R v O'Halloran
[2000] NSWCCA 528
•11 December 2000
Reported Decision: (2000) 36 ACSR 315
New South Wales
Court of Criminal Appeal
CITATION: R v O'Halloran [2000] NSWCCA 528 FILE NUMBER(S): CCA 60526/00 HEARING DATE(S): 11 December 2000 JUDGMENT DATE:
11 December 2000PARTIES :
Regina v James Francis O'HalloranJUDGMENT OF: Spigelman CJ at 121; Mason P at 122; Heydon JA at 2
LOWER COURT JURISDICTION: Supreme Court LOWER COURT FILE NUMBER(S) : 70065/99 LOWER COURT JUDICIAL
OFFICER :Barr J
COUNSEL : Crown - T Game SC/P McGuire
Appellant - C WaterstreetSOLICITORS: Crown - Commonwealth DPP
Appellant - Holman WebbLEGISLATION CITED: Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth)
Acts Interpretation Act 1901 (Cth)
Australian Securities and Investments Commission Act 1989 (Cth)
Corporations Act 1989 (Cth)
Corporations (New South Wales) Act 1990
Criminal Appeal Act 1912 (NSW)
Director of Public Prosecutions Act 1983 (Cth)
Interpretation Act 1987 (NSW)
Securities Industry Act 1970 (NSW)
Trade Practices Act 1974CASES CITED: Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169
Airlines of New South Wales Pty Ltd v New South Wales (No 2) (1965) 113 CLR 54
Australian Securities Commission v Nomura International Plc (1998) 160 ALR 246
Bank of New South Wales v The Commonwealth (1948) 76 CLR 1
Bath (Commissioner of Business Franchises for the State of Victoria) v Alston Holdings Pty Ltd (1988) 165 CLR 411
Cole v Whitfield (1988) 165 CLR 360
Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (1998) 28 ACSR 58
Gould v Brown (1998) 193 CLR 346
Haines v Australian Broadcasting Corpoation (Hunt CJ at CL, 21 July 1995, unreported)
Herald and Weekly Times Ltd v Commonwealth (1966) 115 CLR 418
Hunter v Chief Constable of the West Midlands Police (1982) AC 529
Jones v Commonwealth (No 2) (1966) 112 CLR 206
Murphy v Farmer (1988) 165 CLR 19
North v Marra Developments Ld (1981) 148 CLR 42
North Sydney Brick and Tile Co Ltd v Darvall (1986) 5 NSWLR 681
R v Hughes (2000) 74 ALJR 802
R v Masters (1992) 26 NSWLR 450
Redfern v Dunlop Rubber Australia Ltd (1964) 110 CLR 194
Re Dingjan; Ex parte Wagner (1995) 183 CLR 323
Re Ku-ring-gai Co-Operative Building Society (No 12) Ltd (1978) 22 ALR 621
Re Nolan; Ex parte Young (1991) 172 CLR 460
Re Thomas Christie Ltd (In Liq) (1994) 2 BCLC 527
Reichel v Magrath (1889) 14 App Cas 655
Rogers v R (1994) 181 CLR 251
State of New South Wales v Stenhouse Ltd (1997) Aust Torts Reports 81-423
State Superannuation Board v Trade Practices Commission (1982) 150 CLR 282
Strickland v Rocla Concrete Pipes Ltd (1971) 124 CLR 468
Victoria v The Commonwealth (1996) 187 CLR 416
Walton v Gardiner (1993) 177 CLR 378
Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194
Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189 CLR 1DECISION: Appeal dismissed
IN THE COURT OF
CRIMINAL APPEAL60526/00
SPIGELMAN CJ
MASON P
HEYDON JA11 December 2000
R v James Francis O’HALLORANJUDGMENT1 SPIGELMAN CJ: I ask Heydon JA to deliver the first judgment.
2 HEYDON JA:
Background
The appellant has been charged under s 998 of the Corporations Law. The charge is that he:
“did something that was intended to create a false or misleading appearance with respect to the price of securities of Jeffries Industries Limited in that he instructed Clive Powell to sell 170,000 shares held by Fame Decorator Agencies Pty Limited in Jeffries Industries Limited, down to a price of thirteen cents.”
3 On 7 July 2000 Barr J dismissed a Notice of Motion filed by the appellant seeking to quash the indictment.
4 This is an appeal against that interlocutory order pursuant to s 5F(3)(b) of the Criminal Appeal Act 1912 (NSW). Leave is not required since Barr J has certified that the judgment is a proper one for determination on appeal.
5 Barr J said (1/006-008 [2]-[5]):6 The appellant challenges the following conclusions of Barr J.
“The Crown intends to put its case this way. Jeffries Industries Limited (Jeffries) was a public company listed on the stock exchange. Part of its issued share capital comprised converting preference shares (the shares). The rights of holders of the shares included the right in certain circumstances to have them converted into fully paid ordinary shares. There were times at which those rights could be exercised, but the Articles of Association provided for the acceleration of the conversion date if Jeffries did not pay certain dividends within certain times. On 28 April 1995 the directors of Jeffries announced that dividends payable for the period ended 30 April 1995 would not be paid, and that announcement precipitated the rights of holders of the shares to convert them and take up ordinary shares. The articles prescribed a formula by which a shareholder’s entitlement to ordinary shares should be calculated. One of the factors was or was calculated from the weighted average sale price of all fully paid ordinary shares in Jeffries sold on the Exchange during the twenty trading days immediately before the conversion date. One effect of the application of the formula would be that the lower the weighted average sale price was, the more fully paid ordinary shares a given number of preference shares would produce. The last of the twenty trading days over which the weighted average sales price was to be calculated was Friday, 28 April 1995.
The applicant, a former chairman of Jeffries, controlled Fame Decorator Agencies Pty Limited (Fame). Fame was the trustee of a family superannuation trust of which the applicant was a beneficiary. Fame owned some of the shares. On 28 April the applicant instructed a broker, Mr Clive Powell, to sell 170,000 of Fame’s shares down to a price of thirteen cents.
Sales of ordinary shares in Jeffries were not heavily traded. In March 1995 about 755,000 ordinary shares had sold at prices ranging from twenty-five cents to thirty-five cents each. In April, up to and including 27 April, about 40,000 shares were sold at prices ranging from thirty-five cents to fifty cents. During the morning of 28 April there was a sale of 5,000 shares at forty-five cents each. Following the applicant’s instructions to Mr Powell these sales took place during the last five minutes of trading on 28 April:
5,000 at thirty cents.
28,000 shares were sold at thirty-five cents,
16,000 at twenty-eight cents,
20,000 at twenty-six cents,
6,000 at twenty-five cents,
20,000 at fourteen cents,
74,000 at thirteen cents, and
1,000 at twenty-six cents.
The false or misleading appearance the Crown asserts that the applicant intended was in an artificially low sale price of the ordinary shares in Jeffries on 28 April and an artificially low average weighted sale price for the twenty days of the calculation period, resulting in an artificially high rate of [conversion] from preference shares to ordinary shares.”
The issues on the appeal in outline
(a) The Commonwealth Director of Public Prosecutions had power to bring the prosecution for an alleged breach of s 998 of the Corporations Law by reason of the validity of the Federal-State legislative scheme pursuant to s 51(i) of the Constitution (grounds 1-3).(b) The Commonwealth Director of Public Prosecutions had power to bring the prosecution for an alleged breach of s 998 of the Corporations Law by reason of the validity of the Federal-State legislative scheme pursuant to s 51(xx) of the Constitution (grounds 1 and 4-5).
(c) The indictment was not bad for duplicity (grounds 6-7).
(d) The instruction said to have been given to Mr Powell was capable of falling within s 998 (ground 8).
(e) The Director of Public Prosecutions could rely on sales of shares other than sales at thirteen cents and fourteen cents since the prosecution was not an abuse of process (ground 9).
The Constitutional challenges in context7 The offence charged is an offence under s 998 read with s 1311(1) of the Corporations Law. The Corporations Law is set out in s 82 of the Corporations Act 1989 (Commonwealth). Section 7 of the Corporations (New South Wales) Act 1990 provides that the Corporations Law applies as a law of New South Wales. Though s 998 is thus a State law, the prosecution is brought by the Commonwealth Director of Public Prosecutions. The power of the Director of Public Prosecutions to bring the prosecution rests on Pt 8 of the Corporations (New South Wales) Act and s 47(1) of the Corporations Act 1989.
8 Section 26(a), which appears in Pt 8 Div 1, provides:9 Section 28(1)(a), which appears in Pt 8 Div 2, provides:
“The object of this Part is to help ensure that:
(a) the Corporations Law of New South Wales, and the Corporations Law of each jurisdiction other than New South Wales, are administered and enforced on a national basis, in the same way as if those Laws constituted a single law of the Commonwealth.”
“The object of this Division is to further the object of this Part by providing:
(a) for an offence against an applicable provision of New South Wales to be treated as if it were an offence against a law of the Commonwealth.” …
10 Section 28(2) provides that the purposes for which an offence is to be treated as mentioned in s 28(1)(a) include the prosecution of offences (s 28(2)(a)), the trial of persons charged with offences (s 28(2)(b)) and proceedings relating to either of those matters (s 28(2)(c)).
11 The operation of s 29 turns on two defined expressions. The first is “Commonwealth law”, which is defined in s 3(1) as meaning “any of the written or unwritten laws of the Commonwealth”; there are exclusions, but the definition applies to the Director of Public Prosecutions Act 1983 (Cth). The other defined expression is “the applicable provisions of New South Wales”. In s 3(1) that is defined as including the Corporations Law of New South Wales.
12 Section 29 provides:
“(1) The Commonwealth laws apply as laws of New South Wales in relation to an offence against the applicable provisions of New South Wales as if those provisions were laws of the Commonwealth and were not laws of New south Wales.
(2) For the purposes of a law of New South Wales, an offence against the applicable provisions of New South Wales:
(a) is taken to be an offence against the laws of the Commonwealth, in the same way as if those provisions were laws of the Commonwealth; and
(b) is taken not to be an offence against the laws of New South Wales.
(3) Subsection (2) has effect for the purposes of a law of New South Wales except as prescribed by regulations under section 80.”
13 Thus the effect of s 29(1) is that the Director of Public Prosecutions Act applies as a law of New South Wales in relation to an offence under s 998 of the Corporations Law of New South Wales as if those provisions were not laws of New South Wales but laws of the Commonwealth. And the effect of s 29(2) is that for the purposes of a law of New South Wales, an offence against s 998 of the Corporations Law of New South Wales is taken to be an offence against the laws of the Commonwealth and is taken not to be an offence against the laws of New South Wales.
14 By reason of the fact that s 29 is satisfied, s 31(1) applies. It provides:15 The effect of s 29 of the Corporations (New South Wales) Act 1990 is that a New South Wales statute has conferred on the Director of Public Prosecutions a function and power of prosecuting the appellant. That function and power is also conferred on the Director of Public Prosecutions by Commonwealth enactments, namely s 47(1) of the Corporations Act 1989 and regulation 3(1)(d) of the Corporations (Commonwealth Authorities and Officers) Regulations. Section 47(1) provides:
“A Commonwealth law applying because of section 29 that confers on an officer or authority of the Commonwealth a function or power in relation to an offence against the applicable provisions of the Capital Territory also confers on the officer or authority the same function or power in relation to an offence against the corresponding applicable provision of New South Wales.”
