws with respect to those matters by including the referred provisions in Acts enacted in the terms or substantially in the terms, of the tabled text (including laws containing provisions that authorise the making of Corporations instruments that affect the operation of the Corporations legislation, otherwise than by express amendment), and
(b)          the matters of the formation of corporations, corporate regulation and the regulation of financial products and services, but only to the extent of the making of such laws with respect to those matters by making express amendments of the Corporations legislation (including laws inserting or amending provisions that authorise the making of Corporations instruments that affect the operation of the Corporations legislation, otherwise than by express amendment).
(2)          The reference of a matter under subsection (1) has effect only:
(a)          if and to the extent that the matter is not included in the legislative powers of the Parliament of the Commonwealth (otherwise than by a reference under section 51 (xxxvii) of the Constitution of the Commonwealth), and
(b)          if and to the extent that the matter is included in the legislative powers of the Parliament of the State.
(3)          The operation of each paragraph of subsection (1) is not affected by the other paragraph.
(4)          For the avoidance of doubt, it is the intention of the Parliament of the State that:
(a)          the Corporations legislation may be expressly amended, or have its operation otherwise affected, at any time on or after the commencement day by provisions of Commonwealth Acts the operation of which is based on legislative powers that the Parliament of the Commonwealth has apart from the references, and
(b)          the Corporations legislation may have its operation affected, otherwise than by express amendment, at any time on or after the commencement day by provisions of Corporations instruments, and
(c)          the references are not made subject to any condition relating to:
(i)           the express amendment or affecting of the Corporations legislation by provisions referred to in paragraph (a), or
(ii)          the affecting of the Corporations legislation by provisions referred to in paragraph (b).
(5)          Despite any other provision of this section, a reference has effect for a period:
(a)          beginning at the beginning of the commencement day, and
(b)          ending at the beginning of the day on which it terminates as set out in section 5, but not longer.”
The expression “tabled text” referred to in s4(1)(a) is defined in s3 to include the Bill for what became the Corporations Act which, relevantly, included ss1002G, 1311 and 1400. The expression “referred provisions” is defined in s3 to mean “the tabled text to the extent to which that text deals with matters that are included in the legislative powers of the Parliament of the State”.
The Applicant’s submissions focus on s1400(2). A number of propositions were not in contest:
(i)The reference to the “commencement” in s1400(2) is a reference to the commencement of the Corporations Act 2001 (Cth), i.e. midnight on 14 July 2001.
(ii)As expressly stated in s1400(1), the words “right or liability” in s1400(2) extend to a criminal liability of the character alleged in the indictment.
(iii)A “pre-commencement liability” within s1400(1) arose under s1002G and s1311 of the pre-existing Corporations Law 1991.
(iv)The relevant “corresponding provision[s]” of the Corporations Act 2001 were also s1002G, as originally enacted, and s1311.
The starting point of the appellant’s submissions was that there was some difficulty with the concept of “equivalence” in s1400(2) by reason of the fact that the Commonwealth law could never have one property of the “pre-commencement right or liability”, namely that it was a liability arising under State law. Of course the new law does not have the quality of a State law. That was the point. That does not, however, render in any way ambiguous the word “equivalent” in s 1400(2).
The word “equivalent” does not mean “identical”. It does no more than identify the extent of the replacement “right or liability”. A fundamental object of the 2001 Act was to re-enact, as Commonwealth legislation, the scheme that had evolved over decades of Commonwealth–State co-operation, in order to avoid some of the difficulties that had emerged under the Corporations Law.
The next step in the Applicant’s submissions was to concentrate on the words “as if” in the phrase “as if that provision applied to the conduct or circumstances that gave rise to the pre-commencement right or liability”. It was submitted that the words “as if” are ambiguous in the sense that they could either represent some form of what was called “deeming”, in which case they would not give the Corporations Act a retrospective operation or, alternatively, the Act could have a retrospective effect in the sense that the substituted right or liability arose directly under Commonwealth law.
In my opinion the concentration on the words “as if” is misconceived. The primary operative part of s1400(2) is found in the words “acquires, accrues or incurs”. It is that part of s1400(2) which has the effect of, relevantly, imposing a criminal liability upon persons under the “corresponding provision”. When a statute contains words in parentheses it is often the case that those words are used only by way of example or, if intended to have operative effect, to do so by way of qualification or explication of earlier words which have the primary operative effect. The latter is, in my opinion, the case here. In terms of the effect on the operation of s1400(2) the words in parentheses are subordinate to the words “acquires, accrues or incurs”.
