case_text: The authorities indicate that the kind of exceptional circumstances that might attract the power of discharge or variation include where an interlocutory order was obtained by fraud or non-disclosure of material facts, or through an accident or mistake that occurred without the fault of the parties seeking the relief under O 35 r 7: see Wati v Minister for Immigration and Multicultural Affairs (1997) 78 FCR 543 at 549-551. The court's discretion to vary or set aside an order is to be exercised with great caution having regard to the importance of the public interest in the finality of litigation: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39 ; (1981) 148 CLR 170 (' Brown' ) at 178; Baker v Beckett (unreported, Supreme Court of NSW, Cohen J, 26 May 1998) (' Baker' ); and Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 All ER 745 (' Chanel' ) at 751. Similar principles apply to the variation or discharge of final orders: see Autodesk Inc v Dyason (No 2) [1993] HCA 6 ; (1993) 176 CLR 300 (' Autodesk' ) at 302, 307, 309-310, 317-318 and 321. Further, as Spender J emphasised in Dudzinski in relation to O 35 r 7(2)(c), the rule is not an alternative to the appellate procedure in respect of interlocutory judgments, nor is it to be invoked for the purpose of allowing a party to present a case a second time to its better advantage. In my opinion, these principles apply, a fortiori, where the party applying for discharge of an interlocutory order seeks to reargue the issues that have already been determined by reference to additional evidence that was available to it on the earlier occasion but which it chose not to advance: see also Autodesk at 310 per Brennan J. 8 Ms O'Brien, senior counsel for the applicant, submitted that the respondents must meet a high threshold test in order to succeed in an application for orders discharging an interlocutory order. She cited Brown, Baker and Chanel in support of this submission. In Brown , the High Court held that a further order will be appropriate where new facts come into existence, or are discovered, which render the enforcement of the order unjust. Those changed circumstances must be established by evidence: Brown at 178 per Gibbs CJ, Aickin, Wilson and Brennan JJ. In Chanel , the Court said at 751 that: 'Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter.' The applicant submitted that the respondents had failed to adduce evidence of any new facts or changed circumstances; rather, the matters relied upon by the respondents to support the application were wholly matters which could have been put into evidence at the hearing on 19 May 2006.


case_outcome: cited

case_text: The authorities indicate that the kind of exceptional circumstances that might attract the power of discharge or variation include where an interlocutory order was obtained by fraud or non-disclosure of material facts, or through an accident or mistake that occurred without the fault of the parties seeking the relief under O 35 r 7: see Wati v Minister for Immigration and Multicultural Affairs (1997) 78 FCR 543 at 549-551. The court's discretion to vary or set aside an order is to be exercised with great caution having regard to the importance of the public interest in the finality of litigation: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39 ; (1981) 148 CLR 170 (' Brown' ) at 178; Baker v Beckett (unreported, Supreme Court of NSW, Cohen J, 26 May 1998) (' Baker' ); and Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 All ER 745 (' Chanel' ) at 751. Similar principles apply to the variation or discharge of final orders: see Autodesk Inc v Dyason (No 2) [1993] HCA 6 ; (1993) 176 CLR 300 (' Autodesk' ) at 302, 307, 309-310, 317-318 and 321. Further, as Spender J emphasised in Dudzinski in relation to O 35 r 7(2)(c), the rule is not an alternative to the appellate procedure in respect of interlocutory judgments, nor is it to be invoked for the purpose of allowing a party to present a case a second time to its better advantage. In my opinion, these principles apply, a fortiori, where the party applying for discharge of an interlocutory order seeks to reargue the issues that have already been determined by reference to additional evidence that was available to it on the earlier occasion but which it chose not to advance: see also Autodesk at 310 per Brennan J.


case_title: Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 All ER 745


case_outcome: followed

case_text: The authorities indicate that the kind of exceptional circumstances that might attract the power of discharge or variation include where an interlocutory order was obtained by fraud or non-disclosure of material facts, or through an accident or mistake that occurred without the fault of the parties seeking the relief under O 35 r 7: see Wati v Minister for Immigration and Multicultural Affairs (1997) 78 FCR 543 at 549-551. The court's discretion to vary or set aside an order is to be exercised with great caution having regard to the importance of the public interest in the finality of litigation: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39 ; (1981) 148 CLR 170 (' Brown' ) at 178; Baker v Beckett (unreported, Supreme Court of NSW, Cohen J, 26 May 1998) (' Baker' ); and Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 All ER 745 (' Chanel' ) at 751. Similar principles apply to the variation or discharge of final orders: see Autodesk Inc v Dyason (No 2) [1993] HCA 6 ; (1993) 176 CLR 300 (' Autodesk' ) at 302, 307, 309-310, 317-318 and 321. Further, as Spender J emphasised in Dudzinski in relation to O 35 r 7(2)(c), the rule is not an alternative to the appellate procedure in respect of interlocutory judgments, nor is it to be invoked for the purpose of allowing a party to present a case a second time to its better advantage. In my opinion, these principles apply, a fortiori, where the party applying for discharge of an interlocutory order seeks to reargue the issues that have already been determined by reference to additional evidence that was available to it on the earlier occasion but which it chose not to advance: see also Autodesk at 310 per Brennan J. 9 The authorities, particularly the cases in this Court, make it clear that circumstances must be demonstrated that make it appropriate to entertain the application. It will not be appropriate to do so where it simply amounts to an application to re-run an argument that could have been run on additional evidence. To allow parties to seek to discharge or vary orders in that kind of circumstance would be to subvert the finality of litigation and to invite interminable arguments about issues which have already been adjudicated upon: see Autodesk at 310 per Brennan J. 10 In this case, the respondents now seek to rely on two further affidavits affirmed by Mr James Hugh Lavery on 25 May 2006 and Ms Shelley Ruth Marcus on 25 May 2006. Both affidavits go to issues that were fully and openly contested at the hearing before me on 19 May 2006. The affidavits do not raise any new issue or newly discovered facts or disclose any circumstances that have changed since 19 May 2006. 11 At the hearing on 19 May 2006, the applicant submitted that trust and confidence had not been destroyed between the applicant and her employer and that she had continued to perform her duties in the course of her employment until the day on which she was served with the notice of termination. The respondents traversed these contentions, arguing the contrary position that it was evident that there was now no trust and confidence. That was done both in writing and orally. I addressed these matters in my reasons for judgment of 19 May 2006. 12 After I had delivered judgment and pronounced the orders on 19 May 2006, senior counsel for the respondents foreshadowed this application and explained that counsel for the respondents had taken a conscious and deliberate decision not to place affidavit material of the kind now sought to be relied upon before the Court. The respondents are bound by the decisions of their counsel made in the course of proceedings. In my opinion, there is nothing that would bring this application or this additional evidence within the principles governing the circumstances in which the Court will exercise the power to discharge or vary one of its orders. Accordingly, the application must fail because it does not demonstrate facts and circumstances of the kind that must be demonstrated on the authorities to support an application for variation or discharge of an order. 13 On this ground alone, I propose to dismiss the notice of motion. In any event, if I had regard to the material in the further affidavits of Mr Lavery and Ms Marcus, it would not cause me to alter the conclusion I reached in my previous judgment. It would not alter my evaluation of where the balance of convenience lies nor would it cause me to refuse relief on discretionary grounds.


case_outcome: distinguished

case_text: Dr Jessup QC, senior counsel for the respondents (the applicants on the notice of motion), referred me to several decisions concerning the principles which apply where an interlocutory application is made several times and the previous applications are unsuccessful: Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2006] VSC 170 (' Tenth Vandy' ) and Nominal Defendant v Manning [2000] NSWCA 80 ; (2000) 50 NSWLR 139 (' Manning' ). The decision of Hargrave J in Tenth Vandy canvasses the authorities concerning multiple interlocutory applications, including the decision of the Victorian Court of Appeal in DA Christie Pty Ltd v Baker (1996) 2 VR 582. There is, it seems to me, a distinction between the approach which might be adopted in relation to multiple interlocutory applications where the relevant principal concerns abuse of process, and the approach which has been adopted in relation to applications to vary or discharge an interlocutory order, where the interlocutory order can, in any event, be the subject of an appeal with leave.


case_title: Nominal Defendant v Manning [2000] NSWCA 80 ; (2000) 50 NSWLR 139


case_title: DA Christie Pty Ltd v Baker (1996) 2 VR 582


case_outcome: considered

case_text: In oral submissions, Dr Jessup proposed that the injunctive order should either be stayed or discharged in the absence of an undertaking being proffered now by the applicant equivalent to that proffered by the employee in Robb v Hammersmith and Fulham London Borough Council [1991] IRLR 72; [1991] ICR 514 at 523. The effect of that undertaking was, inter alia, that until trial, the employee would agree to be treated as suspended on full pay. In my opinion, there is no reason why this submission should cause me to alter or vary the orders I made on 19 May 2006. It is open to the applicant and the respondents, by direct discussions or arrangements between them, to address the basis upon which Ms Paras continues in employment pending trial. 18 The final order sought by the notice of motion was an order extending the time in which an application for leave to appeal against my orders of 19 May 2006 might be filed pursuant to O 52 r 10(2) of the Federal Court Rules . Under that rule, a motion seeking leave to appeal must be filed within seven days after the date on which the interlocutory judgment was pronounced. 19 The judgment was pronounced on 19 May 2006 and the seven day period would expire next Monday 29 May 2006. Dr Jessup submits that a short extension of time is appropriate in view of the fact that my published reasons for judgment became available in writing yesterday. The reasons were pronounced orally at the conclusion of the hearing on 19 May 2006.


case_text: The likelihood of leave to appeal being granted is a relevant consideration, even on a limited application to extend the time for the filing of a notice of motion seeking leave: see Deighton v Telstra Corporation Ltd (unreported, Full Federal Court, Lee, Heerey and Nicholson JJ, 17 October 1997) and Croker v Philips Electronics Australia Ltd [2000] FCA 1731. I have some reservation as to whether an appropriate case for an extension of time has been made out. However, I will grant a short extension of time for the filing of a notice of motion seeking leave to appeal. In reaching this conclusion, I am conscious that, as I said in my reasons for judgment of 19 May 2006, the grant of an interlocutory injunction in an employment situation such as this is exceptional, although I consider that this case has special features which made the grant of such relief necessary and appropriate.