The Director of Public Prosecutions Act is a Commonwealth law applying because of s 29. Section 6(1)(a) and (b) of the Director of Public Prosecutions Act confers on the Director of Public Prosecutions, an officer of the Commonwealth, the function of instituting and carrying on proceedings on indictment for indictable offences against the laws of the Commonwealth (an expression which is defined in s 3(1) to include a law of the Australian Capital Territory and hence to include s 998 of the Corporations Law of the Australian Capital Territory). Section 9 of the Director of Public Prosecutions Act also confers a power on the Director of Public Prosecutions to prosecute by indictment in his official name indictable offences against the laws of the Commonwealth (including s 998 of the Corporations Law of the Australian Capital Territory). Hence, by force of s 31, ss 6 and 9 of the Director of Public Prosecutions Act confer on the Director of Public Prosecutions the same function and the same power in relation to s 998 of the Corporations Law of New South Wales.
16 Regulation 3(1)(d) provides:
“(1) Regulations under section 73 may provide that prescribed authorities and officers of the Commonwealth have prescribed functions and powers that are expressed to be conferred on them by or under corresponding laws.”
“Corresponding law” is defined in s 38 of the Corporations Act as meaning, inter alia, an Act of a jurisdiction other than the Australian Capital Territory “that corresponds to this Act”, i.e. the Corporations (New South Wales) Act 1990.
“Each of the following authorities and officers of the Commonwealth have the functions and powers that are expressed to be conferred on them by or under a corresponding law: …
(d) the Director of Public Prosecutions …”.
Regulation 2 defines “corresponding law” as having the meaning given by s 58 of the Corporations Law. Section 58(1) provides that a reference to a corresponding law is a reference to the Corporations Law of another jurisdiction, i.e. the Corporations Law of New South Wales.
17 A State law has thus granted power or authority to a Commonwealth officer, and a Federal law has conferred that power or authority on the Commonwealth officer. The State law would be invalid if wider than the Federal law, and the Federal law would be invalid unless supported by a head of Federal legislative power: R v Hughes (2000) 74 ALJR 802 at 807-810 [18]-[36] per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ, and at 825-6 [110]-[112] per Kirby J.
18 The imposition by Federal laws (the Director of Public ProsecutionsAct, s 47 of the Corporations Act and regulation 3(1)(d)) upon the Commonwealth Director of Public Prosecutions of duties to perform functions or exercise powers created and conferred by New South Wales law must, then, to be valid, be supported by a head of Federal legislative power. In R v Hughes (2000) 74 ALJR 802 at 810-811 [40] the joint reasons for judgment stated:19 In this appeal, the first two questions are whether the machinery provisions just summarised, read with s 998, are supported by s 51(i) or s 51(xx) of the Constitution. It is convenient to take s 51(xx) first.
“The DPP Act in a sense is supported by as many heads of power as from time to time have been exercised by the Parliament to create offences against Commonwealth laws. State laws may create offences in fields where it would have been competent for the Parliament of the Commonwealth to enter directly by its own offence-creating legislation. The power conferred by s 51(xx) with respect to foreign corporations and trading or financial corporations is an obvious example. In such a situation, a federal law which specifies that certain Commonwealth officers have powers and functions expressed to be conferred by the State law with respect to the prosecution of State offences is a law with respect to that head of federal legislative power. This will be true of perhaps the very great majority of offences created by the State legislation which adopts the Law.”
20 Section 51(xx) provides:
Section 51(xx) of the Constitution21 The primary judge commenced by making the following findings of fact (1/020.9-021.2 [40]):
“The Parliament shall, subject to this Constitution, have power to make laws for the peace, order and good government of the Commonwealth with respect to: …
(xx) foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth …”
22 The primary judge then said (1/021.2-.5 [41]):
“According to the evidence of Mr Phillip John Cave and to the annual report of Jeffries and its subsidiaries of 30 June 1995 the group of companies comprising Jeffries and its subsidiaries was in the business of abrasive blasting, cleaning and application of protective coatings to steel and metal, including rubber to metal lining and industrial painting. Such work was undertaken under contract for private enterprises and government bodies throughout Australia and in Thailand. Contracts included work on a pipeline project, a shopping centre, a bridge and dockyard installations. The majority of the work of the subsidiary companies was described in the annual report as essentially factory-based.”
“It was not contended on behalf of the applicant that in carrying out work of that kind the subsidiary companies were not trading corporations. It is therefore unnecessary for the Court to enter upon such an inquiry. The DPP, on the other hand, did not submit that Jeffries was a trading corporation by virtue of the fact alone that it was a holding company of each of the subsidiaries. The inquiry was thereby confined to the question whether Jeffries had acquired the character of a trading or a financial corporation by the manner in which it had involved itself in the business affairs of its subsidiary companies.”
23 The primary judge then summarised the law by saying that a corporation will be a trading corporation when its trading activities form a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation, and that if a substantial and not insignificant part of a corporation’s activities are financial, it is properly characterised as a financial corporation. The appellant does not complain of these propositions.
24 The primary judge then made some further findings of primary fact (1/022.2-024.2 [43]-[49]):25 The primary judge then arrived at the following conclusions (1/024.2-025.1 [50]-[52]):
“Mr Cave involved himself in ‘corporate turnaround projects’. He identified under-performing companies, judged whether their performance could be satisfactorily improved and, if so, invested money in them and assumed executive power. In October 1994, having inquired into the financial position and prospects of Jeffries, he provided financial assistance to it by means of a bank guarantee in the sum of $600,000. On 10 October 1994 he was appointed managing director and chief executive officer. At the same time an associate of Mr Cave, Mr Daniel Wong, became a director and company secretary. Both also became directors of all the subsidiary companies of Jeffries. At 30 June 1995 there were seventeen. Jeffries beneficially held all the shares in each of those subsidiary companies.
Mr Cave and Mr Wong regarded Jeffries and all the subsidiary companies as a single corporate entity and managed it accordingly. They intended it to prosper as an entity and in order to achieve that end they exercised through Jeffries a strong financial control over the affairs of all the subsidiary companies.
Each of the subsidiaries traded on its own behalf. Gaining contracts, sending out invoices, incurring debts and receiving payment. However, no subsidiary controlled its own finances. When a subsidiary company needed to raise working capital it was obliged to go to Jeffries. Mr Cave and Mr Wong devised a manner of financing all the companies in the group through borrowings made only by Jeffries. Jeffries had a $2.15 million loan facility with a financial institution and it exacted from each of the subsidiary companies a guarantee to the lender and a pledge not to charge its assets or borrow money other than from Jeffries. In this way, whenever a subsidiary needed working capital it could, if Jeffries considered it appropriate, obtain it through Jeffries’ loan facility. Having borrowed the money, Jeffries on-lent it to the subsidiary but did not charge interest.
Jeffries lent such money, at least in part, by directly discharging debts incurred by the subsidiaries. When a subsidiary received an invoice either the subsidiary itself would pay or Jeffries would pay. It was Jeffries, under the control of Mr Cave and Mr Wong, who decided which manner of payment would be employed on any occasion.
When a subsidiary received money in payment of an invoice it had rendered, that money was more often than not paid directly into the bank account of Jeffries. It was Jeffries who decided into which account the money would be deposited on any occasion.
This control of monies coming in and going out on account of the subsidiary companies was maintained by Jeffries for the benefit not only of the subsidiary companies involved but for that of Jeffries and of every other member of the group.
The principal subsidiary companies in the Sydney metropolitan area were called BGC Marine Services (NSW) Pty Limited, BGC Marine Services (Aust) Pty Limited and BGC Marine Service Pty Limited. The name of BGC Marine Services (Aust) Pty Limited was displayed on the works. So was the name of Jeffries.”
26 The appellant’s Written Submissions contended that these conclusions were wrong on the following grounds:
“In this way Jeffries performed a function far greater than that of a holding company. It does not state the position too highly to say that the survival of the subsidiaries and each of them depended upon the preparedness of Jeffries to continue to finance it by raising sufficient working capital. Having assessed the profitability and prospects of each subsidiary company, Mr Cave and Mr Wong decided whether they would continue to support it by raising loan capital through Jeffries. If they decided not to support any subsidiary company they simply withheld funds. During Mr Cave’s stewardship such a thing happened on two occasions and each subsidiary or collection of subsidiary companies were obliged to go into voluntary liquidation.
It seems to me that although Jeffries never directly traded with the clients of its subsidiaries, it did involve itself so closely and directly in the trading activities of each of them that it can properly be said that it carried on trading activities and that they formed a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation.
The facts lead me to the conclusion that the activities of Jeffries in raising capital and in directly involving itself in the payment and receipt of monies properly payable and receivable by the subsidiaries, Jeffries made a substantial and significant part of its activities financial so that it might properly be said that it was a financial corporation.”
“His Honour erred in finding that Jeffries was not a holding company (AB 1/21). In [ Actors and Announcers Equity Association of Australia v ] Fontana Films [ Pty Ltd ] [(1982) 150 CLR 169] the High Court clearly held that a holding company fell outside s 51(xx). In Fontana Films the Trade Practices Act of the Commonwealth purported to apply to holding companies (see s 4(1)(d) of the Act). Stephen J at page 195 said ‘to the extent to which it extends to holding corporations it is no doubt in excess of power’. Similarly, Mason J at page 209 and Aickin J at page 215, Gibbs CJ did not decide (page 180-1). However, His Honour the trial judge was in error in categorising Jeffries as both a trading corporation and financial corporation (AB 1/24-5). The very nature of a holding corporation assumes that it will or may use its voting power through its shareholding to influence the decisions of subsidiaries (Lane at 165-166). The views of Messrs Cave and Wong, with respect, are irrelevant (AB 1/22). Jeffries is a classic holding company (Wong AB 2/413-414), (AB 3/649-50 - 659 -60, 672, 675, 678, 680). The group pooling of resources did not and could not re-categorise a corporation. The companies filed group and individual ASC returns. In house movements of money do not create financial corporations ( State Superannuation Board v TPC [(1982) 150 CLR 282]. Otherwise the corporate veil would be irrelevant.”
27 I would reject these submissions for the following reasons.
28 First, the contention that the primary judge “erred in finding that Jeffries was not a holding company” is invalid, because the primary judge did not make that finding either on 1/21 or anywhere else in his reasons for judgment. The primary judge commenced with the assumption, which on the evidence was unquestionably correct, that Jeffries was the holding company of the group, and proceeded to inquire into the issue of whether it was also a trading or financial corporation. The submission is also invalid because it is based on a fallacy, present at later points in the submissions, that if a corporation is a holding company it cannot also be a trading or financial corporation. Nothing in s 51(xx) supports this, and it is plainly absurd. A group of companies could be structured so that the holding company conducts no or little trade while the subsidiaries trade on a substantial scale, or it could be structured so that the holding company is the primary trading entity in the group. Whether a holding company is also a trading or financial corporation is a question of fact in each particular case. See B L Lloyd, “The Constitutional Validity of the Trade Practices Act and Regulation of the Conduct of Holding Companies” (1993) 21 Federal Law Review 279 at 285 and 286.
