Australian Securities and Investments Commission v Shafron & Ors; Shafron & Anor v Australian Securities and Investments Commission [2011] HCATrans 128 (13 May 2011)

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Australian Securities and Investments Commission v Shafron & Ors; Shafron & Anor v Australian Securities and Investments Commission [2011] HCATrans 128 (13 May 2011)

Last Updated: 15 June 2011

[2011] HCATrans 128

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S29 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Applicant

and

PETER JAMES SHAFRON

Respondent

Office of the Registry
Sydney No S30 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Applicant

and

GREGORY JAMES TERRY

Respondent

Office of the Registry
Sydney No S31 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Applicant

and

MEREDITH HELLICAR

Respondent

Office of the Registry
Sydney No S32 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Applicant

and

MICHAEL ROBERT BROWN

Respondent

Office of the Registry
Sydney No S33 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Applicant

and

MICHAEL JOHN GILLFILLAN

Respondent

Office of the Registry
Sydney No S34 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Applicant

and

MARTIN KOFFEL

Respondent

Office of the Registry
Sydney No S35 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Applicant

and

GEOFFREY FREDERICK O’BRIEN

Respondent

Office of the Registry
Sydney No S36 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Applicant

and

PETER JOHN WILLCOX

Respondent

Office of the Registry
Sydney No S37 of 2011

B e t w e e n -

PETER JAMES SHAFRON

Applicant

and

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Respondent

Office of the Registry
Sydney No S41 of 2011

B e t w e e n -

PHILLIP GRAHAM MORLEY

Applicant

and

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Respondent

Applications for special leave to appeal

FRENCH CJ
HAYNE J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 MAY 2011, AT 9.33 AM

Copyright in the High Court of Australia

____________________

MR S.J. GAGELER, SC, Solicitor-General of the Commonwealth of Australia: If the Court pleases, in matters S29/2011, S30/2011, S31/2011, S32/2011, S33/2011, S34/2011, S35/2011, S36/2011 I appear with MS S.E. PRITCHARD for the applicant and in matters S37/2011 and S41/2011 for the respondent. (instructed by Clayton Utz Lawyers)

MR T.F. BATHURST, QC: If the Court pleases, in matters S31/2011, S32/2011, S33/2011 and S34/2011 I appear with MR R.S. HOLLO and MR R.J. HARDCASTLE for the respondents. (instructed by Atanaskovic Hartnell)

MR R.P.L. LANCASTER, SC: May it please the Court, in matter S29/2011 I appear with MR N.J. OWENS for the respondent and in matter S37/2011 for the applicant. (instructed by Middletons Lawyers)

MR R.G. McHUGH, SC: May it please the Court, in matter S30/2011 in appear with my learned friend, MR S.M. NIXON, for the respondent. (instructed by Blake Dawson)

MR P.M. WOOD: May it please the Court, in matter S35/2011 I appear with my learned friend, MR M.S. HENRY, for the respondent. (instructed by Arnold Bloch Leibler)

MR T.M. JUCOVIC, QC: May it please the Court, in matter S36/2011 I appear with MR R.C. SCRUBY for the respondent. (instructed by Kemp Strang Lawyers)

MR B.C. OSLINGTON, QC: May it please the Court, in matter S41/2011 I appear with MR N.M. BENDER for the applicant. (instructed by Henry Davis York Lawyers)

FRENCH CJ: Thank you. Mr Solicitor, it seems to me that, having regard to the advice that we have given to the parties, it would be useful to hear from the respondents first, unless you have something to say?

MR GAGELER: No, your Honours.

FRENCH CJ: Yes, Mr Bathurst.

MR BATHURST: As the Court pleases. We submit that the Court should only grant leave in respect of grounds 2 to 5 in Ms Hellicar’s appeal. Each draft notice of appeal, each of them, is in the same form as page 1191 of volume 5 of the joint application book. We submit that that leave, in relation to paragraph 3 at least, should be limited further by the deletion of the words “in particular” in the first line of that ground of appeal. We submit that although we accept that the issues raised in grounds 2 to 5 are of general importance, we submit that the other matters raised in the grounds of appeal are not such as to warrant the grant of special leave. Could I make that good in this way.

HAYNE J: Before you come to that, Mr Bathurst, understanding the way in which that might be put, is it possible to read the notice of appeal in the remaining grounds as, in effect, accepting that unless ASIC clears those grounds, the orders may have to stand?