case_title: Croker v Philips Electronics Australia Ltd [2000] FCA 1731


case_text: Under the circumstances, bearing in mind the matter has not been served, that there is no proper respondent and that the application for an order of review is bound to fail because the underlying document is simply not in a form capable of being filed, this application for an order of review is dismissed pursuant to O 20, and pursuant to s 31A of the Federal Court of Australia Act 1976 (see Bahonko v The Commonwealth [2008] FCAFC 16). I certify that the preceding seven (7) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. Associate: Dated: 27 June 2008 The Applicant appeared in person Date of Hearing: 25 June 2008 Date of Judgment: 25 June 2008 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2008/981.html


case_outcome: referred to

case_text: rule in Jones v Dunkel was discussed however in Adler v Australian Securities & Investments Commission [2003] NSWCA 131 ; (2003) 179 FLR 1 , Williams v Australian Securities & Investments Commission [2003] NSWCA 131 ; (2003) 46 ACSR 504 , a judgment handed down before the High Court's Rich ruling, where the New South Wales Court of Appeal ruled that the trial judge, Santow J ((2002) [2002] NSWSC 171 ; 41 ACSR 72) , made no error in so far as his findings against Mr Adler, his company and Mr Williams were aided by Jones v Dunkel inferences against both those individuals and the company. In that proceeding ASIC had sought, inter alia , disqualification orders as well as pecuniary penalties. Giles JA, with whom Mason P and Beazley JA agreed, considered the High Court criminal cases discussed above and noted at [658] that proceedings for civil penalties do not share the same fundamental features of a criminal trial. His Honour stated that civil penalty proceedings are expressly to be maintained by civil law processes, not by a criminal trial with its fundamental features, [659]. He concluded that it was open for Jones v Dunkel inferences to be drawn against Mr Adler, his company, and Mr Williams in the proceedings, [661]. The rulings in Adler were therefore made on the footing that the privilege against exposure to penalty was attracted through ASIC's seeking of pecuniary penalties, but this did not prevent the trial judge from applying the rule in Jones v Dunkel, the rule and privilege both falling within the rules of evidence and procedure for civil matters that the court was bound to apply pursuant to s 1317L of the act when hearing proceedings for a declaration of contravention or a pecuniary penalty order. The High Court refused an application for special leave to appeal from the Court of Appeal's decision in Adler : [2004] HCATrans 182 , 28 May 2004. The transcript reveals that the special leave point argued was the issue of procedural fairness in dealing with the imposition of pecuniary penalties and disqualification under the civil penalties regime of the Act; there was no discussion of the rule in Jones v Dunkel .