29 Secondly, the submissions which centre on Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd rest on a misreading of the case. Paragraph (d) of the definition of “corporation” in s 4(1) of the Trade Practices Act, in speaking of a “holding company”, was referring to a holding company which was not itself a trading company but was a holding company of a foreign, trading, financial or Territorial company. The High Court was dealing with the question whether the legislation as far as it applied to holding companies which were not trading corporations was supported by s 51(xx). The quotation appearing in the submissions from Stephen J at 195 is misleading. Immediately after the quoted words: “To the extent to which it extends to holding corporations it is no doubt in excess of power,” Stephen J said “such corporations may not possess any of the qualities of ‘constitutional’ corporations.” That is correct. They may not, but if they do in sufficient measure to be characterised as trading or financial corporations, then they are both holding corporations and trading or financial corporations. Mason J at 209-210 said (and Aickin J agreed at 215):
“In Reg. v Australian Industrial Court; Ex parte C.L.M. Holdings Pty Ltd [(1977) 136 CLR 235 at p. 242], I noted that the presence of par. (d) in the definition of ‘corporation’ in the Act might be a ground for concluding that the operative provisions of the Act were invalid in their application to corporations within the meaning of that paragraph. However, I went on to say ‘the rest of the definition is capable of a severable operation in its application in the operative provisions of the Act’. Further reflection has confirmed in my mind the correctness of the view that the operative provisions to the extent to which they apply to par. (d) corporations are ultra vires, because the holding companies referred to are ex hypothesi outside s. 51(xx) and s. 122. However, the invalid operation is severable by reason of the separation of par. (d) from the rest of the statutory definition. The correctness of this view does not appear to be disputed in the present case.
Although the expression ‘body corporate’ is not defined, s. 4A(5) provides:
‘Where a body corporate -
(a) is the holding company of another body corporate;
(b) is a subsidiary of another body corporate; or
corporate,
(c) is a subsidiary of the holding company of another body
that first-mentioned body corporate and that other body corporate shall, for the purposes of this Act, be deemed to be related to each other.’
Plainly the reach of this provision extends to corporations which stand outside pars. (a), (b) and (c) of the definition of ‘corporation’. It therefore takes the operative provisions beyond the boundaries of Commonwealth power. However, once again it is possible to sever, this time by treating s. 45D(1)(b)(i) as if the words ‘or of a body corporate that is related to that person’ were omitted, there being no interdependence between these words and the balance of s. 45D(1)(b)(i).”
30 This passage makes it plain that Mason J’s remarks were directed to corporations which were holding companies in the sense of being merely holding companies and nothing more. His remarks are not authority for the proposition that no holding company can ever be regulated by a law resting on s 51(xx).
31 Thirdly, the submission that because all holding companies may use their voting power to influence the decisions of subsidiaries, Jeffries was not a trading or financial corporation, is erroneous. Some holding companies may do that; others may not, preferring to exist purely passively and to rely on the boards and executives of the subsidiary companies. A holding company which does use its voting power to influence the decisions of subsidiaries may, depending on the totality of the relevant circumstances, be a trading or financial corporation as well.
32 Fourthly, it is not correct to submit that the views of Mr Cave and Mr Wong are irrelevant. They were directors of every company in the group and were important executive officers. Their intentions and plans, and their conduct in execution of those intentions and plans, constituted material highly relevant to the characterisation of Jeffries. The relevant parts of the evidence statement of Mr Cave dated 13 June 2000, which essentially supported the primary judge’s findings at 1/022 [44], were not objected to by the appellant when it was tendered (1/047 lines 9-21). And the evidence in chief and in re-examination of Mr Wong were not objected to. When the passage about the views of Mr Cave and Mr Wong of which the appellant complains is read as a whole, it can be seen that the beliefs of Mr Cave and Mr Wong are not relied on by the trial judge as an independent point: rather they are stated as part of a composite finding about how those officers managed the group and exercised financial control over the members of it.
33 Fifthly, the evidence referred to does not advance the submission that Jeffries is “a classic holding company” and not a trading or financial corporation as well. The evidence references given refer to evidence that the only revenue which Jeffries received at various periods was management fees, interest or dividends paid by subsidiaries. That takes no account of all the other evidence on which the primary judge relied for his findings.
34 Sixthly, the submission that the “group pooling of resources did not and could not re-categorise the corporation” is an assertion of a proposition but not a demonstration of its truth. The reference to “pooling” is presumably a reference to the role of Jeffries in raising borrowings and on lending them to subsidiaries for the purposes of working capital, the role of Jeffries in withholding funds from unprofitable companies, the role of Jeffries in exacting guarantees and negative pledges from subsidiaries in favour of outside lenders, the role of Jeffries in using monies it borrowed to discharge debts incurred by the subsidiaries, including debts incurred in relation to trading invoices, and the role of Jeffries in procuring that monies receivable invoices rendered by subsidiaries be paid into Jeffries’ bank account. These activities justify Mr Cave’s description of Jeffries as “the banker to the group” (3/556 paragraph 7). They also justify the conclusion that Jeffries was both a trading and a financial corporation.
35 Seventhly, the fact that the companies in the Jeffries group filed “group and individual ASC returns” does not damage the primary judge’s reasoning. That filing was compelled by law, but is neutral on the issue of which of the members of the group were trading or financial corporations.
36 Eighthly, the submission that in-house movements of money do not create financial corporations is without point. It is not supported by the case cited. Even assuming it to be sound, the present facts involve movements of money from parent to subsidiary and back, not merely movements of money within companies. Movements from parent to subsidiary and back can alter the characterisation of the parent.
37 In Re Ku-ring-gai Co-operative Building Society(No 12) Ltd (1978) 22 ALR 621 at 624 Bowen CJ said:38 Jeffries’ role was also to organise the trading activities of its subsidiaries through a common management which saw to the payment of the subsidiaries’ bills and procured receipt of the subsidiaries’ income. It did this for the benefit of itself and for the benefit of every company in the group. Mr Cave said (3/555 paragraph 6):
“a financial corporation is one which borrows and lends or otherwise deals in finance as its principal or characteristic activity …”
In State Superannuation Board v Trade Practices Commission (1982) 150 CLR 282 at 295 Gibbs CJ and Wilson J approved that definition, and the case generally was approved by Mason, Murphy and Deane JJ at 305. Jeffries’ borrowing and lending activities were its principal or characteristic activities, since without them the group would have ceased to trade. That is the short reason for concluding that the attack on the primary judge’s reasoning in relation to financial corporations fails.
“The management of Jeffries and the subsidiaries was centralised in that there was one management team, which made all of the major decisions in relation to the subsidiaries. These decisions took place in the offices of Jeffries.”
The appellant’s contention that the trial judge erred in concluding that Jeffries was a trading company must also fail.
39 It was assumed by the parties and by the primary judge below, and by the parties in preparing for the appeal, that to arrive at a conclusion that Jeffries was a trading or financial corporation was necessarily to establish that the Director of Public Prosecutions had power to prosecute. I do not think this result follows. It is necessary to inquire into whether s 998(1) of the Corporations Law, s 47(1) of the Corporations Act and Regulation 3(1)(d) can be characterised as laws “with respect to” trading or financial corporations, either as they stand or after reading down pursuant to s 15A of the Acts Interpretation Act 1901 (Cth). This raises two main issues. First, does the definition of “securities” go so far beyond corporate securities as to take s 998 outside s 51(xx)? Secondly, does s 15A apply?
40 Were these issues crucial to the outcome of this appeal, the following questions would arise on the first issue. The first question is whether s 998(1) can be characterised as a law with respect to trading or financial corporations independently of s 15A. There is no limitation in it to corporations. Section 998(1) in terms imposes no prohibition on corporations, and imposes no prohibition on what is done to corporations. It does not mention corporations. The expression “securities on a stock market” and the expression “the market for, or the price of, any securities” do not contain any intrinsic limitation to corporations. The Corporations Law s 9 provides that “securities” has the meaning given by s 92. The relevant part of s 92 is s 92(1) which provides:41 Turning to the second issue, s 15A of the Acts Interpretation Act 1901 (Cth) is relevant to s 998 even though the former is a Commonwealth statute and the latter a State statute. This is because the Corporations (New South Wales) Act, s 7, causes the Corporations Law to apply as a law of New South Wales, and s 10 of that Act provides:
“Subject to this section, ‘securities’ means:
(a) debentures, stocks or bonds issued or proposed to be issued by a government; or
(b) shares in, or debentures of, a body; or
(c) interests in a managed investment scheme; or …
(d) units of such shares; or
(e) an option contract within the meaning of Chapter 7;
but does not include a futures contract or an excluded security.”
A government is not a trading or financial corporation, and the expression “body” is not limited to trading or financial corporations. The definition of “body” in s 9 is:
“a body corporate or an unincorporated body and includes, for example, a society or association”.
Hence the trade in securities which is regulated by s 998(1) is not limited to securities of trading or financial corporations.
42 Section 15A provides:
“(1) Subject to Part 1.2 of the Corporations Law of New South Wales, the Acts Interpretation Act 1901 of the Commonwealth as in force at the commencement of section 8 of the Corporations Act, applies as a law of New South Wales in relation to the Corporations Law, and the Corporations Regulations, of New South Wales and any instrument made, granted or issued under that Law or those Regulations (other than application orders under section 111A of that Law) and so applies as if that Law were an Act of the Commonwealth and those Regulations or instruments were regulations or instruments made under such an Act.
(2) The Interpretation Act 1987 does not apply in relation to the Corporations Law, or the Corporations Regulations, of New South Wales or an application order or any other instrument made, granted or issued under that Law or those Regulations.”
As Brennan CJ and Toohey J said in Gould v Brown (1998) 193 CLR 346 at 391:
“It follows that what s 7 of the Corporations (New South Wales) Act picks up and applies as a law of New South Wales is the Corporations Law set out in s 82 of the Corporations Act of the Commonwealth, construed according to the Acts Interpretation Act 1901 of the Commonwealth.”
(There is no present question about the constitutional validity of s 7 itself, so the reasoning by which Brennan CJ and Toohey J concluded in Gould v Brown that the Interpretation Act 1987 (NSW) had to be applied to s 7 so as to limit what it picked up does not arise for consideration.)
“Every Act shall be read and construed subject to the Constitution, and so as not to exceed the legislative power of the Commonwealth, to the intent that where any enactment thereof would, but for this section, have been construed as being in excess of that power, it shall nevertheless be a valid enactment to the extent to which it is not in excess of that power.”
43 Even if it were possible to read s 998(1) down by reading “person” as “corporation”, this would not assist in supporting the prosecution of the appellant, who is not a corporation.
44 In R v Hughes (2000) 74 ALJR 802 the offences charged comprised making available “prescribed interests” contrary to s 1064(1) of the Corporations Law of Western Australia, read with s 1311(1)(a). Section 1064(1) provided:45 The case referred to in footnote 29 was Re Nolan; Ex parte Young (1991) 172 CLR 460 at 485-6. Brennan and Toohey JJ there said:
“A person, other than a public corporation, must not make available, offer for subscription or purchase, or issue an invitation to subscribe for or buy, any prescribed interest.”
The majority judges in the High Court noted a question whether s 1064(1) could be characterised as a law with respect to s 51(xx) corporations. They did not find it necessary to consider that question, because they found that s 1064(1) could be characterised as a law with respect to the heads of power in s 51(i) and (xxix) (at 811 [42]). They mentioned the definition of “prescribed interest”, “participation interest” (which includes the expression “whether in Australia or elsewhere”) and “investment contract” (which includes the expression “whether in this jurisdiction or elsewhere”). They then said (at 811 [43]-[44]):
“The subsidiary definitions respecting ‘prescribed interest’ which are set out earlier in these reasons were so drawn as to operate ‘whether in Australia or elsewhere’ or ‘whether in this jurisdiction [Western Australia] or elsewhere’. Upon the present hypothesis, a law of the Commonwealth could not take these definitions as criteria of operation for a prosecution unless they were read down to exclude purely domestic dealings of the proscribed varieties. However, s 15A of the Interpretation Act may be applied to read down a provision expressed in general terms, including a power to prosecute so as to apply only where the particular prosecution is supported by a head of power29. Consistently with the statement of general principle in the joint judgment in the Industrial Relations Act Case ,30 this would be achieved by construing the phrase in s 47(1) of the Corporations Act ‘functions and powers that are expressed to be conferred on them by or under corresponding laws’ as limited to those functions and powers in respect of matters within the legislative powers of the Parliament of the Commonwealth.31
Accordingly, the federal legislation identified above (s 47(1) of the Corporations Act and reg 3(1)(d) of the Regulations) operates to provide such authority as is necessary under federal law to support the prosecution by the DPP of the offences against the law of Western Australia which are specified in the indictment.”