There is, in my opinion, no ambiguity arising from the words “as if”. The intended application of s1400(2) does not involve any bifurcation of the character upon which the Applicant relied.
Section 1400(2) has the effect of creating criminal liability as and from the commencement of the Corporations Act. The offence is created by s1311(1)(a) of the Commonwealth Act by reference to the then s1002G(1) of the same Act. The extent of the offence so created is “equivalent to” the criminal liability previously created under the State Corporations Law. That a Commonwealth law may validly operate in this manner was established in Regina v Humby; Ex parte Rooney (1973) 129 CLR 231. The same approach was applied to State legislation in Re Macks; Ex parte Saint (2000) 204 CLR 158, being legislation to validate decisions of the Federal Court and the Family Court in the exercise of the cross-vesting legislation that was struck down in Re Wakim; Ex party McNally (1999) 198 CLR 511.
In Humby a Commonwealth Act validated decisions previously held to have been made without jurisdiction in the form: “The rights, liabilities, obligations and status of all persons are ... declared to be, and always to have been, the same as if ... the purported decree had been made by ... ” a judge with jurisdiction. In Macks Gleeson CJ said of this decision:
“[15] Central to the reasoning of the Court was the conclusion that the legislation did not purport to validate the invalid decrees but, rather, established, as was within legislative competence, rights, liabilities, obligations and status of persons.”
The legislative scheme before the Court in Macks was legislation entitled, in each State, the Federal Courts (State Jurisdiction) Act 1999. It contained the same formula, that is that the “rights and liabilities of all persons are, by force of this Act, declared to be, and always to have been the same as if ... each ineffective judgment of ... the Federal Court of Australia ... had been a valid judgment of the Supreme Court”.
In this regard Gleeson CJ said:
“[25] … The State Jurisdiction Acts operate to confer, impose and affect rights and liabilities of persons. They do that by reference to ineffective judgments of the Federal Court, as defined. They do not purport to affect those judgments. They do not purport to validate ineffective judgments of the Federal Court, or to deem such judgments to be judgments of the relevant State Supreme Court. The hypothesis upon which the judgments are defined as ineffective is that they were made without jurisdiction because the State Act purporting to confer jurisdiction was invalid (s4). The rights and liabilities declared by s6 are the same as if an ineffective judgment had been a valid judgment of a State Court. They are rights and liabilities of a kind which State Parliaments have legislative power to impose.”
His Honour finally concluded that the reasons given in Humby applied so that:
“[31] … [T]he the legal operation of the impugned legislation … does not purport to validate ineffective judgments. It creates rights and liabilities of persons. It does so by reference to such judgments; but it does not affect the judgments.”
To similar effect are the observations of McHugh J:
“[111] Section 6 of the State Act does not declare that a judgment of the Federal Court is or is not an ‘ineffective judgment’ as defined in s4. The ‘ineffective judgment’ is used as an historical fact only. By reference to that fact, the legislature of South Australia has declared the rights and liabilities of all persons and the consequences in respect of things done or omitted to be done in relation to them.”
(See also at [210]-[212] per Gummow J and [354]-[355] per Hayne and Callinan JJ).
Section 1400(2) operates in the same way. It creates a criminal liability under Commonwealth law, relevantly s1002G and s1311(1)(a) of the Commonwealth Act, (referred to in s1400(2) as the “substituted right or liability”). It does so by reference to the liability existing under the pre-exiting State law (referred to as the “pre-commencement right or liability” in s1400(1) and (2)). The pre-existing liability is “used as an historical fact only”, to use McHugh J’s formulation in Macks. Section 1400(2) creates a liability for an offence against the law of the Commonwealth, relevantly the offence created by s1311(1)(a).
As noted above s1400 was within the “tabled text” referred to in s4 of the State Referral Act. Accordingly the Commonwealth Parliament was expressly given by all States the power to enact, relevantly, s1400 as well as s1002G and s1311. Nevertheless the Applicant contends there is invalidity.
A similar issue arose in the Court of Appeal of the Supreme Court of Queensland in R v Corbett [2004] 1 Qd R 146. In that case the Court was concerned with s1401 of the Corporations Act which is, relevantly, in identical terms to s1400. Section 1400 is concerned with those provisions of the Corporations Law that were re-enacted as laws of the Commonwealth. Section 1401 is concerned with continuing rights and liabilities under provisions of the Corporations Law which were no longer in force immediately before the commencement of the 2001 Act.

