Australian Securities and Investments Commission v Hellicar & Ors; Shafron v Australian Securities and Investments Commission [2011] HCATrans 295 (27 October 2011)

Last Updated: 27 October 2011

[2011] HCATrans 295

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S176 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Appellant

and

MEREDITH HELLICAR

Respondent

Office of the Registry
Sydney No S177 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Appellant

and

MICHAEL ROBERT BROWN

Respondent

Office of the Registry
Sydney No S178 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Appellant

and

MICHAEL JOHN GILLFILLAN

Respondent

Office of the Registry
Sydney No S179 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Appellant

and

MARTIN KOFFEL

Respondent

Office of the Registry
Sydney No S175 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Appellant

and

GREGORY JAMES TERRY

Respondent

Office of the Registry
Sydney No S180 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Appellant

and

GEOFFREY FREDERICK O’BRIEN

Respondent

Office of the Registry
Sydney No S181 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Appellant

and

PETER JOHN WILLCOX

Respondent

Office of the Registry
Sydney No S174 of 2011

B e t w e e n -

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Appellant

and

PETER JAMES SHAFRON

Respondent

Office of the Registry
Sydney No S173 of 2011

B e t w e e n -

PETER JAMES SHAFRON

Appellant

and

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Respondent

FRENCH CJ
GUMMOW J
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 27 OCTOBER 2011, AT 10.00 AM

(Continued from 26/10/11)

Copyright in the High Court of Australia

FRENCH CJ: Yes, Mr Wood.

MR WOOD: Might I mention two preliminary matters? I understand the Court has been provided, by Mr Bell, a two-page document in answer to your Honour Justice Heydon’s question concerning Allens’ involvement in the board meeting of 15 February. I do not propose to take your Honours through it or refer to it again.

HEYDON J: Is it in the nature of a submission?

MR WOOD: No, it identifies the evidence that supports the submission made yesterday about their - - -

HEYDON J: I see. I do not have it, but I will find it.

MR WOOD: Thank you, your Honour. Secondly, at the end of yesterday when I was referring your Honours to the power of attorney issue, on page 169 of the transcript at lines 7364 and 7366 I wrongly mentioned that the “notification and a ratification” were in the February board pack for the “February board meeting”. That, of course, should have been the April board pack for the April board meeting.

Your Honours will find the actual document at blue six, page 2590. If I can then take your Honours back to volume 6 of the blue book at page 2674, there are two amendments. This is the sixth draft. There are two further amendments. That is numbers three and four in my counting system. Your Honours will see them between letters L and O and they are references to the tabling of Mr Allsop’s advice and the tabling of a cash flow model. They were inserted presumably by Mr Shafron and that is consistent with him changing this draft to track the meeting; there is no doubt of that. But it is interesting to observe that they are the very two documents that Mr Shafron, of course, sent to Mr Cameron with the notations on the top about being presented or tabled at the meeting.

The final two changes, your Honours will find in volume 5. The first one is at 2105. It is at letter N. This is the fifth draft and this was a deletion, the “Consolidation of shares in Jsekarb”. What you will see in mind there was that all the shares owned by JHIL in Jsekarb were going to be consolidated into one. Now, this idea, consolidation of those shares, was deleted. Your Honours I do not think had explained to you the way in which this separation was to work at the legal level.

If your Honours would be good enough to go across the page to 2104 and remember prior to these contemplated transactions that Jsekarb and Coy were sister subsidiaries – direct subsidiaries of JHIL, so the various steps are set out from (a) through to (f) and the first step involved the issue by Jsekarb to Coy of 1,000 shares and the cancellation of JHIL’s shareholding in Jsekarb. The consequence of that was that Jsekarb becomes a subsidiary of Coy and JHIL would not any longer be the parent.

Then there is the constitution of the foundation. Then there is the deed of indemnity your Honours have heard about. Then there is the formalisation of the company loan between Coy and the company. Then there is an issue of shares by Coy to the trust directly or to a trust affiliate and a cancellation of JHIL’s shares in Coy.

Now, the combination of those steps meant that the two subsidiaries ceased to be subsidiaries of JHIL, Jsekarb became the parent Coy and the subsidiary of the foundation. With those legal steps in mind and when one then thinks about why was there a deletion of the consolidation of shares in Jsekarb, ASIC suggests that is because that step did not happen at the meeting and therefore it is deleted. We say the much more likely scenario is a lawyer, such as Mr Shafron, realised that that consolidation of shares at the Jsekarb level did not need to occur. The evidence does not reveal what is the strategy behind this structure of the transfer of ownership of the subsidiaries to the foundation but we say the probabilities are that that deletion occurred because it was perceived to be either undesirable or unnecessary in the transfer.

The final change your Honours will find a couple of pages over at 2109 under the heading towards the top, “Litigation Management Contract”. Now, that, again, was deleted in the sixth edition, or sixth draft of these minutes, and what that addresses was – and the position of a Mr Attrill, one of the first witnesses called by ASIC. He was what could be described as the claims manager or claims supervisor in relation to asbestos claims for James Hardie and he was employed by JHIL.

The idea was that through a service company, Litigation Management, he would directly contract his services to the subsidiaries whereas this minute seems to contemplate that JHIL would be a party to that contract. Your Honours will find in blue 10 just in two places, very rapidly, what Mr Attrill had to say about this proposed arrangement. Firstly, at page 4677 in paragraph 39 of his affidavit he tells us that:

When I left JHIL on 16 February 2001 and established Litigation Management Group Pty Limited –

a slightly different name than the one in the draft minutes he took various things with him. More particularly, at page 4747 in paragraph 241 he tells us that:

On 15 February 2001, LMG was registered as a company. I was and remain the Managing Director and Secretary. On 16 February 2001, LMG entered into consultancy agreements with Coy and Jsekarb, whereby –

his service company:

agreed to manage asbestos-related disease litigation on behalf of those companies.

FRENCH CJ: So the way you are putting this is a foggy sort of consensus at the meeting itself on 15 February and then a construction exercise by management setting up a set of minutes which reflect one of perhaps a variety of ways of giving effect to that consensus?

MR WOOD: Yes, that is right, and comparing that against the specific allegations pleaded, 55 to 57 of the statement of claim and on the basis of which this case was fought over many months at trial. I am also trying to negative the proposition that close attention was paid after the meeting to making the draft minutes an accurate record of what occurred at the meeting, and they are the six changes that occurred. Two are against me, two are dogmatically for me and two are slightly indeterminate, but the indeterminate ones, being the last two, we say the probabilities definitely favour an interpretation inconsistent with the events actually occurring at the meeting.

The other thing of course to be bear in mind on this topic is the evidence tells us that Mr Shafron was involved in the change between the fifth and sixth draft. He was the one that sent it to Mr Macdonald. The nexus of involvement of Mr Robb is, if not tenuous, non-existent, but one knows, and I will not develop this because I know my learned friend Mr Walker is going to develop it further, that Mr Shafron was engaged in conduct on the afternoon of the 15th and on the 16th entirely inconsistent with him having a belief that there was an unconditional resolution passed to approve for release the ASX draft.

Your Honours also know that five of the attendees at the meeting, being Mr Baxter, Mr Harman, Mr Morley, Mr Shafron and Mr Robb, all engaged in activities later in the day of the 15th or on the 16th inconsistent with an unconditional, unqualified resolution to send that draft to the stock exchange and that, we say, would colour any inference that otherwise is available that Mr Shafron was applying his mind in the production of the sixth draft or, indeed, the final version which only had one narrow change to the sixth draft, to the actual events of the meeting.

Can I go then to the fourth topic concerning the minutes and the last one directly – sorry, I am reminded of one other thing. What else happened in the sixth draft was the insertion of the non-Project Green aspects of the minutes. The draft up to that stage had been a draft prepared by Allens focusing upon the creation of the foundation and Project Green. Things such as the release of the third quarter reports and things of that nature were inserted. We have identified in paragraph 30 of our submissions a series of inaccuracies or errors in those additional and different parts of the sixth and final versions of the minutes, and I will not trouble your Honours with those.

Can I finally refer your Honours back to volume 2 of the green book at page 498, paragraph 30 of our written submissions. What this paragraph does, and it extends right through to page 506, is seek to identify what the evidence reveals to be the inaccuracies or errors in the minutes of all types. To give your Honours a visual appreciation of that, we have put together and provided to your Honours a facsimile of the signed version of the minutes with green notations on it that tie back into each of those subparagraphs so your Honours can see where the inaccuracies are. In certain parts of the written submissions in reply by ASIC they seek to suggest that we are precluded from any reliance upon errors in those minutes or inaccuracies that were not identified by the trial judge or referred to by the Court of Appeal.

We cannot, with respect, see the proper basis for any preclusion, and I will not take your Honours to it, but I will indicate where we are justified in propounding all the errors that are reflected in the document that has the green notions on it and in paragraph 30. They are captured by grounds 3 and 10 of ASIC’s notice of appeal, particularly 10 which goes to the reliability of the minutes. That is in green 1, pages 81 and 82. They are captured by grounds 1 and 2 of our notice of contention, which is in green 1, page 86, and they are captured in grounds 2 and 3 of Mr O’Brien’s notice of appeal to the Court of Appeal, which is in volume 3 of the red book at page 938.

It is also said against us in the written submissions of ASIC that there is a qualitative difference between an error relating to a resolution for the establishment of the foundation and errors going to timing or scheduling. We would suggest that for current purposes, that purpose being, are these minutes an accurate record of what occurred at the meeting, there are no grades of difference or no qualitative difference between them, they are either accurate or they are inaccurate, and we say a close or even brief perusal of our paragraph 30 or its depiction on the signed minutes shows that they are seriously riddled with error.

Can I say finally on that topic in response in part to a number of questions from your Honour Justice Kiefel concerning evidentiary onus and where it fits in terms of the place these minutes played at the trial. Your Honours should not overlook the forensic dynamics of this case at trial. ASIC presented as proof of two of the limbs of the factual foundation for the contravention, the signed minutes. That, if taken at face value and regarded as reliable, would prove distribution of a draft ASX announcement and approval of it.

Now, that evidentiary battle line was met in a series of ways. One in the evidence that was produced to impugn the reliability of the minutes as reflected in our paragraph 30. That was through the cross-examination of people such as Mr Harman, Mr Baxter and Mr Morley. It was also met by the demonstration of proof of contemporaneous conduct of five attendees at the meeting where they acted inconsistently with an unconditional resolution on that day or the next day. It was additionally sought to be contradicted by the direct evidence of the directors who gave evidence concerning their absence of any recollection of the distribution or approval of an ASX announcement at the meeting. So they are the critical forensic dynamics that explain why we say the evidentiary onus that was cast our way about the two matters that minutes would prove was firmly cast back to ASIC and never discharged in the way the Court of Appeal ultimately concluded it was not.

Can I then finally come to my last topic and that concerns a question asked by your Honour the Chief Justice and I think also by your Honour Justice Gummow of whether section 251A can operate in any relevant way on the 3 April 2001 minutes to have an evidentiary significance against us and, more generally, how the 3 April minutes containing the resolution to approve is a correct record of what the February minutes stands. There are two things, perhaps three things to say in relation to 251A and its application to the 3 April minutes.

Mr Cameron’s evidence shows us – and it is in volume 12 and it starts at page 5291 where he refers to the board meeting of 3 and 4 April and going over to 5292 at paragraph 178. The next board meeting is 16 May. He refers in paragraph 178 to the minutes of that May meeting. Those minutes were not in the appeal books. Your Honours may know that this trial was conducted on an electronic basis and most of the evidence was in the ether, so to speak. We have provided to your Honours a copy of those minutes, they were in evidence, of 16 May and your Honours will see that the subject matter of approval of the accuracy of 3 February meeting minutes was the topic on the first page of 16 May meeting.

FRENCH CJ: The 3 April minutes?

MR WOOD: Yes, 3 and 4 April – were approved on 16 May is the correct record. Your Honours will see that at about point 3. That system of approval of the correctness or confirmation of previous minutes is consistent in all of the minutes of the Hardie companies. So it is either subsequent meeting or one or two meetings later the minutes are presented to the board for their confirmation. We also know that what happened in relation to the February minutes is that the chairman signed those minutes as a correct record a few days, at least, after the April meeting.

So the sequence seems to be, the next meeting, as an early item on the agenda, you show last meeting’s minutes. If they are confirmed as a correct record, the chairman then signs them and then they go into the filing system that I showed your Honours yesterday detailed by Mr Cameron. If there is any presumption of irregularity that operate against us, we say this evidence demonstrates that those minutes do not get into the records of the company until more than a month has expired. There is no particular reason on the evidence why 251A would be attracted.

In any event, assume that factual matter against me, section 251A(6), if engaged, only makes the minutes evidence of the proceeding, resolution or declaration occurring at the meeting. Your Honours were taken yesterday to paragraph 54 of Justice Gzell’s judgment that set out that subsection. So what it would do if it was engaged would simply make the April minutes evidence of the resolution to confirm as a correct record the February minutes. It would not operate to make the record of events in the February minutes evidence of those events.

But we still have to face up to the fact, and we do, that the 3 April confirmation can be used as an admission against us. That much we face. But we say if we can demonstrate the unreliability or inaccuracy in the February minutes, as we have done so, to admit that that is a correct record is an admission that takes ASIC’s case truly nowhere.

You can test it in a number of ways. The confirmation of the accuracy of the minutes does not make occur that which is recorded concerning the tabling of the power of attorney nominating Mr Jarvi, for example. It may have all sorts of legal effects in terms of ratification of questions of authority, but it cannot make events occur that did not occur. If that is the true analysis of the nature of an admission of the correctness of a record of an event that did not occur, then that admission rises no higher than the reliability of the underlying document, which is obviously in evidence against us anyway. Those are our submissions.

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

MR JUCOVIC: Your Honours can see from our written outline we propose only to deal orally with two matters, two topics. The first topic is the question of Mr Willcox’s involvement in the 3 April meeting. Your Honours were taken to the liability judgment at 1198 in which Mr Justice Gzell records some of the evidence. We just want to take your Honours to the evidence here. Mr Gageler took your Honours to 1198 of the liability judgement and he is recorded, in the transcript for Tuesday at paragraph 1860, to this effect that:

it was found by the trial judge at 1198 he had received the board papers and it was his “normal practice” to read the minutes through thoroughly.

We take issue with the statement that it was Mr Willcox’s normal practice to read the minutes through thoroughly. Your Honours, Mr Willcox’s evidence in his witness statement in relation to his practice is found in appeal book blue 12 at two places. At blue 12, 5506 at line H Mr Willcox gives evidence that his practice in relation to dealing with board papers prior to a meeting, and he said that:

When reading the board papers it is not my practice to spend much time on the minutes of previous meetings.

Then at blue 12, 5558 at line T Mr Willcox, who did not attend the April 2001 board meeting, he said he read the board papers and:

I have no specific recollection of reviewing the draft minutes of the February 2001 board meeting at the time I read these board papers.

Then the cross-examination on this topic is found in black 6, commencing at 2928 at line S. He says that he did not recall reading the minutes in the board papers and at lines M to N on 2929 he says:

I don’t recall reading the board minutes.

At Q to S he says:

If I read them, I don’t recall seeing anything that was so badly misleading that I had cause to do anything about it.

His Honour records that evidence at 1198, but he does not record that part of the evidence where Mr Willcox said “If I read them, I don’t recall” which prefaced his remark and we say there is no basis for a finding, as sought by Mr Gageler, that he would read the draft minutes through thoroughly as part of his ordinary practice or that he in fact did so and there is, accordingly, no basis for an admission in relation to Mr Willcox in relation to the adoption of the April board minutes. That is the first topic I want to deal with.

The second topic I want to deal with, your Honour, is the question of the description in the Allens bill of 29 March 2001 and the inferences which ASIC seeks to draw against the directors in relation to the involvement of Mr Robb in the actual settling of the minute in the period after the meeting of 15 February 2001. Your Honour, the bill is found in blue 7 at 2826. At the second bullet point between lines P and Q is the description that your Honour has been taken to:

settling various completion documents and board minutes as required by Alan Kneeshaw for JHIL, Coy, Jsekarb, the Foundation and MRCFI –

Your Honours, this is the communication relied upon. Apart from the communication of 30 March that your Honours have been taken to between Mr Shafron and Mr Robb there is no other evidence of any communication in relation to the settling of the minutes of 15 February at all, apart from this letter.