They thus contemplated reading down the definitions relating to “prescribed interest” in the State law, but did not in fact do so: they solved the problem by reading down s 47(1) of the Corporations Act , a Federal law.
“Where a law operates distributively and, on a literal construction, embraces cases which are beyond legislative power, s 15A can restrict its operation to cases which are within power provided certain conditions are met. First, it is necessary that ‘the law itself indicates a standard or test which may be applied for the purpose of limiting, and thereby preserving the validity of, the law’: per Latham CJ in Pidoto v Victoria [(1943) 68 CLR 87 at p. 109]. His Honour stated the effect of s 15A in these terms [(1943) 68 CLR at p. 111]:
‘where there are general words or expressions which apply both to cases within power and to cases beyond power, then if an intention of Parliament that there should be a partial operation of the law based upon some particular standard criterion or test can be discovered from the terms of the law itself or from the nature of the subject matter with which the law deals, it can be read down so as to give valid operation of a partial character. In such a case also it would be necessary to consider whether such reading down would alter the policy or operation of the statute with respect to the cases which, after the reading down, would still remain within its terms. But if a law can be reduced to validity by adopting any one or more of a number of several possible limitations, and no reason based upon the law itself can be stated for selecting one limitation rather than another, the law should be held to be invalid. In such a case the law cannot be saved by the Acts Interpretation Act .’
A second condition was stated by Barwick CJ in Strickland v Rocla Concrete Pipes Ltd [(1971) 124 CLR 468 at p. 493]:
‘where the enacted words are capable of division or distribution, the reduced form of the enactment which results must operate upon the persons and things affected by it in the same manner as the enacted words would have operated upon those persons and things had Parliament had the legislative power to have validly passed the enactment. In such a case, it cannot be accepted that the Parliament intended an Act with a different operation upon or with respect to such persons and things. Again, the reduced form or operation of the Act must result in a ‘consistent workable and effective body of provisions’. But within such limits, the parliamentary expression that it intends to enact any law within any of the powers which emerges by construction from the enacted words, notwithstanding any invalidity in parts of the enactment, is imperative.’”
46 If it were necessary to read down s 998(1), the second condition could be satisfied by reading down “securities” to mean “securities of a trading or financial corporation”: so read down, the “reduced form” of s 998(1) would operate on the persons and things affected by it in the same manner as it would have operated had Federal Parliament had power to enact a wider form. A question would remain whether s 998(1) so read down could be characterised as a law relating to s 51(xx) corporations. However that may be, the first condition enunciated by Brennan and Toohey JJ appears unlikely to be satisfied. No Parliamentary intention that there should be a partial operation of the law based upon some particular standard criterion or test can easily be discovered from the terms of the law itself or from the nature of the subject matter with which the law deals. Assuming that s 998(1) would be valid if “securities” was read down in the manner indicated, it would have a valid operation either if “person” were read as “corporation” or if “securities” were read down: no reason based upon the law itself can readily be stated for selecting one limitation rather than another. From this point of view s 998(1) appears to be in the same position as the provisions which the High Court refused to read down in Strickland v Rocla Concrete Pipes Ltd (1971) 124 CLR 468: see particularly at 519-520 per Walsh J.
47 The case mentioned in note 30 in R v Hughes is Victoria v The Commonwealth (1996) 187 CLR 416 at 501-3. At 502-3 Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ discussed cases in which the limitation by reference to which a law is to be read down must appear from the terms of the law or from its subject matter. Thus if the law is intended to operate in an area where the legislative power of the Federal Parliament is subject to a clear limitation, it can be read as subject to that limitation. This is hard to do where the question is whether a provision like s 998(1) in a State Act can be read down, since such provisions are normally drafted without limitations on the powers of Federal Parliament being in mind.
48 One of the cases mentioned in note 31 in R v Hughes is Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189 CLR 1. At 10, Brennan CJ, Dawson, Toohey, McHugh and Gummow JJ said that s 10(1)(c) of the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth) would be invalid if it authorised the appointment of a Chapter III judge to make a report, and had to be read down to preclude this. That is a less extreme instance of the reading down process which was carried out in R v Hughes.
49 R v Hughes read down s 47(1) without engaging in any process of reading down s 1064(1), because s 1064(1) did not have to be read down in view of its support in s 51(i) and (xxix). R v Hughes did not examine whether s 51(xx) supported s 1064(1), and did not examine whether any reading down was possible in relation to that head of power. In my opinion there is a real risk that s 998(1) cannot be read down so as to conform to s 51(xx), and the reasoning in R v Hughes, so far as it read down s 47(1), does not go far enough to support a reading down of s 998(1).
50 It follows that it seems likely that the Director of Public Prosecutions would lack authority to prosecute the appellant if the case turned only on s 51(xx).
51 The Director of Public Prosecutions attempted to establish a s 51(xx) character in s 998(1) by referring to the following passages in Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 at 368-9, where McHugh J said:
“Although laws that regulate the activities, functions, relationships or business of corporations are clearly laws with respect to corporations the power conferred by s 51(xx) also extends to any subject that affects the corporation …
[If], by reference to the activities or functions of s 51(xx) corporations, a law regulates the conduct of those who control, work for, or hold shares or office in those corporations, it is unlikely that any further fact will be needed to bring the law within the reach of s 51(xx).”
To those passages might be added the following (at 368):
“As long as the law in question can be characterised as a law with respect to trading, financial or foreign corporations, the Parliament of the Commonwealth may regulate many subject matters that are otherwise outside the scope of Commonwealth legislative power. Laws that protect s 51(xx) corporations from the conduct of non-corporations, for example, are laws with respect to s 51(xx) corporations.”
52 The Director of Public Prosecutions then submitted that the appellant’s alleged actions “in selling down a substantial parcel of ordinary shares had real and adverse significance for Jeffries”. The problem is that while so far as s 998(1) protects “s 51(xx) corporations from the conduct of non-corporations” like the appellant, it is a law “with respect to s 51(xx)”, s 998(1) extends well beyond that role.
53 Below the Director of Public Prosecutions referred to passages in Re Dingjan; Ex Parte Wagner (1995) 183 CLR 323 at 369-370 which included the following at 370:54 However, I must stress again that though it seems likely that the Director of Public Prosecutions would lack authority to prosecute the appellant if the case turned only on s 51(xx), the parties have not been heard on the two issues which have just been discussed. It is not necessary to arrive at a final decision on s 51(xx), in view of the conclusions to which I have come in relation to s 51(1).
“where a law seeks to regulate the conduct of persons other than s 51(xx) corporations or the employees, officers or shareholders of those corporations, the law will generally not be authorised by s 51(xx) unless it does more than operate by reference to the activities, functions, relationships or business of such corporations.”
It was submitted below that it was clearly in McHugh J’s contemplation that the regulation of shareholders would fall within s 51(xx), and that the persons whose conduct was proscribed by s 998(I) were shareholders of s 51(xx) corporations. However, as already indicated, “securities” appears to extend beyond shares in s 51(xx) corporations, and the prohibition in s 998(1) operates against persons whether they own shares in s 51(xx) corporations or other securities or not.
55 Section 51(i) of the Constitution provides:
Section 51(i) of the Constitution56 The primary judge heard evidence about the system of trading securities on the Australian Stock Exchange (“ASX”) and made the following findings (1/010-012 [13]-[19]):
“The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:
(i) Trade and commerce with other countries, and among the States ….”
“In April 1995 the system by which securities listed on ASX were bought and sold was called the Stock Exchange Automated Trading System (SEATS). All securities trading on ASX was effected through SEATS in the following manner. The SEATS mainframe computer was installed at ASX premises in Sydney. It was connected through the telecommunications system to on-line terminals installed in stockbrokers’ offices in all States of Australia. Such terminals could be operated only by SEATS operators approved by ASX to operate in that capacity. Access to the system could be gained only through a SEATS operator in a stockbroker’s office, so anyone wishing to buy or sell securities listed on ASX could do so only through such a stockbroker.
When a client instructed a stockbroker to make an offer to sell or buy securities, a person in the stockbroker’s office would direct the SEATS operator to enter a bid to sell or buy the requisite number of shares at the appropriate price. Such bids were transmitted from the stockbroker’s terminal to the ASX computer and were there recorded. Having become recorded, those bids became known to all stockbrokers throughout Australia.
Offers to sell and buy securities were grouped and listed in order of price, with higher offers listed first and lower offers last, and then in order of times of entry into the system of offers, with the earliest offers listed first and the latest last. Whenever a buying bid matched a selling bid the computer programme generated a transaction of sale, and that fact was recorded in the system and particulars transmitted to all terminals.
Matches were made and contracts thereby concluded according to the order in which bids were recorded. So, if a bid were entered to buy, say, 100,000 shares at fifty cents and SEATS already had on record bids to sell, say, 10,000 shares at forty cents and, say, 200,000 shares at thirty cents, the programme would generate transactions of sale of 10,000 shares at forty cents and 90,000 at thirty cents.
In this way a stockbroker could observe the whole Australian market in securities, enter, amend and withdraw offers to sell or buy and know when other brokers throughout Australia were doing the same. So anyone anywhere in Australia wishing to trade in ASX listed securities could do so with others anywhere else in Australia.
Sales concluded in this manner were made on credit. When informed in the manner I have indicated of the conclusion of a sale, the selling broker would send the share certificate and document of transfer to the buying broker by post. On receipt of those documents the buying broker would draw a cheque in favour of ASX and have it delivered to the branch of ASX in the State of the buying broker. That State office would draw a cheque in favour of the selling broker and send it to that broker.
The evidence establishes that the broker who sold shares on behalf of Fame was in New South Wales and that of the seven buying brokers three were in Melbourne and four in Sydney.”
57 The appellant said: “The findings of facts in respect of SEATS were open and were not challenged” (Written Submissions page 3). The appellant also “conceded that some of the … trades were between brokers in Victoria and New South Wales”, but submitted that intra-state transactions between brokers were “not within s 51(i)”. The appellant submitted that the primary judge “erred as a matter of law in finding: (a) SEATS itself brought with it the trade and commerce power … , (b) intra-state transactions were caught …”.
58 The primary judge set out five features of the banking industry identified by Dixon J in Bank of New South Wales v The Commonwealth (1948) 76 CLR 1 at 380:
“(a) the constant inter-State transmission of funds and transfer of credit;
(b) constant business communication and intercourse among the States;
(c) the regular use for the purposes of inter-State transactions of instruments of credit and of title to goods and their inter-State transmission;
(d) the integration of inter-State banking transactions with the entire business of the bank to form a system spreading over the Commonwealth without regard to State lines;
(e) the furtherance of commercial dealings by inter-State traders in goods by performing an indispensable part in such transactions.”
59 The primary judge’s reasoning fell into two parts.
60 First, he rejected a submission by the appellant:61 The primary judge rejected these submissions in the following words (1/016.6-017.6 [29]-[31]):
“that the comparison between the securities trading business and the banking business was inappropriate and that any interstate feature of the formation or performance of a contract for trade in securities, for example the delivery interstate of scrip or the payment interstate of a purchase price, was no more than an incident of the contract and did not make it an interstate contract” (1/015.2-.4 [26]).
