Regina v Adler - [2004] NSWSC 108

No judgment structure available for this case.

Reported Decision:
48 ACSR 693
(2004) 22 ACLC 784

Supreme Court

CITATION: Regina v Adler [2004] NSWSC 108

HEARING DATE(S): 15 December 2003

JUDGMENT DATE:
5 March 2004

JUDGMENT OF: James J

DECISION: Application dismissed

CATCHWORDS: Criminal Law - stay of proceedings - double jeopardy - previous civil penalty proceedings

LEGISLATION CITED: Commonwealth Corporations Act 2001

CASES CITED: Adler and Another v Australian Securities and Investments Commission (2003) 46 ACSR 504
re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler and Others (2002) 41 ACSR 72
re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler and Others (2002) 42 ACSR 80
Jones v Dunkel (1958-1959) 101 CLR 298
Maxwell v The Queen (1996) 184 CLR 501
Pearce v The Queen (1998) 194 CLR 610
R v De Simoni (1981) 147 CLR 383
Ridgeway v The Queen (1995) 184 CLR 19
Rogers v The Queen (1994) 181 CLR 251
Walton v Gardiner (1992-1993) 177 CLR 378

PARTIES :
Rodney Stephen Adler
Commonwealth Director of Public Prosecutions

FILE NUMBER(S): SC 70055/03

COUNSEL: DF Jackson QC and N Perram - Applicant
D Fagan SC and M Wigney - Respondent

SOLICITORS: Gilbert & Tobin Lawyers - Applicant
Commonwealth Director of Public Prosecutions

REGINA v RODNEY STEPHEN ADLER

70055/03

INDEX TO JUDGMENT

HEADING TO PART OF JUDGMENT
PAGE

Outline of Events in the Civil Proceedings and the Criminal Proceedings
The Earlier Civil Proceedings
The Criminal Proceedings
1-4

1-3
3-4

The Earlier Civil Proceedings
4-27

The Criminal Proceedings
27-33

The Submissions of the Parties
34-45

Determination of the Application
46-50

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

JAMES J

Friday 5 March

70055/03 REGINA v Rodney Stephen ADLER
JUDGMENT

1 HIS HONOUR: This is an application by Rodney Stephen Adler for an order that certain criminal proceedings which have been brought against him should be permanently stayed on the ground that they constitute an abuse of process. The criminal proceedings are alleged to constitute an abuse of process on the basis that in earlier civil proceedings brought against Mr Adler by the Australian Securities and Investments Commission (“ASIC”) Mr Adler has already been punished for the same conduct as is the subject of the criminal charges.

OUTLINE OF EVENTS IN THE CIVIL PROCEEDINGS AND THE CRIMINAL PROCEEDINGS

2 Later in this judgment I will examine in some detail the earlier civil proceedings and the present criminal proceedings. However, at this stage I will give merely a brief outline of events in the two sets of proceedings.

THE EARLIER CIVIL PROCEEDINGS

3 In the earlier civil proceedings ASIC was the plaintiff, Mr Adler was the first defendant and Adler Corporation Pty Limited (“Adler Corporation”), a company associated with Mr Adler, was the fourth defendant. The proceedings were heard in the Equity Division of this Court by Santow J. (as his Honour then was).

4 On 14 March 2002 Santow J delivered a judgment in which his Honour made findings that Mr Adler and Adler Corporation had committed a number of contraventions of the Commonwealth Corporations Act 2001. This judgment of 14 March 2002 has sometimes been referred to in later proceedings as “the liability judgment.”

5 Although the conduct of Mr Adler and Adler Corporation had occurred before the commencement of the Corporations Act 2001, the provisions of the Corporations Act were applicable under the complex transitional provisions in Chapter 10 of the Corporations Act and particularly s 1400.

6 Santow J’s judgment of 14 March 2002 has been reported. The report of the judgment to which I was referred in argument on the present application is at (2002) 41 ACSR 72.

7 On 27 March 2002 Santow J made declarations, in accordance with the findings he had made in his judgment of 14 March 2002, that Mr Adler and Adler Corporation had contravened provisions of the Corporations Act.

8 On 30 May 2002 Santow J delivered a further judgment in which his Honour made various orders for relief, which were consequential upon the findings and declarations his Honour had earlier made. His Honour’s judgment of 30 May 2002 has in later proceedings sometimes been referred to as “the orders judgment”. The judgment of 30 May 2002 has also been reported. The report of the judgment to which I was referred in argument on this application is at (2002) 42 ACSR 80.

9 Mr Adler and Adler Corporation appealed to the Court of Appeal against the declarations and orders made by Santow J. The appeal was heard by a bench of the Court of Appeal consisting of Mason P, Beazley JA and Giles JA. The reserved judgments of the members of the Court of Appeal were handed down on 8 July 2003, the leading judgment being given by Giles JA, with whom Mason P and Beazley JA agreed. The Court of Appeal allowed the appeals by Mr Adler and Adler Corporation in certain, relatively minor, respects but otherwise dismissed the appeals. At par 774 of his judgment Giles JA summarised the result of the appeals by saying that, although he had differed from the trial judge on some matters, the appeals had in substance failed. The judgments of the members of the Court of Appeal have been reported. Once again, the report to which I was referred in argument on the present application was the report in the Australian Corporations and Securities Reports (2002) 46 ACSR 504.

10 Mr Adler and Adler Corporation have filed an application for special leave to appeal to the High Court. I was informed at the hearing of the present application that the application for special leave to appeal to the High Court has not yet been heard.

THE CRIMINAL PROCEEDINGS

11 On 6 November 2002 Mr Adler was served with five informations and summonses, each information and summons alleging that he had committed a separate offence under the Corporations Act 2001. As in the case of the civil proceedings, the Corporations Act 2001 was applicable, by virtue of the transitional provisions in ch 10 of the Act, even though the conduct alleged to have occurred is alleged to have occurred before the commencement of the Corporations Act. Committal proceedings were held and on 11 July 2003 at the conclusion of the committal hearing Mr Adler was committed for trial on all five charges.

12 On 3 September 2003 the Commonwealth Director of Public Prosecutions served an indictment and a Crown case statement.

13 On 5 September 2003 Mr Adler was arraigned on the indictment before this Court and he pleaded not guilty to each of the five charges. The present application for a stay of the criminal proceedings was commenced by a notice of motion filed on 26 September 2003.

14 I will now proceed to examine in some detail the earlier civil proceedings and the criminal proceedings.

THE EARLIER CIVIL PROCEEDINGS

15 On the hearing of this application I was referred by counsel at different times to the facts alleged in the amended statement of claim in the civil proceedings, the facts found by Santow J in the course of his judgment of 14 March 2002, the recapitulation of conclusions set out near the end of the judgment of 14 March 2002, the declarations of contraventions made on 27 March 2002, the recapitulation in the judgment of 30 May 2002 of factual findings made in the judgment of 14 March 2002 and further findings made in the judgment of 30 May 2002 and the summary of facts in the judgment of Giles JA in the Court of Appeal, especially between pars 22 and 119.

16 It is substantially accurate to say that the facts alleged in the amended statement of claim were found by Santow J to have existed or to have happened and the Court of Appeal rejected all grounds of appeal alleging that Santow J had erred in his findings of fact.

17 The following brief statement of facts is taken from one or more of the sources I have identified. The statement is only a brief outline of some of the more important facts and does not purport to refer to all of the multitudinous facts set out, in one or more of, the amended statement of claim, the liability judgment, the orders judgement and Giles JA’s judgment.

18 HIH Insurance Limited (“HIH”) was a listed public company carrying on the business of an insurer.

19 Mr Raymond Williams, who was also a defendant in the civil proceedings, was a director of HIH and the Chief Executive Officer of HIH.

20 Between 16 April 1999 and 26 February 2001 Mr Adler was a director of HIH. Mr Adler was also an “officer” of HIH Casualty and General Insurance Limited (“HIHC”), a subsidiary of HIH, within the meaning of the expression “officer” in the Corporations Act.

21 Adler Corporation or Mr Adler had a large shareholding in HIH. From at least the beginning of the year 2000 the price of shares in HIH had been declining.

22 On 9 June 2000 Mr Adler sent Mr Williams a fax in which he said that a company named Drenmex (a company associated with Mr Adler) would like to borrow the sum of ten million dollars for the purpose of venture capital and share trading. The full text of the fax, omitting salutations, is set out in par 29 of Giles JA’s judgment.

23 Later on the same day Mr Williams sent a fax to Mr Adler, saying that he would arrange for the funds which had been requested to be transmitted to Mr Adler. The full text of the fax is set out in par 30 of Giles JA’s judgment.

24 On HIH’s copy of Mr Williams’ fax Mr Williams wrote a note to Mr Fodera, an executive director of HIH, who was also a defendant in the civil proceedings, asking Mr Fodera to arrange for the funds to be transferred to Drenmex.

25 On 14 June 2000 Mr Adler sent a fax to Mr Williams, saying that it would not be appropriate to use Drenmex and “the name of the company that has been incorporated is Pacific Eagle Equity Pty Ltd” (“PEE”). PEE was in fact not incorporated until the following day. Mr Adler was its only director and Adler Corporation was the holder of its one issued share.

