Prerogative writs - Prohibition - Prosecutions for creating false or misleading appearance of trading in securities on a stock market - Committal proceedings - Whether Magistrate has jurisdiction - Whether offence "committed, begun or completed" in WA

Corporations Act 2001 (Cth), s 998, s 1338B(8)

Customs Act 1901 (Cth), s 233B

Respondent : Commonwealth Director of Public Prosecutions

Christianos v Young (1990) 3 WAR 303

Craig v State of South Australia [1995] HCA 58; (1995) 184 CLR 163

DPP v Sutcliffe [2001] VSC 43

Fame Decorator Agencies Pty Ltd v Jefferies Industries Ltd (1998) 16 ACLC 1235

John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503

King-Brooks v Roberts (1991) 5 WAR 500

Lamb v Moss [1983] FCA 254; (1983) 76 FLR 296

Macks and Emanuel (No 14) Pty Ltd v Blacklaw & Shadforth Pty Ltd (1997) 15 ACLC 1099

Prentice v St George Bank Ltd [2002] NSWSC 358; (2002) 20 ACLC 923

R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd [1953] HCA 22; (1953) 88 CLR 100

R v Iorlano [1983] HCA 43; (1983) 151 CLR 678

Re His Honour Judge Hammond; Ex parte Roddan (1996) 17 WAR 50

Re Robins SM; Ex parte West Australian Newspapers Ltd [1999] WASCA 16; (1999) 20 WAR 511

Regie National des Usines Renault SA v Zhang [2002] HCA 10; (2002) 76 ALJR 551

Sankey v Whitlam (1978) 142 CLR 1

Ward v The Queen [1980] HCA 11; (1980) 142 CLR 308

Yates v Wilson [1989] HCA 68; (1989) 168 CLR 338

1 MURRAY J: This is the return of an order nisi for prohibition granted by Roberts-Smith J; Re Woods; Ex P Braysich [2003] WASC 143.

2 The proceedings arise out of the complaints of the respondent against the applicant, charging him with 21 offences against s 998(1) of the Corporations Act 2001 (Cth). The complaints allege that the offences were committed on various dates at Perth in WA and elsewhere. The offence charged is an indictable offence. No pleas of guilty have been entered and the charges therefore await committal for trial by the District Court in Perth. As I understand it, the prosecution's disclosure obligations under the Justices Act 1902 (WA), s 103, have been complied with. If nothing intervenes in the process, the next step would be committal for trial upon the entry of pleas under s 104(3) of the Justices Act.

3 Prohibition is sought to prevent the prosecution from having any further recourse to the procedures described. It is alleged that a Magistrate has no jurisdiction in relation to the complaints in question, in respect of which it is said that there is no assertion, nor any evidence disclosed by the prosecution, "that the applicant committed, began or completed any of the alleged offences the subject of the complaints in the State of Western Australia."

4 The contention relies upon the provisions of the Corporations Act itself and the manner in which jurisdiction is conferred, in relation to the Federal offences provided, upon the courts of each State and the Territories. By s 1338B of the Corporations Act jurisdiction is conferred upon the courts of a State, inter alia, to commit for trial on indictment persons charged with offences against the Act. Section 1338B(8) provides:

"(8) The jurisdiction conferred on a court of a State or the Northern Territory by subsection (1) in relation to:

(a) the examination and commitment for trial on indictment; and

(b) the trial and conviction on indictment;

of offenders or persons charged with offences against the Corporations legislation is conferred only in relation to:

(c) offences committed outside Australia; and

(d) offences committed, begun or completed in the State or the Territory concerned."

5 The charges in the complaints are all of offences against s 998 of the Corporations Act. That section, so far as material, is in the following terms:

"(1) A person shall not create, or do anything that is intended or likely to create, a false or misleading appearance of active trading in any securities on a stock market or a false or misleading appearance with respect to the market for, or the price of, any securities.

(3) ...

(5) Without limiting the generality of subsection (1), a person who:

(a) enters into, or carries out, either directly or indirectly, any transaction of sale or purchase of any securities, being a transaction that does not involve any change in the beneficial ownership of the securities;

(b) offers to sell any securities at a specified price where the person has made or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to buy the same number, or substantially the same number, of securities at a price that is substantially the same as the first-mentioned price; or

(c) offers to buy any securities at a specified price where the person has made or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to sell the same number, or substantially the same number, of securities at a price that is substantially the same as the first-mentioned price;

shall be deemed to have created a false or misleading appearance of active trading in those securities on a stock market.

