R v Norton Smith, Michael Richard & Smich, Vincent John
[1998] TASSC 48
•30 April 1998
48/1998
PARTIES: R
v
NORTON SMITH, Michael Richard
SMITH, Vincent John
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: C96/1997
DELIVERED: 30 April 1998
HEARING DATE/S: 22 April 1998
JUDGMENT OF: Underwood J
CATCHWORDS:
Corporations - Supervision, regulation and correction - Examinations - Functions of the Securities Commission - Delegation of all functions and powers of the Commission - Whether includes delegation of function of formation of suspicion necessary to authorise investigation.
Australian Securities Commission Act 1989 (Cth), s13(1).
Little River Goldfields NL & Anor v Moulds & Anor (1992) 10 ACLC 121; Commissioner for Corporate Affairs v Guardian Investments Pty Ltd [1984] VR 1019, referred to.
Aust Dig Corporations [315]
REPRESENTATION:
Counsel:
Crown: R J H Maidment, I M Arendt
Accused: Norton-Smith: G A Richardson
Accused: Smith: T J Ellis
Solicitors:
Crown: Director of Public Prosecutions
Accused: Norton-Smith: G R Richardson
Accused: Smith: Crisp Hudson & Mann
Court Computer Code:
Judgment ID Number: 48/1998
Number of pages: 4
Serial No 48/1998
File No C96/1997
R v MICHAEL RICHARD NORTON-SMITH and
VINCENT JOHN SMITH
REASONS FOR JUDGMENT UNDERWOOD J
30 April 1998
The accused are jointly charged with two counts of fraud, contrary to the Crimes Act 1914 (Cth), s29D and four counts of falsification of books, contrary to the Corporations Law, s1307(1).
It appears that prior to the institution of these proceedings, the Australian Securities Commission, by its delegate, conducted an investigation in purported exercise of the powers conferred by the Australian Securities Commission Act 1989 (Cth) ("the Act), s13(1), which provides:
"The Commission may make such investigation as it thinks expedient for the due administration of a national scheme law of this jurisdiction where it has reason to suspect that there may have been committed:
(a) a contravention of a national scheme law; or
(b) a contravention of a law of the Commonwealth or of a State or Territory, being a contravention that:
(i)concerns the management or affairs of a body corporate; or
(ii)involves fraud or dishonesty and relates to a body corporate, securities or futures contracts.
A considerable body of oral and documentary evidence which the Crown wish to adduce on the trial of the accused, emerged from the conduct of that investigation. On behalf of the accused, it was submitted that such evidence should be excluded in the exercise of the judicial discretion. In order to sharpen the focus of this submission, a specific ruling was sought on the voir dire that document 10 in the Crown's bundle of documents, a memorandum dated 20 February 1991, and the evidence of the witness Stott with respect to this document, be excluded. It was common ground that these two pieces of evidence came to the knowledge of the prosecuting authority by reason of the exercise of the Australian Securities Commission's coercive powers of investigation. A ruling on the admissibility of these two pieces of evidence will determine the admissibility of most of the other challenged evidence.
For the purposes of the voir dire, the following facts were agreed:
no member of the Australian Securities Commission had personal reason to suspect, and no member did suspect, a contravention in the terms of the Australian Securities Commission Act, s13(1) before evidence was gathered; however
the relevant delegate of the Commission entertained, on reasonable grounds, a suspicion that there had been a breach of the Corporations Law;
document 10 and all the oral evidence of the witness Stott became available to prosecuting authorities by the actual or threatened use of coercive powers under the Australian Securities Commission Act, which powers were exercised or were threatened to be exercised by delegates of the Australian Securities Commission.
Instruments of delegation were tendered in evidence on the voir dire of "all of the powers and functions conferred or expressed to be conferred on the Commission by or under (inter alia) Pt3 of the ASC law of each jurisdiction ...". Part 3 commences with s13. With respect to each instrument of delegation, it was an agreed fact that the delegates referred to were the occupiers of the positions shown in the instruments.
On behalf of the accused it was submitted that the Australian Securities Commission investigation was unlawful and therefore the evidence should be excluded in the exercise of the judicial discretion to exclude evidence tainted with illegality. See Bunning v Cross (1978) 141 CLR 54; R v Ireland (1970) 126 CLR 321.
Counsel agreed that I should first determine the issue of whether the investigation was unlawful and, if it was, I should then hear any further evidence and/or submission that any party wished to adduce or put before finally ruling on the admissibility of the identified oral and documentary evidence.
The submission was that:
reason to suspect one or more of the matters specified in the Australian Securities Commission Act, s13(1) is a condition precedent to the making of an investigation;
reason to suspect is a fact, not a "function" or "power" that is capable of delegation, pursuant to the power of delegation contained in the Act, s102(1) which provides:
"The Commission may, by writing under its common seal, delegate to a person all or any of its functions and powers."
as it is an agreed fact that neither the Australian Securities Commission nor a majority of its members (s107(1)) held or entertained the relevant suspicion, the condition precedent to the conduct of the investigation was not fulfilled and the investigation not authorised by law.