According to the submission:
“the input and distribution of information through SEATS was not itself trade and commerce and … delivery of a share certificate or a cheque across a State border was no more than an incident of a contract, … which did not lead to the conclusion that the commercial activity was among the States” (1/016.2-.3 [28]).
62 The second aspect of the primary judge’s reasoning was his rejection of a submission advanced by the appellant that:
“It seems to me that there is a more fundamental quality of ‘interstateness’ about SEATS than about, for example, an insurance office making contracts the performance of which might entail interstate activities. ASX is headquartered in one State not because the manner in which it trades requires it to have any special association with that State, but because the mainframe computer essential to SEATS must be situated somewhere. But SEATS is a national system, and the mainframe computer is no less essential than the terminals situated in a ASX-licensed stockbrokers’ offices in all States of Australia. I think that SEATS is a national system and that the trade in securities to which it gives effect is national.
In my opinion it is possible to identify features of SEATS analogous to the five features of the banking system identified by Dixon J. They are the constant interstate transmission of funds and transfer of credit, constant business communication and intercourse between brokers among the States, the regular use for the purposes of interstate transactions of instruments of credit and of title to securities and their interstate transmission, the integration of interstate transactions for the sale and purchase of securities with the entire business of ASX to form a system spreading over the Commonwealth without regard to State lines, and the furtherance of commercial dealings by interstate traders in securities by performing an indispensable part in such transactions.
I think that the buying and selling of securities by means of SEATS is trade and commerce among the States.”
63 The primary judge said (1/017.9-018.4 [33]):
“even if SEATS transactions between brokers in different States were within the power of the Commonwealth to control by legislation, those wholly within any State were not” (1/017.6 [32]).
64 The appellant’s Written Submissions to this Court in relation to the two parts of the primary judge’s reasoning were put thus:
“It would be unreasonable in my view to regard as excluded from the regulating power of the Commonwealth Parliament some transactions made in a national system of marketing solely because the buyer and seller happened to be in the same State. No such restriction would apply to intrastate banking transactions carried out as part of the national system. I do not think that such transactions can effectively be segregated. It is necessary for a significant part of a national system like banking or trade in securities to be regulated in the interests of the regulation of the whole: Redfern v Dunlop Rubber (1964) 110 CLR 194; Western Union Telegraph Co v Foster 247 US 105 (1918); Howard [“The Constitutional Power of the Commonwealth to Regulate the Securities Market” (1971) 45 ALJ 388] at 391.”
“The findings of facts in respect of SEATS were open and were not challenged. There is however a difference between SEATS and the legislation under challenge in the Bank Nationalisation case [(1948) 76 CLR 1]. SEATS is owned and controlled by the Australian Stock Exchange (‘ASX’). Only certain stockbrokers are able to trade in securities listed on the ASX. In the Bank Nationalisation case, the federal legislation requiring all private banks to be purchased by the Commonwealth Bank was held to be within s 51(i) but prohibited by s 92 (Lane’s Commentary on the Australian Constitution LBC 1986 at 97). The ASX runs a monopoly for the trading of publicly listed securities and the Corporations Law purports to prohibit trading by certain classes and regulates other classes. S 92 must be considered when dealing with s 51(i) as a head of power. Dixon J’s classic description quoted by the trial judge is accepted. However, regulation of such trade within s 51(i) is limited (Lane at 97-8). Intra-state trade and commerce, even if tied in with inter-state trade in economic terms, stands separate in constitutional terms (Lane at 99). Power carries with it the power to render the grant effective. The power to control intra-state trading must be indispensable, essential or typical (Lane at 100). In Redfern v Dunlop Rubber [(1964) 110CLR 194] the prohibition against the restrictive trade agreement covered intra-state agreements because it was directly related. Similarly, intra-state air navigation is caught ( Airlines of New South Wales Pty Limited v New South Wales No 2 ) [(1965) 113 CLR 54]. Kitto J describes this as power which ‘protects against danger of physical interference with the very activity itself which is within power’ ([ Airlines of New South Wales Pty Ltd v New South Wales (No 2) (1965) 113 CLR 54] at 115). It is submitted that the trial judge erred in relying on the Bank Nationalisation when dealing with the business of trading in securities.”
65 These submissions are unsound.
66 First, the appellant does not appear to challenge the primary judge’s reasoning so far as it treats SEATS transactions between brokers in different States as being within the power conferred by s 51(i).
67 Secondly, the appellant does not explain what specific error the primary judge is said to have made in the passages quoted from his reasons for judgment.
68 Thirdly, the primary judge’s reasoning is not refuted by the circumstance that SEATS is owned by the ASX, that only certain stockbrokers can trade on it, or that the ASX operates a monopoly. That state of affairs does not negate the conclusion that SEATS is used to give effect to a national trade in securities and that in the respects described by the primary judge the buying and selling of securities is usefully to be compared to the banking business which Dixon J said in the Bank Nationalisation case answered the description set out in s 51(i).
69 Fourthly, the argument based on Kitto J’s observations in Airlines of New South Wales Pty Ltd v New South Wales (No 2) (1965) 113 CLR 54 at 115 requires fuller quotation of those observations. He said that the relevant question was “whether a given Federal law having an operation upon intra-State commerce is, in that operation, a law ‘with respect to’ commerce with other countries or among the States”. He said:70 Fifthly, it is convenient to deal with propositions asserted by, or attributed by the submission to, Lane. So far as Lane makes the point that s 51(i) is “subject to this Constitution” and hence to s 92, the scope of s 92 has radically changed and reduced since the work referred to was written in 1986: see Cole v Whitfield (1988) 165 CLR 360; Bath (Commissioner of Business Franchises for the State of Victoria) v Alston Holdings Pty Ltd (1988) 165 CLR 411. The proposition that regulation of inter-State trade under s 51(i) is “limited” is not supported either by Lane or by the cases to which he refers. Lane did say at 99: “Intrastate trade and commerce, however tied in with interstate trade in economic terms, stands separate from interstate trade in constitutional terms.” But the proposition is immediately qualified by the next sentence, to which the submission did not refer:
“[That question] must, of course, be considered in the light of the nature of the particular form of commerce to which the law relates. It is, I think, a question as to whether, when the factual situation in which the law operates is understood, the law by its operation upon the intra-State section of the relevant form of commerce is seen to operate also upon the actual conduct of an activity or collection of activities in respect of which federal power exists, e.g., the actual carrying on of activities forming part of the overseas and inter-State sections of that form of commerce. Where the intra-State activities, if the law were not to extend to them, would or might have a prejudicial effect upon matters merely consequential upon the conduct of an activity within federal power, e.g. where the profit or loss likely to result from inter-State commercial air navigation would or might be affected, that mere fact would not suffice, in my judgment, to make the law a law ‘with respect to’ that activity itself. But, by contrast, where the law, by what it does in relation to intra-State activities, protects against danger of physical interference the very activity itself which is within federal power, the conclusion does seem to me to be correct that in that application the law is a law within the grant of federal power.”
Kitto J’s reasoning cannot be limited to laws which protect against the danger of merely physical interference: it must extend to laws which protect against other interference. Section 998(1) provides:
“A person shall not create, or do anything that is intended or likely to create, a false or misleading appearance of active trading in any securities on the stock market or a false or misleading appearance with respect to the market for, or the price of, any securities.”
If a law of that character were limited to inter-State trade, it would be open to persons to create false or misleading appearances of active trading in intra-State trading transactions. Since SEATS is used for sales between buyers and sellers in different States as well as sales between buyers and sellers within a State, s 998(1) in its application to intra-State dealings is protecting against the danger of interference with inter-State dealings, which the appellant appears to accept is an activity within s 51(i). Intra-State actions likely to create a false or misleading appearance of active trading will have an adverse effect on inter-State transactions taking place as part of the market unless regulated in the same way as the inter-State transactions. The two types of transactions are, in relation to conduct creating or intended or likely to create a false or misleading appearance of active trading, “inseparably connected”, to use the language of Menzies J in Redfern v Dunlop Rubber Australia Ltd (1964) 110 CLR 194 at 221. See also Airlines of New South Wales Pty Ltd v New South Wales (No 2) (1965) 113 CLR 54 at 77-78, 127-8 and 149-151.
71 The appellant’s submissions on s 51(i) concluded with these words:
“Nevertheless, there are occasions when Parliament’s power over trade and commerce ‘among the States’ extends to trade within the States, or even to non trade such as slaughtering with a view to trade, stevedoring operations or the making of restrictive trade agreements.”
“As The Incorporation Case [(1990) 169 CLR 482] illustrated, the power to govern corporations is itself limited by the Constitution and limited to specific heads of power within it. It is submitted that SEATS, ASX and the Corporations Law rise no higher than the Constitution itself.”
The first sentence is a truism. To the extent that the second sentence is not unintelligible, it casts no light on whether s 998 is a law with respect to inter-State trade and points to no error in the primary judge’s reasoning on that question.
72 In my opinion the trial judge was correct to conclude that s 998(1) regulated inter-State trade.
73 Contrary to the stand taken by the parties, that does not conclude the problem. It remains necessary to examine whether s 47(1) is within power. The circumstances are closely analogous with those of R v Hughes (2000) 74 ALJR 802 at 811 [42]-[44]. The High Court held that s 1064(1) of the Corporations Law considered in that case related to s 51(i) activity; the same is true of s 998(1). It follows that it is not necessary to read s 998(1) down, and the same reading down process for s 47(1) as was carried out in R v Hughes is available here.
74 Accordingly in my judgment the Director of Public Prosecutions has authority to prosecute the appellant.75 It is necessary to set out the whole of the primary judge’s reasoning on duplicity in view of the terms which the appellant has used to criticise it (1/025-026 [53]-[58]):
Duplicity76 The appellant’s submissions to this Court were:
“It was submitted by the applicant that the indictment was bad because it charged him with having done something that was intended to create a false or misleading appearance. Reference was made to Murphy v Farmer (1988) 165 CLR 19, where it was held that the word ‘false’, when qualifying something done or said, may mean either purposely or deliberately untrue or merely wrong in fact. It was submitted that the word ‘false’ might therefore have a different meaning from ‘misleading’, giving the indictment an aptitude to produce a verdict the meaning of which was uncertain, with consequent embarrassment for the applicant.
It was further submitted that the fact that s 998 deals with market rigging transactions required a distinction between ‘false’ and ‘misleading’. A comparison was drawn with s 995, which is directed at persons who relevantly engage in conduct that is misleading or deceptive or likely to mislead or deceive.
Even if the two words do bear the different meanings contended for in the present case, however, that fact alone does not lead to the conclusion that the indictment is duplicitous. The real question, it seems to me, is whether s 998 creates one offence, an element of which is the creation of a false or misleading appearance, or whether it creates two offences, one of which requires the intention to create a false appearance and the other the intention to create a misleading appearance. In Romeyko v Samuels (1972) 2 SASR 529 Bray CJ said at 552 -
The true distinction, broadly speaking, it seems to me, is between a statute which penalises one or more acts, in which case two or more offences are created, and a statute which penalises one act if it possesses one or more forbidden characteristics. In the latter case there is only one offence, whether the act under consideration in fact possesses one or several of such characteristics. Of course, there will always be borderline cases and if it is clear that Parliament intended several offences to be committed if the act in question possesses more than one of the forbidden characteristics, that result will follow.