26 On the morning of 15 June 2000 Mr Adler instructed a stock broker to purchase two million shares in HIH at market in the name of PEE. Pursuant to these instructions 1,873,661 shares in HIH were purchased at an average price of $1.0062 per share.

27 At the hearing of the civil proceedings Mr Howard, the General Manager Finance of HIH, gave evidence, which Santow J accepted, about conversations he had had on 15 June 2000 with Mr Fodera, Mr Adler, again with Mr Fodera, with Mr Williams and finally with Mr Cubbin, the head of Accounts Payable and Management Accounting in HIH. The terms of Mr Howard’s conversation with Mr Adler are set out in par 44 of Giles JA’s judgment.

28 On 15 June 2000 a cheque for $10,000,000 was drawn by HIHC in favour of PEE and delivered to Mr Adler and was banked in a bank account which had been opened for PEE.

29 Between 16 June and 30 June (or possibly 5 July) further shares in HIH were purchased by PEE through the same stock broker, on instructions given by Mr Adler. These purchases included purchases on 16 June 2000 of 951,339 shares at an average price of $1.0192 per share and purchases on 19 June 2000 of 425,000 shares at an average price of $1.018 per share.

30 The total number of shares in HIH purchased between 15 June 2000 and 30 June 2000 was 3,924,545 shares for a total price including stamp duty and brokerage of $3,991,856.21, all of which was paid out of the $10m which had been paid by HIHC to PEE.

31 Between 14 June 2000 and about mid July 2000 the decline in the traded price of shares in HIH was arrested and the share price slightly increased but thereafter the traded price of shares in HIH again declined.

32 As he was the controller of PEE Mr Adler was required by s 205G of the corporations Law then in force to notify the Australian Stock Exchange of the purchases of shares in HIH and Mr Adler did promptly notify the Stock Exchange. Mr Adler did not notify the Stock Exchange that the acquisition of the shares had been financially assisted by HIH or HIHC. As a result of Mr Adler’s notification to the Stock Exchange there were reports in the financial press that Mr Adler had bought many shares in HIH.

33 On 19 June 2000 a Mr Mellish, a journalist with the Australian Financial Review, contacted Mr Adler and had a conversation with Mr Adler. When asked by Mr Mellish why he had bought shares in HIH, Mr Adler said that shares in HIH were “undervalued in the long term… I think there will be a weakness for another week or two and that will give me a chance to get some volume”. The full text of Mr Adler’s answer, according to Mr Mellish’s evidence which Santow J accepted, is set out in par 150 of Santow J’s liability judgment.

34 On 20 June 2000 Mr Mellish had a further conversation with Mr Adler about the purchases of HIH shares, in which Mr Adler said:-

“I want people to know I am a committed insurance person. People think I have sold out and I’ve got my money and gone. That’s not true. I am making a number of statements about buying these shares. I believe in the company. I’m putting my money up which shows I believe in the industry. I think the company can be a billion dollar company again.”

35 At the time of the payment of the $10m by HIHC to PEE the terms on which the payment was made had not been reduced to writing and had not been finalised.

36 On 7 July 2000 PEE entered into a deed poll prepared by solicitors, constituting the Australian Equities Unit Trust (“the AEUT”). The HIH shares which had been purchased by PEE were treated as an asset of the AEUT.

37 Under the trust deed of the AEUT there were “A” class units and “B” class units, with different rights and entitlements. Four “A” class units were issued to Adler Corporation or another company associated with Mr Adler. One “B” class unit was issued to HIHC.

38 Mr Adler caused PEE as trustee of the AEUT to acquire from Adler Corporation, at cost, shares in companies called dstore Limited, Planet Soccer International Limited and Nomad Telecommunications Limited and also caused PEE as trustee of the AEUT to make unsecured loans to morehuman Pty Limited, Pacific Capital Partners Pty Ltd, Intagrowth Fund No. 1 and PCP Ensor No. 2 Pty Limited, with all of which Mr Adler was associated. The funds used for all of these seven transactions came out of the payment of $10m by HIHC to PEE on 15 June 2000.

39 In part E of the amended statement of claim various allegations of contraventions of the Corporations Law were made by the plaintiff ASIC. It was alleged inter alia that:-

40 (i) By the making of the payment of $10m by HIHC to PEE on 15 June 2000 HIH and HIHC had contravened s 208 of the Corporations Law and that Mr Adler had been involved in the contravention of s 208 and had thereby himself contravened s 209(2).

41 (ii) By the making of the payment of $10m by HIHC to PEE on 15 June 2000 HIHC had contravened s 260A of the Corporations Law and that Mr Adler had been involved in the contravention of s 260A and had thereby himself contravened s 260D(2).

42 (iii) That Mr Adler as a Director of HIH had contravened s 180 of the Corporations Law (amended statement of claim par 74). The particulars to par 74 contained two paras, which were to the following effect:-

43 (1) That Mr Adler had caused or procured HIHC, a subsidiary of HIH, to make a payment (that is the payment of $10m) which had the characteristics alleged in the sub paras of par (1).

44 (2) That Mr Adler had caused or procured PEE as the trustee of the AEUT to purchase shares in HIH, to purchase the three lots of shares from Adler Corporation and to make the four loans.

45 (iv) Mr Adler as an officer of HIHC had contravened s 180 of the Corporations Law (amended statement of claim para 75). In particulars to para 75 the plaintiff repeated the particulars to para 74.

46 (v) Mr Adler as a director of PEE had contravened s 180 of the Corporations Law (amended statement of claim para 76). The plaintiff furnished particulars to para 76 which were broadly similar to para (2) of the particulars to para 74.

47 (vi) Mr Adler as a director of HIH had contravened s 181 of the Corporations Law (amended statement of claim par 81). In para 81 the plaintiff repeated the particulars to para 74.

48 (vii) Mr Adler as an officer of HIHC had contravened s 181 of the Corporations Law (amended statement of claim para 82). In para 82 the plaintiff repeated the particulars to para 74.

49 (viii) Mr Adler as a director of PEE had contravened s 181 of the Corporations Law (amended statement of claim para 83). In para 83 the plaintiff repeated the particulars to para 76.

50 (ix) Mr Adler as a director of HIH had contravened s 182 (amended statement of claim para 88). In para 88 the plaintiff repeated the particulars to para 74.

51 (x) Mr Adler as an officer of HIHC had contravened s 182 (amended statement of claim para 89). In para 89 the plaintiff repeated the particulars to para 74.

52 (xi) Mr Adler as a director of PEE had contravened s 182 (amended statement of claim para 90). In para 90 the plaintiff repeated the particulars to para 76.

53 (xii) Mr Adler as a director of HIH and as an officer of HIHC had improperly used information he had obtained because he was a director of HIH or an officer of HIHC (amended statement of claim paras 95 and 96) and had thereby contravened s 183.

54 (xiii) Mr Adler had been involved in contraventions by Mr Williams of ss 181 and 182 and had thereby, on this basis, himself contravened s 181 and s 182.

55 As already indicated, the Corporations Law, and not the Corporations Act 2001, was in force in 2000 but, by virtue of the transitional provisions in the Corporations Act, it was the provisions of the Corporations Act, as originally enacted, which were applied by Santow J. There was no relevant distinction between the corresponding provisions of the Corporations Law and the Corporations Act as originally enacted.

56 It is convenient to set out some of the statutory provisions relied on by ASIC in the civil proceedings, so far as directly relevant.

(1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

. . . . . . . . . . . . . . . . . . ”

Section 181

. . . . . . . . . . . . . . . . . . ”

Section 183

. . . . . . . . . . . . . . . . . . ”

Section 208

. . . . . . . . . . . . . . . . . . ”

Section 260A

Section 260D(2)

57 Each of ss 180, 181, 182, 183, 209(2) and 260D(2) is described in the Corporations Act as a “civil penalty provision.” Pt 9.4B of Chapter 9 of the Corporations Act sets out a number of “civil consequences of contravening civil penalty provisions”, including:-

. . . . . . . . . . . . . . . . . . ”

These provisions are the civil penalty provisions.

Section 1317F

Section 1317G

Section 1317H

“(1) A Court may order a person to compensate a corporation or registered scheme for damage suffered by the corporation or scheme if:
(a) the person has contravened a civil penalty provision in relation to the corporation or scheme; and
(b) the damage resulted from the contravention.

Section 1317J

. . . . . . . . . . . . . . . . . . ”

Section 1317M

Section 1317N

Section 1317P

“Criminal proceedings may be started against a person for conduct that is substantially the same as conduct constituting a contravention of a civil penalty provision regardless of whether:

Section 1317Q

(a) the individual previously gave the evidence or produced the documents in proceedings for a pecuniary penalty order against the individual for a contravention of a civil penalty provision (whether or not the order was made); and
(b) the conduct alleged to constitute the offence is substantially the same as the conduct that was claimed to constitute the contravention.