case_text: had known Huston for a number of years prior to this. Huston acted as solicitor for Anaconda Nickel Ltd in proceedings in the Supreme Court of Western Australia culminating in an appeal to the Full Court: Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27 ; (2000) 22 WAR 101. These proceedings concerned the enforceability of a short letter said to be a "heads of agreement". In certain respects it bears a remarkable similarity to the framework agreements. The majority (Ipp J; Pidgeon J agreeing) held that the heads of agreement was a valid and binding agreement. Huston helped prepare the draft as well as the final 8 November Letter concerning the three framework agreements provided by FMG to the ASX that day. He attended a meeting with Mr Tony Walsh, Assistant Manager Issuers of the ASX, on 8 November 2004 relevantly to discuss this draft for the purpose of providing further information to the ASX as to the terms of the framework agreements. I have concluded that, for this purpose, Huston would have considered the terms of the related 5 November Letter and the three framework agreements referred to in that letter. He did not advise the FMG Board or Forrest that these agreements were not legally binding or that the 5 November Letter was to that extent incorrect or not reasonably based. Given his role in FMG, had he formed that view, I find that he should have and would have informed the board. That he did not, entitled the board and Forrest to continue to regard the disclosures concerning the legal effect of the framework agreements as correct, or at least that they were reasonably based. That this was so is fortified by evidence of actual advice given by Huston to the FMG board that the framework agreements were legally binding as disclosed. The FMG board minutes of its 22 January 2005 meeting, attended by Huston, record his advice to the board that the CMCC Framework Agreement was binding. So too did an email sent by him on 30 March 2005 to Forrest, Christopher Catlow, David Liu, Rowley, Alan Watling and other FMG executives concerning the AFR Article in which he repeated this advice, relying in particular upon the Anaconda decision. The 30 March 2005 email was not disclosed in ASIC's pleading. While the minutes of the 22 January board meeting were set out as a particular of two allegations concerning FMG's and Forrest's knowledge of the Chinese Contractors' attitude towards the framework agreements and of the legal effect of the agreements, ASIC did not particularise the material passage in the minutes where Huston's legal advice to the board was set out, nor did it refer to this passage in its opening or closing submissions. This is so, despite the fact that, in relation to ASIC's s 674 case, it asserted, amongst other things, that FMG ought to have been aware of the legal effect of the framework agreements asserted by ASIC by first obtaining competent legal advice. Huston was a very experienced and competent commercial solicitor. I was not referred to these documents during the trial until the closing address by Forrest's senior counsel, Mr Myers QC. Their content, combined with other evidence, demonstrates that there was no basis for ASIC to assert dishonesty on the part of FMG, its board and in particular, Forrest. I make the same criticism of the description applied to FMG and by implication its board and particularly Forrest in the way ASIC's case was opened. It was asserted that FMG engaged in a concerted and designed course of conduct in which it made false, misleading and exaggerated statements to the ASX of which Forrest was the architect. In my view the evidence does not support such serious allegations. The principal basis, it seems, depends on ASIC's submission that the framework agreements are self-evidently not binding build and transfer agreements. I rejected that argument. I consider that there was a reasonable basis for FMG, through its board, including Forrest, to have held the view that the framework agreements were binding as claimed. It was supported by Huston's professional oversight to ensure the legal enforceability of FMG's agreements as well as his later positive advice to the effect that they were such. It was a view consistent with Forrest's knowledge of the Anaconda case. It finds arguable support in other authority. Significantly too, CREC approved the terms of the 23 August Media Release before FMG made the notifications to the ASX on 23 August 2004. The release described the CREC Framework Agreement as a "binding agreement to build and finance the railway component of Fortescue Metals Group Ltd's $1.85 billion Pilbara iron ore project". In the release Mr Qin Jiaming (Qin), the President of CREC, is quoted as saying that the contract presented an excellent opportunity for CREC to develop internationally and that CREC was fully confident about its capacity to build the rail project. It was described by him as a 'marriage' immediately following the high level ceremony when the parties signed the Joint Statement which rendered the agreement binding. I find that the terms of the 5 November Media Release provided to CHEC and CMCC was likewise approved, at least not disavowed, by them before disclosure to the ASX by FMG. For at least these reasons, it is important that allegations of dishonesty should be made only where there is a reasonable evidentiary basis for them. It is my opinion that on the totality of the evidence available to ASIC there was no such basis in this case. Notwithstanding that ASIC's assertions as to the meaning and legal effect of the framework agreements differs from that disclosed by FMG to the knowledge of Forrest, this difference, which, in effect, is a difference of opinion does not of itself provide a basis for alleging dishonesty against FMG, its board and in particular Forrest. FMG's opinion was underpinned by the oversight and advice of its in-house counsel Huston. Forrest had his knowledge and experience in Anaconda to draw upon . Documents demonstrating these significant matters were available to ASIC. In light of these it is difficult to discern why ASIC ran a case alleging that FMG's board could not have made the disclosures it did if it had obtained competent legal advice. The board of FMG had no reason to doubt the correctness of Huston's view as to the meaning and legal effect of the framework agreements. He was employed by FMG primarily to ensure that all of FMG's agreements were legally enforceable. The reasonableness of FMG's opinion was strongly contended for by senior counsel for both FMG and Forrest at trial. It was an opinion which I consider was reasonably open. In my view, these allegations of dishonesty should not have been made. I have no hesitation in concluding that FMG and its board, including Forrest, honestly and reasonably held the opinion that the framework agreements were legally enforceable in the sense asserted in FMG's disclosures. They did not hold the opinions propounded by ASIC. Those opinions do not self evidently and obviously arise upon a consideration of the terms of the framework agreements. PART 3: EVIDENTIARY MATTERS Standard of proof ASIC submits in written closing submission that the authorities such as Anaconda, Pagnan SpA, Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 and Uranium Equities v Fewster [2008] WASCA 33 ; (2008) 36 WAR 97 relied on by FMG state that whether or not the parties intended to contract, they must agree on such terms, normally described as essential terms, such that the contract could be enforced or made complete by implying terms or applying considerations of reasonableness. I will consider these authorities further. In Anaconda [2000] WASCA 27 ; 22 WAR 101 , the Court of Appeal found that a binding contract had been made when a heads of agreement containing five clauses was signed, the last paragraph of which said that the heads of agreement "constituted an agreement in itself intended to be replaced by a fuller agreement not different in substance or form". At [28], Ipp J referred to the following statement by Sugerman J, approved by Menzies J in Thorby v Goldberg [1964] HCA 41 ; (1964) 112 CLR 597 at 607: It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential and critical terms, have been agreed upon. So, there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties. Again, there is no binding contract where the language used is so obscure and incapable of any precise or definite meaning that the court is unable to attribute to the parties any particular contractual intentions. In Uranium Equities [2008] WASCA 33 ; 36 WAR 97 , the parties to the putative agreement had been negotiating over a proposed mining joint venture, but no heads of agreement had been executed. The Court found that the trial judge was right in concluding that the parties did not intend to be bound by anything said or done by them until such time as the heads of agreement had been executed. The Court went on to state on the question of uncertainty at [257] that it is "trite" that, even when the requisite intention is present, a contract can fail for uncertainty. The Court said it is also trite that only the omission of an essential term will have the effect that a contract is so incomplete or uncertain as to render it invalid, citing Ipp J in Anaconda [2000] WASCA 27 ; 22 WAR 101 at [29] . The Court referred to the statement of Lloyd LJ from Pagnan SpA [1987] 2 Lloyd's Rep at 619 and found that when regard was had to all the circumstances the parties did not intend to be bound by anything said or done by them until such time as the heads of agreement had been executed . The Court concluded that although some of the matters left over by the parties for future negotiation were important, none were essential to the efficacy of the alleged agreement in the sense that the agreement could not be enforced without it. ASIC also points to the absence of the following from the framework agreements: no provision for choice of contractors or the selection of materials; no definition of "practical completion"; and no specifications for any design elements of the infrastructure. The documents referred to in the Recitals to each agreement would have, no doubt, assisted in clarifying the matters absent from the agreements. In light of those documents, following the approach of Ipp J in Anaconda [2000] WASCA 27 ; 22 WAR 101 at [61] , it may have been possible to conclude that, despite the long list of matters said to render the framework agreements uncertain and incomplete, there was a binding contract, workable by implying terms or on the proper construction of the agreement. The court will apply orthodox principles of implying terms by reference to the implied duty to co-operate and use considerations of reasonableness, to give effect to that intention: Australian Broadcasting Corporation v XIVth Commonwealth Games 18 NSWLR 540; Moffat Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60. The asserted uncertainty or incompleteness may therefore be overcome once the requisite intention to contract is found to be present. In Anaconda [2000] WASCA 27 ; 22 WAR 101 , the issue was whether a binding contract for Anaconda, a company interested in lateritic nickel, to explore and mine for base metals on the tenements of Tarmoola, a company interested mainly in gold, had been made when a heads of agreement containing five clauses was signed, the last paragraph of which said that the heads of agreement ' constitutes an agreement in itself intended to be replaced by a fuller agreement not different in substance or form' . Tarmoola argued that there was no intention to contract, no agreement on essential terms, and that the agreement was incomplete and uncertain. By majority, the WA Full Court rejected these arguments and held that the heads of agreement was a binding contract. Ipp J (with whom Pidgeon J agreed) found that contractual intention was present. His Honour endorsed the existence of the fourth Masters v Cameron category in stating: It is well recognised that parties may enter into a valid contract containing a limited number of terms comprising those terms essential to the bargain that they wish to conclude, in the expectation that at a later date a further contract will be arrived at containing additional terms that would facilitate and clarify the initial contract. That is to say, a binding contract may be arrived at even though it leaves unresolved many matters which might arise in future. [25] Since Anaconda was decided by the Court of Appeal on 17 February 2000 it has been cited, considered or applied without disapproval in a number of contract law cases involving questions of incompleteness or uncertainty, for example: Duskwood Pty Ltd v Bellara Willows Pty Ltd [2001] per Steytler J at [95]; Liristis Holdings Pty Ltd v Wallville Pty Ltd [2001] NSWSC 428 per Barrett J at [38]; African Minerals Limited v Pan Palladium Limited [2003] NSWSC 268 per Einstein J at [26]; Thompson v White & Ors [2006] NSWCA 350 per Tobias JA with whom Ipp and McColl JJA agreed at [100]; Tasman Capital Pty Ltd v Sinclair [2008] NSWCA 248 per Giles JA with whom McColl JA and Young CJ in EQ agreed at [27]-[28]; Donald Fin Enterprises Pty Ltd v APIR Systems Ltd (2008) 67 ACSR 219 per Edmonds J at [131]-[132]; Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd [No 3] [2009] WASC 352 per Murray J at [90]. The approach taken in G R Securities 40 NSWLR 631, Anaconda [2000] WASCA 27 ; 22 WAR 101 and Tasman Capital [2008] NSWCA 248 was followed very recently by the Queensland Court of Appeal in Moffat Property Development Group [2009] QCA 60 , mentioned above, which underlined the importance of the parties' manifest intention to contract. The issue was whether a contract for the sale of rural residential land had been made by an exchange of letters. The Queensland Court of Appeal held that the parties intended to be legally bound through their exchange of correspondence and that there was a contract even though matters such as the timing of completion and arrangements at settlement, the precise timing of the payment of the deposit, the place of settlement, responsibility for insurance, GST issues and the terms of a put and call option were not spelt out in the correspondence. Keane JA delivered the court's judgment. His Honour: (a) accepted McHugh JA's point in G R Securities that "the decisive issue is always the intention of the parties": [23]-[25]; (b) said "the terms of the correspondence exchanged between the parties contemplated the execution of a further contract as the means whereby the bargain which they had concluded would be implemented. It is necessarily implicit in such an agreement that the parties will co-operate to do what must be done to make the further agreement": [30]; (c) adopted McHugh JA's approach in G R Securities and explained that the implied obligation of each party to co-operate with the other to ensure each side obtains the benefit of its bargain serves to supply the deficiencies: [34]; (d) cited Australian Broadcasting Corporation v XIVth Commonwealth Games 18 NSWLR at 548 in stating: "I am of the view that there can be no doubt as to the orthodoxy of referring to 'implied terms or ... considerations of reasonableness' in order to determine whether the parties' 'consensus is sufficiently comprehensive to be legally binding : [51]. Forrest had known Huston for a number of years prior to this. Huston acted as solicitor for Anaconda Nickel Ltd in proceedings against Tarmoola Australia Pty Ltd in the Supreme Court of Western Australia: [2000] WASCA 27 ; (2000) 22 WAR 101. These concerned the enforceability of a short letter said to be a "heads of agreement". In certain respects it bears a remarkable similarity to the framework agreements. The then Full Court, in 2000, by majority (Ipp J; Pidgeon J agreeing) held that the heads of agreement was a valid and binding agreement. The judgment in that case was the foundation of the view held and the advice given by Huston. It was a case which was already well-known to Forrest. He had been Anaconda's CEO at the time of the litigation and its signatory to the heads of agreement which was the subject matter in the case. FMG and Forrest in particular, at least from the beginning of Oct 2004, if not before, were focused on ensuring that FMG's agreements were legally enforceable. This included the framework agreements. It is apparent that one of Huston's principal roles at FMG was to oversee and ensure the legal enforceability or, as Forrest sometimes described it, the "bankability" of FMG's agreements. On 3 October 2004 Forrest distributed a lengthy email to, amongst others, FMG executives and Huston in which he welcomed Huston to the team. Paragraph 3 with the heading "Legally binding contracts" included the following : Some agreements have been written in an ad hoc way with the best means available to the executive responsible. Unfortunately, on a full Bankers legal due diligence some of these may not pass the enforceability test. Gentlemen, please ensure with Peter complete legal enforceability on the agreements that we are all relying to construct FMG. The text of the email, almost entirely, concerns the three framework agreements. In context, therefore, I take this request by Forrest to be referring to, or at least to include, those agreements. Forrest concluded by saying "... I am happy with the release, subject to P. Huston's sign off on the enforceability, to go." This appears to be a reference to a press release concerning an iron ore contract with a Chinese company called Hebei. It again evidences Forrest's quite specific concern that FMG's agreements were legally enforceable. On 20 October 2004, after the execution of the CHEC and CMCC Framework Agreements but before the formal Joint Statement signing ceremony in Beijing on 5 November 2004 when those agreements became binding, Forrest sent an email to various FMG personnel, including Huston, where he referred approvingly to David Liu and his co-ordination of the arrangements with the three Chinese Contractors. He also thanked Huston for his contribution. He said: Peter, (Huston) thanks for the rappid (sic) fire support tonight. Hope we got your instructions right these contract (sic) better be bankable because people are signing them. David pls get the two we worked on today down to Peter for his all clear. I take the word "bankable" in this context to mean such as to satisfy potential FMG financiers, in the course of their due diligence process, as to the "legal enforceability" of these contracts. It is clear from the combination of the 22 January minutes and Huston's 30 March email that, in his opinion, the CMCC Framework Agreement was a binding build and transfer agreement. The case to which he referred was Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27 ; 22 WAR 101 which I have referred to previously. That case concerned the enforceability of a letter containing 5 clauses and described as a "heads of agreement" signed by Forrest who then was Chief Executive of Anaconda. The letter concluded, in terms not dissimilar to clause 7 in each of the framework agreements: The above forms a heads of agreement which constitutes an agreement in itself intended to be replaced by a fuller agreement not different in substance or form. The respondent, Tarmoola, signed the letter confirming its agreement to the tems and conditions set out in it. The parties then entered into negotiations for the "fuller agreement" but those negotiations were unsuccessful. No "fuller agreement' was concluded. Anaconda , amongst other relief, sought a declaration that the heads of agreement was a valid and binding contract. The respondent argued that it was not so bound on a number of bases, including lack of intention to create a binding legal relationship because so many important matters had been omitted, lack of certainty and completeness of the contract. The appeal was successful and the declaration was granted. Tarmoola's application to the High Court for special leave to appeal (P15/2000) was discontinued. Huston , I infer, during the period he was overseeing FMG's agreements, had a detailed knowledge of this case and the reasons for judgment. He was Anaconda's instructing solicitor in that case. As ASIC pleads, Huston was an experienced and practising commercial solicitor. He had, as I have said, been directly involved in preparing the 8 November Letter which concerned all three framework agreements. One of Huston's principal responsibilities was to ensure that FMG's agreements were legally enforceable. He had not suggested to the FMG Board, including Forrest, that the framework agreements were not legally enforceable. His opinion expressed in the 22 January 2005 board minutes and the 30 March 2005 email that the CMCC Framework Agreement was binding necessarily must have applied to the other two framework agreements. FMG's and Forrest's opinion as to the meaning and legal effect of the framework agreements was shaped and informed by Huston's involvement. They had the benefit of his dedicated professional oversight and later his advice as to the legal enforceability of the framework agreements. Forrest as CEO, was directly involved in the Anaconda case and would have been well aware of the judgments both at first instance and on appeal as well as the discontinuance of Tarmoola's application for special leave to appeal to the High Court. Forrest then had the benefit of legal advice in relation to the legal enforceability of a similar agreement. Huston alluded to this in his 30 March 2005 email when he stated, referring to the Anaconda decision: Thus if journalist(s) want to know why Andrew (Forrest) considers the (C)MCC agreement to be binding he is amongst other things relying on his own direct experience from this (S)upreme Court Case. All relevant FMG staff had been told by Forrest in early October to ensure, through Huston, that FMG agreements were legally enforceable. The evidence also demonstrates that, contrary to ASIC's assertion, Huston did give legal advice to FMG as to the legal enforceability of the framework agreements. In particular, the 22 January minutes show that the FMG board turned its mind to the question of whether the CMCC Framework Agreement was binding following the statement by Mr Ma at the 17 January meeting, that it sought legal advice on that question from Huston and that he answered the question in the affirmative. If, as I think likely, although I make no finding, he was asked to advise on the issue of the legal enforceability of the CREC Framework Agreement prior to the 23 August notification, it is reasonable to infer that his opinion and reasons for it were, or would have been, the same as he later twice provided to FMG's board. I consider that Forrest exercised his powers and discharged his duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of FMG in FMG's circumstances; and if they occupied the offices of Forrest within FMG and had the same responsibilities within FMG as Forrest. Forrest, as I have explained earlier in detail, as a consequence of his own appreciation of the decision in Anaconda; his reliance on the legal oversight and advice of Huston; and his appreciation that the Chinese Contractors held the same view that the framework agreements were legally binding, had reasonable grounds for approving or permitting to be made the disclosures, complained of by ASIC, by FMG between August 2004 and March 2005. I am well satisfied that Forrest acted reasonably to ensure that FMG both complied with s 674 of the Act and did not contravene s 1041H of the Act. He did not breach s 180(1) of the Act as alleged by ASIC or at all. Given the conclusions to which I have come concerning ASIC's case under s 1041H I do not consider it necessary to deal with Forrest's further defence based in s 180(2) concerning the Business judgment rule. For all these reasons ASIC's Application against each of the defendants should be dismissed. ASIC should pay the costs of each of the defendants. There will be orders accordingly. I certify that the preceding nine hundred and six (906) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour. Associate: Dated: 23 December 2009 Counsel for the Plaintiff: Mr N J Young QC with Mr J A Thomson, Mr D J Crennan and Mr A J Musikanth Solicitor for the Plaintiff: Mallesons Stephen Jaques Counsel for the First Defendant: Mr J Karkar QC with Mr B Dharmanada and Mr R J Price Solicitor for the First Defendant: Clayton Utz Counsel for the Second Defendant: Mr A Myers QC with Mr M Thangaraj Solicitor for the Second Defendant: Jackson McDonald Date of Hearing: 6-30 April 2009 1-7 May 2009 Date of Judgment: 23 December 2009 SCHEDULES 'A' Dramatis Personae ABB Australia Pty Ltd Australian Securities and Investments Commission ("ASIC") Plaintiff Australian Securities Exchange Limited ("ASX") Walsh, Tony, Assistant Manager Issuers Australian, The (Newspaper) Armitage, Catherine Bromby, Robin Barclay Mowlem Construction Ltd ("Barclay Mowlem") Killinger, Bill, Director and General Manager (Rail) BGC Contracting Pty Ltd ("BGC") China Harbour Engineering Company (Group) ("CHEC") Chen Yongkuan, Vice President Liu Huai Yuan, President China International Trust & Investment Corporation ("CITIC") Wang Jun, Chairman China Metallurgical Construction (Group) Corporation ("CMCC") Ma Yanli, President/ Chairman Shen Heting, President Sun Longjun, Second Business Department Manager Wang Yongguang, Vice President Yang Changheng, Chairman, Zou Wei Min, General Manager China Railway Engineering Corporation ("CREC") Bai Zhongren, Vice President Liang, assistant to Mr Zhang Qin Jiaming, President/ Chairman Zhang, Kean, Project Manager Chinese Ambassador Madam Fu Ying Citigroup Fraser, Chris, Vice President Investment Bank Downer EDI Rail Broad, Danny, employee Expert Witnesses Houston, Gregory, consulting economist employed by NERA Economic Consulting Keene, Reginald, senior client adviser at Bell Potter Securities Sisson, Andrew, Managing Director of Balanced Equity Management Pty Limited Watson, Iain (Dr) Deputy Dean of the UWA Business School External Consultants to FMG Bai Lou-Lin (Lawrence) Xin Yin Field Public Relations ("Field PR") Field, John, Managing Director Skinner, Kevin, Senior Consultant Fortescue Metals Group Limited ("FMG") First Defendant Campbell, Rod, Company Secretary Catlow, Christopher, Chief Financial Officer Dewar, Todd, Project Engineer Fisher, Wei, Executive Assistant Forrest, John Andrew Henry, Second Defendant, Chief Executive Officer and Chairman of Directors of First Defendant. Heyting, Ed, Project Manager of Infrastructure Huston, Peter, in-house legal counsel Kirchlechner, Philip, Head of Marketing Li, Catherine, Engineer Liu, David, Head of China Business Morrin, Juliet, Executive Assistant of Second Defendant O'Reilly, Louise Rowley, Graeme, Executive Director Operations Rui Dana Du, Senior Business Analyst Scrimshaw, Russell, Director Tapp, Julian, Head of Government Relations Watling, Alan, Chief Operating Officer and Head of Port & Rail Williams, Jim, Head of Mining Operations Government of Australia Farmer, Pat, Assistant Minister for Education Haase, Barry, Federal Member for Kalgoorlie Hewett, Kym, Senior Trade Commissioner at the Australian Embassy Thomas, Dr Alan, Australian Ambassador to China Vaile, Mr, Minister for Trade Government of Western Australia Brown, Clive, Minister for State Development Leighton Contracting Leighton Holdings Group Ministry of Commerce ("MOC") Chen Jian, Assistant Minister National Development Reform Commission ("NDRC"). He Lianzhong , Deputy Director General, Foreign Capital Utilization Department Liu Xuhong , Deputy Director General, Foreign Capital Utilization Department Other Chinese companies Chiao United (Fuzhou) Steel Co. Ltd China Shougang International Trade & Engineering Corporation Hebei Wenfeng Iron & Steel Co Ltd Ping Xiang Iron & Steel Co. Ltd Jiangsu Fengli Group Co Ltd Patersons Securities Ltd ("Patersons") Quantm Ltd Shanghai Baosteel Group Sinosteel Corporation ("Sinosteel") State-Owned Assets Supervision and Administrative Commission ("SASAC") Wang Xiaoqi, Director General of the Bureau of Planning and Development ThyssenKrupp Engineering (Australia) Pty Ltd ("ThyssenKrupp") Wong K C, FMG's second largest shareholder in 2004/05 Worley Pty Ltd ("Worley") SCHEDULE 'B' CREC FRAMEWORK AGREEMENT SCHEDULE 'C' CHEC FRAMEWORK AGREEMENT SCHEDULE 'D' CMCC FRAMEWORK AGREEMENT SCHEDULE 'E' AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2009/1586.html