MR BATHURST: Our concern, I suppose the best answer I can give, is that they do not. The way the grounds of appeal are presently framed as we see it would involve this Court considering, as it were, all issues and a complete review of the Court of Appeal’s judgment. Your Honours have seen the Court of Appeal’s judgment. The structure, broadly speaking, was to take ASIC’s principal submissions – your Honours can pick this up in volume 4 commencing at page 849. In paragraph 282 on that page what the court did was deal with those broad themes in what we would say was an orthodox Warren v Coombes type fashion and came to various conclusions on that.

They then moved to Mr Robb, as it were. There are three possible solutions. I know this is a long winded answer to your Honour’s question, I am sorry for that. There are three possible solutions. The first is that the Court of Appeal was correct so far as Mr Robb was concerned and that we say leads to the result the appeal is dismissed. We would also be contending that the Court of Appeal’s other findings, if I can call it that, lead inevitably to the same conclusion irrespective of what is found in relation to Mr Robb. Now, this Court can deal with that submission or omit it, I suppose.

HAYNE J: But if we were to grant leave limited in the fashion you suggest, would those in whose interest you appear put on a notice of contention, in effect, saying that for other reasons given by the Court of Appeal the decision should stand?

MR BATHURST: To the extent that it was necessary to do so, the answer is yes.

HAYNE J: And thus would not the issues which are in 6 to 9 come up? As you say, there is a procedural issue about do you need a note, I understand that, but would not that issue come up?

MR BATHURST: I have to accept it is difficult to avoid it, yes. I think, with respect, that is right, your Honour.

HAYNE J: Are we not therefore better to face it square on with the parties adopting a position, it seemed to me, at least within the bounds of possibility the parties adopting a position, where your side of the record says, look, you have to clear those balls off the table, as well. You cannot just complain about what the Court of Appeal did with the position of Mr Robb?

MR BATHURST: I do not know if some of my colleagues to the right of me or behind me will like this answer, but I think, with respect, your Honour is correct. I do not wish to put anything further in relation to it, on reflection.

FRENCH CJ: Mr Lancaster?

MR LANCASTER: Nothing further, your Honour.

FRENCH CJ: Mr McHugh?

MR McHUGH: On the question my learned friend, Mr Bathurst, was just addressing, your Honours will see from the notice of appeal – if your Honours turn in any of the ones involving the non-executive directors, in Ms Hellicar’s, the relief is at page 1192 – that what is sought in paragraph 12(b) or prayer 12(b) is essentially a complete victory for ASIC. If that is, so to speak, on the table in the appeal to be determined by this Court, then it will be necessary for all issues to be fully ventilated, including the notice of contention that your Honour Justice Hayne mentioned a moment ago.

HAYNE J: I am not sure it really is a contention point, but you understand the matter.

MR McHUGH: Certainly all the evidence, because the issue in the Court of Appeal was whether, having regard to the totality of the evidence ASIC had discharged its burden and only - - -

FRENCH CJ: And the united force of the evidence.

MR McHUGH: Yes, the united force, and only one element in that was this question of fairness. Now, if that is the case, then what your Honours are facing really is a five-day fact appeal because the non-executive director appeal below, with very little duplication among counsel, took six and a half days to run, including exoneration and penalty which was a short part of the argument and which would not be before this Court. The alternative, if your Honours turn to paragraph 12(c), the prayer 12(c), which is across the page, is a remitter to the Court of Appeal.

If the way in which the appeal was conducted in this Court was that the only issue was the question of principle raised by grounds 2 to 5 and ground 3 narrowed in the way in which Mr Bathurst suggested, and that was the issue for determination here and the only relief that was available to my friend was not paragraph 12(b) but rather 12(c), that is a remitter to the Court of Appeal, then one could be looking at a one or a one-and-a-half-day appeal dealing with the question of principle about whether ASIC had any obligation and as a matter of principles of proof what the consequence was and then that question could be remitted or, I should say, the rest of the case could be remitted to the Court of Appeal to be determined in accordance with the law as disclosed by the judgment of this Court.

Then your Honours would not have to get into the totality of the evidence and its united force. It would simply be a question for the Court of Appeal then to decide the case, if Mr Gageler succeeds in this Court, on

the basis that fairness was not one of the issues and that would be a very much more confined debate in this Court and it would certainly save the parties and the Court the enormous effort and expense of going over the same ground that the Court of Appeal has already gone over. One difficulty is that although the Court of Appeal made a number of findings, its decision on the ultimate question, whether ASIC discharged its burden, is not simply the result of adding up intermediate findings.