See also the summary of cases set forth in DPP (Vic) v Williams [1993] 1 VLR 238 in the judgment of Hedigan J at 242-245.
In my opinion s 998 creates not two offences but one. The intent the Crown must prove is to create a false or misleading appearance with respect to the market or price of securities. Only one appearance is required to be proved, and that may be variously or compendiously described as false or misleading in much the same way as that expression was used by Mason J in North v Marra Developments Limited (1981) 148 CLR 42 at 58-59.
In my opinion the indictment as framed is not duplicitous.”
“As a matter of law, His Honour failed to appreciate the duplicity argument. It was submitted and is submitted that s 998(1) strikes at transactions in breach and each transaction is a separate offence (see Cohen J at TB5 and 28). It is implicit, if not explicit in the Court’s findings. Otherwise the jury will be invited to convict on one or some, not all of the transactions. This submission underlines the strength of the earlier submission concerning abuse. The principle in Murphy v Farmer [(1988) 165 CLR 19] also applies contrary to His Honour’s finding.”
77 I reject these submissions.
78 First, the submissions do not explain how the primary judge “failed to appreciate the duplicity argument” as distinct from rejecting it. Indeed the reference to Murphy v Farmer (1988) 165 CLR 19 in the appellant’s submissions to the primary judge and to this Court, and in the primary judge’s reasons for judgment, suggests that the primary judge did appreciate the argument. An argument was put below that s 998(1) created one offence of doing something intended to create a false appearance with respect to the price of securities, and another offence of doing something intended to create a misleading appearance with respect to the price of securities. It was submitted that “false” meant “deliberately untrue” while “misleading” meant “true but misleading in the context” (1/155 line 56-156 line 4). That analysis for s 998(1) was supported by the citation of Murphy v Farmer (1988) 165 CLR 19, a case on the construction of s 229(1)(i) of the Customs Act 1901 (Cth). It was submitted that “the issue in duplicity is not just whether you are able to meet it but whether a jury, in coming to the decision, consider the true import of each word beyond a reasonable doubt and not shovel it together” (1/156 lines 21-24). That was the argument which the primary judge rejected. The primary judge held that what the prosecution had to prove was the doing of something intended to create a particular appearance: it sufficed if that appearance could be characterised as false or misleading. As the primary judge said, Mason J in North v Marra Developments Ltd (1981) 148 CLR 42 at 58-9 appeared to treat the words “false or misleading appearance” in the predecessor to s 998(1), namely the Securities Industry Act 1970 (NSW), s 70, as a single integer of one offence, not distinct integers of separate offences. Mason J said the object of s 70 was to protect the market from “artificial managed manipulation” and to cause it to be “real and genuine, free from manipulation”. He said that the “false or misleading appearance” which conduct in breach of s 70 is calculated to create “is that the market … appears to be real or genuine, there being no overt sign of market support or manipulation”. In Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (1998) 28 ACSR 58 at 62-3, Gleeson CJ used similar language in saying that conduct found in breach of s 998(1) in that case had “both the purpose and effect of creating, temporarily, an artificial market and price”. An artificial, managed, manipulated, non-genuine market is one with a false or misleading appearance.
79 Secondly, pages 5 and 28 of the Appellant’s Tender Bundle do not indicate that Cohen J’s reasoning in Fenwick v Jeffries Industries Ltd supports the submission; nor do pages 5 and 28 of Cohen J’s reasons for judgment.
80 Thirdly, even if some language of Cohen J, or something “implicit” in the findings of Cohen J, could be found to support the appellant’s argument, that would have no significance, because the present argument could never have been put to Cohen J in civil proceedings.
81 Fourthly, the argument advanced by the appellant to this Court that it is necessary to identify a “transaction” in breach and to charge each “transaction” separately is without point: if a ‘transaction’ has to be identified, it can be found in a single instruction to sell 170,000 shares down to a price of thirteen cents. The charge is doing “something intended to create a false or misleading appearance”; it is not necessary that there be any actual transaction, but s 998(1) can be contravened by a single instruction, as Sackville J held in Australian Securities Commission v Nomura International Plc (1998) 160 ALR 246 at 344-348. The fact that there were a number of sales and purchases is not the essence of the charge: what is essential is the single act of giving the instruction to the stockbroker.82 The submission turns on s 998(5) and (9) which provide:
Is the instruction allegedly given to Mr Powell capable of being brought within s 998?
83 The primary judge said (1/028 [61]-[62]):
“(5) [Circumstances which amount to false or misleading appearances] Without limiting the generality of subsection (1), a person who:
(a) enters into, or carries out, either directly or indirectly, any transaction of sale or purchase of any securities, being a transaction that does not involve any change in the beneficial ownership of the securities;
(b) offers to sell any securities at a specified price where the person has made or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to buy the same number, or substantially the same number, of securities, at a price that is substantially the same as the first-mentioned price; or
(c) offers to buy any securities at a specified price where the person has made or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to sell the same number, or substantially the same number, of securities at a price that is substantially the same as the first-mentioned price;
shall be deemed to have created a false or misleading appearance of active trading in those securities on a stock market
…
(9) [Reference to transactions includes offers and invitations] The reference in paragraph 5(a) to a transaction of sale or purchase of securities includes:
(a) a reference to the making of an offer to sell or buy securities; and
(b) a reference to the making of an invitation, however expressed, that expressly or impliedly invites a person to offer to sell or buy securities.”
84 The appellant’s complaint is put thus in ground 8 of the Notice of Appeal:
“It was submitted by the applicant that an instruction to a broker could not constitute conduct for the purposes of subs (1) because only transactions contemplated by subss (5) and (9) were contemplated by subs (1). So there must be, by a combination of subss (5) and (9), at least an offer to sell or buy securities or an invitation for an offer to sell or buy securities.
No authority was offered to support such a construction. Subs (5) in terms does not limit the generality of subs (1). The submission is contrary to the plain meaning of the section and is without substance.”
85 The appellant submitted to this Court:
“His Honour erred in finding that an instruction to a broker is capable of being conduct for the purposes of s 998 of the Corporations Law …”
“… an instruction to a broker in the instant circumstances could not constitute conduct for the purposes of s 1311(1) because only transactions within sub-sections (5) and (9) were contemplated by sub-section (1). There must at least be an offer to sell or buy or an invitation to buy or sell. There is no authority (AB 1/28) but this Court is invited to so find on general principles of construction. In other words, an instruction as pleaded is not something that can create a false or misleading appearance within s 998(1).”
86 In oral argument the appellant drew attention to the marginal note: “False trading and market rigging transactions”. I see no utility in the marginal note in view of the fact that it is ambiguous. Does it refer to “false trading transactions” and “market rigging transactions”, or “false trading” and “market rigging transactions”?
87 I would reject the appellant’s other submissions on the short ground that s 998(5) is a provision which is enacted without limiting the generality of s 998(1). Section 998(9), which does no more than assist in defining s 998(5), is subject to the same qualification. The submission that only transactions within s 998(5) and (9) are within s 998(1) thus flies in the face of the words in s 998(5) “Without limiting the generality of” s 998(1). Giving an instruction to a stockbroker is capable of falling within s 998(1), as Sackville J held in Australian Securities Commission v Nomura International Plc (1998) 160 ALR 246 at 344-348. That case is inconsistent with the appellant’s submission.
88 In its Written Submissions under this head, directed to ground 8, the appellant put an argument which goes beyond ground 8 and is not capable of supporting any other ground. He said:
“In earlier submission, the parry of McHugh J is embraced. On the hearing of Fame’s application for leave to appeal, he posed the ultimate question:
‘Here you have somebody in the market who is prepared to buy these shares at 13 cents 14 cents and for the Applicant’s collateral advantage it decides to sell. Now, how does that deceive the market? (TB/60) And later said: ‘This case is about as far removed from the mischief these sections were designed to deal with as could be imagined’ (TB/62).
It is submitted that this reasoning as developed by Priestley J is the correct analysis of the application of the law to the relevant facts.”
This submission refers to what McHugh J said in an application for special leave to appeal to the High Court of Australia against the decision of the Court of Appeal in Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (1998) 28 ACSR 58 in which the majority of the court comprised Gleeson CJ and Powell JA, while Priestley JA dissented.
89 I would reject the submission.
90 First, while it may not be fatal that the submission does not go to any ground of appeal, the submission was not put to the primary judge in any developed way. Priestley JA’s “different view” was referred to and “certain helpful comments from the bench” during the special leave application were mentioned, but the appellant below said “as far as the different view was concerned, that need not matter to your Honour” (TB 149 lines 45-49). Counsel for the appellant not unreasonably said that it would have been difficult to persuade Barr J, sitting in the criminal jurisdiction, not to follow the opinions stated in the Court of Appeal, even though they did so in a civil case.
91 Secondly, the observations of a justice of the High Court of Australia designed to test the oral argument of counsel in the course of a special leave application do not constitute material in the nature of an authority binding on this Court and only in quite exceptional circumstances could they even be treated as persuasive. They were addressed to counsel opposing special leave, Gaudron J did not join in them, and in any event special leave was refused.
92 Thirdly, in R v Masters (1992) 26 NSWLR 450 the Court of Criminal Appeal refused to follow a decision by majority of a Court of Appeal comprising five judges: detailed reasons were given to support the proposition that the Court of Criminal Appeal is not bound by decisions of the Court of Appeal. The Court of Criminal Appeal said that “it would naturally have great regard for a carefully considered decision of the Court of Appeal” (at 472). Even if this Court is not bound by decisions of the Court of Appeal, in my judgment this Court ought to follow decisions of the Court of Appeal unless convinced they are plainly wrong. I am not convinced that the decision of the Court of Appeal in Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd is plainly wrong and no argument, beyond the quotation of McHugh J’s remarks and a reference to Priestley JA’s dissenting judgment, was developed to suggest that it was.
93 The appellant in oral argument also contended that s 998(1) could not apply to merely “private” instructions on the basis that they were not capable of having an effect on a market or a price. I would reject this for the reasons given by Mason J in North v Marra Developments Ltd (1981) 148 CLR 42 at 58-9. Further, nothing in the statutory language supports the submission.94 The background is lucidly explained by the primary judge (1/029-030 [63]-[67]):
May the DPP rely on sales of shares other than at thirteen cents and fourteen cents?
95 The primary judge summarised the appellant’s argument below thus (1/031 [68]):
“The question arises whether, because of the decision of this Court in related civil proceedings, it would be an abuse of process for the DPP to rely as prohibited acts on any instruction given by the applicant to Mr Powell to sell Fame’s ordinary shares other than at thirteen cents and fourteen cents. When Mr Cave heard about the sales of Fame’s shares on 28 April 1995 he became concerned, among other things, about the rights of ordinary shareholders in Jeffries, because the lower weighted average price resulting from those sales would give converting preference shareholders proportionately more ordinary shares. After obtaining legal advice, the directors decided to exclude sales made on 28 April 1995 from the calculation of the average weighted sale price. A summons was brought in the Equity Division of this Court by a holder of converting preference shares who was not connected with Fame or the applicant, seeking a declaration that the calculations for conversion should include the sales of 28 April: Fenwick v Jeffries Industries Ltd , Cohen J 18 August 1995 [(1995) 13 ACLC 1334]. Jeffries, Mr Cave, Mr Wong and the other directors of Jeffries were made defendants. They cross-claimed against Fame, seeking declarations that it had engaged in misleading conduct in breach of s 995(2) Corporations Law and that by virtue of the sales of 28 April 1995 it had created and intended to create a false and misleading appearance with respect to the price of the ordinary shares in Jeffries in breach of s 998.