case_text: Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth of Australia [1977] HCA 71 ; (1977) 139 CLR 54 at 72.7, Mason J said: No doubt it is correct to say that, where in the recitals to a deed or an agreement it is acknowledged that the parties have agreed to do, or will do, certain acts, a promise to do those acts will be read into the agreement in the absence of an express promise to that effect. Then, there being no indication of a contrary intention, it may safely be inferred that the absence of a contractual provision was due to oversight or inadvertence. It can be seen from the recitals that FMG accepted CREC's offer to "execute the Works", namely the "Build and Transfer" of the railway. Applying Mason J's proposition in Ansett Transport Industries [1977] HCA 71 ; 139 CLR 54 , CREC's promise to build and transfer the railway may, arguably, be read into the operational part of the agreement, there being no indication of a contrary intention. Accordingly, in my view, it is arguable and reasonably so that the Recitals of the agreement record the parameters of the intended agreement, that is, the offer and acceptance of the obligation to build and transfer the railway. Clause 1.1 arguably does not derogate from this obligation. This clause lists the matters which would be the subject of further development and agreement including definitive engineering design to Australian standards. Arguably this is a reference to the definitive feasibility study process which the parties knew had to be completed in order for details of their agreement to be worked out and in particular would define the scope of the Works, the scheduling of the Works and the cost of the Works. Clause 7 provides that: This document represents an agreement in itself and it is recognised a fuller and more detailed agreement not different in intent from this agreement will be developed later.


case_title: Aspdin v Austin (1844) 5 QB 671

case_text: supports an argument that the agreement recorded in the recitals for CREC to build or "execute" the railway should be given effect and should be treated as an agreement between FMG and CREC even where the operative provisions of the framework agreement do not contain such a provision and there is nothing inconsistent with such a construction in the operative provisions: Buckland v Buckland [1900] 2 Ch 534 at 540.3; MacKenzie v Childers (1889) 43 Ch D 265 at 274.7, 275.4-276.1; Ex parte Dawes; in re Moon (1886) 17 QBD 275 , 286.8, 288.2, 289.7; Aspdin v Austin (1844) 5 QB 671 at 683. This is even more so where, as here, the framework agreements were not drawn by lawyers. They were drafted by Heyting, an engineer, who also holds a Masters of Business Administration and who had some training in contract management. In those circumstances, arguably, a distinction between recitals and operational clauses should not be rigorously applied in an attempt to determine the parties' intention, determined objectively. Expressly, the recitals proceed on the basis that there is an agreement for the relevant Chinese contractor to build the infrastructure which is sought to be recorded in the framework agreements. The recitals do not say or imply that what follows is merely an informal arrangement, or a mere agreement to negotiate.