Counsel for the accused were unable to produce any authority to support the proposition for which they contended. The researches of counsel for the Crown, and my own, have similarly been unsuccessful in finding any case that has directly considered this point. However, there are many cases in which it has been assumed that the statutory power of the Commission to delegate all or any of its "functions and powers" includes a power to delegate the entertainment, on reasonable grounds, of the relevant suspicion. See, eg, Australian Securities Commission v Lucas (1992) 108 ALR 521 at 535; Sim v National Companies and Securities Commission [1988] VR 961; Commissioner for Corporate Affairs v Guardian Investments Pty Ltd [1984] VR 1019; Re Venice Nominees Pty Ltd (1992) 108 FLR 237.
In Guardian Investments, Ormiston J had to consider the Companies Act (Cth), s16A which provided:
"Where the Commission has reason to suspect that a person has committed an offence under a provision of this Act, the Commission may make such investigation as the Commission thinks expedient for the due administration of this Act."
His Honour said at 1023:
"Upon its proper construction I consider that, before an investigation can take place pursuant to s 16A, it is necessary for the Commission or its delegate to have reason to suspect that a particular person has committed an offence under a specific provision of the Code." [Original emphasis]
In Little River Goldfields NL & Anor v Moulds & Anor (1992) 10 ACLC 121, the appellants sought to establish that an investigation undertaken pursuant to the Act, s13(1), had no validity. Five separate points were put on behalf of the appellant. The one put to me on this voir dire was not amongst them, but, in the course of dealing with a submission that the decision to make the investigation must be in writing and include the grounds on which the relevant contravention was suspected, Davies J (Federal Court) said at 127:
"In the usual course of events, the requisite belief will not be held by the Commission itself but by one of its authorised officers. An officer of the Commission will have authority to determine whether an investigation should be instituted or continued. Having regard to s 102 of the Act, that officer will presumably be a delegate of the Commission. But that is not to say that any officer who is a delegate would be entitled to take action on behalf of the Commission in respect of an investigation. Ordinarily, in organisations, officers are given authorities and responsibilities in addition to formal delegations. Ordinarily, the institution of an investigation and the continuance of an investigation will be undertaken by an officer of the Commission who has the authority of the Commission to handle that matter. Within the lines of authority established by the Commission, a particular matter will be committed to the responsibility of an appropriate officer subject to the supervision of his superiors.
In any particular case, therefore, it will be sufficient that the duly authorised officer who has the responsibility for the investigation has reason to suspect that a specified contravention has been committed and considers it expedient to conduct the investigation."
The Act, s5(1) defines "power" as including "authority". Thus, s102 enables the Commission to delegate any of its functions, powers and authorities. Those three words are of wide import. The primary definition in the Shorter OED of "function" is, "the activity proper or natural to a person or thing". There is nothing in the Act that suggests that those words, read together, should not be given a wide meaning.
The entertainment of a specified state of mind on the part of the Commission as a condition precedent to the exercise of a statutory power appears in several sections of the Australian Securities Commission Act. See, eg, ss13(2) and (3), 16(1), 19(1), 43(1) and 46. There are many cases in which applicants have sought to set aside a s19 notice. In none of those I have looked at has there been a challenge to validity of the notice on the ground that the requisite state of mind was entertained by a delegate and not the Commission. This is not surprising. The Commission, being a body corporate, cannot entertain a suspicion or a belief. Only a natural person can entertain a suspicion or a belief. However, a suspicion entertained by a natural person may be attributed to a corporation if there is the relevant relationship between that person, the suspicion or belief and the corporation. Accordingly, I accept the submission on behalf of the accused that if a majority of the members of the Commission entertained a suspicion within the terms of s13(1), and, of course, such suspicion was reasonably based, the condition precedent specified by s13(1) would be fulfilled.
However, there is nothing in the Act to indicate that the Commission cannot act by authorised officers just as any corporation acts by its authorised officers. Indeed, this power of delegation is legislated for in the widest terms by s102. It is true, as was contended on behalf of the accused, that the existence of the necessary suspicion is a fact and a fact cannot be delegated. However, it is not the fact that is not delegated. What is delegated is an activity or function of the commission, viz, consideration of material with a view to the formation of a relevant suspicion. If and when the suspicion is formed, then the fact will exist. In my view, having regard to the objects of the Act and the performance of Commission functions and powers as enacted in s1, it is clear that a primary function of the Commission is consideration of whether investigations should be conducted in the cases specified by s13 and part of such function is the formation of the relevant state of mind. This is how I understand Davies J to have approached the matter in the passage I have cited above from the Little River Goldfield's case. For this reason, it is clearly competent for the delegation to include the formation of the suspicion which is the condition precedent to the exercise of the power conferred by the Act, s13(1).
That this approach is correct is reinforced by other provisions in the Act. For instance, it is unlikely that Parliament intended that only the Commission could form the suspicion or belief specified by s19(1) when, in the majority of cases, the formation of such suspicion or belief would not be called for other than during the course of an investigation by its delegate. Such an approach to the Act would make it unworkable. Similar observations can be made with respect to the other sections of the Act which require the commission to have a specified state of mind before it is authorised to act.
On the voir dire I ruled that the impugned evidence was not tainted with illegality and no basis for the exercise of the exclusionary discretion arose. I stated that I would give written reasons for that decision as soon as I was able to do so. These are those reasons.
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