The Australian Securities Commission (ASC) intervened. ASC supported the case for the declarations sought in the cross-claim, including the declaration that Fame was in breach of s 998 in transacting each of the sales of its shares made on 28 April 1995.
The applicant was not a party and neither was the DPP.
Cohen J made declarations in due course including a declaration that Fame, by virtue of the sales at thirteen cents and fourteen cents, created and intended to create a false and misleading appearance with respect to the price of the ordinary shares of Jeffries in breach of s 998. His Honour was not so satisfied with respect to any sale of Fame’s shares at prices ranging from thirty-five cents to twenty-five cents.
Fame appealed to the Court of Appeal and ASC cross-appealed. They were the only parties before the Court of Appeal. Fame challenged Cohen J’s findings and declarations, including those as to the breach of s 998 by the sales at thirteen cents and fourteen cents. ASC contended that his Honour’s findings and declarations did not go far enough and that the other sales on 28 April 1995 had been made in breach of s 998. However, ASC did not pursue the cross-appeal because the legal issues of concern to it were sufficiently covered by Fame’s appeal. So the Court of Appeal concerned itself with the sales at thirteen cents and fourteen cents. By a majority, the Court dismissed Fame’s appeal. Special leave to appeal to the High Court was refused.”
96 The primary judge rejected that argument on the following grounds (1/031-033 [69]-[72]):
“The applicant referred to statements of the members of the majority of the High Court in Rogers v The Queen (1994) 181 CLR 251. The Court in that case held by a majority that issue estoppel has no application in criminal proceedings but that proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive because they seek to litigate anew a case which has been already disposed of by earlier proceedings. See the judgment of Mason CJ at 255-256 and of Deane and Gaudron JJ at 272-278. It was submitted that an assertion by the DPP that the applicant’s instructions to Mr Powell to sell at prices other than thirteen cents and fourteen cents were in breach of s 998 would constitute an abuse of process because it would seek to litigate again issues decided by Cohen J and would be a direct challenge to his Honour’s judgment.”
97 The appellant conceded that the doctrines of res judicata and issue estoppel did not apply, but commenced by putting the following submissions to this Court:
“The central purpose of the proceedings before Cohen J was to determine the correctness of the decision by the directors of Jeffries to exclude from the conversion calculation the sales of its shares on 28 April 1995 and so determine the competing claims of converting preference shareholders and ordinary shareholders. Although ASC was an intervening party, called evidence and no doubt made submissions, it sought no orders. Although it was the only respondent to Fame’s appeal, it did not press its cross-appeal. In no way did it represent the Commonwealth in the right of a prosecutor. The proceedings were not criminal and there was no intention that any criminal sanction should follow.
It often happens that disputes arise between shareholders or officials of corporations, and that those disputes have to be dealt with urgently by the courts in order to enable the companies concerned to fulfil their proper functions. Fenwick v Jeffries Industries Limited was such a case. It was heard in July and the reserved judgment of Cohen J was delivered in August 1995. Like Fenwick v Jeffries Industries Limited, such cases may require the trial judge to make determinations which express or imply findings that there have been breaches of the Corporations Law. It would be a matter of concern to the proper administration of the criminal law if every such determination in favour of a party could be put forward to bar or to justify a stay of criminal proceedings subsequently commenced and arising out of the same facts or to limit the issues properly arising therein. It would threaten public confidence in the administration of justice because serious issues of a criminal kind might thereby be effectively determined in whole or in part in inappropriate fora and by inappropriate means. The need to ensure that wrongdoers were brought to trial would give rise to the need to defer urgent and important civil proceedings until related criminal proceedings could be concluded. The administration of justice would fall into disrepute.
The Crown case is that when the applicant gave Mr Powell his instructions they had discussed the state of the market for Jeffries’ shares and the applicant knew that there were outstanding bids to buy them at prices ranging between thirty-five cents and twenty-five cents as well as those at fourteen cents and thirteen cents. He knew that the entry of a selling bid at thirteen cents would first match and exhaust all selling offers at higher prices, provided he had enough shares to sell. That is why, notwithstanding the desire to sell at the lowest possible price so as to produce the desired effect on the average weighted sale price of the shares, the applicant arranged for Fame to sell at prices between thirty-five cents and twenty-five cents as well as at fourteen cents and thirteen cents. So the instructions for those sales are capable of being seen as having been given with the same intent as that which accompanied the instructions to sell at thirteen cents and fourteen cents.
I do not think in all the circumstances that the reliance of the DPP on the applicant’s instructions to Mr Powell to sell at prices between thirty-five cents and twenty-five cents would constitute an abuse of process or that a trial conducted on that basis would seek to litigate again issues decided by his Honour or directly challenge his Honour’s judgment.”
“With respect, his Honour failed to properly analyse the issues before the Court concerning the prior civil proceedings and the current criminal proceedings. It may be strictly true that the Applicant was not a party to the original equity proceedings (AB1/30) but it was not disputed that Fame was controlled by the Applicant (Gleeson CJ at TB/40 [scil 44]) and that the Applicant and Fame were regarded as one. Priestley JA said (TB/51 [scil 55]) ‘the Appellant is a company whose actions were decided on and carried out by O’Halloran. For simplicity, I will refer to him as the appellant. The appellant took the market as he found it.’ Cohen J said ‘in my opinion the acts of O’Halloran on behalf of Fame also constituted a breach of s 998’ (TB/27). In an application such as the present, it is submitted that the Court should look at the substance not the shell. His Honour also noted that the DPP was not a party. However, the ASC was not only an intervenor, who cross examined and filed evidence. The ASC cross-appealed and was the only protagonist supporting the decision below (TB/39-40). His Honour failed to consider that the criminal proceedings themselves were laid by the ASC as informant (TB/1). His Honour failed to appreciate that the Equity Court examined the Appellant’s actions and true motives (TB/18) not those of the company in isolation.”
98 Despite these contentions, the facts remain that the appellant is a legal person distinct from Fame Decorator Agencies Pty Ltd; the Director of Public Prosecutions is a legal person distinct from the Australian Securities Commission (as it was then known) - see s 8 of the Australian Securities and Investments Commission Act 1989 (Cth); and even though the Australian Securities Commission was the informant, it is the Director of Public Prosecutions who is prosecuting on behalf of the Crown, not the Australian Securities Commission. The Australian Securities Commission was quite independent of the Director of Public Prosecutions; the functions, powers and duties which it fulfils through its officers differ from those of the Director. There is nothing to suggest that the primary judge “failed to appreciate” any aspect of what Cohen J did. Though the position in relation to parties is not by itself the reason why I would reject the appellant’s argument, it does create certain difficulties for the appellant.
99 The appellant’s submissions continue:
“His Honour misunderstood the application of the principles of abuse of process, oppression and fairness (AB 1/32). There is no suggestion that these criminal proceedings involve any additional or fresh evidence. The issues the subject of Cohen J’s declarations and background findings and facts are also necessarily issues. Of course the standard of proof is different but ex hypothesi, if non 13 and 14 cents share trades were found not to breach the law, using the civil standard, one asks how can such transactions be a breach under the criminal standard?”
100 The short answer to this question is that a jury, properly directed, in relation to evidence which may not necessarily be identical with that tendered before Cohen J, may reach a conclusion which is different from that of Cohen J. Cohen J’s decision created no res judicata or issue estoppel. It was directed to a different issue from that which the indictment raises.
101 The appellant then submitted:102 The appellant then submitted:
“The example given by His Honour fails to recognise that the principles of fairness, abuse of process and oppression do not inure for the benefit of the Crown ( Rogers (1994) 181 CLR 251 per Brennan J at 267).”
It is not clear what is meant by the reference to the “example given by His Honour”. If that is a reference to the reasoning in paragraph [70] of the primary judge’s reasons for judgment, that reasoning does not turn on fairness, abuse of process and oppression. Rather it identifies the inconvenience and injury to the public interest which would flow from accepting the appellant’s submissions. In my judgment it does so in so effective a manner as to provoke doubts about the correctness of the appellant’s position.
“In any event, His Honour’s reasoning is irrelevant to the current situation. Rather, it is the attempted re-litigation of the non 13 and 14 cents share transactions which raise a direct challenge to the earlier determination and invites the scandal of conflicting decisions. It jeopardises public confidence or as Jacobs J [sic] said in Re Thomas Christy Limited ([1994) 2BCLC 527]: ‘to allow re-litigation of these before the self same court would seem absurd to Joe Citizen, who through his taxes pays for the courts and whose own access to justice is impeded by court congestion’. All the more so where the tax payer supports the ASC and the DPP.”
103 There cannot be “re-litigation” if there has not been litigation. The Director of Public Prosecutions has no connection with Mrs Fenwick, who sued as plaintiff before Cohen J representing all persons holding converting preference shares in Jeffries (except Fame Decorator Agency Pty Ltd and the appellant). The law prevents Mrs Fenwick re-litigating in civil proceedings issues decided in earlier civil proceedings; it does not necessarily prevent a non-party, namely the Director, litigating issues for the first time in criminal proceedings.
104 The submission does not point out that Re Thomas Christie Ltd (In Liq) was a very special case. Manson was the former managing director of a company in liquidation. He endeavoured to prove in the liquidation for a sum representing a claim for wrongful dismissal. There had been earlier proceedings in which the Secretary of State had applied for his disqualification as a director. In those proceedings, he had been found unfit to be concerned in the management of a company by reason of his conduct. That conduct would have justified his summary dismissal. It was held that Manson was not entitled to re-agitate his conduct by seeking that a conclusion be reached about it against the liquidator which was different from that which had been reached about it on the application of the Secretary of State. Manson was not legally represented before Jacob J (at 531b), and there was medical evidence that he was under stress (at 537h). Whatever the merits of the observation of Jacob J which the appellant’s submission quotes, the result may be defensible for a different reason. Once Manson had been found unfit in proceedings brought by the Secretary of State to which he was party, he might not have been able to resist summary dismissal on the ground that the finding of itself justified dismissal. And even if that reasoning does not support the result, the case is distinguishable from the present: in that case Manson was seeking to re-litigate in later proceedings an issue on which he had failed in earlier proceedings, whereas in this case the Director of Public Prosecutions is seeking to litigate for the first time an issue on which Mrs Fenwick, but not he, had failed earlier.
105 The appellant continued:
“The Appellant relies on the principles enunciated in Rogers . A category of case where abuse of process may exist is where a party seeks to re-litigate an issue already decided. Res judicata and issue estoppel will preclude re-litigation of any issue between the same parties. Rogers take[s] the principle further than these mechanisms which protect against conflict. The majority in [ Rogers ] found the tender oppressive and unfair in that it exposed [Rogers] to re-litigation of the issue decided earlier and conclusively in his favour. The present case is capable of generating conflicting decisions in the same Court and jeopardising public confidence.”
106 In my opinion Rogers v R (1994) 181 CLR 251 has nothing to do with the present circumstances. That case held that where in one case brought by the Crown against the accused a record of interview has been held involuntary, it is not open to the Crown in a later case to re-tender it on a different charge. The language used in Rogers v R must be read in the light of that fact; in any event, none of that language supports the present submission of the appellant. Further, Rogers v R was not a case in which the indictment was quashed. Rather it was a case in which the High Court held that it was an abuse of process to tender certain evidence. The orders specifically contemplated that the prosecution could continue, though the High Court also declared that an acquittal should follow if no additional evidence was called on the relevant counts.