Our submissions really are that on a Briginshaw standard once one understands what the underlying transactions were and what was happening the description of the work done in the letter is not sufficient basis for your Honours to conclude, in the absence of Mr Robb, that Mr Robb was involved in settling the 15 February minutes. We point to the fact that the description of the work done in the 29 March 2001 letter is a compendious description of work done and it is work done as required for Mr Kneeshaw.

Can I take your Honours to the minutes of 15 February which were in green 245 to 250 to make the point that there was extensive documentation required to establish the foundation. They included what came to be known as the deed of indemnity and the establishment fund. Your Honours will see at the foot - and Mr Wood took you to this this morning for a different purpose - of 245 there was a creation of a trust by the company, that is, it became the settlor of a trust deed.

There are a number of steps taken. At 246(b) there was to be a trust deed; (c) there was to be a deed of indemnity; there was to be loan arrangements (d); there was to be issues of shares and payment of money. Then at the foot of that page your Honours will see there is to be a “Consolidation of Shares in Coy”. Relevantly, your Honours will see it was resolved that:

the actions of the Company’s representative Alan Kneeshaw in consenting to short notice and approving the resolution –

was ratified. He is referred to again in a number of steps your Honour will see commencing at 247. There is a heading:

Amendments to the Constitutions of Coy and Jsekarb

...

Resolved to ratify the actions of the company’s representative Alan Kneeshaw in consenting to short notice and approving the resolution.

Coy and Jsekarb Change of Names

...

Resolved to ratify the actions of the Company’s representative Alan Kneeshaw in consenting to short notice and approving the resolution.

Your Honours will see at 248 the first item is the constitution of the foundation. There was a tabling of foundation deed. The second item was the tabling of the indemnity, and that was to be executed by the company. The next item refers to inter-company loans. Your Honours will see the last item on page 248 is the “Shareholding in Coy” and Mr Kneeshaw was appointed as a representative of JHIL to attend a meeting “and vote in favour of the resolution”.

Then at 249 under a heading “Shareholding in Jsekarb” there is a resolution to consent to short notice of meeting and the appointment of Mr Kneeshaw. At the foot of the page there is a resolution that Macdonald and McGregor “be appointed as a committee of the Board to hold and attend any meeting” to effect the Coy and Jsekarb transaction.

Now, Mr Morley’s evidence which is found in volume 12 of the appeal books, your Honours, blue 12, he gave evidence of numerous meetings of the directors and members of Coy and Jsekarb. At volume 12, page 5664, between lines D and M in paragraph 519 of Mr Morley’s statement, he refers to:

various meetings of the directors and members of Jsekarb and Coy held commencing after about 4.00pm on 15 February 2001 . . . These meetings were held in the evening of 15 February 2001 through to the morning of 16 February 2001, finishing after 4am on the 16th. Certain preliminary meetings had also already been held on 14 February 2001 –

He says that the dates on some of the meetings are not correct because:

it was intended to hold a number of meetings on the evening of 15 February 2001, a few of them did not occur until the morning (around 4am) of the 16th.

Now, many of those minutes were put into evidence by ASIC through Mr Cameron whose witness statement on this issue is found at volume 12 of the appeal book at 5275, commencing at line M to 5276 K, and your Honour will see that there are minutes at M. There are various minutes of 14 February of James Hardie and Co, previous name Coy, going over to meetings of Jsekarb at the top of page 5276 going down to line K. Then at 5287 at lines L to P there are references to meetings on 15 February and at 5288 P to S references to meetings again on 15 February, but on a meeting held at 4 am on 16 February.

Now, the work for which Allens charged is said to have been done at the request of Mr Kneeshaw and Mr Kneeshaw is identified in the evidence as the manager of secretarial services at James Hardie. He represented James Hardie in various capacities at some of these meetings. We have attached to our oral submission two minutes, which are in the evidence but not in the appeal book, of meetings of the two subsidiaries. The first document shows James Hardie was there by its representative and it is signed by Mr Kneeshaw. The second document shows that James Hardie was there by its representative, Mr Kneeshaw. So these are minutes of meetings of members. There is also evidence in Mr Cameron’s statement which I need to just take your Honours to shortly at blue 12 at 5285 between lines N and P where he says that he says that:

At some stage prior to 23 February 2001 but after 16 February 2001; I received from Allens draft minutes of the board meetings of Amaca and Amaba.

So when your Honour sees the context in which the bill is rendered as settling various completion documents required, as your Honours can see from 15 February board meetings, to complete the transaction, to establish the foundation, to enter into the deed of covenant of indemnity, and these being completion documents required by Mr Kneeshaw who is the company representative for these meetings, then the statement in the letter of 29 March 2001 takes on a completely different view and has to be read in its context and has to be read against the rest of the evidence about communications between Allens and Mr Shafron in relation to the settling of the minutes of 15 February 2001. Your Honour, those are the submissions we wish to make.

FRENCH CJ: Thank you, Mr Jucovic. Yes, Mr Walker.

MR WALKER: May it please the Court. As you will have seen from the document outlining what we wish to say as respondent in address, it is narrowly focused. It is a topic that is not peculiar to Mr Shafron, of course, and it has already been referred to, I think, by all my friends for the respondents. There is one aspect that is noted in paragraph 2 of the outline which is perhaps special to the argument thus far between us and ASIC. But your Honours will note that the evidentiary material upon which this address relies is all set out in paragraph 10d of our written submissions in-chief, which you will find in the green book at 331 to 332. I will not weary the Court by, as it were, simply reading that, but everything I say is based upon those references.

They produce the three occurrences which you find, or circumstances which you find designated a, b and c in paragraph 1 of our outline for today. They are thus evidence which was available to the Court of Appeal in its assessment of the record for the appeal by way of rehearing in which, for the reasons that have been greatly canvassed already in this hearing, a starting point could be that there was a minute upon which ASIC relied which itself, had been endorsed as correct, as recorded by yet another minute.

Now, if that is an available starting point, and as I will say in a moment the Court of Appeal thought it was, then obviously gathering evidence that may tell against what was conveyed by the minute was an ordinary forensic exercise. Indeed, had the minute of 15 February been ruled by his Honour, as perhaps it might have been, to have the statutory status of evidence subject to contrary proof, then what would have been accomplished would be a formal statutory legislated reversal of onus on such a factual issue, leaving of course exactly the same exercise to be engaged in. What does the evidence considered as a whole and giving its proper role to the legal allocation of onus of proof, what does the evidence yield first for the trial judge then an appeal by way of rehearing for the Court of Appeal on the fact in issue? The fact in issue was that prescribed by the pleading, and I do not want to repeat but I do wish to rely upon what my learned friend Mr Gleeson took you to in that regard.

In particular, we wish to emphasise that it was the pleading itself that drew a distinction, graphically demonstrated by the two different annexures to the pleading, between the 7.24 am draft and the final which eventually Mr Don Cameron, the other company secretary, sent to the ASX, as recorded in paragraph [120] of the trial judge’s reasons. The difference, in other words, played a role for the pleader in assigning different delinquencies in the allegations against the directors, that was the draft release, and the allegation against Mr Macdonald, that was the final release. Mr Macdonald had other statements as well, of course.

So that the fact in issue set by the pleading was going to be the subject of the weighing of evidence according to the allocation of onus in light of the trial judge’s rulings about the minute. Otherwise, of course, naturally the legal onus of making good the facts upon which the alleged delinquencies depended lay upon ASIC.

That is not to say that there could not be of course evidentiary shifts or even in the ordinary to and fro of any forensically presented factual dispute, points at which it can be said more or less informally that the focus has shifted to one party rather than the other to make good or to detract from a proposition that either appears or appears to be missing from the record.

It is in that context only that we draw to attention only what we have listed in paragraph 1 of our outline for today, the details of which have been substantiated by the materials set out in paragraph 10d of our written submissions. The significance of the first is of course the nature of the inquiry. This is obtaining outside consultant’s consent for the way in which they are spoken about, including that which is attributed to them as being, as it were, their position.

One can see why there is a gamut of considerations for general counsel involved in getting approval. There could be legal, and not merely what I might call professional or etiquette consequences, very serious legal consequences for misstating the position of an outside consultant, particularly when, as Mr Loosley’s advice had made clear to the company, it was important that there was respectable outside support that could be called in aid on the critical question of sufficiency of funding.

Now, that meant that from general counsel’s point of view what was important to know was, what is the proposed text to be published attributing to Trowbridge a statement which was important for the company’s separation strategy? That meant, in turn, that one needed to know what was proposed to be published. The issue in this case was the allegation by ASIC that the directors had settled what was proposed to be published by approving the release. That is why they were sued for what had happened at the meeting, a fully accomplished breach of their duty, so it was alleged, regardless of, we know, and before the actual publication of the notice delivered by Mr Don Cameron to the ASX.

Testing, as one ought, in the Court of Appeal what the record revealed about the corporate officers and servants and agents involved, the PR agents - Mr Baxter, Mr Shafron and Mr Macdonald - and all the others that have been named, testing ASIC’s hypothesis obviously involved asking the question: if it is true that that draft was approved by the directors at the board meeting, is it likely that Mr Shafron, general counsel present at the meeting, would be in any doubt as to the wording “attributing position to Trowbridge” for which he needed to seek their consent?

Though nothing lends itself to logical black and white answers in such an investigation, that is the nature of weighing evidence and considering competing inferences, plainly in the Court of Appeal as it struck their Honours it was well justifiable for their Honours to hold that it would not be likely that if what ASIC proposed had happened had happened, Mr Shafron would have been in the doubt that that dealing plainly showed.

It was very telling in relation to the importance to having text in order to get a meaningful consent from the outside consultant whose prestige was being employed, it was obviously very telling that when he was told that Mr Baxter was still working on text to be published, as general counsel he asked, “Whatever you have now please”, the work in progress, the draft continuing. That in turn obviously contributes an element to the overall evaluation of what the evidence said, including what the minutes said, on the issue had there been an approval of a text and more to the point, had there been an approval of the text annexed to the statement of claim in the case against the directors and Mr Shafron.

The second one I do not need to dwell on more than is set out in our written submissions. Mr Shafron simply did not have a text - I think the jargon is soft or hard - to send to Trowbridge in order to show them and so he was confined to talking about paraphrases. Then, in our submission, a significant piece of evidence where I am afraid ASIC and Mr Shafron are at odds about how it was dealt with in the Court of Appeal. It is a significant piece of evidence. It is a very short and telling revelation of Mr Shafron’s and Mr Morley’s mentality after the release of the announcement, that is, after the ASX had received that which, it would appear, Mr Macdonald had approved after Mr Baxter had kept working.

We know there are differences. I return to the fact that the different versions are the subject of different allegations and different annexures in the statement of claim. Mr Shafron asks - it is called the press release, it is most unfortunate wording but it is wording that, I think, emanated from Mr Baxter’s department and had been used throughout the matter. That is why you will find it in both judgments. There is no question that when they are referring to the press release they are referring to that which went to the press as well as to the ASX, it being, of course, salutary to have the same message both to journalists and to the ASX.

Mr Shafron asked who approved it. If what ASIC alleged had happened, there is really no doubt that as general counsel concerned with authorisation - and your Honours have seen the announcement policy to which Mr Gleeson took you - there is no doubt that he would have not needed to ask the question, he would have well known that it had been approved by the board.

An alternative scenario to be considered is it is a question asked by somebody who saw that there were differences - I do not need to dwell on them, your Honours have been told about them - and was asking who approved this press release given that there had been an earlier approval of something different or primitive or, at least, not the same as that which was published. But there is no suggestion and there was no attempt in cross-examining Mr Morley to demonstrate that that was the position, either in Mr Morley’s mind or by what was revealed as to Mr Shafron’s state of mind.

It is said in the written submission against us at the places we have noted in paragraph 2 of our written outline for today that the Court of Appeal did not accept that the conversation that I have just been addressing on had occurred. Could I take your Honours, please, in the Court of Appeal reasons to paragraph [336] first. We see at the foot of that page 69 of the white book, their Honours in train of referring to the differences between that allegedly approved and that finally published:

the changes were significant. This suggests that making them was thought to be open despite whatever had occurred at the meeting, and thus that whatever had occurred at the meeting was less than the draft ASX announcement resolution. If a draft news release was before the board, the board did not give it final sign off as an important announcement according to the process described by Mr Baxter, but the final terms of the news release and ASX announcement were left to management.

At [337] “This gains some support”, and those are the important words:

This gains some support from the fact that others at the meeting appear to have acted on the same basis:

Then what follows, typography apart, is obviously a finding or at least a submission accepted by their Honours in the Court of Appeal. You will drop down to about line 19 on the page and your Honours will see:

Mr Morley gave evidence that on 16 February 2001 Mr Shafron asked “who approved the press release?”

Et cetera. Their Honours note that the trial judge did not make a finding.

GUMMOW J: Is all this based on paragraph 537 and Mr Morley’s statement?

MR WALKER: Yes, your Honour.

GUMMOW J: At white 12?

MR WALKER: Yes.

GUMMOW J: Is that the only evidentiary root of all of this?

MR WALKER: Yes.

GUMMOW J: Your client did not give evidence?

MR WALKER: My client did not give evidence.

GUMMOW J: So when you say 1c, that is not accurate?

MR WALKER: We say that that is - - -

GUMMOW J: Those quoted words are not in paragraph 537.

MR WALKER: You will see that at line V:

Shafron then asked me who approved the press release.

GUMMOW J: Yes, that is right.

MR WALKER: I am sorry, your Honour.

GUMMOW J: That is Mr Morley’s account of something that happened.

MR WALKER: Yes.

GUMMOW J: Mr Morley is not quoting. He is saying what he took the words said to him to be.

MR WALKER: I am sorry, your Honour is quite right. It does not appear in the witness statement as direct speech, it appears as indirect speech. The indirect speech is “He asked me who approved the press release.”

GUMMOW J: Now, was Mr Morley examined on this?

MR WALKER: Yes.

GUMMOW J: If he was examined on it, 537 is not the only evidence bearing on it.

MR WALKER: I did not catch the last part of your Honour’s question.

GUMMOW J: If he was examined on paragraph 537, that is not the only material bearing on this question. Where was he cross-examined on it?

MR WALKER: If you go to volume 2 of the black book, at page 919, about K:

Coming back to the conversation in paragraph 537 –

paragraph 537 is the paragraph in question where both Baxter and Shafron are referred to by Morley. At the foot of 920, V:

You didn’t have that conversation with Mr Shafron –

I think, having failed in that challenge, the matter remained as it did. So, yes, the matter was raised in cross-examination but the evidence was taken no further. It was certainly not qualified or detracted from by his testimony.

KIEFEL J: The trial judge made no finding.

MR WALKER: Made no finding and that is what is recorded by the Court of Appeal in paragraph [337].

HEYDON J: Just for noting, there was cross-examination on page 910 at about paragraph 537, letter H.

MR WALKER: Yes. It is referred to by the cross-examiner at that point, as it were, to draw the witness’ attention, I think, to a matter which the course of questioning that then starts is going to be desired to challenged and that is what is returned to at the pages I have drawn to attention where that appeared to culminate. It is a challenge that employs the witness’ acceptance previously of an event having happened which is at odds with the inference that we and others draw from the reported conversation, namely, that it ad not happened.

HAYNE J: We see that especially at 910, letter V, do we not?

MR WALKER: Yes, quite so.

HAYNE J: But nothing in the conversation changed his belief that the minutes were accurate.

MR WALKER: Quite so, yes.

KIEFEL J: Mr Walker, if the directors voted – and I use the word advisedly – informally, if they resolved informally to allow management to make an announcement to the ASX, not in a form before them but effectively delegated that, do you say that the matter is resolved just as a pleading point? I am looking at paragraph 57 of the statement of claim which is set out at paragraph [228] of the Court of Appeal’s reasons.

MR WALKER: The short answer is no, but I need to go further because there is what can fairly be called a pleading point. First of all, like others who have preceded me at the Bar table, I put to one side as no refuge for us the notion that there is not a formal ballot by hand raised or voices expressed one by one. There is no point in our case on any such distinction.

KIEFEL J: So there might be authorisation. It seems to come down – if it is a pleading question, about whether it requires the specific document to be before the board or whether or not it is sufficient for the purposes of the charge in the pleading that they have allowed management to do whatever and therefore have authorised it.