58 The first seven declarations made by Santow J on 27 March 2002 pursuant to his liability judgment of 14 March 2002 were declarations against Mr Adler. These declarations were in the following terms (I have retained the references to “the Corporations Act” or “the Corporations Law” in the copy of the declarations handed up on the hearing of the application):-

“(1) A declaration, pursuant to section 1317E(1) of the Corporations Act 2001, that the First Defendant, Rodney Stephen Adler, whilst being a director of HIH Insurance Ltd and an officer of HIH Casualty and General Insurance Limited, contravened section 209(2) of the Corporations Law by reason of conduct in so far as described in the facts and matters referred to under ‘the Conclusion’ in paragraphs (3) and (8) of the Recapitulation of Conclusions of the Court, commencing at page 278 of the Reasons for Judgment, dated 14 March 2002 attached hereto ("the Conclusions"), pertaining to Mr Adler's involvement in having instigated and caused the payment of $10 million by HIH Casualty and General Insurance Limited to Pacific Eagle Equities Pty Limited on or about 15 June 2000, in circumstances where such payment involved contraventions by HIH Insurance Ltd and HIH Casualty and General Insurance Limited of section 208 of the Corporations Law.

by

.

(3) A declaration, pursuant to section 1317E(1) of the Corporations Act, that the First Defendant, Rodney Stephen Adler, whilst being a director of HIH Insurance Ltd, contravened sections 180(1), 181(1), 182(1) and 183(1) of the Corporations Law by reason of conduct in so far as described in the facts and matters referred to under ‘the Conclusion’ in paragraphs (3), (20), (21), (26), (28), (29), (30), (31) and (32) of the Conclusions pertaining to Mr Adler's involvement in having:

(a) instigated and caused the payment of $10 million by HIH Casualty and General Insurance Limited to Pacific Eagle Equities Pty Limited on or about 15 June 2000;

(b) caused the purchase of shares in HIH Insurance Limited by Pacific Eagle Equities Pty Limited in the period from 15 June 2000 to 5 July 2000;

(c) caused the sale of shares in dstore Limited, Planet Soccer International Limited and Nomad Telecommunications Limited by Adler Corporation Pty Ltd to Pacific Eagle Equities Pty Limited in the period from 25 August 2000 to 26 September 2000; and

(d) caused the making of loans by Pacific Eagle Equities Pty Limited to morehuman Limited, Pacific Capital Partners Pty Limited, Intagrowth Fund No.1 and PCP Ensor No.2 Pty Limited in the period from 28 June 2000 to 30 November 2000.

(4) A declaration, pursuant to section 1317E(1) of the Corporations Act, that the First Defendant, Rodney Stephen Adler, whilst being an officer of HIH Casualty and General Insurance Limited, contravened sections 180(1), 181(1), 182(1) and 183(1) of the Corporations Law by reason of conduct in so far as described in the facts and matters referred to under ‘the Conclusion’ in paragraphs (3), (20), (21), (26), (28), (29), (30), (31) and (32) of the Conclusions pertaining to Mr Adler's involvement in having:

(a) instigated and caused the payment of $10 million by HIH Casualty and General Insurance Limited to Pacific Eagle Equities Pty Limited on or about 15 June 2000;

(b) caused the purchase of shares in HIH Insurance Limited by Pacific Eagle Equities Pty Limited in the period from 15 June 2000 to 5 July 2000;

(c) caused the sale of shares in dstore Limited, Planet Soccer International Limited and Nomad Telecommunications Limited by Adler Corporation Pty Ltd to Pacific Eagle Equities Pty Limited in the period from 25 August 2000 to 26 September 2000; and

(d) caused the making of loans by Pacific Eagle Equities Pty Limited to morehuman Limited, Pacific Capital Partners Pty Limited, Intagrowth Fund No.1 and PCP Ensor No.2 Pty Limited in the period from 28 June 2000 to 30 November 2000.

(5) A declaration, pursuant to section 1317E(1) of the Corporations Act, that the First Defendant, Rodney Stephen Adler, whilst being a director of Pacific Eagle Equities Pty Limited, contravened sections 180(1), 181(1) and 182(1) of the Corporations Law by reason of conduct in so far as described in the facts and matters referred to under "the Conclusion" in paragraphs (3), (20), (26), (28), (29), (30), (31) and (32) of the Conclusions pertaining to Mr Adler's involvement in having:

(a) instigated and caused the payment of $10 million by HIH Casualty and General Insurance Limited to Pacific Eagle Equities Pty Limited on or about 15 June 2000;

(b) caused the purchase of shares in HIH Insurance Limited by Pacific Eagle Equities Pty Limited in the period from 15 June 2000 to 5 July 2000;

(c) caused the sale of shares in dstore Limited, Planet Soccer International Limited and Nomad Telecommunications Limited by Adler Corporation Pty Ltd to Pacific Eagle Equities Pty Limited in the period from 25 August 2000 to 26 September 2000; and

(d) caused the making of loans by Pacific Eagle Equities Pty Limited to morehuman Limited, Pacific Capital Partners Pty Limited, Intagrowth Fund No.1 and PCP Ensor No.2 Pty Limited in the period from 28 June 2000 to 30 November 2000.

(6) A declaration, pursuant to section 1317E(1) of the Corporations Act, that the First Defendant, Rodney Stephen Adler, contravened section 182(2) of the Corporations Law by his involvement in a contravention by the Second Defendant, Raymond Reginald Williams, whilst being a director of HIH Insurance Limited, of section 182(1) of the Corporations Law by reason of conduct in so far as described in the facts and matters referred to under "the Conclusion" in paragraphs (3) and (33) of the Conclusions pertaining to Mr Adler's involvement in having instigated and caused the payment of $10 million by HIH Casualty and General Insurance Limited to Pacific Eagle Equities Pty Limited on or about 15 June 2000.

(7) A declaration, pursuant to section 1317E(1) of the Corporations Act, that the First Defendant, Rodney Stephen Adler, contravened section 182(2) of the Corporations Law by his involvement in a contravention by the Second Defendant, Raymond Reginald Williams, whilst being a director of HIH Casualty and General Insurance Limited, of section 182(1) of the Corporations Law by reason of conduct in so far as described in the facts and matters referred to under "the Conclusion" in paragraphs (3) and (33) of the Conclusions pertaining to Mr Adler's involvement in having instigated and caused the payment of $10 million by HIH Casualty and General Insurance Limited to Pacific Eagle Equities Pty Limited on or about 15 June 2000.”

59 On 27 March 2002 Santow J also made declarations (declarations 16-19) that Adler Corporation had contravened s 181(2), s 182(2) and s 183(2) by its involvement in contraventions by Mr Adler as a director of HIH and as an officer of HIHC, that Adler Corporation had contravened s 181(2) and s 182(2) by its involvement in contraventions by Mr Adler as a director of PEE, that Adler Corporation had contravened s 209(2) by its involvement in contraventions of s 208 by HIH and HIHC and that Adler Corporation had contravened s 260D(2) by its involvement in a contravention by HIHC of s 260A.

60 The paragraphs in the Recapitulation of Conclusions in Santow J’s liability judgment referred to in the declarations of contraventions by Mr Adler made on 27 March 2002 provided, either in full or so far as is directly relevant, as follows:-

“(3) Conclusion: I accept the evidence of Mr Howard (General Manager Finance of HIH) as to the conversations he recounts and the order of events of 15 June 2000. Those events concern the way in which the payment of $10 million was effected, including the two conversations that occurred with Mr Fodera, the conversation with Mr Adler, and subsequently with Mr Williams and then Mr Cubbin. I am satisfied on the evidence that:

(a) as of 15 June 2000, Mr Adler was fully aware of the $10 million investment, having instigated it, and of the proposed investment in HIH shares as well as its later application in the kind of unlisted technology investments he later caused to be made;

. . . . . . . . . . . . . . . . . .”

(e) none of Messrs Adler, Williams or Fodera made any steps towards getting Investment Committee or Board approval (with Mr Adler acknowledging the existence of ‘internal procedures’ which he said he left to Mr Williams ‘to look after’) and each were content to proceed, with documents to follow after;

(f) it may be inferred that Mr Adler had had prior discussions with Mr Williams about the trust, including in particular the intended purchase of shares in HIH.

(8) Conclusion: I am satisfied that within the meaning of s 209(2) of the Corporations Act both Mr Adler and Mr Williams were ‘involved’ in a contravention of s 208 of the Corporations Act by HIH and HIHC, as was Adler Corporation.

(19) Conclusion: Each of Mr Adler and Mr Williams were ‘involved’ in the contravention by HIHC of s 260A of the Corporations Act, in giving financial assistance to HIHC to acquire shares in its holding company HIH, being assistance which did materially prejudice the interests of the company or its shareholders.

. . . . . . . . . . . . . . . . . .