In Corbett, Davies JA with whom Williams and Jerrard JJA agreed, said:
“[24] The referral was, relevantly, in the terms of s 1401. It may be described, generally, as a referral of an existing liability to a State. But the way in which this was done was to deem persons who had incurred a liability to the State under s1064 and s1331 of the Law, on the date of commencement, to incur a liability to the Commonwealth equivalent to and in substitution for the liability which the previously had (s1401(3)); and for that purpose, to deem the Act to include s1064 and s1311 (s1401(2)(a)).
[25] If that is the correct construction of the referral and of s1401, it can be seen that it does not enable the Commonwealth to prosecute a State offence. What the referral does is to refer to the Commonwealth power to make laws in respect of what were, at the time of referral, existing liabilities for offences against State legislation; and to do so by deeming those liabilities to be liabilities for equivalent offences against Commonwealth legislation. And that is what s1401 does.
[26] Nor do the referral or s1401 operate upon past conduct by making past conduct unlawful. Rather they operate upon existing liabilities for that conduct. Prosecutions in respect of those liabilities instituted or, subject to the validity and operation of s1383, continued after the date of commencement would be prosecutions in respect of deemed Commonwealth offences.”
I would not myself use the terminology of “deeming”. I prefer the analysis in Humby and Macks referred to above. That is, however, mere terminology. Davies JA made it quite clear that the offence in issue was an offence under Commonwealth law.
Subject to the above observation, the analysis of s1401 by Davies JA is applicable to s1400. I note that special leave to appeal from this judgment was refused on the basis that it had insufficient prospects of success. (See Parker v Commonwealth Director of Public Prosecutions, High Court of Australia, 25 June 2003).
Notwithstanding the express terms of s1400 and its inclusion in the “tabled text” that was referred, the Applicant submits that the effect of the section is limited by s4(5) of the State Referral Act which, as quoted above, makes provision for a reference to have effect for a period beginning on the commencement date and ending on the day identified in s5, that is a five year period. The Applicant also invoked s4(4) of the State Referral Act, which indicates that the Corporations Act may be amended, or have its operation affected, by legislation or instruments after the commencement date. The Applicant submitted that if the Corporations Act can only have its operation altered after 15 July 2001, it must follow that it cannot have its operation extended to a time prior to that date. This submission should be rejected.
What was referred was legislative power, not legislation. As the Respondent submitted, s4(5) identifies the period in which the Commonwealth Parliament may legislate pursuant to the reference. It says nothing about the period for which it may legislate.
I can see no implication which prevents s1400(2) operating in accordance with its terms. It serves the object set out in s1370 which, to repeat it in part, is:
“ ... that individuals are ... put in the same position immediately after the commencement as they would have been if ... the new corporations legislation ... were a continuation of that old corporations legislation”.
Even if I was of a different view on the above matters, I have no doubt that insider trading in shares of a corporation is within the corporations power in s 51(xx) of the Constitution. Accordingly, ss1002G, 1311 and 1400(2) in their application to the circumstances of the present case, could be supported as a law of the Commonwealth under s51(xx) and the Commonwealth would not need to rely on the referral of power. Section 1400(2) is a section to which I would give an ambulatory operation. However, submissions were not directed to s51(xx) and it is not appropriate to determine the case on this basis.
Leave to appeal should be refused.
MASON P: I agree. The Applicant’s attempted bifurcation of s1402 into retrospective and non-retrospective parts is an unhelpful gloss on the text as regards the constitutional issues. One is reminded of the remarks of Windeyer J in Regina v Commonwealth Conciliation andArbitration Commission; Ex parte Professional Engineers’ Association Australia (1959) 107 CLR 208 at 272:
“Counsel for the States started with the proposition that disputes are either industrial or not industrial. That is logically incontestable; and, as was said by counsel in Repton v Hodgson in a sentence which Jordan CJ brought to light in an essay, ‘Like Sinclair’s well-known division of sleeping into two sorts, namely sleeping with or sleeping without a nightcap, it would seem to exhaust the subject’.”
SANTOW JA: I agree with Spigelman CJ and Mason P.
SPIGELMAN CJ: The order of the Court is that leave to appeal is refused.

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LAST UPDATED: 28/02/2005