(6) In a prosecution of a person for a contravention of subsection (1) constituted by an act referred to in subsection (5), it is a defence if it is proved that the purpose or purposes for which the person did the act was not, or did not include, the purpose of creating a false or misleading appearance of active trading in securities on a stock market.

(7) A purchase or sale of securities does not involve a change in the beneficial ownership for the purposes of this section if a person who had an interest in the securities before the purchase or sale, or an associate of the person in relation to those securities, has an interest in the securities after the purchase or sale.

(8) ...

(9) The reference in paragraph (5)(a) to a transaction of sale or purchase of securities includes:

(a) a reference to the making of an offer to sell or buy securities; and

(b) a reference to the making of an invitation, however expressed, that expressly or impliedly invites a person to offer to sell or buy securities."

6 As I have said, the complaints allege offences committed at Perth in WA "and elsewhere". Each complaint alleges that the applicant created a false or misleading appearance of active trading in the ordinary, fully paid shares of Intrepid Mining Corporation NL, contrary to s 998(1) of the Corporations Act 2001. The offences are particularised in two different ways:

• In the majority of the complaints it is alleged that the applicant "caused to be made an offer to buy" a specified number of ordinary fully paid shares in Intrepid Mining at a nominated price "and thereby caused to be carried out a transaction that did not involve any change in the beneficial ownership" of a specified number of the ordinary fully paid shares in Intrepid Mining. This form of complaint clearly relies upon s 998(5)(a) and (9)(a).

• In the remaining complaints the allegation is simply that the applicant "caused to be carried out a transaction that did not involve any change in the beneficial ownership in respect of" a stipulated number of the ordinary fully paid shares in Intrepid Mining. This form of complaint relies upon s 998(5)(a) without the assistance of subs (9)(a).

7 In each case then the gravamen of the complaint is that the applicant created a false or misleading appearance of active trading in the ordinary fully paid shares of Intrepid Mining by causing to be carried out a transaction of sale or purchase of the shares which did not involve any change in their beneficial ownership.

8 This is not an offence of recent origin. A predecessor of s 998(1) in the Securities Industry Act of NSW was discussed in North v Marra Developments Ltd [1981] HCA 68; (1981) 148 CLR 42, particularly by Mason J at 58 - 59. Hayden JA, as his Honour then was, said of that discussion that the words "false or misleading appearance" was to be treated as a single integer of one offence: R v O'Halloran [2000] NSWCCA 528; (2000) 182 ALR 431 at 451 - 452 [78].

9 Relative to these complaints it may be said that this is an offence having one element. In the form in which these charges are brought, it is the creation of a false or misleading appearance of active trading in the securities identified in the complaints. In my opinion, s 998(5) is a true deeming provision. Proof of any of the matters to which the subsection refers, in this case the carrying out of transactions of sale or purchase of securities which do not involve any change in the beneficial ownership of the securities, will prove the creation of a false or misleading appearance of active trading in those securities on a stock market, whether the subsection is applied with or without benefit of the assistance of the expanded notion of a transaction of sale or purchase of securities provided by the application of subs (9).

10 To rely upon those provisions in aid of the process of proving an offence charged contrary to s 998(1), is not to create an offence of entering into or carrying out a transaction of sale or purchase of the kind described in s 998(5)(a). It remains a mode of proof of an offence against s 998(1). Therefore the offence with which the Court is concerned in this case may be described as an offence constituted by any act or omission which has the effect or result of creating the false or misleading appearance of active trading proscribed by s 998(1).

"It seems to me that the object of the section is to protect the market for securities against activities which will result in artificial or managed manipulation. The section seeks to ensure that the market reflects the forces of genuine supply and demand. By 'genuine supply and demand' I exclude buyers and sellers whose transactions are undertaken for the sole or primary purpose of setting or maintaining the market price. It is in the interests of the community that the market for securities should be real and genuine, free from manipulation. The section is a legislative measure designed to ensure such a market and it should be interpreted accordingly."

12 It is in that context therefore that one must approach the requirements of s 1338B(8)(d) so as to ask the question whether the offences charged were offences in respect of which it is properly alleged that they were committed, begun or completed in WA. In this case, the prosecution relies upon the contention that the offences charged were completed in this State.

13 In relation to the proper interpretation of s 1338B(8), in R v Toubya [1993] VicRp 14; [1993] 1 VR 226 the question was the effect of the jurisdictional provision contained in s 80 of the Commonwealth Constitution which provides, so far as material:

"The trial on indictment of any offence against any law of the Commonwealth shall be by jury, and every such trial shall be held in the State where the offence was committed ...".