MR WALKER: Yes. A pleading that the directors were delinquent by what I will call in the circumstances excessive delegation proved to be excessive after the event because of a misleading publication. That would have been not conveyed by 57 and is not conveyed by 57. The pleader sought to obtain the advantage of what appeared in the record, and that includes the minute and the draft and combining the two, to be able to say that the draft conveyed things which directors acting properly could not have approved and then derivative allegations against my client in that regard.

I am concentrating there on 57(a) and I am looking at it as a matter of substance. It is the approval by the means the board voted, or effectively voted, and approving the draft ASX announcement, which we know by its capitals and by its annexure is a particular document, is not a stationary exercise. There would be no point in that. It has to do with the text. The text was different from the final announcement in the respects that have been gone over and over, I do not need to go back to, and the pleader regarded the differences as material because of the way in which the case was pitched against Mr Macdonald with respect to that publication.

KIEFEL J: But I suppose that raises the question, is it, because there may be a finding open that the directors informally voted in favour of a resolution, approving the announcement that was in fact made? So if you take the word “draft” out, that would prove the announcement.

MR WALKER: Your Honour, it is obvious that the case could have been pleaded and run differently. In our submission, it is far too late, indeed was too late in the Court of Appeal, for ASIC to transform the case to one of the substance or the imputation, if I can borrow from defamation, the imputation to be found in the draft ASX announcement and to say that that was, without the document being present or without the document being approved as final, that was delinquency of the directors. They did not plead, they did not undertake to prove that. They said here is the document and here are the minutes and then as the trial got underway, there was the falsification attempted by the directors of the minute, and that simply has the effect of meaning that all the evidence going to the fact in issue was the draft ASX announcement approved had to be considered. Once one puts aside the informality of votes, about which there was never a point taken, it came down to recollections and records.

HAYNE J: Your proposition is one which takes as its premise an acceptance of the fact that the only draft in existence at the time of the meeting was the 7.24 draft, is that right?

MR WALKER: No. The evidence showed there was another one, line 53 or whatever - - -

HAYNE J: But do you accept that it is the 7.24 draft that was taken by Baxter to the meeting?

MR WALKER: That is the finding, that is a premise of what I am arguing, yes.

HAYNE J: This branch of the argument is, as I understand it, the fact that management considered itself at liberty, having had reference to experts named in the report and others – I interpolate, reference not earlier made – that management considered itself at liberty to alter the text points, suggests, demonstrates, one of those - - -

MR WALKER: Nothing is conclusive.

HAYNE J: - - - that no approval was given to the draft?

MR WALKER: That is correct. There was not, in particular, a case run or, for that matter, admissions extracted that any member of management, Mr Baxter for example, considered or thought or consciously took the risk of being in breach of a mandate from the board.

HAYNE J: There are a few other things on the table, are there not? First, urgency.

MR WALKER: Quite so.

HAYNE J: Second, the need to make the announcement next day.

MR WALKER: Yes.

HAYNE J: Third, the need to sign off with the experts which had not been done at the board meeting.

MR WALKER: Quite so. The Court of Appeal, with respect, took all them into account. An exemplar, not the only place, an exemplar of that is to be found at paragraph [432]. This is in the course of their Honours dealing with a process of reasoning by the trial judge which went, in effect, to what their Honours in the Court of Appeal called the singularity of purpose reasoning. If the document was there, which the trial judge found, it was there only for the purpose of approval, therefore it being there supported the case it was approved. Now, I hope I have not done injustice to the trial judge’s reasoning but that is, I think, a fair paraphrase of what their Honours in the Court of Appeal were in the course of considering in the holdings that conclude in paragraph [432].

Your Honours will see a reference to it being “expressly subject to refinement”. That, you will recall, derives from a pre-meeting, just pre-meeting, assertion by Mr Baxter very evocatively in the course of settling, if I can call it that, or fixing on the form of the draft that went to the meeting and saying, in effect, there will be more work done on this, subject to refinement. He was not talking about a committee settling it at the board meeting, quite plainly, and he did not act thus either. There is no record of a settling by committee at the board meeting and there is record of him refining, if that is the right expression, certainly changing, later.

A few lines further down about lines 7 or 8 on the page you do see the reference to the urgency, “a last minute affair”. Their Honours there talk about “any distribution and discussion”. They are testing an argument here and reasoning. They are not finding there was distribution or discussion, that is, even if there had been distribution and discussion, they are concerned to consider what his Honour had reasoned at first instance, namely, if it was there, it would only be for approval, and they were saying, no, any distribution and discussion was to inform the board of the work in process. It was treated as work in progress because progress continued. No one was heard to say and no one was invited to agree that they had continued in breach of mandate to work where work had been finalised. That is the significance of their Honours holding about line 12 or so, “That, in essence, is what happened.” I stress, this is a paragraph for the purposes of overturning the reasoning at trial about so-called singularity of purpose, but it does cut across the whole territory as well.

FRENCH CJ: The concept of approval is consistent with a so far so good assent to the draft.

MR WALKER: Yes.

FRENCH CJ: Arming management with the authority to proceed within that general framework which, of course, included the critical message referred to in the pleadings of a fully-funded foundation.

MR WALKER: Of course it is consistent with that, and there are many terms that are used in day-to-day administration and commerce for that purpose, such as, “in principle”, et cetera, and many resolutions in relation to announcements will include familiar phrases such as “subject to”, in this case, “Allens settling” or “subject to senior counsel advising”, et cetera, often delegating to a chief executive final responsibility. Now, none of that appears in the records here and we know the record in question, the minute, is one that was made before the event. That does not prevent it from being a reliable record after the event. A minute drawn beforehand, uses an agenda with somebody ticking boxes as they are accomplished is, with respect, an extremely reliable record of a meeting, but no one has suggested that is how it was used here.

So in this overall evidentiary contest concerning the fact in issue there cannot now be, in our submission, a substitution of what I might call a more diffuse fact in issue than that which was pleaded at 57(a) of the statement of claim. In particular there cannot be the substitution that the board approved in principle the key message of certainty of sufficiency of funds. That would have been extremely straightforward as a pleading. It is not what was done and it is certainly not the way the case was fought.

My learned friend, Mr Gleeson, took you to various junctures in the hearing where the point was taken by way of, as it were, a point of arrest, an invitation for an amendment application, et cetera. Those are, in our submission, very powerful indications that it was too late in the Court of Appeal for the case to be so changed and certainly too late here.

Now, 57(b) in the pleading, which really does not play a great substantive role, one might have thought, is nonetheless still in the pleading and it really only goes to emphasise just how particular and specific and peculiar to the annexed document the pleader was making the allegation. There is this idea of a corporation authorising the execution of the announcement. That is language that we know comes from very common form resolutions, of which there are examples in this case for transactional documents to be executed.

It is perhaps a little odd for an ASX announcement but adapting it to the exigencies of such a document, Mr Cameron sending an office company secretary, I suppose, would fill that bill. Then the idea that the directors voted in favour of resolution to send it to the ASX as such, in our submission, again ties it very strongly - we are talking about a palpable object to be transmitted no doubt rather than conveyed physically, but nonetheless it is a fixed text. That is how the pleader chose to do it and for the reasons we have put that cannot now be moved away from.

Could I, in relation to the minutes, offer something in answer to a question Justice Bell asked yesterday in relation to the Court of Appeal dealing with the particular aspect of the minute which is in question in this case? What we offer in that regard starts, we think, obviously enough at paragraph [469] at page 93 of the white book. It starts at [463] of course, but the particular point I want to make starts at [469]:

The minutes none the less remained as evidence –

That picks up our point, on any view, given the ruling that is not before this Court under the statute - they were evidence and obviously important evidence. That is recognised at the very beginning of [470] - “ordinarily”, that is the same as “prima facie”, “ordinarily be good evidence”. Indeed, one might even venture, even without statutory status, they are presumably the best evidence. The importance of them as part of the case is explicitly recognised in [470]. I am not going to dwell on passages with which your Honours are very familiar.

The reasoning continues. The holdings culminate at [497], several pages over, and the minutes have not, as it were, in relation to the passing of the resolution in question, they have not moved away from central focus. They retain central focus, as they should, in the way I have suggested. They are there requiring to be falsified by the directors in order, and without any worry about legal onus or evidentiary onus it needs to be falsified simply because if the minutes was the only evidence on the point, then they would no doubt carry the day. That is recognised at [497]. But being evidence, powerful admissions, it can be said, of the formal organic kind in the governance of a corporation, nonetheless, like all admissions, shorn of statutory status, their reliability and weight falls to be considered in the context of all of the material.

HEYDON J: This is a point that has been made several times in the last three days. What is your present point?

MR WALKER: My present point, your Honour, is that – the answer to Justice Bell did not include a reference to this passage of the reasons and I wanted to draw it to attention. It includes, in particular, the landing place at [488], on which I do not need to dwell, but it is an answer to Justice Bell’s question. This whole passage, including [488], is, we would offer, where the Court of Appeal did what Justice Bell asked about.

Finally, in relation to the issue upon which Mr Shafron’s post-meeting conduct was relevant, namely, weighing up ultimately whether the minutes were falsified in this regard, it is important to bear in mind that there is what might be called a flying start to the case for the directors and Mr Shafron in that regard because ASIC’s case said that the minute was wrong. ASIC’s case said that what was sent to the ASX, executed if you like by the corporation, was not that which was approved, said ASIC, at the meeting.

HAYNE J: Why does that make the minute wrong?

MR WALKER: Your Honour, ASIC’s case was that the minute recorded the approval of a document which was not sent to the ASX.

HAYNE J: Management changed it, so? How does that make ASIC’s case deficient?

MR WALKER: Your Honour, we may be at cross-purposes. Let me explain. ASIC’s case was that the minute which speaks not of the particular document but of that which goes to the ASX, that the minute in fact recorded the approval of something which was not sent to the ASX. So on the face of the minute the ASX announcement, the announcement that went to the ASX, was not the one approved. Now, that does not falsify the minute so long as one knows the content of the expression in the minute of the document. The pleading supplied that content by saying it was the draft avowedly, said the pleader, not the one sent to the ASX.

So ASIC’s case was that the minute on its face until by the pleading and the evidence proposed by ASIC, you saw the contents supplied in their case, that the apparent bland authorisation of the ASX announcement was not in fact what had occurred. The ASX announcement – that is the one that went to the ASX, I am not talking about drafts – was not approved. It is for those reasons, in our submission, that the very change upon which there was such explicit attention placed by the pleader for ASIC, the very change of document from draft to final, is one which, in our submission, gave purchase to what became the forensic contest as to whether the minute or the various recollections, lack of recollections and records, to which reference has been made, would support inference one way or the other.

GUMMOW J: What do you say about paragraphs 64 and 65 of the pleading in red 1 at 197?

MR WALKER: That, in relation to the pleading at 57, that remained the conduct upon which ASIC relied, in particular, the representations in 64 were not the subject of the alleged wrongdoing.

HAYNE J: I am sorry, put that again.

MR WALKER: The alleged wrongdoing was approving the draft ASX announcement.

HAYNE J: I understand that. What was the last proposition you put?

MR WALKER: The representations that are found in paragraph 64, for example, the making of them was not said to be that which the directors had wrongfully voted in favour of.

HAYNE J: I maybe mistaken, but I think that the text of (a) to (d) of 64 would not be greatly different from the text of the declaration of contravention?

MR WALKER: Your Honour is right, yes.

FRENCH CJ: The conduct, of course, is 119 in the premises.

MR WALKER: Yes. May it please the Court.

FRENCH CJ: Thank you, Mr Walker. Yes, Mr Solicitor.

MR GAGELER: If the Court pleases, Mr Bannon will do the reply.

HEYDON J: Mr Bannon, can I just ask you a question. Mr Walker was talking about paragraph [337] of the Court of Appeal’s judgment which is on page 70 of the white joint appeal book, this conversation between Mr Morley and Mr Shafron on 16 February. Did the Court of Appeal ever return to that topic later in its judgment?

MR BANNON: Not so far as we are aware, your Honour. I was going to address that in more detail, that conversation, but as perhaps a prelude, paragraph 218 of the trial judge’s judgment agreed. His Honour found that Mr Morley was mistaken in the evidence he gave that he saw Mr Robb write the word “anticipated” on a draft of the press release in the early hours of the 16th for a number of reasons. One was, by that stage the draft had been overtaken, 7.28 – the word “anticipated” had already been included in the 7.28 pm draft. Firstly, there is no document which records his handwriting in those terms. The Shafron conversation is based in part on a reference to him saying, “I saw Mr Robb writing ‘anticipated’”.

The cross-examination, which I will take your Honours back to, proceeded in part on attacking his evidence in relation to Mr Shafron because he incorporated as part of it something which we say never happened, namely, I saw Mr Robb writing “anticipated” on the work. There are other matters that we say the trial judge did not accept that evidence. There is no finding in favour of that evidence in relation to Mr Morley and one of the pieces of evidence which was admitted against him and not others was his, again a matter about which there was cross-examination, agreement in a submission made by JHIL to the Jackson inquiry that the resolution had, in fact, been passed.

That was a matter which was admitted against him on the basis that, to the extent anyone would seek to rely on Mr Morley’s evidence as reliable, we, ASIC, could rely on any matters admitted against him which go to his credit. But I will come back to that in a little bit more detail.

The draft minutes of the 15 February meeting were only draft unless and until they were approved by the directors. That occurred on 3 and 4 April, a two-day meeting in California, the minutes for which appear at blue 7, page 2839. I do not need to take your Honours to that. Unless and until they approve them they were no more than a draft. When they did they became a correct, purportedly correct record of the company, not only of what – an act of the company but an act undertaken by them. It was a record in substance of what they said they had done.

There is no issue that that resolution approving the minutes was passed in April. That is trial judgment 1193. His Honour also records that as was the fact that the draft minutes were included in the board papers sent to each of the directors well prior to that meeting. In relation to Mr Willcox, although he was not present at that meeting, as his Honour records, the trial judge at liability judgment 1198, and your Honour has heard from Mr Jucovic the evidence in relation to that, there are two pieces of evidence one needs to add to that.

Firstly, at volume 12, 5505 at point S of the blue book, he there says in paragraph 17 that he would spend between “one and three days” depending on the volume of the material, working his way through the board papers. Secondly, in black volume 6, may I emphasise at 2928 within the body of the material to which my learned friend, Mr Jucovic, took your Honours, the answer he gave at T 2928. He accepted that he read the board papers. He accepted that they included the draft minutes.

At T, all he is simply saying is he cannot recall now reading them. He understood that one of his functions as a director was to read them and the next question and answer, if there were matters materially incorrect he understood it as one of his duties to report that to somebody. He found nothing in there misleading – sufficiently misleading to cause him to act to the contrary and those answers down to point R on 2929. The effect of that is that by his conduct he admitted the correctness of those minutes as well.

My learned friend, Mr Jucovic, has taken your Honours to an issue in relation to the Allens bill at volume blue 7, 2826. It raises and puts perhaps into true perspective a number of the arguments which have been advanced on behalf of the directors in this case. At 2826, the words, as your Honour knows, say:

settling various completion documents and board minutes as required by Alan Kneeshaw for JHIL –

As has been pointed out, this was a complex transaction. The minutes included part of the necessary steps to achieve the outcome which every director sought to achieve, namely, the separation, which the company has asserted to the public that it achieved and which no director asserted to this Court that they did not achieve. If one goes to the signed minutes in the green book at 245 under the heading “Creation of Foundation”, there are a series of matters referred there; an (a) steps in relation to cancellation of shares, the issue of shares; over the page, constituting the foundation, a series of steps, consolidation of shares; over the next page at 247, establishment resolutions, amendments to constitutions, change of names, appointment for the records.

These are not matters which can be done otherwise than by corporate acts, otherwise than by resolutions of the directors and these are necessary to achieve the completion and effect of separation. It is noteworthy within that section that the last matter within that section at page 250 is the ASX announcement. In other words, what one had obviously was an experienced firm of solicitors making sure everything happened which had to happen to effect this and that all legal obligations were complied with, one of which of course was complying with the listing rule, as picked up by the relevant legislation. That is why one may infer that the ASX announcement appears as one of the necessary matters to occur.