(20) Conclusion:

(a) A reasonably careful and diligent director or officer of HIH or HIHC in the position of Mr Adler, would not have caused or procured the payment on 15 June 2000 of $10million by HIHC to PEE to be applied as it was (in part) in purchasing HIH shares. To the extent that $3,973,397.84 was so used for the purpose of assisting PEE to acquire shares in HIH, not only did that assistance materially prejudice the interests of HIH and HIHC and in that sense was not advantageous to AEUT, the unit holders of AEUT, including HIHC or to HIHC’s holding company HIH, but also it was not disclosed as it should have been to other directors of HIH (save Mr Adler, Mr Williams, Mr Fodera and to a limited extent only, as regards the subscription to AEUT, Mr Cassidy). Nor was it brought by Mr Adler to the attention of the Investment Committee of HIH for approval or ratification, as it should, nor was the mandate for AEUT’s investments ever brought to the Investment Committee for approval by Mr Adler, as mandatorily required by the Investment Committee’s Terms of Reference. The semi-covert bypassing of proper corporate safeguards for these arrangements (only executive directors apart from Mr Adler were aware), reflects consciousness of impropriety on Mr Adler’s part. Furthermore, the purchase was made by Mr Adler stating publicly that he was purchasing HIH shares and with the object to maintain or support the HIH share price rather than for HIH’s purpose, of enabling HIHC to obtain, through its interests in AEUT, the benefit of a quick profit on the resale of HIH shares so acquired. Mr Adler thereby breached s 180 of the Corporations Act. This was in failing to follow authorised practices (see paragraph 372(13) above) and in properly safeguarding the interests of HIH and HIHC (in the latter case as an officer), falling well short of the standard of a reasonably competent person in his category of appointment, well familiar as he was with investment practices; see paragraph 375 above.

(b) The foregoing circumstances also give rise to breach of s 181, applying the principles set out in paragraph 735 particularly (1), (2), (4), (5) and (6) with (3) not applying in the circumstances. Mr Adler as a director was required to act in good faith, and for a proper purpose, neither of which he did. This was in promoting his personal interest by making or pursuing a gain (of maintaining or supporting the HIH share price for his own benefit as a substantial shareholder) where looked at from the viewpoint of a person familiar with the circumstances, there was a real or substantial possibility of a conflict between his personal interests and those of the company in pursuing a profit, and in failing to make proper disclosure. Moreover the interests of HIH and HIHC were put at risk by the illegality under s 208 and s 260A as well as by concealment from the market that HIHC was funding these purchases of HIH shares, not Mr Adler or his interests.

(c) Moreover, he improperly used his position as a director (thereby in breach of s 182) to gain the foregoing advantages to himself, as a substantial shareholder, via Adler Corporation, in HIH; the principles set out in paragraph 458 below are directly applicable. This was for the improper purpose earlier described, namely maintaining or supporting the price of shares in HIH, so as to benefit his own HIH holding rather than HIH, as evinced by his conduct earlier described including foregoing a quick trading profit and selling his shares first rather than after, or at least at the same time. Moreover, it was concealed from the Investment Committee collectively, though known to Messrs Fodera, Williams and to a much more limited extent Mr Cassidy, as well as Mr Howard. As a consequence, Mr Adler, as a director of HIH and an officer of HIHC, and as a director of PEE, contravened s 182.

(d) Insofar as the ‘business judgment’ provisions of s 180(2) are concerned, these could not apply to exonerate Mr Adler. This was because there was no ‘business judgment’ (as either a defence or as an element in the contravention) shown by Mr Adler to have been made ‘in good faith for a proper purpose’ (s180(2)(b)). Clearly Mr Adler did have ‘a material personal interest in the subject matter of the judgment’ so also precluding application of that rule. No equivalent defence at general law is made out either.

Corporations Act

(26) Conclusion: At the time of the acquisition by PEE of the shares in dstore, it is a fair inference, on the evidence, and strengthened by Mr Adler's failure to give any other explanation, of a matter, which was peculiarly within his knowledge, that he was aware that:

(a) dstore was in need of significant capital in order to continue doing business given the "burn rate" it was known to Mr Adler to have been experiencing;

(b) dstore was encountering difficulties in raising new capital;

(c) dstore was having cash flow difficulties;

(d) there was a significant risk that dstore would fail (paragraph 49 of ASIC's Statement of Claim).

(e) PEE had thereby acquired from Adler Corporation an unlisted investment (dstore) which was not the subject of independent analysis, was purchased from interests associated with a director (Adler), who had not disclosed this to the directors of HIH other than Mr Williams and Mr Fodera (and subsequently Mr Cassidy) nor sought approval from the Investment Committee or Board either for the investment of $10 million in AEUT or its application in part to acquire assets such as dstore from Adler Corporation, in circumstances where this entailed a clear conflict of interest for Mr Adler,

(f) that purchase was not advantageous to AEUT or to the unit holders of the AEUT, including HIHC, or to HIH but was to the advantage of Adler Corporation and Mr Adler;

In so doing, Mr Adler breached his obligation

(a) to exercise the degree of care and diligence required from a director by s180 of the Corporations Act breaching his obligations as a director or officer to HIH, HIHC and PEE, and having a material personal interest in the subject matter of any business judgment could not rely on any defence under the business judgment rule;

(c) not to improperly use his position to gain an advantage for himself or to cause detriment to each of HIH, HIHC and PEE, so breaching s182 of the Corporations Act, and

(d) not to improperly use information obtained by him to gain an advantage for himself or to gain an advantage for Adler Corporation, so contravening s183 of the Corporations Law, being information concerning the Investment Committee procedures and Investment Guidelines, the HIH Investment Portfolio and the susceptibility of Mr Williams to a proposal whereby HIH invest money in less conservative ways, such as in unlisted equities and venture capital; see para 95 of the Plaintiffs Statement of Claim (no s183 claim is made in relation to PEE).

Adler Corporation, by reason of its "involvement" as vendor to PEE of the unlisted investments, and being in (shared) control of PEE as majority unit holder, must be taken to have contravened each of the provisions of the Corporations Act that Mr Adler has contravened (save s180 which is not pleaded against Adler Corporation).

(a) Planet Soccer was in need of significant capital in order to continue in business;

(b) Planet Soccer was encountering difficulties in raising new capital; and

(c) There was a significant risk that Planet Soccer would fail, in the absence of such new capital.

In all other respects, the position with regard to the investment in Planet Soccer is substantially the same as for dstore. Mr Adler is in contravention of s180 to s183 in relation also to the purchase of Planet Soccer, as also is Adler Corporation (save for s180) by reason of its involvement in the relevant breaches .

(29) Conclusion: At the time of the acquisition by PEE of the shares in Nomad, Mr Adler was clearly aware that:

(a) Nomad was in need of significant capital in order to continue in business;

(b) Nomad was encountering difficulties in raising new capital and failed to do so when needed by the time of the sale to AEUT, nor subsequently;

(c) there was a very significant risk, which Mr Adler must have appreciated, that Nomad would fail, which risk eventuated in less than four months; and

(d) again the Investment Committee and its approval process were bypassed by Mr Adler, and also Mr Williams.

(30) Conclusion : Mr Adler caused PEE, as trustee of the AEUT, to make an unsecured loan without any adequate documentation of $160,000 to Morehuman Pty Limited, without any documented obligation to pay interest and with no security other than an inadequately documented guarantee. That loan was not advantageous to AEUT, nor disclosed to other Directors of HIH, or brought to the attention of the Investment Committee of HIH, save that it came to the attention of Mr Adler and Mr Williams. In those circumstances, Mr Adler was in contravention of s180 to s183 of the Corporations Act for similar reasons as are set out in relation to the earlier findings, as is Adler Corporation (save for s180).

(31) Conclusion: The conclusion as to the loan to Intagrowth Fund No 1 by AEUT, is the same as the finding in relation to the Morehuman loan in para 694, above.

(32) Conclusion: The finding in relation to the two loans to PCP and PCP Ensor respectively, is the same as for the loan to intagrowth (para 706) and earlier to Morehuman (pare 694). The PCP Ensor loans were favourable to Mr Adler because of his apparent entitlement to a very substantial share of the profits in respect of the development and via PCP's role as project manager. The loans were disadvantageous to HIH/PEE because they were made without security other than the Wolfe guarantee (itself unsecured) in respect of the PCP Ensor loan, for a very limited (ten percent) share of profits which was never paid and in circumstances where the careful scrutiny and monitoring which would ordinarily have attended an HIH property development investment, through the Investment Management Group and Investment Committee, was entirely bypassed.

(33) Conclusion: There is no basis for Mr Adler to be "involved" in any contravention by Mr Williams of s181 of the Corporations Act as I have earlier concluded Mr Williams did not himself contravene that provision. However Mr Adler was knowingly involved in Mr Williams' contravention of s182 so as to be in breach of s182(2).

61 In his orders judgment of 30 May 2002 Santow J ordered pursuant to ss 206C and 206E of the Corporations Act that Mr Adler be disqualified from managing corporations for a period of twenty years. These sections provided:-

Section 206C

Section 206E

62 In his orders judgment Santow J also decided that Mr Adler should be ordered to pay compensation pursuant to s 1317H of the Corporations Act. The precise amount of the compensation payable was not finally fixed in the orders judgment.

63 In paras 125-142 of the orders judgment Santow J considered applications by ASIC for pecuniary penalty orders under s 1317G of the Corporations Act. Santow J decided to make a pecuniary penalty order for $450,000 against Mr Adler for all of Mr Adler’s contraventions and a pecuniary penalty order for the same amount against Adler Corporation for all of its contraventions.