case_text: makes the following submission which I accept as a correct statement of the law. The proper construction of an agreement should be determined by what reasonable people in the position of the parties would have understood by the relevant clauses by considering not only their text, but also the surrounding circumstances and the purpose and object of the transaction: e.g. Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; (2004) 218 CLR 451 at [22] ; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at [40] ; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3 ; (2008) 234 CLR 151 at [8] and [53]. The whole of the document should be considered and its provisions given harmonious effect: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36 ; (1973) 129 CLR 99 at 109 (Gibbs J, in dissent, but not on the applicable principle).


case_title: Australian Broadcasting Corporation v XIVth Commonwealth Games (1988) 18 NSWLR 540

case_text: submits in written closing submission that the authorities such as Anaconda, Pagnan SpA, Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 and Uranium Equities v Fewster [2008] WASCA 33 ; (2008) 36 WAR 97 relied on by FMG state that whether or not the parties intended to contract, they must agree on such terms, normally described as essential terms, such that the contract could be enforced or made complete by implying terms or applying considerations of reasonableness. I will consider these authorities further. In Anaconda [2000] WASCA 27 ; 22 WAR 101 , the Court of Appeal found that a binding contract had been made when a heads of agreement containing five clauses was signed, the last paragraph of which said that the heads of agreement "constituted an agreement in itself intended to be replaced by a fuller agreement not different in substance or form". At [28], Ipp J referred to the following statement by Sugerman J, approved by Menzies J in Thorby v Goldberg [1964] HCA 41 ; (1964) 112 CLR 597 at 607: It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least its essential and critical terms, have been agreed upon. So, there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties. Again, there is no binding contract where the language used is so obscure and incapable of any precise or definite meaning that the court is unable to attribute to the parties any particular contractual intentions. In Australian Broadcasting Corporation v XIVth Commonwealth Games 18 NSWLR 540 Gleeson CJ, with whom Hope and Mahoney JJA agreed, confirmed at 584E-F the importance in a Masters v Cameron type of dispute of assessing the parties' intention to make a concluded bargain, and stated that the question of intention is distinct from, although it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. His Honour stated: Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention. ASIC also points to the absence of the following from the framework agreements: no provision for choice of contractors or the selection of materials; no definition of "practical completion"; and no specifications for any design elements of the infrastructure. The documents referred to in the Recitals to each agreement would have, no doubt, assisted in clarifying the matters absent from the agreements. In light of those documents, following the approach of Ipp J in Anaconda [2000] WASCA 27 ; 22 WAR 101 at [61] , it may have been possible to conclude that, despite the long list of matters said to render the framework agreements uncertain and incomplete, there was a binding contract, workable by implying terms or on the proper construction of the agreement. The court will apply orthodox principles of implying terms by reference to the implied duty to co-operate and use considerations of reasonableness, to give effect to that intention: Australian Broadcasting Corporation v XIVth Commonwealth Games 18 NSWLR 540; Moffat Property Development Group Pty Ltd v Hebron Park Pty Ltd [2009] QCA 60. The asserted uncertainty or incompleteness may therefore be overcome once the requisite intention to contract is found to be present. The approach taken in G R Securities 40 NSWLR 631, Anaconda [2000] WASCA 27 ; 22 WAR 101 and Tasman Capital [2008] NSWCA 248 was followed very recently by the Queensland Court of Appeal in Moffat Property Development Group [2009] QCA 60 , mentioned above, which underlined the importance of the parties' manifest intention to contract. The issue was whether a contract for the sale of rural residential land had been made by an exchange of letters. The Queensland Court of Appeal held that the parties intended to be legally bound through their exchange of correspondence and that there was a contract even though matters such as the timing of completion and arrangements at settlement, the precise timing of the payment of the deposit, the place of settlement, responsibility for insurance, GST issues and the terms of a put and call option were not spelt out in the correspondence. Keane JA delivered the court's judgment. His Honour: (a) accepted McHugh JA's point in G R Securities that "the decisive issue is always the intention of the parties": [23]-[25]; (b) said "the terms of the correspondence exchanged between the parties contemplated the execution of a further contract as the means whereby the bargain which they had concluded would be implemented. It is necessarily implicit in such an agreement that the parties will co-operate to do what must be done to make the further agreement": [30]; (c) adopted McHugh JA's approach in G R Securities and explained that the implied obligation of each party to co-operate with the other to ensure each side obtains the benefit of its bargain serves to supply the deficiencies: [34]; (d) cited Australian Broadcasting Corporation v XIVth Commonwealth Games 18 NSWLR at 548 in stating: "I am of the view that there can be no doubt as to the orthodoxy of referring to 'implied terms or ... considerations of reasonableness' in order to determine whether the parties' 'consensus is sufficiently comprehensive to be legally binding : [51].


case_title: Australian Competition & Consumer Commission v Leahy Petroleum [2004] FCA 1678 ; (2004) 141 FCR 183

case_text: Australian Competition and Consumer Commission v Leahy Petroleum [2004] FCA 1678 ; (2004) 141 FCR 183 , Merkel J, who was dealing with admissions in the context of proceedings against a company under the TPA, stated at [118]: "(c) Admissions in the s 155 examinations [118] Although s 84(2) of the (Trade Practices) Act does not extend to admissions (see TNT Management at 19 and Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 26 ALR 609 at 633 (" Nicholas Enterprises ")), there are a number of circumstances in which the admissions of a servant or agent in relation to past events may be admissible against the principal. A servant or agent may have authority to make admissions about past events by virtue of the servant's or agent's general or specifically delegated authority to answer inquires of a particular nature: see TNT Management at 18. The inquiries may include dealing with investigating authorities in any matter concerning the business: see Nicholas Enterprises at 632. Senior counsel for ASIC submits that s 87 of the Evidence Act may be applied to admissions in a s 19 transcript in the same way as it was applied in ACCC v Leahy [2004] FCA 1678 ; 141 FCR 183 to admissions made in examinations under s 155 of the TPA. I accept that submission. Senior counsel for FMG did not take issue with the authenticity of the signatures of Rowley and Watling on the transcripts. He also indicated that FMG had no objection to my reading those transcripts and deriving from them whatever assistance I could. However, he said the representations in the transcripts could not be viewed as admissions because they were not adverse to FMG's case. In Part 1 of the Dictionary of the Evidence Act , "admission" is defined as follows. admission means a previous representation that is: (a) made by a person who is or becomes a party to a proceeding (including a defendant in a criminal proceeding); and (b) adverse to the person's interest in the outcome of the proceeding.


case_title: Australian Competition & Consumer Commission v Mayo International Pty Ltd (1998) ATPR 41-653

case_text: J noted at [120] that s 87(1)(b) of the Evidence Act has been applied in the context of cases brought pursuant to the TPA such as Australian Competition and Consumer Commission v Mayo International Pty Ltd (1998) ATPR 41-653.


case_text: authority for the availability of the rule in Jones v Dunkel in civil penalty proceedings is found in Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (2001) 115 FCR 442 , where Hill J stated at [33]: Where the proceedings are criminal (and the present proceedings are not; they are proceedings, inter alia, for the recovery of a civil penalty) it might be thought that the failure of the accused to go into evidence should not lead to the drawing of Jones v Dunkel inferences. After all it is clear that a witness can not be compelled to give evidence which is likely to incriminate the witness or expose the witness to a penalty. However, even in criminal cases it has been held that the failure of the accused, who is in a position to deny, explain or answer the evidence adduced by the prosecution, to give evidence will permit the jury to draw inferences adverse to the accused more readily: see Azzopardi v R [2001] HCA 25 ; (2001) 179 ALR 349 , affirming Weissensteiner v R [1993] HCA 65 ; (1993) 178 CLR 217. A fortiori, therefore, the failure of a respondent to proceedings for recovery of a pecuniary penalty to give evidence on a matter relevant to an issue in the proceeding and deny, explain or answer the evidence adduced against the respondent will permit the Court more readily to draw the inferences to which the decision in Jones v Dunkel refers. In Council of the New South Wales Bar Association v Power [2008] NSWCA 135 ; (2008) 71 NSWLR 451 at [21] , a proceeding seeking removal of a legal practitioner from the Roll, Hodgson JA, with whom Beazley and McColl JJA agreed, referred to the High Court's conclusion in Azzopardi [2001] HCA 25 ; 205 CLR 50 that it was open to a trial judge in a criminal case to make a comment relating to the absence of evidence of additional facts peculiarly within the knowledge of the accused. Hodgson JA went on to say at [22] concerning the case before him that: If this had been a criminal trial, then in my opinion what the High Court said in Azzopardi would have meant that a jury could have been told that inferences from proved facts could more safely be drawn because the opponent elected not to give any explanation in terms of additional facts peculiarly within his knowledge or any evidence of such facts. In my opinion, if such Jones v Dunkel reasoning is available to a jury in a criminal trial, it must a fortiori be available to a court in civil proceedings such as the present. That would be so, even if these civil proceedings are regarded as proceedings for a civil penalty. I note that a similar view was expressed by Hill J in Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd [2001] FCA 1800 ; (2001) 201 ALR 502 at [33] .