One of the possibilities that this Court can consider, I guess, is to say separation never occurred, the directors never passed these resolutions, that is one possibility. Some of the submissions your Honours have heard over the last three days come adventurously close to putting forward that proposition. It is not a proposition which has been found by either tribunal below. To the extent my learned friend, Mr Wood, invites this Court to list a whole series of other errors, or a whole series of resolutions were not passed, the critical resolutions which affected foundations, we would submit that is not an invitation which this Court would find remotely attractive for the first time to, in effect, find that those resolutions were not passed.

Our case as pleaded and as relied upon was, we say, that the directors did what they say they did, which was to pass a resolution approving an ASX announcement. It was not part of our case to speculate the way in which they did it, the degree of formality with which they did it or the words which were used. They had their own forms of procedure which did not require investigation or speculation by us or by the Court. A good example of that is a point taken by my learned friend, Mr Gleeson, to the effect that – it is inevitable, I speak in advance.

HAYNE J: You are in a hole, stop digging.

MR BANNON: It is a hole I am quite enjoying. But was to say it is clear by reference to evidence of Mr Baxter that Mr McGregor did not himself table the announcement. We address that matter in green submissions at 521 in paragraph 7, the last sentence:

Ms Hellicar conceded that a reference in JHIL minutes to a document being “tabled” by the chairman did not necessarily involve the chairman distributing copies, but embraced him referring to a senior officer who might distribute it.

The reference is given at transcript 16, I will not go to it, is she was asked and she agreed you did not expect poor old Mr McGregor to be the person who physically wandered around the room handing it out. It was sufficient, and everyone accepted it as sufficient and accurate if Mr McGregor said something like, well, Mr Baxter has got a document to distribute, for example, and that was treated as tabled. They had their own shorthand ways of dealing with things. Our case was then and is now sufficient within the pleading we say they did what they say they did.

My learned friend, Mr Wood, also invited your Honours as part of an exercise to say notwithstanding numerous references to the tabling of documents, they were never tabled. Firstly, that is not a finding which has been made by either the tribunal below. Secondly, it was sought to be made by reference to evidence of Mr Cameron. If I could invite your Honours to go to black 1, it starts at 172, the relevant cross-examination, but between 172 and 175, and I will not invite your Honours to read all of it, but I can just focus on a couple of answers. At 174 between D and M, effectively what has been put to him is saying you have purported.....you will have to set out everything which was tabled or everything that you can find in your file. And he says, no, well, there was another file. Again at page 175 between between L and R it said “you haven’t referred to that” and at O:

Q. That would suggest that it actually didn’t make it into your files, wouldn’t it?

A. No, I think that’s probably drawing a bit of a long bow. The fact that I don’t – I’ve never been asked “Did you get that?”, or “Didn’t you get that?”; I would have to check to see whether I did.

What that evidence is effectively saying, to the extent the submission is put, this was an attempt to comprehensively identify every single document which was tabled. No. And was this an attempt on our part to prove every single resolution in the case? No. Did we expect that directors of a public company were going to run a case to say all those resolutions we said in the past, including these ones, by reference to tabled documents that they never happened? We did not expect that and neither did this witness. Mr Wood’s submission is not well founded on the evidence, if I may say so.

We have prepared, at the risk of – not without some trepidation – a further response to Mr Wood’s minutes document which has been circulated. It includes our response to his responses, the effect of which I can summarise and I do not think I will take your Honours to it, is we identified as scheduling errors, in other words we have already identified that.

GUMMOW J: Just slow down a minute, Mr Bannon. What is this document?

MR BANNON: This is a response to Mr Wood’s document. So in effect it picks up Mr Wood’s – the minutes – it picks up what Mr Wood has said by reference to blue, that is his matter which he relies upon purporting error, and in brown underneath – red I think it is – is what we say in response. We indicate where there was no finding and in particular where there was no finding based on evidence of various directors, none of which was accepted by courts below, and the invitation, in effect, is to have this court for the first time accept evidence of directors, in effect, saying, guess what, we did not actually pass all those resolutions.

BELL J: Mr Bannon, at the base of your document, on the left-hand side, does it have Legal\305430554.1?

MR BANNON: Yes.

GUMMOW J: Tiny print at the bottom of the very first page.

MR BANNON: I am sorry, your Honour? Yes.

GUMMOW J: Justice Bell asks you. I am curious too. 305430554.1.

MR BANNON: Yes, I am sorry. It is simply a word processing - - -

GUMMOW J: Yes, I know. Do we have the right document?

MR BANNON: Yes, it is. I am sorry, yes. Yes, I am sorry, your Honour, I thought I said yes. Your Honour Justice Gummow the other day referred to the fact that failure to comply with the relevant section in relation to the keeping of minutes involved a criminal offence, picked up by the Criminal Code. There are two other provisions of the law at the time which were relevant, 1307 and 1308 – and I think we have provided separate copies to the Court – one of which related to falsification of a record - falsification of books, that is, subsection (1):

An officer . . . of a company who . . . falsifies any . . . books affecting or relating to affairs of the company is guilty of an offence.

Section 1308(2):

A person who, in a document required by or for the purposes of this Law . . . makes or authorises the making of a statement that to the person’s knowledge is false or misleading in a material particular . . . is guilty of an offence.

Persons who aid and abet are picked up by the Crimes Act in section 5 - aid, abet or procure, et cetera.

GUMMOW J: Just stopping a minute, would 1308(2) attach to the minutes approved at the later meeting?

MR BANNON: Yes, we would submit it would.

GUMMOW J: Because that is a document required by the Act?

MR BANNON: Yes, required by the law to be kept. The respondent’s contention amounts to this. We as directors were not told about and we did not approve an emphatic announcement it is going to the market and if we had been asked to, we would have said no. Those responsible for preparing the minutes include obviously Mr Shafron and other members of management, and I will come to Mr Robb as well. Each of those persons must have been aware on any view of what happened at the meeting and if it be the fact that the director’s did not approve an announcement and, secondly, what was contained in the minutes that the minutes contained that resolution, there is no other conceivable conclusion to it. So what does the respondent’s case amount to? What, that management, including Mr Shafron, with the assistance of Mr Robb - - -

GUMMOW J: I am sorry, I am just being slow. Looking at 1308(2), the company would make the statement, but the directors would authorise it?

MR BANNON: Yes.

GUMMOW J: So they would be, as it were, distinctly liable?

MR BANNON: Yes. Then anyone aiding and abetting that exercise or knowingly involved would also be liable.

GUMMOW J: Yes.

MR BANNON: Those would include persons involved for presentation of draft minutes, which they must have known were false, on the respondent’s case, to the board for approval. What that involves, in effect, that management knowing, and one has to include Mr Shafron and Mr Robb in this, knowing that the board had not approved an announcement, they were going to try and pin responsibility for the announcement on the board and how they were going to do that? By getting the board themselves to admit they had done it by approving the minutes. What does that involve? What, that they could rely on the fact that nobody on the board would read the minutes or that the board would forget that they had approved the most important announcement in the history of the company’s affairs – sorry, had not approved the most important announcement in the history of the company’s affairs? There is an air of unreality about it.

There were two other elements to it, of course, which are referred to in the Court of Appeal’s judgment and the trial judgment. Firstly, there is no dispute that each director was sent, shortly after the meeting, the final announcement. There is no dispute that there was a fax which was sent which referred to organising a telephone conference, on the Tuesday I think it was, to discuss the reaction to the announcement. Now, whatever one gets out of that, and the Court of Appeal did think you got much out of it, but we beg to differ but it does not perhaps matter so much for our purposes, how does the respondent’s version of events stick together in accordance with ordinary probabilities?

We respectfully submit there is no plausible or sensible way through that morass which reaches a conclusion which is sensible and the bright light perhaps which shone on the minutes and the obvious implications of it, which we relied on in our closing submissions and which we relied on in our opening submissions without any reference to evidence of Mr Robb because we did not have any, got lost in the Court of Appeal under the spotlight of what we submit is an unfounded aspiration or principle.

Could I next address a matter which was raised by my learned friend, Mr Gleeson. My learned friend submitted that the bill copy, if I can use that shorthand expression, could have been received by Messrs O’Brien or Terry in a separate line of communication. Firstly, it could not have been received before the meeting. Everyone has agreed with that, but the trial judge’s finding at [224] was it was not issued to anybody before the meeting. There was no logic to it being provided after the meeting by which time the document had been superseded. That was the Court of Appeal’s logic in endorsing the trial judge’s finding in relation to the Allens copy. That appears at [383], if I could take your Honours to that, in the Court of Appeal’s judgment. In the second sentence of paragraph [383] their Honours say, amongst other things:

it is not likely that they would have done so unless they received it at the meeting, since it was supplanted by the 9.35 am version.

That same logic would inform separate provision of the BIL document to the BIL directors, and it is not without moment that their Honours in the Court of Appeal, although they refer to the separate communication argument back in [375], do not seem to fasten on that. The one they fasten on is the one which appears at the last sentence of [382], namely, the Jackson inquiry theory. We have addressed the Jackson inquiry theory in our submissions in detail at green 215 at paragraph 136, but the effect of that, and I will not trouble your Honours to go through the detail of it now, but the effect of it is, firstly, no one submitted to the Court of Appeal that that was one of the likely means that the BIL directors received that document. That is conceded by our learned friend’s, Mr Terry, submissions, green 363, paragraph 49, and no one else raises to the contrary.

It was not raised in argument by the Court of Appeal to give the parties an opportunity to address it. If we had been given that opportunity, we would say then what we say now, namely, those gentlemen had nothing to do with Mr Jackson’s inquiry. They had left the company by May 2001. The persons who were involved in the Jackson inquiry and who gave declarations of interest, about which your Honours have seen reference in the judgment, were Mrs Gillfillan, Mr Brown and Ms Hellicar. Furthermore, the evidence of Mr Cameron was, as your Honour knows and found by the trial judge at paragraph [209], they did not keep copies.

The other error made by the Court of Appeal which we have identified and no one takes up the challenge, which was to suggest that Mr Cameron’s – and this is all in that part of our green book submission – was to say that the Mr Cameron evidence did not address the 2001 situation. It did. Everyone effectively concedes that. So if you take that brick out of the wall, namely, that they had nothing to provide to the Jackson inquiry in that form and that the BIL directors had nothing to do with it, then that collapses that theory about the Jackson inquiry.

Can I just add this? Can I invite your Honours to go to the trial judge’s judgment at paragraph 111. This is a non-controversial matter but it is worthy of note in the context of this bill copy. At paragraph 111 his Honour records at about point K that the document which was attached to the email of 7.24 was the same terms as the draft notes except it contained text boxes. I do not need to take your Honours to it but the text box version of it appears at blue 5, 2086. Then at paragraph 129 of the judgment his Honour records Mr Baxter’s evidence at point L that he took the announcement without the boxes to the meeting. Then at 195 his Honour records it would have been a simple matter to remove the boxes. Then at 196 records that the BIL copy is the same as the draft announcement without text boxes, and 209 I have referred to earlier, namely:

the Draft ASX Announcement was not produced from the records of JHIL.

In other words, in a non-text box version the only copies in existence were the ones produced by BIL and the ones produced by Allens. As his Honour records in the combination of 209 and 210, was that if directors left their board packs on their table, they were destroyed and in the case of directors who took them away, their own evidence was that they destroyed them. So that what one has in the form of this draft announcement is a piece of paper which came into existence which was cleaned up, removal of text boxes, if I may infer, for the purpose of distribution. That was Mr Baxter’s evidence. It existed for a period of time which encompassed the window of the meeting and otherwise did not exist in JIHL’s records and it was produced only by BIL and Allens and the explanation survived for the others.

The trial judge’s process of reasoning was entirely sound in concluding that it must have been delivered at the meeting, both to Allens and BIL. I should add one thing, it was not suggested in cross-examination of Mr Baxter by any counsel, and perhaps notably by counsel for Mr Terry and Mr O’Brien, that he delivered the draft announcement to Mr Terry or Mr O’Brien in any circumstance outside the meeting.

GUMMOW J: Mr Bannon, could you just look at the Court of Appeal at [392] for a second?

MR BANNON: Yes.

GUMMOW J: There is a long answer at the end of the paragraph by Mr Brown where he says he:

probably used the same type of shorthand –

that “fully funded” would have been used as the concept, et cetera, and up the top, I think, at [391] there was a discussion of the “key messages”, et cetera.

MR BANNON: Yes.

GUMMOW J: So his evidence would indicate that this phrase “fully funded” was in play during the discussions at this meeting.

MR BANNON: Yes, absolutely, your Honour. At [393] is part of the witness statement of Mr Brown, and I know that your Honours have been taken to that twice both by Mr Solicitor and by Mr Gleeson, but it is worth looking at again because two of the matters put forward by Mr Gleeson and, indeed, seem to have been embraced by the Court of Appeal is why would, as a matter of probability, the directors have approved an emphatic release when the slides and the board papers suggested two things, that the board could not be told, given an assurance, that funding would be full, firstly and secondly, the communication strategy would not be that funding would be full but would be something less than that.

The impediment to those submissions being accepted lay in Mr Brown’s - not the cross-examination, although it is expanded upon - Mr Brown’s evidence-in-chief. One only has to look at paragraph 195 in paragraph [393]. He says:

Because the board papers . . . did not expressly state that the additional funding for the Foundation would be adequate to satisfy all claims, this question was at the forefront of my mind during the discussion. The oral presentations at the board meeting had made evident management’s view that the funding would be sufficient –

Would be sufficient for what? To satisfy all claims. The Court of Appeal engages in a tortuous exercise trying to find slides which support this. In Mr Brown’s own evidence-in-chief he said he got that assurance at the meeting. Not only that, the next paragraph is he said he wanted to get double confirmation that it “would be sufficient to meet all future claims”. He asked that question and Mr Macdonald said:

“If we can’t tell [them] . . . the plan and it won’t work.”

And he said:

“I appreciate that difficulty . . . are you sure there are going to be sufficient funds in the trust?”

MR MACDONALD SAID:

“Yes there are.

How the Court of Appeal could conclude on the basis of that evidence that the directors were given an assurance about funding which was less than what Mr Brown said in-chief is not explained in their reasons. Could I invite your Honours to just - - -

CRENNAN J: Well, if you just go back to the passage to which Justice Gummow was just referring at the bottom of the previous page, it appears that the phrase “fully funded”, according to Mr Brown’s evidence, the fourth line from the bottom, was developed in that meeting, that shorthand.

MR BANNON: Yes, and, with respect, I agree, your Honour, and that is the effect of his answers in cross-examination. He effectively was saying, well, that is how, talk fully funded and maybe that was the shorthand and maybe that is part of the problem. They saw a piece of paper and approved it fully funded and did not look at it carefully enough. We do not have to speculate in relation to that.

GUMMOW J: The last sentence in paragraph [391] might pick up what Justice Kiefel was putting to you I think:

the discussion satisfied his expectation, and that the board was content to leave the drafting of the news release to management.

MR BANNON: Yes. Could I then invite your Honours, in relation to Mr Brown’s statement, to look at the earlier part of his statement, volume 13 of the blue book, just a couple of passages in that, at page 5739, just to see the lead up to that paragraph 195, at point Q to S, the words “I resolved to myself”. Then at 5745 at point O to Q. It is against that background one comes to paragraph 195, and it is cross-examination. Could I take your Honours to black 3 at 1191. At point V on the page I was asking him about that conversation with Mr Macdonald. At point V I invited him to give his evidence of that account of the conversation without reference to his statement. He said:

I’m happy to do it without my statement, certainly. I went to Peter and I said, “Are you sure there’s enough money there?”, and Peter came back and said to me, “We have to be able to make that statement.” And I said to him, “Peter, I appreciate you have to make that statement –

That appreciation logically must have come from somewhere else, not, one may add, “Hold on, Peter, you have been telling us all meeting you cannot tell us that,” or, “Hold on, Peter, you have been giving us assurance of lack of funding.” No:

“Peter, I appreciate you have to make that statement, but that’s not the question I asked you.”

He has a very good recollection. He says:

I was slightly annoyed . . . Yes, we can be sure there’s sufficient funds.