64 As I have already indicated, the appeals to the Court of Appeal by Mr Adler and Adler Corporation were almost entirely unsuccessful. The only respects in which the appeals succeeded were that the Court of Appeal held that Santow J should not have found that Mr Adler had committed any contravention of s 183 of the Corporations Act and hence all references to s 183 were ordered to be deleted from the declarations of contraventions and the Court of Appeal also held that the amount of compensation payable should be calculated in a slightly different way. On the hearing of the present application I was informed that the amount of compensation payable was ultimately fixed at just under eight million dollars.

65 Although the Court of Appeal held that Santow J should not have found that Mr Adler had committed any contravention of s 183, the Court of Appeal did not vary the pecuniary penalty orders which Santow J had made against Mr Adler and Adler Corporation.

THE CRIMINAL PROCEEDINGS

66 The indictment on which Mr Adler was arraigned on 5 September 2003 contained five counts to all of which Mr Adler pleaded not guilty. The five counts were that Mr Adler:-

“1. On 15 June 2000 at Sydney in the State of New South Wales with the intention to induce other persons to buy securities, namely ordinary shares in HIH Insurance Limited (“HIH”) did carry out more than two transactions in the ordinary shares of HIH, which transactions were likely to have the effect of increasing the price of ordinary shares in HIH on a stock market, namely the Australian Stock Exchange.

2. On 16 June 2000 at Sydney in the State of New South Wales with the intention to induce other persons to buy securities, namely ordinary shares in HIH Insurance Limited (“HIH”) did carry out more than two transactions in the ordinary shares of HIH, which transactions were likely to have the effect of increasing the price of ordinary shares in HIH on a stock market, namely the Australian Stock Exchange.

3. On 19 June 2000 at Sydney in the State of New South Wales with the intention to induce other persons to buy securities, namely ordinary shares in HIH Insurance Limited (“HIH”) did carry out more than two transactions in the ordinary shares of HIH, which transactions were likely to have the effect of maintaining or stabilising the price of ordinary shares in HIH on a stock market, namely the Australian Stock Exchange.

4. On 19 June 2000 at Sydney in the State of New South Wales did disseminate information that was false in a material particular and was likely to induce the purchase by other persons of securities, namely ordinary shares in HIH Insurance Limited when at the time of disseminating the said information he knew that it was false in a material particular.

5. On 20 June 2000 at Sydney in the State of New South Wales did disseminate information that was false in a material particular and was likely to induce the purchase by other persons of securities, namely ordinary shares in HIH Insurance Limited, when at the time of disseminating the said information he knew that it was false in a material particular”.

67 The first two counts in the indictment, which apart from the dates assigned are in identical terms, are based on s 997(1) of the Corporations Act (since repealed) which provided, so far as is relevant:-

“A person must not… carry out … two or more transactions in securities of a body corporate, being transactions that… are likely to have the effect of increasing the price of securities of the body corporate on a stock market with intent to induce other persons to buy …. securities of the body corporate”.

68 The third count is based on s 997(7) of the Corporations Act (also since repealed) which provided so far as is relevant:-

“A person must not … carry out … two or more transactions in securities of a body corporate being transactions that … are likely to have the effect of maintaining or stabilising the price of securities of a body corporate on a stock market with intent to induce other persons to … buy securities of the body corporate”.

69 The fourth and fifth counts, which apart from the dates assigned are in identical terms, are based on s 999 of the Corporations Act (also since repealed), which provided so far as is relevant:-

“A person must not… disseminate information that is false in a material particular … and …(a) is likely to induce the … purchase of securities by other persons … if, when the person … disseminates the information … the person knows … that the … information is false in a material particular”.

70 Sections 997 and 999 did not, of themselves, create offences. However, s 1311 of the Corporations Act provided that a person who did an act or thing that a person was forbidden to do by a provision of the Act was guilty of an offence by virtue of s 1311.

71 As indicated earlier in this judgment, although the conduct is alleged to have occurred before the commencement of the Corporations Act, the Corporations Act is applicable by reason of the transitional provisions in Chapter 10 of the Corporations Act and particularly s 1400, which created equivalent rights and liabilities to those that existed before the commencement of the Corporations Act under carried over provisions of the “old” corporations legislation.

72 For each of the five offences charged the maximum penalty is imprisonment for five years or a fine of $20,000 or both.

73 At the same time as the indictment was served a Crown Case Statement was served on Mr Adler. The Crown Case Statement contains fifty-six paragraphs, all of which I have taken into account. I will expressly note the terms of some only of the paragraphs in the Crown Case Statement.

“(7) On 9 June 2000 the Accused, on Adler Corporation letterhead, sent a fax to Williams in relation to an investment company, Drenmex, and an investment by HIH.

(8) On the same day Williams replied and in relation to this proposal said:

‘I will therefore arrange for these funds to be transmitted to you early next week. There is one aspect which should be clarified and that is the limit on any one particular venture or share trade’.

(9) There is a handwritten note on this fax initialled by Williams:

‘Domenic Please arrange for the funds to be forwarded to Drenmex Pty Limited 14/6’

Domenic Fodera (“Fodera”) was a director and the Chief Financial Officer of HIH.

(10) On 14 June 2000 the Accused sent another fax which stated that it was not appropriate to use Drenmex and that the name of the company that had been incorporated was Pacific Eagle Equity Pty Limited.

(11) Pacific Eagle Equities Pty Limited (“PEE”) was formed on 15 June 2000. From the date of incorporation the Accused was a director and secretary. The only other director was appointed and ceased being a director on 15 June 2000. On the same day the Accused caused the establishment of a bank account in ANZ for PEE.

(13) At around 10.00 am on 15 June 2000 the Accused telephoned Foster from Foster Stockbroking (“Foster”) and gave instructions in relation to the creation of a new trading account in the name of PEE. He also placed an order, on behalf of PEE, to buy $2m HIH shares at market. As a result of this order it bought 1,873,661 shares at an average price of $1.0062. The volume of shares traded on that day was 4,932,662. Accordingly PEE’s trades represented 38% of the shares traded. The shares in HIH opened on 15 June 2000 at $0.97 and closed at $1.02.

(14) The purchases by PEE of the HIH shares referred to in paragraph 10 were likely to have the effect of increasing the price of HIH shares on the ASX. The Accused carried out these transactions with the intention of inducing other persons to buy HIH shares.”

“(20) On 16 June 2000 The Accused, on behalf of PEE, placed an order with Foster to purchase $1m shares in HIH at market. As a result Foster, on behalf of PEE purchased 951,339 shares in HIH at an average price of $1.0192. The volume of shares traded on that day was 2,258,193. Accordingly PEE’s trades represented 42% of the shares traded. The shares in HIH opened on 16 June 2000 at $1.01 and closed at $1.03.

(21) The purchases of HIH shares by PEE referred to in para 17 were likely to have the effect of increasing the price of HIH shares on the ASX. The Accused carried out these transactions with the intention of inducing other persons to buy HIH shares.

(22) On the morning of 19 June 2000 the Accused told Foster to cancel the balance of the order and purchase 500,000 HIH shares at market. As a result Foster, on behalf of PEE purchased 425,000 shares in HIH at an average price of $1.018. The shares in HIH opened on 19 June 2000 at $1.02 and closed at $1.02.

(23) The purchases by PEE of the HIH shares referred to in para 19 (sic) were likely to have the effect of maintaining or stabilising the price of HIH shares on the ASX. The Accused carried out these transactions with the intention of inducing other persons to buy HIH shares.

(24) On 19 June 2000 the Accused sent a letter to HIH and the ASX annexing a Notice pursuant to s 205G which disclosed that he had a relevant interest in 1,873,661 shares which had been purchased at $1.01 per share on 15 June 2000 in an on-market transaction. . . . . . . . . . . . . .

(25) On 19 June 2000 Morgan Mellish (“Mellish”) a journalist with the Australian Financial Review (the “AFR”), became aware of the 205G notice and contacted the Accused. A conversation took place to the following effect:

‘Mellish: I just wanted to talk to you about the director’s notice today and ask a few questions. When did you buy the shares?

Accused: I bought them on market on Thursday and Friday. I bought them from private clients. I started buying straight after that statement. As a director I felt it was better to start buying after that statement came out… It freed me up because everyone has the same knowledge. Once that statement came out I had no market sensitive knowledge.’

Mellish: Why did you buy the shares?’

Accused: The shares were undervalued in the long-term. HIH have fallen an awful lot because of tax loss selling because it has been a hideous under-performer. I think there will be a weakness for another week or two and that will give me a chance to get some volume. And I’m fairly confident about the medium-term outlook of the company. I think it’s a solid medium-term acquisition’.

(27) By making those statements in the conversation on 19 June 2000, the Accused disseminated information that on 15 and 16 June he had bought for himself, beneficially, shares in HIH. This was false in a material respect because the Accused had not bought for himself beneficially the shares in HIH and the Accused knew that it was false in this respect. This information was likely to induce the purchase by other persons of HIH shares.