107 Finally, the appellant submitted:108 The submission does not point out that none of the cases discussed by Giles CJ Comm Div are remotely analogous to the present. Reichel v Magrath (1889) 14 App Cas 655 was a case in which Reichel was defeated on an issue in proceedings he brought against certain parties, and it was held to be an abuse of process for him to re-agitate it in later proceedings brought against him by different parties. Walton v Gardiner (1993) 177 CLR 378 raised the issue of whether, where a moving party had brought disciplinary proceedings against medical practitioners which had been stayed, there ought to be a stay of the second set of disciplinary proceedings brought by that moving party against the same practitioners in relation to allegations substantially overlapping the allegations in the first proceedings. Hunter v Chief Constable of the West Midlands Police [1982] AC 529 was a case where an accused was convicted on the basis of an allegedly coerced confession: civil proceedings by him against the police claiming damages for injuries allegedly suffered when the confession was obtained were struck out as an abuse of process. Rogers v R (1994) 181 CLR 251 and Re Thomas Christie Ltd (In Liq) [1994] 2 BCLC 527 were discussed above. Haines v Australian Broadcasting Corporation (Hunt CJ at CL, 21 July 1995, unreported) was a case in which, as Giles CJ Comm Div said at 64,088:
“Giles CJ of the Commercial Division found that Rogers’ reasoning stands alone and applies even where a new party is involved ( State Bank of New South Wales Ltd v Stenhouse Ltd (1997) Aust Torts Reports 81-423 at 64,077). In Stenhouse , Giles CJ said, in deciding whether proceedings are an abuse of process because a party seeks to re-litigate a issue already decided, regard may be had to -
‘(a) the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or an ultimate issue;
(b) the opportunity available and taken to fully litigate the issue;
(c) the terms and finality of the finding as to the issue;
(d) the identity between the relevant issues in the two proceedings;
(e) any plea of fresh evidence, including the nature and significance of the evidence and the reason why it was not part of the earlier proceedings; all part of -
(f) the extent of the oppression and unfairness to the other party if the issue is re-litigated and the impact of the re-litigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and
(g) an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.’
If these matters are measured in this appeal, it is submitted that abuse of process should have been found.”
“Haines sued three defendants for defamation. Two of the defendants were not served. On the separate decision of the question pursuant to Pt 31 r 2 of the Rules, it was held that the matter complained of could not convey the defamatory imputations alleged. Haines then amended to continue against only one of the unserved defendants and a new party, no longer for defamation but for injurious falsehood and misleading or deceptive conduct. The representation on which he relied for these purposes was no different in substance from the imputation which had earlier been rejected. On application by the new party, it was held that the proceedings against the new party would have been struck out as an abuse of process but for the proffering of a changed and substantially different representation.”
109 In all these cases the person whose role in later proceedings, whether as moving party or defendant, was characterised as an abuse of process was a person who had been a party to the earlier proceedings. The Director of Public Prosecutions was not party to the civil proceedings before the Supreme Court. In all of these cases, too, the persons said to have abused process had lost on an issue in the earlier proceedings. The fact that some arguments of the Australian Securities Commission advanced by it in furtherance of the public interest of having the “legal issues of concern to it clarified” (see 28 ASCR 58 at 59 per Gleeson CJ) were not accepted by Cohen J does not necessarily mean it suffered “loss” or had an “issue” decided against it. No relief was sought against it; it sought no relief; it filed no cross claim (13 ACLC 1334 at 1,338). It filed a Notice of Cross-Appeal, but did not pursue it in the Court of Appeal.
110 Further, the appellant’s submission does not refer to a statement by Hunt CJ at CL, as construed by, and evidently approved by, Giles CJ Comm Div in State Bank of New South Wales Ltd v Stenhouse Ltd at 64,088 that “there will not be abuse of process if someone not a party to the earlier case wishes to re-litigate an issue decided in that case in favour of the opposite party” (emphasis added). The criteria set out by Giles CJ Comm Div quoted in the appellant’s submission must be read in the light of these matters.
111 However, as indicated above, I would not reject the appellant’s arguments by relying on the difference between the Australian Securities Commission and the Director of Public Prosecutions. Or, for that matter, the difference between the appellant and the company which he controlled. In my opinion, even if there were a complete identity of parties between the civil proceedings and the present prosecution, there would no abuse of process. Let it be assumed that some body had power both to intervene in the civil proceedings (which the Australian Securities Commission had power to do under s 1330 of the Corporations Law) and to institute the present prosecution, that it intervened and behaved as the Australian Securities Commission did, and that it then commenced the present prosecution. Let it also be assumed that the appellant personally was party to the civil proceedings instead of the company which he controlled. There could not be any abuse of process for two reasons.
112 First, the issue before Cohen J was different from that which is raised by the indictment. This is important, since of the seven factors listed in State Bank of New South Wales v Stenhouse Ltd (1997) Aust Torts Reports 81-423 at 64,077, the first four expressly turn on precise identification of the issues. The issue before Cohen J was thrown up by the articles of Jeffries in relation to the entitlements of converting preference shareholders. That in turn required a consideration of the price of sales of ordinary shares on the Stock Exchange for twenty trading days. Mrs Fenwick contended that the sales should include the sales made by Fame on 28 April. In view of the suspicion which Jeffries and its directors had about Fame’s sales at the end of 28 April, their refusal to include those sales had to rest on an inquiry into which sales created or were intended to create a false or misleading appearance within the meaning of s 998(1). The issue under the indictment is quite different. It focuses not on the sales, but on the intention underlying the instruction that led to those sales, namely, an instruction to sell down to a price of thirteen cents. An instruction to sell down to a price of thirteen cents can flow from an intention to create a false or misleading appearance even though sales above fourteen cents may not be based on that intention. In short, the appellant’s argument depends on an appeal to a supposed inconsistency between Cohen J’s findings that sales down to twenty-five cents were not vitiated by a prohibited intention and a jury conviction on the indictment, which would rest on a finding that an instruction to sell down to thirteen cents was vitiated by the prohibited intention. But the apparent inconsistency is not a real inconsistency. The intention underlying the sales down to twenty-five cents might have been one thing, while the intention underlying the instruction to sell down to thirteen cents was another. The indictment, as it were, jumps over the issues on which Fame won before Cohen J (the intention underlying sales down to twenty-five cents) and concentrates on an issue related to, but not identical with, that on which Fame lost, namely the intention underlying an instruction to sell to a price as low as thirteen cents. Fame’s success in the civil proceedings would not be inconsistent with the appellant’s failure in the criminal proceedings even if the appellant’s mental state is a subject for examination in both.
113 The second reason why I would reject the appellant’s argument is that there is nothing wrong in an enforcement body intervening speedily in civil proceedings which must be determined expeditiously with a view to having an input into their result, and later instituting criminal proceedings. The “sales” issue before Cohen J was something which arose out of a special language in the structure of the Jeffries articles. It was not an issue which the Australian Securities Commission formulated. The civil proceedings were structured by other parties, without any contribution from the Australian Securities Commission. Despite that, the Australian Securities Commission had the power to intervene pursuant (inter alia) to a function of clarifying the law. As Gleeson CJ said, it wanted to have a role in the way the court dealt with the “legal issues of concern to it”. In the example under consideration, of a body which could intervene in civil proceedings but also institute criminal proceedings, the body in question would have been using the civil proceedings to achieve a clarification of the law; its use of a criminal prosecution to punish the appellant and achieve goals of specific and general deterrence would be a distinct use of court process which could not have been achieved in the civil proceedings - and a legitimate use of court process. If this were not permissible, it would be necessary for the body in question either to decline to participate in the civil proceedings (which were being conducted with such urgency as to preclude any prosecution being instituted and heard before they were resolved) or to abandon any prospect of a criminal prosecution. Either outcome is against the public interest. Kirby P frequently urged the Australian Securities Commission and its predecessor, the National Companies and Securities Commission, to utilise their statutory powers of intervention, particularly in view of the importance of securing sound decisions on the construction of uniform legislation: e.g. North Sydney Brick and Tile Co Ltd v Darvall (1986) 5 NSWLR 681 at 684-5. And any course which would place a practical fetter on the discretion of the Director of Public Prosecutions whether or not to prosecute must be suspiciously scrutinised. If the appellant’s submissions went so far as to contend that an abuse of process exists where a regulatory authority intervenes in civil litigation having a particular result and then institutes criminal proceedings in which it seeks to characterise the relevant conduct in a different, but not necessarily inconsistent, way, I would reject them as wholly unsupported by authority and unsound in principle.114 In my opinion the appeal should be dismissed.
Orders
Section 51(v) as a head of power115 The primary judge rejected the Director of Public Prosecutions’ submission that s 51(v) of the Constitution was a head of his power to prosecute the appellant.
116 Section 51(v) of the Constitution provides:117 The primary judge quoted certain words of Kitto J in Herald and Weekly Times Ltd v Commonwealth (1966) 115 CLR 418 at 434 which, set out in full, are as follows:
“The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: …
(v) Postal, telegraphic, telephonic, and other like services …”
118 In Jones v Commonwealth (No 2) (1966) 112 CLR 206 at 226 Kitto J said that the s 51(v) power extended to the conditions on which persons may use the services described in s 51(v). The Director of Public Prosecutions submitted that that included conditions on what may be communicated, but did not cite any Australian authority to this effect. He did cite some American cases to that effect. However, in Wells v John R Lewis (International) Pty Ltd (1975) 25 FLR 194 at 204 the Full Court of the Industrial Court (Spicer CJ, Dunphy and Smithers JJ) said, in a case about the operation of s 64(3) of the Trade Practices Act 1974 (Cth) as modified by s 6(3), which seeks to utilise s 51(v) as a source of power:
“The main attack, however, is directed against so much of Div 3 as, if valid, creates offences consisting of certain kinds of conduct on the part of persons who are not the holders of television licences. Plainly enough, the attack must succeed unless the conduct which is thus made unlawful is so relevant to the subject of television services that a law forbidding it is a law with respect to that subject.”
The primary judge then said (1/020 [37]-[38]):
“S 998 is not directly about communications by the relevant media, but it may concern them indirectly because, given the nature of SEATS, it is possible that anything done in contravention of the section may be done by means of any of the relevant communications media. (In fact, the act alleged against the applicant was giving instructions by telephone.) But I think that such use of the media would be no more than a mere incident of the prohibited conduct.
I do not think, using the terminology of Kitto J, that the conduct made unlawful by s 998 is so relevant to the subject of postal, telephonic, telegraphic or other like services as to be a law with respect to those services.”
“And it is not to be doubted that a law prescribing the classes of communications which may or may not be sent through the post is a law with respect to the postal services of Australia.”
119 The question of whether the conclusions of the primary judge about s 51(v) are correct is extremely important. It is an issue having implications going far beyond the present case. For example, s 6(3) of the Trade Practices Act seeks to utilise s 51(v) to give validity to large parts of the Trade Practices Act directed to consumer protection, namely Pt IVA and Divs 1, 1A and 1AA of Pt V. Despite the many methods by which the key consumer protection provisions have been made more and more widely applicable in recent years, it would be undesirable to bring into existence judicial observations casting doubt on the effectiveness of s 6(3), or even supporting its effectiveness, in a case in which it is not necessary to do so. It is also undesirable because the Court has not had the benefit of full submissions on this point. In my opinion, since sufficient constitutional support for the present prosecution exists independently of s 51(v), it is not necessary to consider whether s 51(v) offers support as well.
120 As indicated above, I would dismiss the appeal.
121 SPIGELMAN CJ: I agree with Heydon JA.
122 MASON P: I agree with Heydon JA.
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