Then one goes over to 1325 at point U, asked a further question about that evidence he gave. Your Honour asked him whether he wanted to qualify that:

No . . . I would like to explain further that the context of my question to Mr Macdonald was in the context of the Trowbridge best estimate -

et cetera. Then, at 1326 commencing at point S, I ask him to agree, with respect, a blindingly obvious proposition that when Mr Macdonald was referring to a statement he was referring to a public statement and that passage of cross-examination continues over the next page and your Honours will note that at point E at 1327, from E to L, your Honours may recognise that as a passage which is reproduced in the Court of Appeal’s judgment at [394]. They cut off the quotation at point M and do not include what appears at M to P:

Now, Peter came back and responded in the context that I’ve outlined to you, and that is where I picked him up –

This is at point N on 1327:

I can say it that way, because my concern was not the public statement. He came back and answered me in that context –

The Court of Appeal did not include that, nor did they include the part over the next page, 1328, which your Honours were taken to by Mr Gleeson but can I just emphasise an answer he gave. This is 1328 between H and O. The question of mine, M:

So we’re agreed, are we, that when he referred to a statement, you understood him to be referring to a statement in a press release?

A. And to statements that you might make to other interested parties – the whole lot.

So he agreed with me. Then, lastly in this transcript, 1341 at point V:

Q. Could I ask you, still with this document, to go to page 0290, if we could scroll back up to that. Do you see there is a heading on that slide –

Now, that reference to 0290 I can indicate your Honours is blue 5226 and over the page, 1342:

Q. Could I draw your attention to the fourth dot point. The language of, “The Foundation expects to have enough funds to pay all claims”?

That was the diamond point which your Honour Justice Gummow asked Mr Gleeson the question about as would that not justify an emphatic statement and my learned friend, I think, responded well, it could, but not as emphatic as the press release. Then he said:

Q. You would agree with me that that falls short of a clear statement that there would be sufficient funds?

A. Yes, sir.

Q. I think you accept that what was indicated to you by way of key messages in the meeting was much clearer than that?

A. Yes, sir.

That slide is slide 29. It is slide 29 which the Court of Appeal founds in its reasons at [418] is in effect the foundation stone for saying his Honour’s finding that the emphatic statements must have been sourced in the press release at the meeting involves faulty reason because look at slide 29. In fairness to their Honours they do refer to this evidence but they seem to give it not the weight that we respectfully submit one should.

Perhaps at 1340, harking back to part of the discussion in relation to the use of “fully funded”, at 1340 at point C to K I am taking him through the actual draft announcement and to the extent to which he disagreed with anything it, it was almost nonexistent any way as to whether he would have agreed with it, but the only qualification he gives on the certainty thing is, well, in the context of how you mean certain. Then he goes on to say, in other words, he had a – you see, in his mind, rightly or wrongly, he said had a jargon in relation to certainty, but none of that excludes not only possibility but the high probability he may have conveyed or approved the statement which included that word. That is an example of the word “certainty” being in play.

Now, the trial judge in the last sentence at 149 picked up that Mr Brown’s evidence in relation to the Macdonald conversation involved him accepting that that was a statement about the content of the announcement to the ASX, and that was that passage at 1328, and that was correct. The trial judge being on top of all the evidence and the material, not surprisingly, picked up on it. If I could then go to the Court of Appeal’s judgment at [297], firstly, their Honours posed what were said to be two difficulties with ASIC’s submission:

First, as the separation proposal was presented to the board in the board papers and the slides, communication of sufficiency of funding (let alone full funding) was not necessary . . . was presented, sufficiency of funding was not going to be communicated –

At [299] their Honours said:

It should be recognised that, as we later note at [415], Mr Brown agreed that “the levels of assurance that we received in the meeting about the sufficiency of funding are stronger than what is implied [the key messages slide]” Management may have expressed greater confidence at the meeting, and in the paragraphs of our later discussion we refer to Mr Macdonald’s assurance that “[w]e are providing enough funds for future claims”.

But this sentence is important –

But this did not go to essentiality of communication of full funding in order to quell stakeholder opposition.

That, with great respect to their Honours, is just wrong because we have just seen not only the terms of his affidavit in-chief, but what he said in cross-examination was it went directly to that issue. He accepted that he had to make that statement, but that sentence there seems to be the basis on which their Honours discounted that evidence and kept in play the significance of what they said in [299]. That is in the context when one goes to [393] where their Honours refer to this paragraph which we have seen before and in [394] their Honours with the chapeau to the quote say:

In his oral evidence Mr Brown said that he was concerned about sufficiency of funding on the basis of Trowbridge’s actuarial best estimate, and that his “I appreciate that difficulty” did not refer to making a public statement or anything in a draft news release.

That is where they set out what appears, as I say, as a partial quote from that page 1327. It did not include the rest of the answer and it did not include what appeared on 1328 where he agreed to the exact contrary of it. That failure to quote the full evidence appears to have led the Court of Appeal into that error.

At [418] is the passage where their Honours dealt with the slide issue. As I say [418] is slide 29 which was the document at blue 5, 2226, which I do not need to go to. We deal with this in our submissions at page 395 of the green book. There is just one additional reference can I invite your Honours to add to that. It is 395 in blue in paragraph 15. I do not need to take your Honours through the detail, but in many ways I have addressed it. But we give a footnote reference 18 to the relevant slide as blue 2283. That is a copy of the slide at blue 5, 2226 and that is footnote 18 on page 395 of the green book. Because your Honours were taken by Mr Gleeson to 2226 - - -

GUMMOW J: What do we do to footnote 18?

MR BANNON: So footnote 18 should read or add the reference, I should say, “Blu 5/2226”, because that is the document to which your Honours were taken by our learned friend, rather than a copy, which we footnoted. It is the same document. So it should be “Blu5/2226” as an additional reference to footnote 18. Once one has at the meeting, which we say one does, the draft announcement as was submitted by my learned friend, Mr Gleeson, that one should not or could not safely conclude that it was at the meeting for the purposes of approval. Firstly, we say, well the minutes confirmed that it was.

Secondly, my learned friend submitted that Mr Baxter’s evidence was destroyed in cross-examination. We respectfully submit the matters which my learned friend took your Honours to, and in particular his answer at black 1352, around about B – if I can just take your Honours to it – he maintained his position, which his evidence was important announcements such as this usually went to the board, firstly. Secondly, he took it to the board for approval. That is why he took it and he maintained that position, notwithstanding he accepted that there were difficulties.

Thirdly, that evidence that it was taken for approval is also confirmed by a contemporaneous piece of evidence, which is referred to in the Court of Appeal’s judgment at [477] of their reasons, which was – so paragraph [477]. So their Honours record that at 8.05 am on the morning of the very meeting Mr Robb and Mr Shafron are communicating a draft set of minutes which anticipates that an announcement will be approved at that meeting, notwithstanding that both Mr Shafron and Mr Robb know, or they must know, that they do not have a copy of the draft announcement. Yet that was not a matter which caused them to alter the draft minutes, ie, it is a contemporaneous document recording that they anticipated there was going to be approval at that meeting, notwithstanding the absence of pre-vetting.

There is also the reference in green page 199 of our submissions, paragraph 80 - sorry, it is page 182, I am sorry in paragraph 17, the last sentence, we refer to another document:

A management preliminary work plan prepared on 22 January –

after the January meeting which said –

“press release to be workshopped prior to the next Board meeting –

Again, a recognition by the board that they had to have one ready before the next board meeting. We have Mr Baxter’s own email, which was on the basis that he has had to get the document to the meeting and one can add my learned friend took your Honours, Mr Gleeson, to the January board papers and the 17 January meeting.

If I just briefly give your Honours an indication at volume 3 of the blue book, 1297 -I think my learned friend made the point the draft press release was not there for approval but that is really only there because, as he pointed out at 1279, correctly, at point T that they were planning to do the actual “establishment” at the February board meeting. But nevertheless, at 1297 under the heading “Communications Strategy”, under the heading “Introduction”:

The following recommendations –

they are recommendations obviously not to themselves. They are recommendations to the board, and then the draft press release is part of that recommendation. At point N:

recommended that any announcement be made on Friday 16 February to coincide with the announcement –

The last diamond point at point R:

establish a firm on-the-record position which we can then defend as required.

Not only is there a need to comply with the statutory obligation but this will be the official company position. Then my learned friend submitted that Mr Baxter did not present, or might be inferred that he did not present, the draft to the board because he was embarrassed or felt that it was underdone, or some such proposition. No such proposition, while it may appeal to current counsel for those respondents, was put to Mr Baxter at the time in cross-examination. In any event, such weight of the submissions were completely overtaken by the fact that the BIL copy and the Allens copy were at the meeting anyway, and it is not a finding made by the Court of Appeal.

A number of times a rhetorical question has been asked by various of our learned friends, why would the board approve this in these circumstances where it had not been prevented? It is speculation. It is not something one has to answer, but in the light of their minute but there are at least half a dozen reasons, a number of which have fallen in discussion over the last couple of days.

One, there had to be an approval of an announcement before the 16th. There was urgency. The prospect of getting another board meeting between the morning of the 15th and before the announcement the following day on the face of it does not sound plausible. Secondly, there obviously was time pressure. As the trial judge’s judgment indicates, there was a beefing up of the cash flow model to make it look as if it was sufficient funding which was going in time with developments of the communication strategy and in particular the announcement. So that you could not actually get out a communication strategy which said full funding until you had some cash flow model which might vaguely support it.

Next, you had and perhaps in terms of their evidence you had Mr Macdonald saying at the meeting we have to make this statement. Why would a solicitor sit there and not say “Hold on”? Well, one reason, you have got the managing director saying we have to make this statement. The solicitors have known all about for a long time the problems of this proposal. If you cannot satisfy the stakeholders it will not work, as Mr Macdonald said.

They are ordinary English words in the statement. The message is the message which the directors themselves, we would submit, had wanted to convey to satisfy stakeholders, and indeed, accepting what even they themselves said about reputation which was in January, to satisfy their own reputation. There are a number of reasons why they would have said yes, we approve that.

In relation to the US directors, we have addressed this matter in our written submissions in writing, but, in effect, my learned friend, Mr Gleeson, said that ASIC has to prove exactly how it was that the US directors approved this announcement. We do not. Their own minute says they did approve it. We do not have to prove how they did it. They did not have a copy. So be it. But if it was distributed, the proposition that it was not referred to at all seems entirely implausible, but the short answer is, they approved it, they said they approved it. But, in any event, we also refer your Honours to what was said in writing in relation to that.

Post-meeting changes, we say, as the trial judge said, in effect, so what? Either management acted within authority or they did not. Mr Baxter’s evidence, which your Honours have been taken to but perhaps I could just remind your Honours of it and I will not take your Honours back to it, black 1, 409 and black 412. The effect of his evidence was, as far as he was concerned, they could undertake changes provided he had to pass them through Mr Macdonald, which he assumed were to be addressed by Mr McGregor. None of that sound implausible at all, not only in the ordinary circumstances, but the ordinary circumstances of a board resolution and someone making an assessment.

GUMMOW J: What is that passage?

MR BANNON: That is black 1, pages 409 and 412. Perhaps I could briefly take your Honour back to it. So that is starting at 409 at point M:

Q. You felt yourself entirely at liberty to make those changes in accordance with your obligations . . .

A. Not entirely. It would have - - -

Q. With the approval of Mr - - -

A. Macdonald.

Q. - - - Macdonald, if that was necessary?

1. And discussion with others.
   

He says at point V:

Q. But you had just made 15 or so changes consistent with what you have said was a proper discharge . . .

A. Yes.

Q. You couldn’t have run that going behind the back of the directors, if they had set in stone . . .

A. Correct.

But what he explains is, as far as he was concerned, he was not running around behind the back of the directors, because at 412 he is asked again about this. At the top of the page:

Q. And certainly, as far as you understood, whether Allens made that suggestion before or after a board meeting, the board was entitled to assume that those changes would be made; do you agree?

A. Yes, and if Allens suggested a material change, then I would expect it to go back to - - -

Q. Mr Macdonald?

A. Well, it would involve – that discussion would involve Mr Macdonald, and, at the very least, I would expect Mr Macdonald to go back and consult, at the very least, the chairman, Mr McGregor, who would then decide - - -

Q. What to do?

A. - - - whether to consult the rest of the board.

Q. We’re dealing just with general processes at the moment.

A. Yes, that’s correct.

Down to Q. So that there was a process which could deal with the situation which was an urgent situation. So far as the changes on the document and the Court of Appeal’s indication that they may have come from Mr Robb, those findings start at [325]. Firstly, at [325] their Honours say:

The addition of “anticipated” reduced the assurance of sufficiency of funds, and appears to have come at the suggestion of Mr Robb.

Can I just take to task at that proposition, if one looks at [324], the unchanged words are “The Foundation will have sufficient funds”. That is a statement as to the future. So that is effectively saying to the public we do not have them now. “Has” actually increases certainty, but as soon as you take out the “will have” from the “sufficient funds”, if you did not put “anticipated” or some other sense of futurity you would be left with:

has sufficient funds to meet all legitimate compensation claims anticipated from people injured.

It might indicate the sense of only the ones we have got so far. So if you remove the futurity from one element, you have got to put it back in with the other element. The net effect of that is it is neutral, but the overall answer is the essentially misleading nature and the key message of both the draft and the final are exactly the same. Then at [332] say the “anticipated” may have come from Mr Robb. At [352] they say some of these changes may have come from Mr Robb. Paragraph [351] there is a speculation of “contemplated reduction in the level of assurance”.

The short answer to all of this is, whatever one speculates as to the state of mind of Allens or their representatives of what they were doing, the fact is that this press release went out in a final form with all the misleading nature of it. There is not on file, by way of example, a letter from Allen Allen and Hemsley saying, we have read this. We understand you want to send it out. We understand you think you have to send it out. Here it is. We say this is misleading. Not a word of that. So the presumption which the Court is invited to assume that Allens would have pipped up and said, hang on, you cannot say that, is not supported by the objective facts.

Could I then move to the argument advanced by our learned friend, Mr Walker, in relation to Mr Morley’s position. I think I have given your Honours a reference to [218]. Could I take your Honours back to his evidence in blue book 12 at 5667. At paragraph 534, this is on page 5667 of volume 12, at point E, this is where he gives evidence to say:

In the early hours of the morning on 16 February 2001, I was working in Robb’s office . . . on a late amendment . . . I do recall noticing Rob writing “Anticipated” on it.

By that stage 7.28 pm of 15 February had been and gone and the word “anticipated” was already there. There is not a single piece of paper which includes Mr Robb’s handwriting of “anticipated”, but he could not on any view have been writing “anticipated” on a draft press release in the early hours of 16 February.

At 537, the conversation which is relied upon by learned friend, Mr Walker, has as part of the statement, the conversation, “I noticed Mr Robb writing on it”. So the objectively attackable part of the conversation underpinning it was attacked in cross-examination, ie that he would have said anything about Mr Robb writing something on a statement. At 218 of the trial judge’s judgment, his Honour said that Mr Morley was mistaken in saying that he had seen Mr Robb writing that, but the cross-examination at volume 2 of the black book at 910 refers to that conversation and at point S there was nothing in that conversation which caused him to change his:

honest belief at the time of the Jackson inquiry –

that the minutes were correct in that respect. Then over the page he was tackled at about point P to R that part of his task, well P to X, was to review the submissions made to the Jackson inquiry and that continued at 912 about point P and I will come to the reference of those submissions and the cross-examination in relation to this matter picked up again at 919. It has been pointed out between 919 S through to 921 E. It is put to him that the conversation he had with Mr Shafron did not take place, relying in part on the reference to “anticipated”, relying in part on his honest belief that the minutes were correct.

The reference to the submissions to the Jackson inquiry appears in the Court of Appeal judgment at [534], paragraph [534]. Perhaps I should jump to [537] just to make it clear that these documents were:

admitted, limited in their use to the case against Mr Morley.

But at [532]:

JHIL (by then ABN 60 Pty Ltd) and JHINV made submissions to the Jackson inquiry.

[533] Draft submissions were prepared.

At [534] there is the submission that:

The terms of the media release . . . were considered and the subject of a resolution –

There is some more discussion in relation to it, but we sought to get it admitted on a wider basis against other defendants but it was admitted against Mr Morley. Now, there is no finding in favour that that conversation which Mr Morley deposed to occurred. The matter which was referred to by the Court of Appeal relied on by our learned friends does not amount to a finding that it has occurred. The Court of Appeal simply says there was no finding. In effect, to the extent our learned friends invite this - - -

HEYDON J: Sorry, Mr Bannon. Paragraph [337] of the Court of Appeal’s judgment on page 70 deals with who approved the press release point. Now, I appreciate throughout the Court of Appeal’s judgment they say some things are quite weighty but then they are not very weighty and some things gain support, but they do quote a statement of Mr Morley’s evidence that:

Mr Shafron asked “who approved the press release?”