case_title: Australian Securities & Investments Commission v Cycclone Magnetic Engines Inc [2009] QSC 58

case_text: Australian Securities and Investments Commission v Cycclone Magnetic Engines Inc [2009] QSC 58 , Martin J was asked to consider whether publications including television news film made on Cycclone's website was in relation to a financial product (at [124]). Evidence was adduced that the defendant had referred prospective shareholders to its website (at [125]). Martin J stated at [146] and [147]: [146] The web site was, no doubt, intended to fulfil a number of functions. One would have been to publicise CME in a general way. Another was to allow interested persons to contact CME - the web site contained a feedback page. Another was, as the home page made clear, "to obtain... direct investment and to complete the development program". [147] The conduct of CME in placing the film on the web site and then describing it as showing the engine working is relevantly indistinguishable from writing an ASX release to the same effect, especially in the context of the introductory words on the home page about "obtaining direct investment", that is, shares in CME. That conduct, therefore, comes within s 1041H. Forrest submits that these observations suggest that publicising FMG in a general way is not conduct in relation to a financial product. I do not agree. Martin J's comments at [147] demonstrate that he viewed the conduct in placing the film on the web site and then describing it as showing the engine working is relevantly indistinguishable from writing an ASX release to the same effect. His Honour's use of the word 'especially' in that paragraph indicates that that conclusion was reinforced by, and not dependent upon, the introductory words on the home page about obtaining direct investment. FMG sent the 23 August Letter, 2004 Annual Financial Report, 2004 Annual Report, September Quarterly Report, 5 November Letter, 8 November Letter, November Presentation, December Quarterly Report, February Presentation and Bag of Rusty Nails Presentation to the ASX. The letters were re-published to the market in the ordinary course by the ASX. It does not dispute that those publications were in relation to a financial product. Further FMG published the 23 August Media Release, 5 November Media Release and February Presentation on its website. The 23 August Letter and the 5 November Letter referred readers to FMGs website. It does not dispute that those publications were in relation to a financial product.


case_title: Australian Securities & Investments Commission v Fortescue Metals Group Ltd [No 2] (2009) 176 FCR 529

case_text: tendered signed transcripts of examinations conducted pursuant to s 19 of the ASIC Act of Rowley and Watling. The transcripts were sought to be tendered under ss 81 and 87 of the Evidence Act as evidence of admissions made on behalf of FMG. On 29 April 2009, during the trial, I ruled that, upon proof of the authenticity of the examinees' signatures and my satisfaction that the transcripts contain relevant admissions, the transcripts were admissible: Australian Securities and Investments Commission v Fortescue Metals Group Ltd [No 2] (2009) 176 FCR 529 at [44]. Rowley's alleged admissions in his s 19 examination and proffered by ASIC as admissions by FMG pursuant to s 87 are: At all material times Rowley was a director of FMG. The knowledge he acquired in his capacity as such was therefore FMG's knowledge. [p 5 lines 15-36] Rowley, and therefore FMG, knew, from at least 14 October 2004, that the Chinese Government had decided that the equity issue was to be resolved before there was to be further progress. [p 58 lines 8-9 39-45; p 59 lines 1-4 ] ] Rowley, and therefore FMG, knew, from around 14 October 2004, that: NDRC had directed the Chinese Steel Mills not to deal directly with FMG any further, but rather to deal through (C)MCC; the process of trying to get off take agreements signed with specific steel mills had started to slow down; this had been orchestrated by the NDRC; and there was not going to be progress until there was an agreement about equity. [p 59 lines 6-17] Rowley knew or believed that negotiations in relation to the equity participation were probably first raised when FMG started negotiations post CREC and started to involve (C)MCC and the wider China. At around that time NDRC became very much a party. [p 66 lines 27-34] As at 22 January 2005, Rowley, and therefore FMG, knew or believed that CREC, CHEC and (C)MCC were not acting on their obligations because: the issue of equity had not been resolved; and as far as China was concerned, until that issue was resolved, the agreements as they stood would not be actioned. [p 67 lines 5-7; p 69 lines 8-17]


case_title: Australian Securities & Investments Commission v Macdonald (No 11) [2009] NSWSC 287 ; (2009) 256 ALR 199

case_text: conclusion, the standard of proof that I must apply is the balance of probabilities as prescribed by s 1332, and I accept that in deciding whether ASIC's allegations are made out on the balance of probabilities I am required to take into account the causes of action and the gravity of the matters alleged and their consequences: s 140(2) Evidence Act ; Briginshaw [1938] HCA 34 ; 60 CLR 336. If inferences are to be drawn, ASIC has to establish that the circumstances appearing from the evidence give rise to a reasonable and definite inference and not merely to conflicting inferences of equal degrees of probability: Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287 ; (2009) 256 ALR 199 at [186] ; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132 ; 162 FCR 466 at [38] . The authorities state that two inferences are involved in the rule in Jones v Dunkel . First, a court might infer that the evidence of the absent witness would not have assisted the party that failed to call that witness; secondly, a court might draw, with greater confidence, any inference unfavourable to the party that failed to call that witness, if that witness appears to be in a position to cast light on whether the inference should be drawn: Manly Council v Byrne and Anor [2004] NSWCA 123 at [51] ; ASIC v Macdonald [2009] NSWSC 287 ; 256 ALR 199 per Gzell J at [1137]. ASIC cites the recent decision in ASIC v Macdonald (No 11) [2009] NSWSC 287 ; 256 ALR 199. It submits that the information about the Deed of Covenant and Indemnity which formed the basis of ASIC's claim against James Hardie Industries Limited made under the predecessor section to s 674 was information about the significance and effect of that Deed: at [484], as to which the defendants were too emphatic in understating the effect of this information in market releases. Yet what occurred there was the complete failure by the company to disclose the existence of certain covenants, an indemnity and the obligation to make certain payments. It was not a case, such as the present, involving, in effect, differing opinions as to the meaning and effect of agreements as a whole. I do not find it, in that respect, to be of any assistance. I will then, against this background, consider whether the only reasonable opinion as to the meaning and legal effect of each framework agreement is as expressed in the Informations or whether the opinion of FMG that each was an enforceable agreement to build, transfer and finance the relevant Project infrastructure was reasonably held. It is accepted that, in substance, each framework agreement is mutatis mutandis to the same effect. I will consider then the CREC Framework Agreement. However my conclusions will apply to all three framework agreements. ASIC submits that had such advice been obtained, the misleading statements could not have been made by a responsible company or board of directors and that the failure by FMG to obtain legal advice is a relevant consideration. ASIC did not lead expert opinion evidence as to what such an opinion was likely to have been had it been sought. ASIC referred to ASIC v Macdonald [2009] NSWSC 287 ; 256 ALR 199. There, Gzell J found at [1275] that ASIC had made out its case that the company, James Hardie Industries Limited, negligently failed to disclose information concerning the restructuring of the company in contravention of Listing Rule 3.1 and s 1001A(2) of the Corporations Law as carried over into the Act for reasons including that it did not obtain any legal advice as to whether it should disclose the information. The information did not consist of an opinion as to the meaning and legal effect of an agreement. ASIC pleads at ASC [102] that by 26 January 2005, FMG and Forrest were aware firstly that CREC, CHEC and CMCC did not regard the framework agreements as requiring them to construct and finance the infrastructure necessary for the Project; and secondly that the agreements did not have the effect of obliging those companies to construct and finance the infrastructure. Among the particulars relied on by ASIC to establish FMG's and Forrest's knowledge are the minutes of a meeting of FMG's directors including Forrest on 22 January 2005, and Huston's attendance at the meetings on 16 and 17 January 2005 involving FMG and the representatives of CREC, CHEC and CMCC, together with Huston's status as a qualified, experienced and practicing commercial solicitor. I have discussed in some detail the meetings of 16 and 17 January in Part 9. At those meetings, FMG and the Chinese Contractors discussed their relationship and sought to reach agreement on the size of the equity interest that FMG would grant to a Chinese entity. I have found that the Chinese suggestion at the 17 January meeting that the previous agreements were merely MOUs was a negotiating tactic employed to advance their case for a majority equity interest in the Project. ASIC did not specify in its pleading what aspect of the 22 January minutes it was relying on to establish either or both of these assertions. In fact, ASIC made no reference to this document in oral or written submissions. Further, ASIC did not plead nor explain in submissions just how it was that Huston's attendance at the 16 and 17 January meetings and his status as a qualified, experienced and practicing commercial solicitor advanced ASIC's assertions. The CHEC Framework Agreement was executed on 1 October 2004. The CMCC Framework Agreement was executed on 20 October 2004. In ASIC v Macdonald (No 11) [2009] NSWSC 287 ; 256 ALR 199 at the time of both alleged continuous disclosure contraventions there was a negative perception in the market place in relation to the shares of the holding company due to its asbestos liability. Gzell J noted at [507] that the reasonable person would think on receipt of the information concerning the covenants and indemnities that the company's asbestos claim liability had been controlled and that the blight upon its share price had been removed. In relation to the second set of information, his Honour noted that the severing of the company's connection to its asbestos liability was positive information and likely to reduce negative sentiment in the market regarding the company's shares: [1121]. ASIC refers to the recent decision of Gzell J in ASIC v Macdonald (No 11) [2009] NSWSC 287 ; 256 ALR 199 where Mr Macdonald, the chief executive officer and a director of James Hardie Industries Limited was held to have contravened s 180(1) by: making false or misleading statements at a press conference; and approving, or failing to advise not to release, or failing to remove matters that were false or misleading from, an ASX announcement which contained over-emphatic statements and which were false or misleading. Mr Macdonald and number of other directors were also held to have contravened s 180(1) by approving a draft ASX announcement which contained false or misleading or deceptive statements about the funding of a medical research and compensation fund that the company was establishing. His Honour stated that the directors ought to have been and they should have realised that they were prevented from approving the unequivocal and unqualified statements as to certainty of sufficient funding in the draft announcement. In the present case, ASIC pleads (ASC [166(b)(1)]) that the information in each of FMG's disclosures was published to "persons who commonly invest in securities in the ASX's financial market". Further, ASIC pleads that FMG's conduct in publishing the information, making the statements and representations, or creating the impressions associated with the disclosures was conduct "designed to encourage reasonable investors in the ASX's financial market to invest, or to continue investments, in the First Defendant". This formulation I regard as no different, in substance, to the language of s 677 of the Act, namely the question of the influence or likely influence of information upon common investors. I do not think it is intended by ASIC to describe an actual causal consequence but merely an encouraging or influencing factor. ASIC, borrowing from the language of Gzell J, submits that FMG's and Forrest's disclosures to the market between 23 August 2004 and 24 March 2005 were likewise emphatic, unequivocal and unqualified. Thus while ASIC is not required to prove that FMG intended to engage in misleading or deceptive conduct to establish contraventions of s 1041H, evidence of intent will allow the Court to readily infer that the intention has been effective. ASIC submits that the evidence supports a finding that FMG and Forrest in particular intended to mislead and deceive investors and potential investors in FMG shares. The Representees The various persons to whom ASIC claims FMG made the disclosures were: reasonable investors in the ASX's financial market; media publishers; the audience of the media publishers; persons obtaining access to media releases, FMG's letters to the ASX and other company reports on FMG's website; media representatives who attended a telephone press conference conducted by Mr Forrest on 23 August 2004; the audience of the Business Sunday television program broadcast on or about 17 October 2004; and attendees at conferences between August 2004 and March 2005 where Forrest gave presentations on behalf of FMG. Relevance of media commentary ASIC's claim that the disclosures were false and misleading is pleaded against a factual background summarised by ASIC at ASC [18], subparas (a) to (v). That background is derived from 265 documents listed in Schedule 10 to the ASC. The documents included in the Schedule are from the following sources: Letters, media releases, conference and meeting presentations, progress reports and statutory reports provided to the ASX by FMG; and Media reports published by newswire services such as Australian Associated Press Financial News Wire; and by national and capital city newspapers including the Australian Financial Review, The Australian, The Sydney Morning Herald, The Age, and The West Australian. ASIC submits that the elements found in ASIC v Macdonald (No 11) [2009] NSWSC 287 ; 256 ALR 199 that led Gzell J to find that Macdonald had breached his duties as a director are present in this case in that Forrest: (a) was Chairman and Chief Executive Officer; (b) had control and responsibility for the making of ASX announcements; (c) was intimately involved in the preparation and approval of the various announcements and the later company presentations; (d) knew full well that the statements were false, misleading and deceptive and that unqualified and emphatic statements could not be made concerning the execution of binding, build and transfer contracts by the three Chinese contractors; (e) knew that the ASX announcements and the company presentations had been crafted to induce a positive effect on the price or value of FMG shares by positively influencing investors; (f) knew that this conduct exposed FMG to serious risks to its reputation and placed it in likely contravention of important provisions of the Act; (g) knew that the false announcements withheld from the market the true information concerning the terms, legal effect and significance of the actual framework agreements, which steps placed FMG at risk of likely contravention of s 674. It is not in issue that Forrest was, at all material times prior to about 17 May 2005, the chairman of directors and chief executive officer of the first defendant; and that he has, since on or about 17 May 2005, been FMG's chief executive officer. In his closing written submissions, Forrest points out that ASIC did not tender any direct evidence regarding his, or any other FMG directors' duties or call expert evidence regarding the role of a director or a chief executive officer in a company like FMG at the material times. Forrest also points out that ASIC had sought to tender parts of his s 19 ASIC Act examination transcript but withdrew the tender after he sought to include parts of the explanatory and contextual portions of his examination transcript. ASIC emphasized the recent judgment in ASIC v Macdonald (No 11) [2009] NSWSC 287 ; 256 ALR 199 , where Gzell J held that the Chief Executive Officer, Macdonald, and a number of other directors, had breached their duties under s 180. Gzell J held that Macdonald failed to advise the board of the company that the draft ASX announcement was expressed in too emphatic terms concerning the sufficiency of funds held by the foundation to meet all legitimate asbestos claims and that as a result the ASX announcement was misleading and deceptive. He also found that Macdonald failed to properly advise the board as to the fact that the cash flow model supporting the statements concerning funding had not verified the key assumptions contained in the model. I have already considered this case, which turns on its own facts. It is of no particular assistance in the resolution of this issue concerning Forrest. Forrest does not dispute that he knew of FMG's duties regarding Listing Rule 3.1 but says FMG did not breach s 674(2) of the Act. Alternatively, Forrest says, if FMG breached s 674(2) of the Act (which is denied), for the reasons regarding Forrest's honest and reasonable beliefs, a reasonable person in Forrest's position and FMG's circumstances would have acted the same way that Forrest did.