It is, as your Honour the Chief Justice says, a decision to which the Court of Appeal came having regard to the totality of the evidence and in order to answer that ultimate question, whoever it is who does it, that court will have to look at the totality of the evidence. So the only thing I really wish to add to what Mr Bathurst said is that a way of dealing with it would be to narrow the grounds of appeal and the available relief to a remitter if ASIC succeeds.

I should note one other matter. My client had an application for a stay before the trial judge and an appeal from that which was rejected in the Court of Appeal. My client may wish to file a notice of cross-appeal where the special leave question would have to be addressed at the hearing of the appeal on the pure question of whether there is a prosecutorial duty along the lines that was rejected in Adler. In my submission, that would not add substantially to the scope of what this Court would have to do on the question of fairness.

HAYNE J: Sorry, would or would not?

MR McHUGH: Would not. It would really cover very similar ground, and I just flag that, but it would not really have any bearing on the scope of the amount of time that would have to be set aside. Unless there is anything further, those are the submissions for Mr Terry.

FRENCH CJ: Thank you, Mr McHugh. Mr Wood.

MR WOOD: Our position is the same as that advanced by my learned friend, Mr McHugh, save for the putative cross-appeal. We think remitter is the answer to your Honour Justice Hayne’s question to my learned friend, Mr Bathurst, on a notice of contention that could be captured in that and there could remain the discrete point of principle about a regulator’s duty and its breach with the rewriting, as it were, of ground No 3. That is our position.

FRENCH CJ: Thank you, Mr Wood. Mr Jucovic.

MR JUCOVIC: I have nothing to add to what Mr Bathurst said, but I am in a different position to Mr Wood and Mr McHugh in that we would

anticipate filing a broader notice of contention and going beyond the question of whether the resolution was passed, but dealing with the question of whether the Court of Appeal was correct in finding that my client was negligent in regard to particular evidence that was only given by my client in the case, that he would not understand that statements could be read by people as conveying certainty which were not dealt with by the Court of Appeal. So apart from that, your Honour, we are in a different position.

FRENCH CJ: Thank you, Mr Jucovic.

MR JUCOVIC: Could I also say, your Honour, we put a different position, so far as costs are concerned, in page 1285 in paragraph 23. I say no more than what is in our paragraph 23. We are the only persons who raise that issue. If your Honour pleases.

FRENCH CJ: Yes, all right. Thank you.

MR BATHURST: Your Honour, may I raise one issue which I should have raised before? We will be seeking leave to file a notice of contention on behalf of Mr Koffel and Mr Gillfillan, the American directors. Your Honours will recall their position. There is a concurrent finding they did not know about it. The issue is narrow, whether overseas directors in that position are entitled to rely on the people who in fact had the press release. So it will involve no further factual material.

FRENCH CJ: Yes, thank you. Yes, Mr Oslington, my apologies.

MR OSLINGTON: May it please the Court. Since we filed our application for special leave to appeal the Court of Appeal delivered the decision on Mr Morley’s penalty and Mr Morley was successful in that he achieved a finding of honesty and the period of disqualification was reduced so that it expires in about three months time. In those circumstances, we have agreed with ASIC that we will no longer pursue our application for special leave to appeal in exchange for ASIC’s promise not to seek leave to appeal the penalty judgment against Mr Morley and that each party pay their own costs in the High Court, and we will file minutes in the Registry to give effect to that.

FRENCH CJ: So that will simply be application dismissed. Each party pay their own costs?

MR OSLINGTON: Yes, your Honour.

FRENCH CJ: Yes, all right. Thank you very much, Mr Oslington.

MR GAGELER: We accept that we need to clear grounds 2 to 5. The question is whether we can comfortably leave it at that. The critical paragraph in the Court of Appeal’s judgment, your Honours will recall, is at page 998 of volume 4, paragraph 796:

There was some basis for finding that the Draft ASX Announcement Resolution had been passed, although in our view not with the weight seen by the judge.

Then this is the critical sentence –

Having regard in particular to the failure to call Mr Robb, with consequences for the cogency of ASIC’s case, we do not think ASIC discharged its burden of proof.