Mr Walker’s submission that that is, in effect, an adoption of that I think needs to be grappled with.

MR BANNON: Yes. The way they put it, the opening words from [337] is:

This gains some support from the fact that others at the meeting appear to have acted on the same basis –

So that is language which has an element of tentativeness about it, whatever the noun of that is. Then the third bullet point:

Mr Morley gave evidence . . . He said that he answered that he assumed Mr Macdonald had. The judge did not make a finding, but this is consistent with Mr Shafron thinking that the news release was not one on which the board had signed off.

We would venture to submit that that is not a finding by the court that that evidence should be accepted, but it seems to be built upon other matters infecting – we would use the word “infecting” – their Honours’ reasons to say, in effect, although his Honour did not find that, this would seem to be consistent with other things we are coming to for other reasons. But if it is amount to a finding, then we would respectfully submit it involved an error because it failed to grapple with his Honour’s rejection of the evidence in relation to “anticipated” at 218 firstly - - -

HEYDON J: Did the Court of Appeal deal with the anticipated point?

MR BANNON: There was no attempt to overturn that finding. Did they address it? I think, your Honour, they did. Can I give an answer as soon as possible?

HEYDON J: Yes.

MR BANNON: But they certainly, I can safely say, did not overturn that finding. Whether they referred to it at all – I have a recollection they did but I cannot point to it.

GUMMOW J: This last sentence at [337], last phrase:

but this is consistent with Mr Shafron thinking that the news release was not one on which the board had signed off.

It is not necessarily consistent with that.

MR BANNON: Yes. Of course, you have the problems of Mr Shafron being involved in the minutes, which were said to have been approved.

GUMMOW J: And him not giving evidence.

MR BANNON: And him not giving evidence.

GUMMOW J: Why should there be any assumption in his favour on this?

MR BANNON: Mr Walker, perhaps fairly, also indicated that it is also consistent with him saying, well who approved the final form.

GUMMOW J: Exactly.

MR BANNON: And it is quite conceivable that he was not involved in that process. So it does not really advance, with respect, our learned friend’s case.

KIEFEL J: The Court of Appeal refer to the anticipated change at [331] and [332].

MR BANNON: Thank you, your Honour. Yes, I think that is referring to the change. I do think they have referred to Mr Morley’s theory, but we will try and find it.

HEYDON J: Did he write “anticipated” in the presence of Mr Morley in Mr Robb’s office?

MR BANNON: I am sorry, your Honour?

HEYDON J: That “anticipated evidence” deals with a different “anticipated” point.

MR BANNON: Yes, I think so, yes. Yes, yes quite. The other matters raised by my learned friend, Mr Walker, in relation to the soft copy, the Court of Appeal’s finding, on the finding - the reasoning at [337] did not attribute to the request for a soft copy of the significance, which our learned friend seeks to attribute it and, we would submit, that the Court of Appeal’s reasoning in that process is sound.

HEYDON J: This whole indentation in paragraph [337] is a mistake, is it? It is not a quotation from anything? Is it not just a piece of the Court of Appeal’s own prose? If not, what is it a quotation from?

MR BANNON: The quotation “who approved” - yes, your Honour is right actually.

HEYDON J: The material beginning “Mr Harman sent” is not a quotation from anything.

MR BANNON: I see. My form in an earlier version of the appeal book has dot points.

HEYDON J: I see. It is the Court of Appeal’s prose, yes.

MR BANNON: This is the as published, I think that is the reported version. The Australian Law Reports have failed to include the bullet points, your Honour.

GUMMOW J: Yes, we are not unfamiliar with that sort of thing.

HEYDON J: They butcher judicial prose.

MR BANNON: Can I then address matters raised by my learned friend, Mr Bell, largely the matters which have been addressed by Mr Solicitor but can I just address a couple of matters. As we submit, and as the trial judge records at paragraph 205, no party sought an adjournment to the proceedings. No counsel submitted that they had cross-examined somebody on a basis for which they would have not cross-examined but for what we had said about the proposal to call Mr Robb. We made available any witness who had previously been called for further cross-examination and that request was taken up by one counsel only. That was Mr Wood, who asked some questions of one witness only, Mr Baxter, which appears at black 2673, three days after receipt of the advice.

The stay application to which my learned friend – was based on Adler and, as your Honour was taken to, the submission was made, in effect, to Justice Gzell, you must rule against this application, which the judge duly did at that invitation, so as whatever other words may have been used in the submission, that was the basis on which it was put that that is an appeal against that at the Court of Appeal and that failed and that has not been brought up to this Court.

The Jones v Dunkel submission to which my learned friend referred in the submission which is black 8, 3414 to 3415, did not rely on the matters sought to be relied upon now, which went along traditional Jones v Dunkel lines, Payne v Parker.

GUMMOW J: Stopping there for a minute. Am I correct in taking that you are saying that any principle of fairness would find effect at a procedural level, such as the stay application, but it would not find effect at the substantive level of evaluating evidence?

MR BANNON: That is so. I think the answer my learned friend, Mr Bell, gave to a question from the Bench as to, does it make any difference to the position you take whether or not ASIC had ever said anything about Mr Robb, the answer was no, which rather informs one that the point they are making is not based on anything we have said but it is some basis which ultimately resides in the Court of Appeal’s alleged duty, because if it is just something we said in circumstances where, as I say – there was an opening written submission that was provided for the Court. It is about 500 pages, we would not burden the Court, but we did not refer to any evidence of Mr Robb, we did not have any, although we served the list of topics.

That was a long time before and it was before the confidentiality issue had been lifted. We never got a signed statement from him. There is nothing in the procedure, we respectfully submit, which could logically inform the substantive effect for which they contend and, in my respectful submission, my learned friend, Mr Bell, actually did not explain how anything which happened in the procedure actually informs that content in terms of effecting the evidentiary process.

HAYNE J: There is something fundamentally difficult about a principle of fairness which is about fairness of trial affecting the outcome of the trial that has been had as distinct from leading to an order for new trial.

MR BANNON: Yes, I agree with that, your Honour. Could I just make one additional point in relation to Mr Bell. At [664] of the Court of Appeal’s reasons, it was accepted by my learned friend that that reference in [664] to the draft statement of Mr Robb was not part of the evidence in the appeal or was not before the court. Nevertheless, my learned friend thought it appropriate to refer to what is said in there as illustrative of a certain point. The illustration he gave was, as I understood it, the possibility that the draft press release was first given to Mr Robb on the morning of the 16th.

One could say this about that, perhaps it does not assist this process at all to refer to something which is not before the court but if the illustration had not been given, nobody submitted to the court at any level that there was any plausible, logical or even conceivable reason why a draft which had been overtaken 7.28 pm would be first given to Mr Robb the following morning in circumstances whereby 7.28 pm, on their own contentions and on the Court of Appeal’s findings, that draft included suggestions which had the input of Mr Robb. No plausible, sensible reason was ever suggested for that and the Court of Appeal which had the benefit of the draft on the application nevertheless found what they did confirming the trial judge’s finding that it must have been given at the meeting.

In relation to list topics, as I said, that was provided a long time before we had access – before the lifting of the confidentiality regime. It was not in evidence on the trial, it was evidence on the application, and I think Mr McHugh in the Court of Appeal fairly indicated that fact. Nevertheless, he referred to it and nobody objected to it, and again we do not have a particular objection to it other than it does not really inform the process. For what it is worth, what we can say is what everyone finds in that - .....statement as a topic was the announcement approved and are the minutes correct?

Your Honour Justice Heydon asked the question of a couple of counsellors as to whether or not there was a power for the judge to call a

witness. Apostilides indicates that in a criminal circumstance there is, in exceptional circumstances, that power. There is debate, as your Honour knows, in the civil sphere of..... - a judgment of Justice Wilcox suggested it, and then there was an English judgment and it was the judgment of Justice Street from some time ago which addressed this issue, and the position would appear to be, certainly with the consent of the parties, the trial judge can do so. That was not sought, or asked. Secondly, it is a matter of debate, but there seems to be a decent basis for it if the trial judge does think some very unfair process is about to happen. He can achieve that.

Of course, all of this comes back to a matter which was raised in discussion with your Honours. What is the content of what it is that Mr Robb was supposed to say, or what were we supposed to leave from him if we did not have a statement, and ultimately it does boil down to, as Mr Solicitor said some days ago, it would appear they wanted him to be cross-examined in the forensic challenge which, I think, your Honour Justice Hayne indicated, to persuade him that he had in effect aided and abetted a crime. May it please the Court.

I am sorry, there are two cases referred to by Mr Bell I should just mention. One was the Deare Case. That was a case about discovery. It does not inform the issue. In relation to the State of Foreign Affairs v Quark English decision, that was simply an application of their version of Jones v Dunkel, absence of reasons for an administrative decision-maker. Then lastly, the proposition that section 64 was first referred to in our oral submissions has to be measured against paragraph 54 of our submissions at green 192, where we referred to that matter. May it please the Court.

FRENCH CJ: Thank you, Mr Bannon. We will now adjourn until 2 o’clock, and we expect to finish the hearing of the next matter by 4 o’clock. Thank you.

AT 12.42 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 1.59 PM:

FRENCH CJ: Yes, Mr Walker.

MR WALKER: May it please your Honours. May I start with the facts concerning Mr Shafron’s position, blue book, volume 1, page 299. It is an Individual Employment Agreement for Executive Senior Manager, line C. It is dated 2 August 1988. It is James Hardie Industries Limited to Mr Shafron in Australia. Page 302, clause 2.1 is the basic promise by Mr Shafron. Clause 3, to the top of page 303, describes his position as, line C:

the position of General Counsel and Company Secretary.

You will report to the Managing Director, or as You may be advised –

You see starting at the foot of 303 and onto 304 the order of remuneration in those days. Could I then take you to page 317 in the same volume, the letterhead of that same company but dated a few days later, 28 August 1998 to Mr Shafron offering secondment, line N, with James Hardie USA Incorporated for approximately three years. It continued thereafter we can tell, your Honours. Next to the heading “Location of Service” at line S there is the initial service as:

General Counsel and Company Secretary in Mission Viejo, California –

and you see the expectation of serving elsewhere in what I will loosely call the group and the “report to the Chief Executive”. Over the page, 318, there is a promise of the facts.....I am afraid, your Honours. It sets out:

The duties of this position will be as set out in an appropriate Delegation Agreement.

None was found to be tendered at trial. So there is no content that I am able to put to that. You see, however, a statement about the benefits, the corporations to benefit from those duties. You get a notion of, at that time, the remuneration, 318, starting line H and following. I do not need to dwell any further on it. The most important thing that both sides rely on for their opposite ends is the description of the position.

You will have seen in our written submissions that we attempted an argument that the opportunity was available from the existence of joint company secretaries, one of whom was general counsel and the other of whom was not, to understand from the nature of the latter’s position what, if one was to examine the different aspects of the duties of the combined position general counsel and company secretary, might be general counsel as opposed to company secretary. To that end, could I take you in volume 12 of the blue book first to page 5231, paragraph 12 and in that paragraph, really the whole of that paragraph, I will not read it aloud, the flavour is accurately summarised at line L “This role was largely administrative”. However, it also involves, see line P, arranging for necessary ASIC filings and ASX announcements.

Could I take you over to page 5235, paragraph 22, under the heading “Regulatory Announcements” starting at about line F. He accepts responsibility in his periods as secretary for what he says is “looking after certain regulatory requirements”. I will not read it on, but your Honours see that it includes a number of matters explicitly related to the ASX. Finally, in relation to Mr Shafron, there is the finding in the trial judgment at paragraph 378, your Honours do not need to turn it up;

He is a qualified legal practitioner with Bachelor and Masters of Law degrees from the University of Sydney. He was admitted to practice in Australia and in California.

The same paragraph notes his appointment as company secretary and performing the role of general counsel. There is no qualification attempted or available of that factual material in support of our appeal. We have to work with that material. Can I then go to the statutory provisions both of which we have set out, I hope conveniently, on one page in the green book, page 122. The Court of Appeal says in its critical findings that these are matters of fact, and so they are, of course. This is the legal framework which would render relevant or illuminating the evidence and to which the findings of fact would be directed.

Section 180 at the foot of that page is one of those provisions for which the definition of “officer” serves purpose, and that is the one under which we were sued of course. I draw to attention that the language of section 180(1), perhaps unnecessarily, given the inclusion of “director” in the definition of “officer”, nonetheless starts “A director or other officer”, and it may be a slender point, but it, in our submission, emphasises that, what I might call the paradigm of the role which brings in its train the not very alarming statement of duty but elsewhere, as this litigation demonstrates, the rather alarming possibility of sanctions, including banning, et cetera, the paradigm is the director. One cannot push that too far because it is a “director or other officer” but given that they did not have to use the word “director”, it is, in our submission, of some textual support for our overall argument.

Can I come then to the definition of “officer”. Items (a) through (g) ought to be seen as purposively, as it were, all reinforcing a similar notion of the echelon within a hierarchy which will attract the status of officer as opposed, for example, to executive or employee or servant, et cetera. Again, as one would expect from the history of corporations or perhaps even their pre-history, one has at the head the age-old descriptions of director and secretary.

We are bound to say, though, it is of no comfort or support to us in our appeal, that bearing in mind the vast range that the secondary materials suggest over the years of degrees of responsibility for secretaries of corporations, ranging from little more than clerical to virtually governance, that it may be, as it were, hard lines for all secretaries, that is, all people designated secretaries, that they are included in the definition of “officer”. So be it, they are. But we would say of (a) that it starts the list by what I will call the most well-established nomenclature over history of those who ought to be regarded as officers. For a long time directors and secretaries would have been the only people with, as it were, the label of a position to consider as possible officers.

May I pass over to come back to, as the main object of my argument, paragraph (b) of the definition, and quickly note the similarity in terms of control of the corporation and responsibility for its affairs that one can readily see from the nature of each of those positions, or officers, designated in (c), (d), (e) and (f). They are all people, to look forward to one of our arguments, who you would expect, partly in order to carry out their duties in accordance with standards required by section 180, would be in receipt from time to time of professional advice. They would be in receipt of proposals to be considered and options to be chosen from.

I then come back to the critical one for our case which is paragraph (b), the portion of which, item (i), is in question in our case. But it must, of course, be understood in the overall context (a) to (g) as well as within (b)(i), (ii) and (iii). The first thing to note is that there are conceptual differences with respect to the relation with the corporation of the persons intended to be comprehended by each of categories (i), (ii) and (iii) within paragraph (b). Decision-making – I hope that is not tendentious as a summary – is (i). Influential as to financial standing is (ii). Then control, de facto perhaps, is (iii).

They are all, if those labels serve sufficiently accurately to convey the general concept type between each of them, they are all at what might be called the governmental head of the corporation. Not necessarily formally, we know that from items (ii) and (iii) in particular. But they are involved at a level which for the corporation is in number (i) affecting “the whole, or a substantial part”. Number (ii), affecting “significantly the corporation’s financial standing”, and number (iii) “the directors of the corporation are accustomed to act” in accordance with what are called “instructions” or “wishes”.

Now, there is something to be gained contextually from the parenthetical exclusion in item (iii) of what might be called powerful advisers. I call them powerful because the use of the parenthetical exception is in order to prevent the words of (iii) otherwise applying and that contemplates that there might be, for example, a tax adviser or merchant banker, a lawyer, in accordance with whose instructions that would jar perhaps with a lawyer, or wishes - disinterestedness would rather suggest that wishes would not come into it either but in any event it has been contemplated there may be a sufficiently powerful adviser that they but for the words in parentheses might fall within this category.

Why I call them advisers is, of course, that that is the word chosen as the pivot for the entry to the excluded class. “Excluding advice given”, so the draftsman contemplates that that which might generally be described as “instructions” and “wishes”, nonetheless can have a carve-out from it of something called “advice”.

Then one sees that there is a reference to proper performance of functions attaching to professional capacity, all of which, of course, is perfectly adapted to the position of professionals as well as other people who give advice in return for fees or monetary reward. Then there is a reference as well to business relationship with directors or corporation and it may well be, to pick two obvious examples of what might be called very powerful statements made to a corporation, bankers and insurers, each of which, obviously, have by reason of what I might call statements concerning preferences which make available offers that cannot be refused, can influence and shape what a corporation does or does not do. They have been carved out.