case_title: Australian Securities & Investments Commission v Maxwell (No 2) [2006] NSWSC 1052 ; (2006) 59 ACSR 373

case_text: meaning and effect of s 180(1) was recently analysed by Brereton J in Australian Securities and Investments Commission v Maxwell (No 2) [2006] NSWSC 1052 ; (2006) 59 ACSR 373 at [99] - [102] and in turn adopted by Gzell J in Australian Securities and Investments Commission v Macdonald at [236], and by Hamilton J in Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2008] NSWSC 1224 ; (2008) 69 ACSR 1 at [27] . Significantly, for this case, a director or other officer may breach his duties by allowing the company to contravene a provision of the Act if that contravention is likely to result in jeopardy to the interests of the company. Brereton J in ASIC v Maxwell (No 2) [2006] NSWSC 1052 ; 59 ACSR 373 said: if a contravention of s 180(1) is to be established, it must be founded on jeopardy to the interests of the corporation, and not to protection of the interests of potential investors: [105] relevant jeopardy to the interests of the company may be found in the actual or potential exposure of the company to civil penalties or other liability under the act, and it may no doubt be a breach of the relevant duty for a director to embark on or authorise a course which attracts the risk of that exposure, at least if the risk is clear and the countervailing potential benefits insignificant: [104]


case_title: Australian Securities & Investments Commission v Narain [2008] FCAFC 120 ; (2008) 169 FCR 211

case_text: effect of the amendments was to expand the scope of s 1041H beyond dealing in securities to any misleading and deceptive conduct in relation to a financial product or financial services. The Full Federal Court has recognised that the scope of the operation of s 1041H is very wide: Australian Securities and Investments Commission v Narain [2008] FCAFC 120 ; (2008) 169 FCR 211. Special leave to appeal to the High Court was refused: Narain v Australian Securities and Investments Commission [2008] HCATrans 408 per Crennan and Kiefel JJ. Section 1041H: general principles He submits that the words "in relation to" signify the need for there to be some relationship or correlation between FMG's conduct and its shares: ASIC v Narain [2008] FCAFC 120 ; 169 FCR 211 per Jacobson and Gordon JJ at [69] and [74]. There the respondent was the managing director of Citrofresh International Ltd (CTF). The respondent was involved in the writing of an "ASX Release" which claimed that CTF's products could reduce the spread of four major viruses including HIV/AIDS. The respondent instructed CTF's secretary to send the statement to the Australian Stock Exchange who published it. The statement affected the price of CTF shares. It was held at first instance that the ASX Release did not contain representations "in relation to" CTF's shares pursuant to s 1041H of the Act because the statement did not refer to shares on the face of it, or deal with the shares directly. This construction was rejected by the Full Court which held that the phase "in relation to" in s 1041H of the Act only requires an indirect or less than substantial connection between the misleading conduct or statement and the financial product and that it is not necessary for a statement to expressly refer to the shares or to deal with the shares on its face. In deciding that the respondent engaged in conduct in relation to a financial product, CTF's shares, by publishing the statement on the ASX, Finkelstein J held that there was a sufficient connection between the statement and CTF's shares by reason of (1) the content of the statements, which concerned the business of CTF; and (2) the place of their publication, namely on the the exchange where the shares were traded. Jacobson and Gordon JJ said the concept of misleading and deceptive conduct is one which embraces all of the circumstances in which the conduct takes place, and that the relevant conduct was not merely the text of the announcement. Their Honours said the statement was an announcement made to the ASX about a "landmark" test result for the company's products and was disclosure to the market. Forrest submits that the Court's ratio in Narain was that CTF's representations contained in announcements made to the ASX were "in relation to a financial product" because the representations were published where shares were traded. I do not think this was what their Honour's intended although the announcement in that case was made to the ASX. For Finkelstein J, the publication on the ASX was just one of two factors giving rise to the connection between the statement and the relevant financial product. The RIU Explorers Conference brochure discloses that it was attended by representatives of a considerable number of mining companies. It appears to have been a professional conference. The RIU Presentation was not sent to the ASX. I am however not persuaded, for lack of evidence as to the attendees, that the RIU Presentation at the RIU Explorers Conference meets the statutory description as construed in ASIC v Narain [2008] FCAFC 120 ; 169 FCR 211 . There is no precise evidence as to who attended the AJM Iron Ore and Steel Forecast where the Bag of Rusty Nails Presentation was given. I have described this as the "first disclosure". However, Kirchlechner had attended this conference for a number of years and he said that typically, amongst others, there were brokers who attended. I take him to be referring to stock brokers. A copy of the PowerPoint slides used in the presentation was sent to the ASX. I have described this as the "second disclosure". These contain information amongst other things as to the source of FMG's funding for the Project including $630m from "China Rail"; $571m from "China Harbour"and $306m from "China Metallurgical". These are references to CREC, CHEC and CMCC. The amounts are said to be "under agreement". I accept that this conveys the impression of binding agreements between FMG and each of those companies. This information lies in the context of public knowledge of the fact of the execution of these three agreements as binding agreements. They therefore constitute, in effect, a re-publication of that information to the market and therefore is conduct in relation to a financial product. I am satisfied that the first and second disclosures constituted conduct by FMG in relation to a financial product. General principles in relation to s 52 are applicable


case_title: Australian Securities & Investments Commission v Rich [2009] NSWSC 1229

case_text: are civil penalty proceedings, not criminal proceedings, and it would be contrary to the legislative intention underlying the civil penalty provisions to apply a de facto criminal standard of proof in such proceedings: Australian Securities and Investments Commission v Rich [2009] NSWSC 1229 at [408]. Finally, in Australian Securities and Investments Commission v Rich [2009] NSWSC 1229, Austin J concluded at [458] that, having considered the reasoning in Dyers and Adler , the principle in Jones v Dunkel is applicable against either party to civil penalty proceedings. Unique amongst other corporate officers, the chief executive officer stands at the apex of the operational and managerial structures of the company, and his or her authority is qualified only by any residual power left in the board: Randall v Aristocrat Leisure Ltd [2004] NSWSC 411. A chairperson of a listed public company may have special responsibilities beyond those of other non-executive directors. These responsibilities include such things as the public announcement of information: ASIC v Rich [2009] NSWSC 1229 at 463.