(29) All of the above purchases of HIH shares were settled using part of the $10m received by PEE on 15 June 2000.

(30) On 20 June 2000 the Accused sent a further letter to HIH and the ASX annexing a Notice pursuant to s 205G which disclosed that he had a relevant interest in a further 951,339 shares which had been purchased at $1.02 per share on 16 June 2000 in an on-market transaction.

(31) Mellish became aware of this Notice and again contacted the Accused. During the course of this conversation Mellish asked: 'How committed to HIH are you?' The Accused replied:

'I want people to know I'm a committed insurance person. People think I sold out and I've got my money and gone. That's not true. I'm making a number of statements by buying these shares. I believe in the company. I'm putting my money up which shows I believe in the industry. I think the company can be a billion dollar company again.'

semble

74 It is apparent that Count 1 in the indictment is based, iter alia, on the allegations in paras 13 and 14 of the Crown Case Statement, that Count 2 in the indictment is based, inter alia, on the allegations in paras 20 and 21 of the Crown Case Statement, that Count 3 in the indictment is based, inter alia, on the allegations in paras 22 and 23 of the Crown Case Statement, that Count 4 in the indictment is based, inter alia, on the allegations in paras 25 and 27 of the Crown Case Statement and that Count 5 in the indictment is based, inter alia, on the allegations in paras 31 and 33 of the Crown Case Statement.

THE SUBMISSIONS OF THE PARTIES

75 It was submitted by counsel for Mr Adler that the criminal proceedings should be stayed as an abuse of process because of the exposure of Mr Adler to double jeopardy, in that Mr Adler had already been punished, by the pecuniary penalty orders made in the civil proceedings, for substantially the same conduct as is alleged by the prosecution in the criminal proceedings.

76 It was submitted by counsel for Mr Adler that the conduct on his part alleged in the criminal proceedings was the same as part of the conduct in which in the civil proceedings it had been alleged in the amended statement of claim that he had engaged and in which in the civil proceedings he had been found by Santow J and by the Court of Appeal to have engaged. This submission was developed in great detail by counsel for Mr Adler but, as it was not disputed by counsel for the Crown and as it is clearly correct, there is no need to go into the details of the submission. The conduct alleged in the first three counts in the indictment is carrying out transactions consisting of causing the purchasing of shares in HIH on 15 June 2000, 16 June 2000 and 19 June 2000, which was part of the conduct alleged and found in the civil proceedings. The conduct alleged in the fourth and fifth counts in the indictment is the disseminating of information to Mr Mellish on 19 June 2000 and 20 June 2000, which was part of the conduct alleged and found in the civil proceedings.

77 It was conceded by counsel for Mr Adler that neither the declarations which were made in the civil proceedings, nor the compensation order, nor, according to authority binding on a single judge of the Supreme Court, the disqualification order, were penal in nature, although it was submitted that the compensation order was for a very large sum of money and the disqualification order was severely detrimental to Mr Adler and that these orders were “part of the overall circumstances.”

78 It was, however, submitted for counsel for Mr Adler that the pecuniary penalty order made against Mr Adler in the civil proceedings was penal in nature. In support of this general submission, counsel said that in the Act pecuniary penalty orders are clearly distinguished from compensation orders, that the word “penalty” occurs in the very name of the orders, that pecuniary penalty orders can be made only on the application of ASIC

79 It was submitted by counsel for Mr Adler that Mr Adler should not be exposed to punitive proceedings twice in respect of the same conduct, that in the criminal proceedings he was being exposed to being punished again for conduct for which he had already been punished and that the criminal proceedings were an abuse of process and should be stayed.

80 It was accepted by counsel for Mr Adler that in no case were the elements of a criminal offence charged against Mr Adler the same as the elements of any civil cause of action which had been brought against Mr Adler in the civil proceedings and, accordingly, no plea in bar was available to Mr Adler. See Pearce v The Queen (1998) 194 CLR 610 at 616-620. However, although no plea in bar was available to Mr Adler, this court still had power to grant him a stay of the criminal proceedings (counsel referred to Pearce at 620 (29)). I was referred to authorities emphasising the width of a court’s power to grant a stay of proceedings, including Walton v Gardiner (1992-1993) 177 CLR 378 and Rogers v The Queen (1994) 181 CLR 251. I was also referred to authorities concerning the inherent powers of courts to protect their own processes, such as Ridgeway v The Queen (1995) 184 CLR 19. It was contended by counsel for Mr Adler that it was not material that the previous proceedings had been civil proceedings and that only the current proceedings were criminal proceedings. What mattered was that, whatever the nature of the two sets of proceedings, Mr Adler had been punished in the earlier proceedings and was now exposed to being punished again for the same conduct in the current proceedings.

81 It was submitted by counsel for the Crown that the elements of the offences charged in the criminal proceedings were different from the elements of the causes of action in the civil proceedings, so that in no case were the elements of an offence the same as the elements of a civil cause of action. Counsel for the Crown devoted many pages of their written submissions to demonstrating the validity of this conclusion. As the conclusion was not disputed by counsel for Mr Adler, there is no need for me to summarise all of the Crown’s elaborate demonstration. I will summarise simply one part of it.

82 One cause of action in the civil proceedings was that Mr Adler as a director of HIH had contravened s 180 of the Act. The elements of this cause of action were:-

83 These elements of a civil cause of action under s 180 of the Act were not the same as the elements of an offence under s 997 (and s 1311) of the Act or the elements of an offence under s 999 (and s 1311) of the Act. The elements of an offence under s 997 (1) (and s 1311), so far as relevant, are:-

(2) being transactions that were likely to have the effect of increasing the price of securities of the body corporate on the stock market

(3) the person carried out the transactions with the intent to induce other persons to buy securities of the body corporate

84 The elements of an offence under s 997(7) (and s 1311) are the same, except that the second element is that the transactions were likely to have the effect of maintaining or stabilising the price of securities of the body corporate on the stock market.

85 The elements of an offence under s 999 (and s 1311) of the Act are, so far as relevant:-

(2) the information was false in a material particular

(3) the information was likely to induce the purchase of securities by other persons

(4) at the time when the person disseminated the information the person knew that the information was false in a material particular

86 It was conceded by counsel for the Crown that there would be some “overlap” of evidence, that is some evidence which had been admitted in the civil proceedings as being relevant to the cause of action under s 180 would also be admissible in the criminal proceedings but, it was submitted, the evidence would be admissible in the criminal proceedings for the purpose of proving or tending to prove a different matter from the matter it proved or tended to prove in the civil proceedings. For example, evidence had been admitted in the civil proceedings, and would be admissible in the criminal proceedings, that Mr Adler had caused HIHC to pay the sum of $10,000,000 to PEE on 15 June 2000. In the civil proceedings, so far as the cause of action based on s 180 was concerned, that evidence had been admitted to prove a contravention by Mr Adler of his duty of care and diligence as a director, that is to prove the second element of the civil cause of action. However, in the criminal proceedings that evidence would be admissible, on the charges under s 997 of the Act as being evidence of a circumstance from which, in conjunction with other circumstances, the inference could be drawn that Mr Adler had carried out the transactions with the intent to induce other persons to buy securities of the body corporate, that is as evidence tending to establish the third element of the offence, and on the charges under s 999 of the Act as evidence that the information Mr Adler had disseminated to Mr Mellish was false and known by Mr Adler to be false, that is as evidence of the second and fourth elements of the offence.

87 Counsel for the Crown proceeded in the rest of this part of their written submissions to demonstrate that the elements of none of the offences charged were the same as the elements of any other civil cause of action against Mr Adler in the civil proceedings, for contravening s 180 of the Act as an officer of HIHC or as a director of PEE; or for contravening s 181 as a director of HIH or as a officer of HIHC or as a director of PEE; or for contravening s 182 of the Act as a director of HIH or as an officer of HIHC or as a director of PEE; or for contravening s 183 of the Act as a director of HIH or as an officer of HIHC; or for contravening s 209 of the Act; or for contravening s 260D (2) of the Act.

88 It was submitted by counsel for the Crown that, apart from the differences in the elements of the civil causes of action and the criminal offences, the civil causes of action and the criminal offences had different purposes or “gravamens” and that these different purposes were, indeed, reflected in the differences in the elements. The purpose of the civil causes of action was to enforce the obligations of a director or an officer of a company or of a person at least in a position to be “involved” in a contravention by a company and to provide remedies for wrongs done against a company or its shareholders by a director or an officer of the company or a person involved in a contravention by the company. It was, accordingly, essential to the civil causes of action that Mr Adler should have been a director or an officer of a company or a person involved in a contravention by a company.

89 On the other hand, the purpose of the criminal offences of stock market manipulation (s 997) or disseminating knowingly false information in relation to securities in a company (s 999) was to protect the integrity of the market in shares in a company and to punish wrongs to potential purchasers of shares in a company. It was, accordingly, not essential to the criminal offences that Mr Adler should have been a director or an officer of the company or have held any position in the company.

90 Counsel for the Crown contended that, because the civil causes of action and the criminal offences were different, in their elements and in their purposes, and were different in important respects, the criminal proceedings could not be said to be an abuse of process, and, hence, should not be stayed.