So we are talking about advisers being carved out in iii, notwithstanding they are persons whose advice, understood to be instructions or wishes, such as directors, are accustomed to act in accordance. That means that there is something in the nature of a habit. It could certainly include standing retainers or standing contracts such as one has with a bank. It would also include employment. Understood in that way, it is, in our submission, important to observe then that the critical text for our case, which is item i, is about decision-making.

Item iii, which is separate from that, contemplates directors acting and directors quintessentially decide, of course, directors acting in accordance with somebody else’s instructions or wishes. To put it another way, the powerful adviser, whose instructions or wishes or advice are usually followed, is not considered by that item to be the person acting, that is the directors, that is, would not be considered to be the person making the decision. From that internal, textual surround, in our submission, item i bears the interpretation by preference that we have unsuccessfully contended for in both courts below, and the emphasis is, as you have seen in our writing, on the significance of the simple term, unambiguous in this context, “makes”, the second word of it, and then further in the alternative “making”, “participates in making”.

Now, it would be, in our submission, odd if the most powerful advisers, those excluded by the parenthesis in item iii, the most powerful because it can be said that they are somebody whose advice is nearly always followed repeatedly, they are not within item (b). But somebody whose advice is considered, from time to time, taken from time to time and is only ever treated as advice is within item i because servants and agents, that is employees and consultants, asked to formulate proposals, frame options and give advice participate in a process, which was the way ASIC argued it, albeit unsuccessfully in the Court of Appeal.

In order for this purposively all to fit together, in our submission, a proper distinction ought to be observed, as you have seen in our written submission, between those many people who, in very often fractional ways, contribute overall to a board’s decision-making and, on the other hand, those who actually participate in the making of decisions. Now, it is not only at board level that decisions within item i of paragraph (b) are captured. We have, in our written submissions, in a way I do not need to elaborate, pointed out that there are, for example, committees – for example, very important committees such as audit committees – where, without being a director one could be involved, that is, participate in making decisions and being on an audit committee decisions that affect the whole or a substantial part of the business of the corporation.

The same we have offered in argument, written argument, is true for those who have, by way of delegations, the power to make decisions, subject always, of course, to overruling or perhaps to the absence of ratification, by a higher organ such as a chief executive officer or a board. We have accepted, in our argument, that those are people who participate in making a decision because what they do produces what I will call the executive outcome. In our submission, that cannot be said of somebody like Mr Shafron, whose position as general counsel and company secretary, is nowhere shown as involving delegated decision-making of a kind that would fit within the last of the models I have proposed.

A fortiori, it does not include him, because he has nothing in the nature of a veto. He does not even have a vote. Nor can it be said that he is a person who selects options, though he may be a person who presents them. Nor can it be said that he is a person whose proposals are proposals that by being made bring about a state of affairs called a decision. That is what (b)i calls for, a decision that affects the whole or a substantial part of the business of the corporation because any of his proposals, assuming any could be attributed to him alone for the purposes of argument, none of his proposals would ever of themselves do any such thing, without a further not formal, but substantive step being taken.

In each case that not formal, but substantive step to be taken is for somebody to make the decision by choosing the option considering, accepting, rejecting, modifying the proposal. We know, though the inquiry about section 9 and its application to Mr Shafron is, of course, in general and with respect to his position, we know from the facts relied upon by ASIC that not coincidentally came from the facts of this actual transaction, that he had been involved as part of a team – in house and out house, if I can put it that way – employees and consultants, which have put together a number of proposals over quite a time and had, from time to time, been sent away to do different things; that is to change directions in accordance with strategic decisions taken by the board.

In our submission, it is for those reasons that on an ordinary contextual and purposive reading of sections 9 and 180 that Mr Shafron would not, without decided addition to the facts that we submit are the whole of the facts relevant to this question, fall within the description of a person who makes or participates in making decisions that affect the whole or a substantial part of the business of the corporation.

At this point, if I could go, may it please your Honours, to the way in which the Court of Appeal reasoned the matter. I will not take you to the whole of the passage. It starts in the white book at 173 in paragraph [885]. I want to pick it up at paragraph [891]. You will see there that there is a submission on Mr Shafron’s behalf about an error at trial “taking part in the relevant process” and just a leap ahead [893] suggests that in a limited and perhaps temporary fashion, we won that argument in the Court of Appeal. In the course of that argument, their Honours note at about line 45 in paragraph [891] that what either I or they called a touchstone:

was said to be whether the putative officer did more than provide material for the consideration of the decision-makers.

Then there is answering or opposite submission noted at [892] during the course of which there is a reference to an argument that statutory provisions need to be understood as being “a basis additional to . . . making decisions” and, in our submission, though I cannot say it is clear the Court of Appeal has accepted that submission and is thereby in error, that appears to be the better reading of the final result in the Court of Appeal and consideration of section 9, as I have already taken your Honours to, would show that there is a very large step to say that it is adding anything to making a decision to include all those who participated in making the decision. There is no addition. It is just ensuring that those who made the decision, and that includes all participants in making the decision, are in the same category. The submission continues to be considered and at the top of page 175 in paragraph [892], there is a submission noted, about line 5:

that decision-making was a deliberative process in which management developed, presented and promoted proposals for board decision, as participants in the decision-making.

That would already obviously indicate a very large group of people, and it would certainly involve outside advisers. At paragraph [893] their Honours really reject that and with respect to this point, we would be in respectful agreement saying that they:

do not think it useful to inject language of process into the statutory language. The definition refers to participation in making decisions –

We interpolate, quite so, and that is where it should have stopped. Then it says –

It does not prescribe that the decision are made by the board –

that is not a difficulty for our argument –

it may be that a management decision to present a highly significant proposal will suffice –

We, with respect, would enter a caveat about that. Anything which is a proposal, if it is truly a proposal, is being put to somebody else who will dispose of what the junior person has proposed. So though obviously this will depend upon particular facts, it may be that that is not a useful gloss of the statutory language. In any event, their Honours go on –

but wherever the decisions be found, the test is participation in their making.

We, with respect, accept that that immaterial deployment of the statutory language in a slightly different way is as far as one should go –

Participation is more than administrative arrangement –

but the word “administrative”, with respect, evades the need to consider those who are not just administrators but also advisers, perhaps advising on one aspect, say tax, of an overall proposition. Then comes what appears to be the ratio stated positively that we have argued as you see in our written submissions constitutes the error in the case. It says:

there must be a real contribution from the postulated participation to the making of the decisions -

Now, contribution to the making of the decisions is not for the reasons we have argued in our written submission, is not to be equated in the context of this statutory language and the purpose which it serves is not to be equated with participation. Many people contribute to the making of a decision including those, for example, who gather the basic data or statistics that are necessary in order to put in a financial projection the various options which the board may be considering.

Indeed, without the information as to what might happen if we open a plant there or close a plant here without that basic information the decision would be crippled. The contribution is real. The contribution could be called essential and yet, in our submission, it is possible, simply intuitively as an abiding impression to state that those people will not be participants in decision-making though they have really, and we would add essentially, contributed to the making of a decision.

That completes what I want to say about why there is error in the approach of the Court of Appeal. Leaving it as a real contribution, the notion of something which is not a real contribution is not a helpful tool of analysis, is, for the reasons we have put, far too broad and would make item (b)i in section 9 a most anomalous inclusion in the list of what are otherwise persons very close to the top or indeed above the board in terms of corporate governance. Can I then move to the question of - - -

GUMMOW J: It was paragraph [894], was it not, in the Court of Appeal which founds, really, the declaration of contravention, does it not?

MR WALKER: Yes, it does. We have taken each of those in our written submissions in a way that I will now briefly summarise, to point out that there is error in those. This is now where it is said that there is, presumably their Honours are applying the test of real contribution to the making of decisions and we would simply urge that instead it should be asked is this Mr Shafron participating in the making of decisions? The touchstone that they start off in [894] is, as I said earlier, that which is found at the end of [891] someone doing more than providing, “material for the consideration of the decision-makers”.

Material for consideration, by the way, will include recommendations and opinions and it would come as news to most lawyers and tax advisers that their recommendations or opinions involve participation in decision-making as opposed to being material, usually on one and not all aspects of the decision in hand, which will be taken into account by those who participate in the decision-making. Just taking them in turn and very briefly, being part of the Project Green team cannot possibly be participating in the decision-making that affects the whole or a substantial part of the business.

Of course, what Project Green was about was something which was massive in the history of the company. That much has always been conceded by us but being part of the team which includes a number of executives and consultants considering proposals and presenting options and being sent away to do things when the board wants them done differently, see January, for example, cannot possibly mean that you are making a decision or participating in making it as opposed, of course, to providing advice and assembling information.

The word “promotion” is, of course, one way that one might indicate an order of preference among options or recommendations. The whole notion of options and recommendations distances the person who makes them from the person who makes a decision. An option is a choice. It is not being made by the person who presents options, whether they are ranked or not. It is made by the person to whom those options are presented. Recommendations ditto. Then their Honours refer at line 22:

Participation in decisions may involve some frequency or repetition, which there was.

But frequency or repetition is the hallmark of the humblest of employees’ contributions right at the base of the pyramid of decision-making, just as it would be, one expects, with all busy executives. It entirely begs the question of participation in decision-making. The fact that Mr Shafron’s work was significant in the consideration follows from him being, as he was, general counsel. It is as significant, perhaps not quite so significant, as the involvement of Allen Allen and Hemsley in that regard. Then there is a reference to having more general participation. It being more general does not add to its proximity to the decision-making as opposed to the process anterior to decision-making. There is a reference to Mr Baxter’s evidence that significant amounts must require Mr Shafron to play a part which would not have been a matter of form, but no one has suggested –

HEYDON J: It is not “play a part”. It is required his approval.

MR WALKER: Yes, that is right. But the significant announcements, in our submission, does not involve decisions that affect the whole or a substantial part of the company’s business any more than that is true of the in-house counsel who attends to a conveyance of property. Yes, they are expected to do their job properly, to observe the law and to make wise decisions about its application. That does not make them a participant in decision-making of the kind called for by the statute.

Then there is a reference to actuarial information being provided to the board. That does not involve Mr Shafron or place Mr Shafron any more than it placed Mr Attrill, who answered to him about litigation experience, as a person participating in decision-making as opposed to playing a part, no doubt an important one, in the subordinate and subservient and ancillary role of assembling and presenting information for consideration by the decision-makers, be they his superior in the executive hierarchy or the board.

Penultimately, there is a reference to frequent reporting on litigation risk management. To suggest that that involves participation in decisions of the kind called for by the statute is, in our submission, quite odd. Reporting on how the company has been going in court, with respect, says nothing whatever about the involvement of a person at that level, let alone the kind of decisions in question. Then finally, there is this item which very often happens for both general counsel and company secretary and no doubt, therefore, for somebody with both roles, namely, authority to sell off matters which have been authorised by a board.

None of those, in our submission, suggest that there is participation in decision-making as opposed to anterior service to decision-makers or ministerial execution of decision as directed. That completes in [893] the rationale that their Honours, by reading the statute, applied and in [894] the application to the facts. In our submission, error is shown by the combination, as we put it, of the error concerning the meaning and the error concerning the characterisation of the actual conduct.

However, that does not get us anywhere near home because, under section 180, we are subject to its strictures if we are any other officer and we are undoubtedly company secretary and as such are an officer. That then raises the point that we have tried to make good hitherto unsuccessfully that there is, not artificially and without any problematic difficulties, of course a distinction to be made between what a person does as general counsel and what a person does as a company secretary, at least in the broad, because one would start with the proposition that a company secretary who is not a lawyer will obviously not be acting as general counsel. One may also say the person who is attending to the filing of ASX announcements would be acting as company secretary just as confidently as one would say that a person who is compiling and keeping the minute book is acting as company secretary.

Similarly, if somebody is retaining solicitors and expressing his or her own opinions about the legal questions in the observations in the retainer or the observations in a brief to counsel, one can confidently say that is acting as general counsel and not as company secretary. In our submission, that there may be tasks which have a literally ambivalent character does not defeat the evident possibility that in the main the distinction will be readily capable of being drawn, aided obviously by the legal professional character of being general counsel.

In that regard, in our submission, it can then be said that, particularly by comparison with what Mr Donald Cameron’s responsibilities were, being company secretary but not general counsel, it can be said that each and every aspect of Mr Shafron’s conduct for which he was eventually held liable, each and every one is to do with the need to get legal advice, the need to give legal advice, the need to point out by reference to legal standards the reprehensible or at least risky nature of what was proposed to be announced or what had been announced and, in our submission, each of those, for the reasons we have put in our written submission, is a matter that lends itself preternaturally to characterisation as general counsel. That then, of course, raises the legal question that continues to have a separate importance in our argument, proposition 2 in our outline for today.

In our submission, the language of section 180 lends itself most naturally to an understanding that it is the office by dint of which section 180 applies to a person, which will provide against the objective standard the words require, the area in which the conduct falls to be measured by section 180. One sees that first from the expression “director or officer” - it is a concern with a person as an officer; second, by the reference to occupation of “the office held by”, that is, that which makes you the officer; “and had the same responsibilities within the corporation as” is, as we understand it, the phrase in the provision which separates the parties.

It is said against us that having “the same responsibilities within the corporation as” is a phrase which will capture each and every responsibility. You have seen one example we have given in our written submission, the lathe operator who is a worker representative on the board. Obviously he has responsibilities as a lathe operator. It is, in our submission, comical to suppose that section 180 was intended to capture those responsibilities.

FRENCH CJ: Does “responsibilities” extend powers and duties referred to in the chapeau?

MR WALKER: Probably not. “Responsibilities” refers to the, what I will call area of conduct, the mandate or a delegated authority. Powers and duties are the means by which the office with those responsibilities is discharged. It does not go beyond, no. One can also posit somebody who is unquestionably a director, let us say a managing director, who also

happens to be taking his turn as the fire marshal on that floor of the skyscraper. They are responsibilities and very important ones, but they are surely not intended to be within the expression one finds in 180(1)(b), “the same responsibilities within the corporation as”.

The reason why textually what we urge ought to be preferred comes in the final words of the paragraph, “the director or officer”. We have ventured to gloss that or to explain the meaning for which we contend by saying that means qua director or officer. That is why the expression is used, “the director or officer”. The concern of the legislature is with the person as an officer. It is for those reasons, in our submission, that there is error of a kind that ought to be corrected and has produced the serious outcomes for my client hitherto which ought to be corrected in this Court.

I have covered what I want to cover about proposition 3 when I referred in particular to paragraph [894] and to the general counsel nature of what was being done. Propositions 4 and 5, I do not wish really to add much, if anything, to what we have put in our full written submissions. As to proposition 4, the DOCI contravention, one is reminded of something my learned friend, Mr Bannon, said earlier today in the earlier appeal, where he referred to the representatives of Allens as being members of an experienced firm of solicitors knowing of matters including obligations of disclosure. Quite so, in our submission. For the reasons we have put in our written submissions, there had been sufficient volunteering by Allens and intermittent though, I accept, specific reference to disclosure and the dealings between Mr Shafron and Allens concerning disclosure to make good the proposition we have put about DOCI contravention.

As to superimposed inflation, your Honours have seen in our written submission the reference to the evidence, not contested so far as we understand, where there is measure of agreement between the expert actuaries called in the case; an assumption of zero superimposed inflation was a reasonable one, said one expert, was towards the bottom of a permissible range, said the other expert. That is an overlap, a congruence in part which, in our submission, renders quite wrong the finding that Mr Shafron, not an actuary at all, should have somehow expressed a contrary view. There is no basis for that in the actuarial expertise and there is no basis for that in the man holding office as a company secretary. Otherwise we rely upon our written submissions and may it please the Court.

FRENCH CJ: Thank you, Mr Walker. Yes, Mr Gageler.

MR GAGELER: Your Honours, our learned friend’s outline of submissions contains five propositions. He started with proposition 3, he moved to proposition 1, he moved to proposition 2 and then he relied on his written submissions for propositions 4 and 5. May I deal briefly and in reverse order with each of the propositions. I deal with propositions 4 and 5 simply to make the point that they involve questions of fact unworthy of ultimate appellant consideration and to found a submission that in respect of the grounds of appeal underlying propositions 4 and 5 there should be a revocation of special leave.