There is some ambiguity in that paragraph. On one view what the court is saying is but for the duty identified and but for the consequences identified the trial judge’s approval finding would stand. Now, if that is the correct understanding of what the court was saying, then if we succeed on grounds 2 to 5, we also succeed on ground 7 and we also succeed on ground 11 and the High Court need not be further troubled by the case.

The difficulty is that is not the only available reading of what the Court of Appeal has there said and it is not the reading for which Mr Bathurst himself contends. He contends that the Court of Appeal is to be interpreted as saying yes, there was that factor but there were other factors as well. He wants to confine ASIC in the appeal to the High Court to grounds that he wishes to contend are moot, in any event. In our submission, to guard against that possibility it is appropriate that the other grounds be before the Court. They are grounds which, on one view, are not necessary grounds, in any event.

If the ultimate conclusion of fact as to the passing of the relevant resolution is to be contested before your Honours, either by reference simply to an ambiguity in the Court’s judgment or on the basis of notices of contention, then your Honours will have to weigh the relevant facts. These other grounds really just go to the weight given to some particular elements of fact. When I say “some particular elements of fact”, ground 10 is really quite important. Ground 10 speaks to the weight to be given to the resolution recorded in the minutes that your Honours would see at page 904 of volume 4, paragraph 465, that resolution, being in quite clear cut terms and having been approved at the subsequent meeting of the board.

FRENCH CJ: The April meeting?

MR GAGELER: The April meeting, yes. So there it is. Those minutes were said by the Court of Appeal to be very much open to question and to be treated with considerable reserve. These are minutes of a board meeting of a public company approved at the subsequent board meeting and, in our submission, it would rise to the point of principle simply the question of how much weight ought properly be given to minutes of that nature. If your Honours please.

HAYNE J: That is a statutory question, is it not? Does not the statute speak about the records?

MR GAGELER: Yes, it does.

FRENCH CJ: There was some issue about whether the statute was engaged, was there not, in this case?

MR GAGELER: There is no doubt that they are business records. There was some technical point - - -

FRENCH CJ: About the Corporations Act?

MR GAGELER: - - - about the Corporations Act. I think they were not recorded within the relevant time for the Corporations Act provision to apply, but they were certainly business records. Your Honours, we do not see this as a five-day case. The question of the making of the resolution and the terms of the resolution really go to what happened at one meeting. This case did take a long time in the courts below. We see it as going no more than two days in the High Court, assuming all issues to be in play.

HAYNE J: Implicit in that, is there some estimate of how long ASIC is seeking to address the Court? If leave were granted on all issues, how long would ASIC want to address the Court?

MR GAGELER: Four hours.

FRENCH CJ: I understand the record below comprised 9,000 pages in the hard copy version together with a penumbra of electronic records, is that correct?

MR GAGELER: Yes, your Honours. I will be pointing to the minutes and attempting to guide your Honours through the dust. The question of costs of Mr Jucovic’s client, we have addressed in writing at page 1289. Your Honours will see there that we submit that there ought be no condition on the grant of special leave. I have nothing to add to that. If such a condition were imposed, we would of course comply with it.

FRENCH CJ: What do you say in response to Mr Shafron’s application for special leave?

MR GAGELER: We have nothing to say in response to that.

FRENCH CJ: And the Morley application, I think Mr Oslington has indicated that has been resolved?

MR GAGELER: Yes, and so far as is necessary we consent to that being done without cost.

FRENCH CJ: The Court will adjourn briefly to consider what course it will take.

AT 9.54 AM SHORT ADJOURNMENT

UPON RESUMING AT 9.58 AM:

FRENCH CJ: We are of the view that there should be a grant of special leave in each of the matters on all of the grounds advanced, save for the application S41 of 2011 of Morley v Australian Securities and Investments Commission which will be dismissed with no order as to costs. The question of the costs of the appeal and of the application today ultimately can be dealt with and submissions renewed along the lines that were put, I think, by Mr Jucovic at the hearing of the appeal.

It would assist us if the parties were able to lodge with the Registry today by 1 o’clock a copy of the core appeal book which was used in the Court of Appeal. We would propose that the matter come back for some programming directions before Justice Hayne at 2.15 pm. Does that create a difficulty for anybody? All right. The matter will be dealt with on that basis and Justice Hayne will resume in this Court to deal with some programming directions to ensure that the case is adequately managed. We would allow, notwithstanding the estimates that have been put to us, three days for argument in the matter. The Court will adjourn briefly to reconstitute for the next matter.

AT 10.00 AM THE MATTER WAS CONCLUDED