91 Counsel for the Crown relied on a passage in the joint judgment of McHugh, Hayne and Callinan JJ in Pearce, in which their Honours said at 621 (31), in answer to a submission that it had been an abuse of process to charge the appellant with both of two counts in an indictment:-

“The short answer to the contention that the charging of both counts was an abuse of process is that because the offences are different (and different in important respects) the laying of both charges could not be said to be vexatious or oppressive or for some improper or ulterior purpose.”

92 The Crown also relied on s 1317P of the Act. S 1317P expressly provided that criminal proceedings could be started against a person for conduct that was substantially the same as conduct constituting a contravention of a civil penalty provision, regardless of whether, inter alia a pecuniary penalty order had been made against the person.

93 In reply to counsel for the Crown’s submissions, counsel for Mr Adler accepted that there were differences between the elements of the causes of action in the civil proceedings and the elements of the offences charged in the criminal proceedings, so that no plea in bar was available, but submitted, correctly, that in an appropriate case, a stay of criminal proceedings can be granted, even though no plea in bar is available. Counsel for Mr Adler contended that counsel for the Crown had overstated the extent to which the purposes of the civil causes of action and the criminal offences differed. For example, in the judgments of Santow J and the Court of Appeal in the civil proceedings, it had been regarded as a significant matter in determining whether Mr Adler had breached his obligations as a company director or a company officer and in determining what orders for relief should be made, that Mr Adler, in causing the payment of $10,000,000 by HIHC to PEE and in causing the application of part of that sum in the purchase of shares in HIH, had had the intention of maintaining or stabilising the price of shares in HIH.

94 Counsel for Mr Adler submitted that the Crown could not rely on the passage that I have quoted from the joint judgment in Pearce.

95 In order to understand some of the submissions which were put by either counsel for Mr Adler or counsel for the Crown, it is necessary to refer to Pearce in greater detail.

96 In Pearce the indictment included inter alia two counts, inflicting grievous bodily harm with intent to do grievous bodily harm, an offence under s 33 of the Crimes Act (count 9 in the indictment) and breaking and entering a dwelling house and while therein inflicting grievous bodily harm, an offence under s 110 of the Crimes Act (count 10 in the indictment).

97 Pearce applied for a stay of proceedings on the grounds that the indictment was oppressive or an abuse of process, because by the inclusion of counts 9 and 10 in the indictment he would be placed in double jeopardy. Pearce’s application for a stay was refused. Pearce then pleaded guilty to several counts in the indictment, including counts nine and ten. The sentences imposed on Pearce included sentences for the offences charged in counts 9 and 10, for each of which he was sentenced to imprisonment for twelve years (less time already served), the two sentences to be served fully concurrently but cumulatively on a sentence for another offence.

98 In their joint judgement in Pearce, McHugh, Hayne and Callinan JJ dealt with the subjects of “the nature of ‘double jeopardy,’” “double prosecution,” “plea in bar,” “stay of proceedings” and “double punishment.” It was the part of the joint judgment dealing with “stay of proceedings” which was mainly referred to by counsel in the present application and it is convenient to quote the whole of this part of the joint judgment.

Rogers v The Queen

(30) The decision about what charges should be laid and prosecuted is for the prosecution. Ordinarily, prosecuting authorities will seek to ensure that all offences that are to be charged as arising out of one event or series of events are preferred and dealt with at the one time. Nothing we say should be understood as detracting from that practice or from the equally important proposition that prosecuting authorities should not multiply charges unnecessarily.

R v De Simoni

(32) It follows that the primary judge was right to conclude that the proceedings on the indictment (or counts 9 and 10 in particular) should not be stayed.

(33) More difficult questions arise in deciding whether the appellant could be or was doubly punished.”

99 It was submitted by counsel for Mr Adler that the part of para 31 of the joint judgment in Pearce on which the Crown sought to rely was limited in its application to cases where, as in Pearce itself, two or more charges were laid in the same criminal indictment and did not apply to cases where two separate sets of proceedings had been brought at different times.

100 It was put by counsel for Mr Adler that the reference in para 31 of the joint judgment in Pearce to the decision of the High Court in R v Simoni showed that the part of para 31 was so limited. Two or more charges which included a common element (such as doing or inflicting grievous bodily harm) but which also had separate elements could be included in the same indictment, so that the offender, on conviction, could be sentenced for the whole of the criminality in his conduct, without infringing the principle of sentencing stated in De Simoni

101 It was submitted that, in any event, insofar as the conclusion in Pearce that there was no abuse of process rested on the principle of sentencing in

De Simoni

102 The submissions made by counsel for Mr Adler about s 1317P of the Act varied, as between counsel’s written submissions in chief, counsel’s written submissions in reply and counsel’s oral submissions at the hearing.

103 In counsel’s written submissions in chief it was submitted merely that, if the Crown sought to rely on s 1317P, then counsel for Mr Adler would contend that Chapter III of the Commonwealth Constitution prevented the Parliament authorising the executive to abuse the processes of courts exercising federal jurisdiction.

104 In counsel for Mr Adler’s written submissions in reply it was submitted that, for three reasons, s 1317P and other provisions in c 9 Pt 9.4B were unconstitutional, as undermining public confidence in the courts or as giving rise to abuses of process which it was beyond the powers of Parliament to authorise. The three reasons given by counsel were:-

(1) Under s 1317M a court could not make a pecuniary penalty order against a person for a contravention of a civil penalty provision, if the person had already been convicted of an offence constituted by conduct that was substantially the same as the conduct constituting the contravention. On the other hand, under s 1317P criminal proceedings could be started against a person for conduct that was substantially the same as conduct constituting a contravention of a civil penalty provision, even though a pecuniary penalty order had already been made against the person. It was submitted that it would undermine public confidence in the administration of justice by the courts, if the extent to which a person was punished for his conduct depended on a decision of the executive as to whether the first proceedings to be brought against a person should be civil penalty proceedings or criminal proceedings.

(2) If civil penalty proceedings were brought first, so that, in accordance with s 1317P, criminal proceedings could subsequently be brought, the defendant in the civil penalty proceedings would be placed in a situation in the civil penalty proceedings where, if he gave evidence, he would disclose to the Crown the evidence he might give in any subsequent criminal proceedings but if he did not give evidence he would run the risk of the court in the civil penalty proceedings drawing a Jones v Dunkel ((1958-1959) 101 CLR 298) inference against him.

105 In oral submissions by counsel for Mr Adler at the hearing, counsel did not press any of the reasons which had been advanced in written submissions for the conclusion that s 1317E and other provisions of c 9 Pt 9.4B were unconstitutional. The only oral submission made about the constitutionality of s 1317P was that, if s 1317P on its proper interpretation meant that, if a criminal proceedings fell within its terms, the court would have no power to stay the proceedings, then it was unconstitutional. However, it was submitted by counsel for Mr Adler, that this was not the proper interpretation of s 1317P and that the proper interpretation of s 1317P was that the starting of criminal proceedings falling within s 1317P would not ipso facto give rise to an abuse of process but that in an appropriate case the court would have power to stay criminal proceedings falling within s 1317P.

106 It was submitted by counsel for Mr Adler that s 1317P dealt with a large number of situations. It was unsurprising that subsequent criminal proceedings could be started, regardless of whether any of paragraphs (a), (c) or (d) applied and regardless of whether a pecuniary penalty order, if it imposed a merely nominal penalty, had been made. However, in the present case, Santow J had sought to impose a penalty of an amount which would be appropriate to what he had found to be Mr Adler’s conduct and Santow J had imposed a very substantial penalty.

107 In further submissions, counsel for the Crown submitted that the sentence in para 31 of the joint judgment in Pearce which the Crown relied on, was not limited in its application, as counsel for Mr Adler had submitted, to the laying of two or more charges in the same criminal indictment. What had been said in para 31 of the joint judgment in Pearce would apply equally to the bringing of two separate sets of proceedings at different times against the same offender. Counsel for the Crown pointed to the reference in

108 As regards s 1317P, counsel for the Crown submitted that, on its proper interpretation, s 1317P meant that the starting of criminal proceedings in cases falling within its terms would not of itself amount to an abuse of process, although an abuse of process could arise because of matters other than that the conduct charged in the criminal proceedings was substantially the same as the conduct constituting a contravention of a civil penalty provision, and in such a case the court would have power to stay the criminal proceedings because of that abuse of process. On such an interpretation of s 1317E, the section would not be unconstitutional. In the present case, there were no matters, other than that the conduct charged in the criminal proceedings was substantially the same as part of the conduct constituting contraventions of civil penalty provisions, such as would give rise to an abuse of process.

DETERMINATION OF THE APPLICATION

109 I accept, as was not disputed, that the conduct on the part of Mr Adler alleged in the criminal proceedings is part of the same conduct as Mr Adler was alleged, and found, in the civil proceedings to have engaged in. The states of mind which Mr Adler is alleged in the criminal proceedings to have had are the same as, or similar to, the states of mind which he was alleged, and found, in the civil proceedings to have had and which were regarded as significant in the civil proceedings, even though they were not elements of the causes of action in the civil proceedings.