case_title: Australian Securities & Investments Commission v Rich (No 3) [2003] NSWSC 328 ; (2003) 21 ACLC 920

case_text: to the civil penalty authorities, in Rich , the High Court reversed a decision of the New South Wales Court of Appeal ( Rich v Australian Securities & Investments Commission [2003] NSWCA 342 ; (2003) 203 ALR 671) that the defendants in civil penalty proceedings brought by ASIC were not permitted to resist an order for discovery made by the trial judge by claiming the privilege against self-exposure to penalty. The orders sought by ASIC included disqualification orders but not pecuniary penalties. The trial judge, Austin J, did not classify the proceedings as proceedings for the imposition of a penalty: Australian Securities and Investments Commission v Rich (No 3) [2003] NSWSC 328 ; (2003) 21 ACLC 920 , at [53]. the Court of Appeal (Spigelman CJ, with whom Ipp JA agreed; McColl JA dissenting) upheld Austin J's ruling, identifying a disqualification order as having an exclusively protective purpose and stating that it should not be characterized as a penalty for the purposes of the penalty privilege. However, the High Court (Gleeson CJ, McHugh, Gummow, Hayne, Callinan and Heydon JJ, Kirby J dissenting) decided that the disqualification order was a penalty and accordingly the proper course was to refuse any order for discovery: per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [37]-[40]. The ruling was made in the joint judgment in consideration of s 1317L of the Act which requires the application of the rules of evidence and procedure for civil matters when hearing proceedings for a declaration of contravention or a pecuniary penalty order. Their honours concluded at [19] that that the statute itself requires the application of the body of law which has developed in relation to the privileges against penalties and forfeitures when deciding whether an order for discovery should be made. The Rich cases therefore turned on the issue of whether a disqualification order was a penalty. It was not in dispute that the privilege against exposure to penalty protected a defendant in civil proceedings not only from being obliged to give discovery, but also from being subject to any direction that affidavits or witness statements be provided to the plaintiff prior to the hearing or at any time prior to the conclusion of the plaintiff's case: see e.g. Austin J at first instance: [2003] NSWSC 328 ; (2003) 21 ACLC 920 , at [19]-[30]. In their judgments, neither the High Court nor the Court of Appeal considered the application of the rule in Jones v Dunkel ; Austin J mentioned it briefly in passing at [58].


case_title: Australian Securities & Investment Commission v Southcorp Ltd [2003] FCA 1369 ; (2003) 130 FCR 406

case_text: legislative history of the continuous disclosure provisions was reviewed by Lindgren J in Australian Securities and Investment Commission v Southcorp Ltd [2003] FCA 1369 ; (2003) 130 FCR 406 at [7] - [16] . I gratefully adopt his Honour's review in part: [7] A review of the legislative history of the continuous disclosure provisions shows the importance that the legislature and the regulator have attached to them, and the publicity which has been given to them. [8] In June 1991 the then Commonwealth Attorney-General, Michael Duffy, requested the Companies and Securities Advisory Committee (the Committee) to examine the need for a legislatively-based continuous disclosure regime. [9] The Committee reported in September 1991. It noted that while the Corporations Law (the Law) required disclosure of information in particular sets of circumstances, it did not contain a comprehensive scheme for the full and accurate disclosure of market sensitive information on a timely basis. The Committee noted that Australian Stock Exchange (ASX) Listing Rules required a listed company or trust to notify its home exchange "immediately" of any information that was necessary to avoid the establishment of a false market in its securities, or that was likely to affect materially the price of its securities. The Committee recommended the introduction of a statute-based enhanced disclosure regime which would: overcome the inability of general market forces to guarantee adequate and timely disclosure by disclosing entities; encourage greater securities research by investors and advisors, thereby ensuring that securities prices more closely, and quickly, reflect underlying economic values; ensure that equity and loan resources in the Australian market are more effectively channelled into appropriate investments, and that funds are withheld or withdrawn from poorly performing disclosing entities. This will promote capital market efficiency; assist debt holders in monitoring the performance of disclosing entities and thereby determine whether, or when, to exercise any right to withdraw or reinvest their loan funds, or convert debt to equity; act as a further, or substitute warning device for holders of charges over corporate assets, that breaches in covenants may have taken place, or the risk of default has increased; assist potential equity or debt holders of disclosing entities to better evaluate their investment alternatives; lessen the possible distorting effects of rumour on securities prices; minimise the opportunities for insider trading or similar market abuses; improve managerial performance and accountability by giving the market more timely indicators of corporate performance; encourage the growth of information systems within disclosing entities. This assists directors in their decision making and compliance with their fiduciary duties; and reduce the time and costs involved when preparing takeover and prospectus documents. [10] Following a process of consultation, the Government decided to introduce continuous disclosure provisions into the Law. On the Second Reading Speech on the Corporate Law Reform Act (No 2) 1992 (Cth), which contained continuous disclosure provisions proposed to commence on 31 December 1993, Senator Bolkus, Minister for Administrative Services, stated: ... an effective disclosure system will often be a significant inhibition on questionable corporate conduct. Knowledge that such conduct will be quickly exposed to the glare of publicity, as well as criticism by shareholders and the financial press, makes it less likely to occur in the first place. In essence, a well-informed market leads to greater investor confidence and, in turn, to a greater willingness to invest in Australian business. ( Australia, Debates, Senate , (1992), p 3581) [11] The continuous disclosure provisions were eventually introduced as ss 1001A, 1001B, 1001C and 1001D of the Law by the Corporate Law Reform Act 1994 (Cth) s 4 , Sch 1, Item 92, and commenced on 4 September 1994. Subsection 1001A(2) provided that a listed disclosing entity must not contravene the continuous disclosure provisions of the listing rules of a securities exchange applicable to the entity, by 'intentionally, recklessly, or negligently' failing to notify the securities exchange of information that was not generally available, and which, if it were generally available, a reasonable person would expect to have a material effect on the price or value of the securities of the entity. In November 1996, the Companies and Securities Advisory Committee (CASAC) conducted a review of the continuous disclosure regime introduced in 1994, and released a report entitled "Report on Continuous Disclosure". In that review, a survey had been conducted of listed disclosing entities. The CASAC report concluded that the regime was operating effectively for those entities. The report stated at para 1.7: Respondents to this survey considered that continuous disclosure had helped to keep the market, and investors in listed disclosing entities, more informed. Continuous disclosure also reinforced the obligations on directors and management to disclose material information to the market. Respondents considered that investors gained a better and more timely understanding of the issues facing the company and how these might affect the value of their shares. Continuous disclosure also encouraged listed entities to formalise their lines of internal communication to ensure that the directors and senior management were fully informed of all events affecting the price or value of the entity's securities. Overall, the respondents considered that continuous disclosure encouraged greater investor confidence in the price discovery mechanism of the securities market. The majority of the 70 listed disclosing entities who responded to the CASAC survey, indicated, in relation to question 22 dealing with external advice, that they had sought professional advice, mainly from law firms, on the application of continuous disclosure requirements. That advice included whether disclosure was required in the circumstances, the operation of the provisions which created exceptions to mandatory disclosure, and whether certain information would have a material effect on the price or value of securities. The present case includes consideration of whether legal advice was given to FMG concerning FMG's continuous disclosure obligations; the effect of any such legal advice and the reasonableness of the defendants' reliance on any such advice. On the commencement of the Financial Services Reform Act 2001 (Cth) on 11 March 2002, s 1001A, which contained the original continuous disclosure obligations, was replaced by s 674 in a new Chapter 6CA of the Act. The Revised Explanatory Memorandum for the Financial Services Reform Bill 2001 explained that the placement of the continuous disclosure provisions near Chapter 6D reflected the fact that these provisions deal with ongoing disclosure obligations in relation to securities as defined for the purposes of Chapters 6D and 7. The Revised Explanatory Memorandum also explained: Proposed section 674...generally replicates section 1001A of the Corporations Act , subject to changes in terminology. In order to comply with the Criminal Code , the fault elements currently contained in subsections 1001A(2) and (3) have been omitted and the default fault elements under the Code will apply in future to offences against this provision. Proposed section 678 applies the Criminal Code to all offences in Chapter 6CA at commencement. The Revised Explanatory Memorandum also explained that contravention of the continuous disclosure provisions would give rise to a liability for financial services civil penalty provisions, in line with the approach taken to a number of other prohibitions related to market misconduct.


case_title: Australian Securities & Investments Commission v Sydney Investment House Equities Pty Ltd [2008] NSWSC 1224 ; (2008) 69 ACSR 1

case_text: meaning and effect of s 180(1) was recently analysed by Brereton J in Australian Securities and Investments Commission v Maxwell (No 2) [2006] NSWSC 1052 ; (2006) 59 ACSR 373 at [99] - [102] and in turn adopted by Gzell J in Australian Securities and Investments Commission v Macdonald at [236], and by Hamilton J in Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2008] NSWSC 1224 ; (2008) 69 ACSR 1 at [27] .


case_text: accept ASIC's submission that a chief executive officer or managing director may reasonably be expected to have more information available to him or her and to be more diligent than other board members. The title, Managing Director, is synonymous with Chief Executive Officer. This matter of principle may be discerned from a number of authorities. A managing director has a particular responsibility to make sure the other directors understand the potential harm in a proposed transaction: Permanent Building Society v Wheeler (1994) 11 WAR 187, at 241. A chief executive officer will be employed under a contract containing an express or implied term that he or she exercise the care and skill expected of a person in that position: AWA Ltd v Daniels t/as Deloitte Haskins & Sells (1992) 7 ACSR 759 at 1014. At p 867 the Court explained that a chairman is: ...responsible to a greater extent than any other director for the performance of the board as a whole and each member of it. The chairman has the primary responsibility of selecting matters and documents to be brought to the board's attention, in formulating the policy of the Board and in promoting the position of the company.