If your Honours go to proposition 5, it is concerned with the topic of superimposed inflation. It is ground 6 of the notice of appeal. It is the subject of the Court of Appeal’s analysis at paragraphs [1061] to [1074] and it is the subject of the Court of Appeal’s own declaration at the end of its judgment that you see in the white book at page 227, and to go to the essence of the point that is sought to be made on behalf of Mr Shafron, the contravention found by the Court of Appeal is not about Mr Shafron being required to question Trowbridge’s expert opinion.

The contravention is about Mr Shafron being required to advise the board that the 4 per cent claims inflation rate which had been used by Trowbridge in its June 2000 report and which was carried over by Trowbridge in the updating of that report for the 2001 board meeting, was significantly lower than the actual recent claim’s inflation rate shown by information to which Mr Shafron became privy after June 2000 and before February 2001. There are just three paragraphs in the Court of Appeal’s judgment to which I should refer in that regard. One is at paragraph [1066] where, after the 4 per cent figure used by Trowbridge as noted in [1061], it said at [1066]:

at the August 2000 board meeting Mr Shafron’s presentation had included that JHIL’s costs were increasing at rates much greater than Trowbridge’s assumed “Claim payout inflation of 4% compound PA”.

Then [1068], picking it up at the second and third sentences:

It should be found that he [Mr Shafron] knew that the cash flow projections in the February 2001 Trowbridge report did not allow for superimposed inflation.

That report was an updating on alternative scenarios of claim numbers in the light of the Watson and Hurst study. Trowbridge was concerned in February 2001 not with the revision of the average cost of claims to which the inflation figure went but with looking at a different pattern of claim numbers, and one sees that, and I do not ask your Honours to turn to it, in the blue book at page 1937, L. So the conclusion to which the Court of Appeal comes, in our respectful submission, unexceptionally at paragraph [1073] at the top of the next page is that:

It was not a matter of Mr Shafron second-guessing Trowbridge. He knew that JHIL’s experience was that the cost of claims was increasing at a much higher rate than the general inflation rate.

In our submission, it is unworthy of this Court to be required to reassess the underlying material. If your Honours then turn to our learned friend’s proposition 4 which is ground 5 of the notice of appeal. It is the subject of the third declaration made by his Honour, noted by the Court of Appeal at page 879, and the argument elaborated in Mr Shafron’s written submissions before this Court is nothing more than a reprise of the argument of fact put to and rejected by both the trial judge and the Court of Appeal, the argument being that Mr Shafron was entitled to assume that if disclosure was required, then Allens would advise.

What was found by both the trial judge and the Court of Appeal, in a nutshell, was that it was not within the scope of Allens’ retainer to advise on the disclosure of the DOCI information. The trial judge put that succinctly in his judgment at paragraph 563 after an elaborate review of the documentary evidence at paragraphs 518 to 533.

The Court of Appeal went through the same exercise, looked through the same documents at paragraphs [995] to [1030] and came independently, accumulatively, to the same conclusion. This, of course, is where the argument is being put on Mr Shafron’s behalf as to inferences, as to the scope of the retainer that should be drawn from documentary evidence in circumstances where Mr Shafron himself chose not to give evidence. Again, in our respectful submission, there is no basis upon which this Court should be required for a third time to trawl through those documents.

I come then to proposition 3, the question being whether the contraventions of section 180 found by the trial judge and by the Court of Appeal are in respect of acts or omissions that fell within the scope of Mr Shafron’s duties as company secretary of JHIL. Now, Mr Shafron’s proposition in this respect starts from a premise which he records in the written submissions is common ground and that premise is that the duties of a company secretary, beyond ensuring compliance with the core list of statutory obligations that one sees set out in section 188 of the Act, is in every case a question of fact. We entirely agree.

He then makes two leaps, and they are two leaps which, in our respectful submission, have no basis in logic. Indeed, they contradict the premise and they find no foothold in the evidence. Leap number one is to say that because he was appointed as company secretary and general counsel, whatever Mr Shafron did he did in one capacity to the exclusion of another. The other leap is to find the duties of Mr Shafron as company secretary by looking to what can be inferred about the duties of Mr Cameron as company secretary.

If one looks to the contract of employment, to which your Honours have already been taken at volume 1 of the blue book at page 303, not only was Mr Shafron employed in clause 3.1 in the position of general counsel, but his duties as referred to in clause 4.1 were said to be:

those typically associated with the position [singular] which You fill –

In our submission, the Court of Appeal was absolutely correct when it said at paragraph [925] that given those employment arrangements it was “artificial to separate out” one role from another. Without burdening your Honours with turning again to the minutes – the minutes your Honours will recall record at page 244 the participation of Mr Shafron in the meeting on 15 February 2001, he being described as being at that meeting as general counsel and secretary.

If one looks at what he did in the series of events leading up to that meeting and then in the meeting itself as recorded by the trial judge in the passage set out by the Court of Appeal in paragraph [899], as supplemented then by what the Court of Appeal says at paragraphs [894] and [895], there is no basis, in our respectful submission, for considering that Mr Cameron was performing responsibilities in the discharge of some separate obligations or duties as general counsel to the exclusion of his responsibilities as company secretary.

Our learned friend suggested that the contraventions were in respect of the legal judgments made or not made. That overlooks the significant commercial element involved in determination of whether or not disclosure should be made. Your Honours noted that the chapeau to paragraph [889] is said by way of summary an introduction to the elaborate involvement that is then catalogued. Mr Shafron was the second or third most senior executive of JHIL reporting directly to Mr Macdonald. The point is made at paragraph [894] – and I do not go through the catalogue of events that have been set out, but the point is made at paragraph [894] in the second sentence not only that:

He was part of the Project Green team –

but he was part:

of its promotion [and] of the separation proposal to the board.

In paragraph [895]:

what Mr Shafron did went well beyond administrative arrangement, and well beyond providing advice or information as required –

The way in which the learned trial judge put it is somewhat to similar effect. At paragraph 393 what he said was that:

Mr Shafron played a vital role in the board’s deliberations thereby participating in the making of that decision.

It was not simply the giving of legal advice. So, in our respectful submission, proposition 3 should be rejected. Turning to proposition 2, we move to a question of construction, the question of construction concerning section 180 of the Corporations Law and then the Corporations Act. The very artificiality, in our respectful submission, of attempting to separate Mr Shafron’s responsibilities as company secretary from the other responsibilities of Mr Shafron within the single position to which he was appointed within - - -

FRENCH CJ: You say it is a composite office described by those two terms?

MR GAGELER: It is a composite office, yes, and that illustrates the sense – the commonsense of the position taken by the Court of Appeal in the construction that it adopted and elaborated at paragraphs [908] to [916], that is, once you find a person who is a director or other officer then you have the subject, you have a person who is subject to the provision, you look to the actual circumstances of the corporation, you look to the actual responsibilities of that person within the circumstances of the corporation and the - - -

FRENCH CJ: For the purposes of contravention you are looking to power and duties, are you not?

MR GAGELER: That is right, and I entirely accept Mr Walker’s elaboration of the relationship between responsibilities and powers and duties, the point being that once you find the actual responsibilities of the person within the corporation, then the duty imposed by section 180 applies to the exercise of the totality of the person’s powers and the discharge of the totality of their duties. Indeed, the difficulty which Mr Shafron’s construction leads to could be well illustrated by considering the position of a managing director or someone with the designation of Mr Macdonald, a managing director and chief executive officer, and a person appointed, in effect, to a single position.

Apparently Mr Walker would have it that as a director, the duty of care imposed by section 180 would be applicable, but as perhaps performing other responsibilities you need to separate out those responsibilities from the responsibilities of a director, the thing becomes rather complex. We have given your Honours, and I will not go to it orally, but we have given your Honours in our outline of submissions a reference to Rich[2003] NSWSC 85; , 44 ACSR 341 and a useful discussion in the judgments of Justice Austin, referred to by the Court of Appeal, but no elaborated upon.

Dealing, if I may, with proposition 1, which concerns the construction paragraph (b)i of the definition of “officer” in section 9 of the Act, can I note two matters of context. One is that the defined term “officer” in relation to a corporation is employed not just in sections 180 to 184, but in a large number of other provisions of the Act, some expressed to impose duties on officers and others expressed to impose criminal sanctions. May I mention by way of illustration just a couple of them. There is section 312, which is a duty to assist an auditor. There is section 530A, which is a duty to assist a liquidator. There is section 596, fraudulently inducing the giving of credit to a company. Section 1307, falsification of a company’s books and section 1309, furnishing false information. All of those expressed to apply, relevantly, to an officer.

That is the first point of context. The other point of context is that the language of paragraph (b)i of the definition, your Honours might note, is repeated in two other sections. One of them is section 206B(1), which concerns automatic disqualification from managing a corporation and the other is section 206A(1)(a), which concerns a person committing an offence in circumstances where they are disqualified from managing a corporation. Now, all of that leads to this general proposition that the narrower the scope of paragraph (b)i of the definition, the narrower of the scope of the corporate governance to which each of those sections contributes.

Our learned friend’s construction ultimately turns on a very formal somewhat mechanistic view that a person who makes or a person who participates in making a decision is in each case a person who is a decision-maker, either individually or collectively. That is really what it comes down to. In our submission, what that approach fails to recognise is that decision-making if it is not to be entirely arbitrary or irrational, involves deliberation, that the modes of decision-making within the scheme of the Act itself can legitimately vary from corporation to corporation and that within any number of legitimate modes of corporate decision-making, a person may take part in deliberations so as to influence or even determine a result without being a formal decision-maker.

There is no difficulty in reading the word “participates”, as did the Court of Appeal, as meaning take part in and there is no difficulty in

reading the reference to making decisions as a reference to the deliberative exercise. One can say the deliberative process, provided one is concerned with that element of making decisions alone and not with the process leading up to the making of decisions, and the difference between the Court of Appeal and the trial judge in this respect really just came down to a use of language. Both of them were proceeding by reference to the same substantive understanding.

FRENCH CJ: What do you say about the positive consequence of your construction set out in the second sentence of paragraph 5 of the appellant’s outline, that is, application to external advisers?

MR GAGELER: It is conceivable, your Honour, that an external adviser – it depends how you use the word “external”.

FRENCH CJ: Well, the categories set out there.

MR GAGELER: It is conceivable that a person who is not in an employment relationship with the company may so participate in a decision-making exercise as to fall within paragraph (b)i in circumstances where they may not fall within paragraph (b)iii. We accept that. So far as a difference between the trial judge and the Court of Appeal are concerned, what the trial judge said at paragraph 388 needs to be read with what he said at paragraph 393 when he said at 388:

To participate in making decisions that affect the whole or a substantial part of the business of a company is, to my mind, the same as taking part in the relevant process.

His Honour should be read there as meaning the relevant deliberative process. That becomes clear when you put that together with his conclusion at paragraph 393, last sentence:

Mr Shafron played a vital role in the board’s deliberations thereby participating in the making of that decision.

In our submission, what the Court of Appeal then said at paragraphs [893] and [894] in the passages your Honours have already been taken to was perhaps a quibbling with the language, a different understanding of what the word “process” might have been referring to, but, in substance, the Court of Appeal applied and correctly applied to the evidence the same factual inquiry. If the Court pleases, those are our submissions.

FRENCH CJ: Thank you, Mr Solicitor. Yes, Mr Walker.

MR WALKER: Your Honours, one point only as to the last matter raised by my learned friend. The answer to the Chief Justice’s question given by my learned friend really does suggest that all of the named consultants for Project Green would fall within (b)i, notwithstanding, of course, that all of them were merely responding professionally to requests for information, advice, opinion, calculations and the like, projections, which was amalgamated and then considered as a whole by the board, sent back on occasion and eventually the subject of an executive decision, in this case by the board.

The notion that the consultants had made any decision which can be named is, in our submission, contrary to ordinary English. The proposition that they were vital to the making of the decision is, however, quite different. Of course they were. As I put it in-chief, those who assemble, perhaps at a humble level in a corporation, the essential factual data upon which the decision is made, a decision which would be reckless or criminal without factual data, are of course vital to the making of the decision.

The notion that the consultants had made any decision which can be named is, in our submission, contrary to ordinary English. The proposition that they were vital to the making of the decision is, however, quite different. Of course, they were. As I put it in-chief, those who assemble, perhaps at a humble level in a corporation, the essential factual data upon which a decision is made, a decision which would be reckless or criminal without factual data are, of course, vital to the making of the decision. The notion that they participate in its making is, in our submission, contrary to ordinary language and to contextual purposive reading of this provision.

For the same reason, the way in which my learned friend has answered the Chief Justice’s question and, indeed, has developed the argument about the proper interpretation of the definition of “officer” in section 9 means that there is no explanation whatever for the anomaly that results whereby the very powerful adviser, item (b)iii is not an officer by dint of advice but the not so powerful adviser, somebody who cannot be said to be a person in accordance with whose instructions or wishes the directors are accustomed to act can, nonetheless, fall within item (b)i and why, because they give advice. In our submission, that is - - -

HAYNE J: Well, the solution to the conundrum may, may not, lie in observing this about (b)i. It makes or participates in making decisions. The decision is not identified as being a decision of an organ of the company. The decision is identified as being decisions that affect the whole, et cetera.

MR WALKER: Quite so.

HAYNE J: Now, the decisions of management of a company about the way in which a separation proposal would be framed and effected, subject to board approval, may differ from the decisions of a solicitor advising management or board about how that might be done.

MR WALKER: Quite. We accept entirely that example and, indeed, its appropriateness in the facts of this case.

HAYNE J: But is not the sting in the tail in the example the decisions of management?

MR WALKER: Yes, I was not unaware of the extended anatomy, your Honour, no. Yes, and that is what I wanted to come on to deal with. So, if this was an exercise by which or, it could be seen that Mr Shafron was a man – it did not have to be on this occasion of course for him to have this status, but if he could be shown to be a man who made decisions as management of course, subject to ratification by the board, we have volunteered that in our written submission, if that could be shown, then the purposive reading that we have urged of section 9’s definition would have such a person within the class comprehended by item (b)i. But that could not be shown here; he did not make decisions.

It is not making a decision that affects the whole or substantial part of the business of the corporation to assemble options from which somebody else will make the choice which will send the company that way or this way. That management is thinking about what they have been asked by decision-makers to think about does not itself constitute the making of any decision that affects the whole or a substantial part of the business of the corporation. “Affects” is an important word. There must be some dispositive or executive quality to that which is called the decision. There is no such dispositive or executive quality to something which simply raises options, as it were, the discussion paper contribution to the eventual decision-making. May it please the Court.

GUMMOW J: Mr Walker, did the primary judge give reasons for not making the declaration that was made by the Court of Appeal in the cross-appeal? I cannot find them at the moment.

MR WALKER: I do not know, your Honour. Sorry, your Honour.

GUMMOW J: He made three declarations. Two of them were knocked out by the Court of Appeal. The third one survived and the Court of Appeal added another one.

HAYNE J: You are getting a lot of advice and help, Mr Walker.

MR WALKER: They are all participating, your Honour.

HAYNE J: Decisions that will affect.

MR WALKER: My learned friend, the Solicitor, has shown me – I am starting at paragraph 411 - - -

GUMMOW J: This is in the second - - -

MR WALKER: Yes, 519 of the red book. This is the cash flow. It starts at 414 and concludes at 423.

HEYDON J: Of what?

MR WALKER: Of that same judgment.

HEYDON J: Which judgment?

MR WALKER: Does your Honour have volume 2 of the red book?

GUMMOW J: No, I have the report.

MR WALKER: I am so sorry. It is the liability judgment.

GUMMOW J: Yes:

I am not satisfied that the final allegation against Mr Shafron with respect to the 15 February 2001 Meeting has been made out.

MR WALKER: That is right.

GUMMOW J: Is that what he is talking about?

MR WALKER: Yes, your Honour. Because following our lack of success in the Court of Appeal, there was the reconsideration in the Court of Appeal of what I will call penalty.

GUMMOW J: Thank you.

MR WALKER: May it please the Court.

FRENCH CJ: Thank you. The Court will reserve its decision on all these matters and adjourn till 9.30 tomorrow morning in Melbourne and 9.30 tomorrow morning in Sydney.

AT 3.19 PM THE MATTER WAS ADJOURNED