110 I accept that, for the reasons given by counsel for Mr Adler, the pecuniary penalty order made in the civil proceedings against Mr Adler was penal in nature.

111 Because the elements of the criminal offences are in all cases different from the elements of the causes of action in the civil proceedings, no plea in bar is available to Mr Adler in the criminal proceedings. However, even though no plea in bar is available, the court still has power to grant a stay of the criminal proceedings on the ground that they constitute an abuse of process. The power to grant a stay is a broad power and there is no closed list of categories of abuse of process.

112 I accept the submission made by counsel for the Crown, which is supported by the detailed analysis in the Crown’s written submissions, that, because of their different elements, the criminal offences are not merely different, but different in important respects, from all of the causes of action in the civil proceedings for contraventions of ss 180, 181, 182, 183, 209(2) and 260D(2) of the Act.

113 I also accept the submission for the Crown that the civil causes of action and the criminal offences have different purposes; the purpose of the civil causes of action being to enforce the obligations of a director or an officer of a company or a person in a position to become involved in a contravention by a company of a civil penalty provision and to provide remedies for wrongs done against the company or its shareholders; whereas the purpose of the criminal offences is to protect the integrity of the market in shares in a company and to punish wrongs done to potential purchasers of shares in the company.

114 I conclude that, because of the important differences between the elements of the civil causes of action and the criminal offences and because of the different purposes served by the civil causes of action and the criminal offences, the criminal proceedings do not constitute an abuse of process.

115 In my opinion, assuming as against the Crown that the previous civil proceedings can be assimilated to criminal proceedings and the contraventions found in the civil proceedings can be regarded as “offences,” the Crown is entitled to rely on what McHugh, Hayne and Callinan JJ said in para 31 of their joint judgment in Pearce, that because “the offences are different (and different in important respects) the laying of both charges could not be said to be vexatious or oppressive or for some improper or ulterior purpose.”

116 In my opinion, this passage in the joint judgment in Pearce is not limited in its application, as counsel for Mr Adler submitted, to cases in which two or more offences are charged in the same indictment. It happened to be the case in Pearce that the appellant had been charged with two or more offences in the same indictment. However, in my opinion, in this part of their joint judgement which is headed “stay of proceedings,” the justices of the High Court were dealing generally with the subject of the staying of proceedings on the grounds of abuse of process. As was pointed out for counsel for the Crown, the justices in paragraph 29 of the joint judgment referred to the possibility of there being cases in which the “repeated” prosecution of an offence (that is, the prosecution of an offence at different times) would be an abuse of process.

117 So far as the decision of the High Court in R v De Simoni is concerned, the need to lay charges that, together, reflect the whole of the criminality of an accused in a series of events if the accused is to be punished for the whole of that criminality, would apply to the laying of multiple charges either in the same indictment or in successive indictments.

118 It is true that in para 30 of the joint judgement in Pearce it is said that “ordinarily” the prosecuting authorities will seek to ensure that all charges are preferred and dealt with at the one time and that “that practice” is commended and not to be detracted from. However, the joint judgment clearly recognises that it will not always happen that all offences arising out of the same series of events will be preferred and dealt with at the same time.

119 Insofar as s 1317M of the Act involves any legislative curtailment of the sentencing principle in De Simoni or the principle of ensuring that an offender is punished for the whole of his criminality, there is no need to extend that curtailment beyond cases actually falling within s 1317M.

120 In my opinion, the Crown is also entitled to rely on s 1317P of the Act.

121 None of the grounds which were advanced in counsel for Mr Adler’s written submissions in support of the contention that s 1317 P was unconstitutional, were pressed in counsel for Mr Adler’s oral submissions at the hearing. In any event, I consider that all of these grounds are unsound.

122 The extent to which an offender is punished for his conduct always depends on decisions made by the prosecuting authorities, whether to prosecute and, if so, what charges should be laid. See Pearce at 620 (30) and Maxwell v The Queen (1996) 184 CLR 501. Decisions taken by the executive which affect the extent to which an offender is liable to be punished for his conduct would not undermine public confidence in the administration of justice by the courts.

123 Likewise, any placing of a defendant in civil proceedings in a dilemma whether to give evidence in the civil proceedings and thereby disclose the evidence he might give in any subsequent criminal proceedings or to refrain from giving evidence in any civil proceedings and run the risk of the court in the civil proceedings drawing a Jones v Dunkel inference against him, would not undermine public confidence in the administration of justice by the courts. Under s 1317Q evidence would not be admissible in any subsequent criminal proceedings of the evidence given by the accused in previous civil penalty proceedings.

124 At the hearing of the application the parties were in agreement, and in my opinion correctly, that, whatever is the true effect of s 1317F, it cannot mean that a declaration of contravention made by a judge according to the civil standard of proof in previous civil penalty proceedings is admissible, and still less that it is conclusive evidence, in subsequent criminal proceedings before a jury in which the criminal standard of proof applies. If, by virtue of s 1317Q, evidence in previous civil penalty proceedings is not admissible in subsequent criminal proceedings, then, surely, a declaration of contravention made in previous civil penalty proceedings could not be admissible in the subsequent criminal proceedings.

125 The only argument advanced in their oral admissions by counsel for Mr Adler in support of a conclusion that s 1317P was unconstitutional depended on the proper interpretation of 1317P being that, if criminal proceedings fell within its terms, a court had no power to grant a stay. At the hearing both counsel for Mr Adler and counsel for the Crown agreed that this was not the proper interpretation of s 1317 P and that the proper interpretation of s 1317P is that the starting of criminal proceedings against a person for conduct that is substantially the same as conduct which has been found in earlier civil penalty proceedings to be a contravention of a civil penalty provision is not ipso facto or per se an abuse of process but that, in an appropriate case, a court has power, having regard to other matters or other matters as well, to grant a stay.

126 In my opinion, s 1317P reinforces the conclusion I have reached independently of s 1317P, that the criminal proceedings should not be stayed as an abuse of process. Section 1317P specifically authorises the starting of criminal proceedings against a person for conduct that is substantially the same as conduct constituting a contravention of a civil penalty provision. Section 1317P specifically authorises the starting of such proceedings, notwithstanding that a pecuniary penalty order has been made against the alleged offender (para (b) of s 1317P). Paragraph (b) cannot be read down as applying only where a nominal pecuniary penalty order has been made in the civil penalty proceedings. Ordinarily one would expect a judge who has made a declaration of contravention and who has decided to make a pecuniary penalty order, to make a pecuniary penalty order in an amount which is appropriate to the person’s conduct constituting the contravention and not for a merely nominal amount.

127 A court would have power to stay criminal proceedings falling within

128 I conclude that the application for a stay of the criminal proceedings brought against Mr Adler should be dismissed.

*******

Last Modified: 02/25/2005

Citations

Regina v Adler [2004] NSWSC 108

Most Recent Citation

Cases Citing This Decision

5

R v Adler [2005] NSWSC 274

Office of State Revenue v El Kazzi (No. 1) [2013] NSWLC 18

Chief Executive, Office of Environment and Heritage v Grant Wesley Turnbull (No 3) [2019] NSWLEC 165

Cases Cited

9

Statutory Material Cited

1

Australian Securities and Investments Commission v Adler [2002] NSWSC 171

Rich v Australian Securities and Investments Commission [2004] HCA 42

Pearce v The Queen [1998] HCA 57

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CITATION:	Regina v Adler [2004] NSWSC 108
HEARING DATE(S):	15 December 2003
JUDGMENT DATE:	5 March 2004
JUDGMENT OF:	James J
DECISION:	Application dismissed
CATCHWORDS:	Criminal Law - stay of proceedings - double jeopardy - previous civil penalty proceedings
LEGISLATION CITED:	Commonwealth Corporations Act 2001
CASES CITED:	Adler and Another v Australian Securities and Investments Commission (2003) 46 ACSR 504 re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler and Others (2002) 41 ACSR 72 re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler and Others (2002) 42 ACSR 80 Jones v Dunkel (1958-1959) 101 CLR 298 Maxwell v The Queen (1996) 184 CLR 501 Pearce v The Queen (1998) 194 CLR 610 R v De Simoni (1981) 147 CLR 383 Ridgeway v The Queen (1995) 184 CLR 19 Rogers v The Queen (1994) 181 CLR 251 Walton v Gardiner (1992-1993) 177 CLR 378
PARTIES :	Rodney Stephen Adler Commonwealth Director of Public Prosecutions
FILE NUMBER(S):	SC 70055/03
COUNSEL:	DF Jackson QC and N Perram - Applicant D Fagan SC and M Wigney - Respondent
SOLICITORS:	Gilbert & Tobin Lawyers - Applicant Commonwealth Director of Public Prosecutions

HEADING TO PART OF JUDGMENT	PAGE
Outline of Events in the Civil Proceedings and the Criminal Proceedings The Earlier Civil Proceedings The Criminal Proceedings	1-4 1-3 3-4
The Earlier Civil Proceedings	4-27
The Criminal Proceedings	27-33
The Submissions of the Parties	34-45
Determination of the Application	46-50