14 Having discussed relevant authorities, the Court of Criminal Appeal of Victoria held, at 234-5, that for jurisdictional purposes there was no obligation under s 80 to prove where the offence alleged was actually committed. It was enough if it was able to be said that the offence was properly alleged on the evidence to have been committed within the State, a conclusion to be drawn as much from the terms of the statute creating the offence as from the facts relied upon as constituting its breach. See also R v Perfili (1995) 84 A Crim R 26.

15 This case requires no consideration of the appropriate standard of proof to be applied to the establishment of the relevant jurisdictional fact under s 1338B(8), as to which see Thompson v The Queen [1989] HCA 30; (1989) 169 CLR 1. The jurisdictional question relevant to the application for prohibition may be formulated as being whether there is evidence to establish that the complaints properly allege that the conduct of the applicant relied upon by the prosecution created in WA a false or misleading appearance of active trading in the ordinary fully paid shares of Intrepid Mining. I am satisfied that there is such evidence in the committal papers before the Court of Petty Sessions.

16 In the first place, the Australian Stock Exchange (ASX), the relevant stock market, is a national exchange on which trading in quoted securities, such as those in Intrepid Mining, is conducted by a computerised trading system known as the Stock Exchange Automated Trading System (SEATS). Trading on SEATS may only be conducted by an authorised trading participant, a broker who is authorised to buy or sell quoted securities on the ASX. The applicant is such a trading participant. He is based in Sydney with access to a SEATS computer terminal in his office there. He may use that system in Sydney to enter on the computer bids and asks represented by orders to sell or purchase shares placed with him by clients.

17 Such an order or offer when entered on the applicant's SEATS terminal is electronically communicated to all SEATS terminals, wherever they may be, which were connected when the order resulting in an offer to buy or sell shares is entered. When the computer achieves a match between an offer to buy and an offer to sell nominated shares, the transaction is effected and reported at the terminal of the trading participant and to other terminals on the system. The trading participant would then generate his own contract note and forward that record of the trade to the client. It is clear that any activity of a kind described above, performed by the applicant relative to the complaints before the Court, was carried out in Sydney. But the transactions thus effected were, as I have said, reported to other active SEATS terminals and there is evidence of such reporting and the downloading of such information by traders on the ASX in Perth, relative to the occasions particularised in the individual complaints.

18 It is irrelevant for present purposes to discuss the evidence provided in the prosecution brief by which it might be proved that the nature of the transactions in which the applicant participated in the manner described above was such that the beneficial owner of the shares in Intrepid Mining did not change. It is sufficient to say that it is alleged that the applicant received a buy order on one account and a sell order on the other in respect of the same shares and acted upon them by carrying out or causing to be carried out a transaction of sale and purchase which did not in fact change the beneficial ownership in the shares.

19 The relevant matter for jurisdictional purposes is that the nature of the computerised trading system is such that the conduct of the applicant

in Sydney is properly alleged to have created a false or misleading appearance of active trading in the shares in Perth. The proof of that allegation is by the evidence that the transaction of sale or purchase, which allegedly did not involve any change in the beneficial ownership of the securities, was available to be seen and indeed, on the evidence, probably was seen by trading participants on the ASX in Perth, thus creating here as well as in other Australian jurisdictions, the alleged false or misleading appearance of active trading in the shares.

20 The courts of this State, in my opinion, have jurisdiction in relation to the committal for trial and the trial upon indictment of these charges on the ground that the offences are properly alleged to be offences completed by the creation of the effect of active trading in this State. I would discharge the order nisi for prohibition.

21 TEMPLEMAN J: I have had the advantage of reading in draft the reasons published by Murray J. I agree with those reasons and would also discharge the order nisi.

22 MCLURE J: I have had the opportunity of reading in draft the reasons for judgment of Murray J. I agree with his conclusion that the order nisi for the writ of prohibition should be discharged. I also agree with the substance of his Honour's reasons save with respect to the matters to which I now refer.

23 The only issue in this application concerns the jurisdiction of the Magistrate to deal with the complaint charging the applicant with 21 offences contrary to s 998(1) of the Corporations Act 2001 (Cth) ("the Act"). Section 1338(B)(8) provides:

"The jurisdiction conferred on a court of a State or the Northern Territory by subsection (1) in relation to:

(a) the examination and commitment for trial on indictment; and

(b) the trial and conviction on indictment;

of offenders or persons charged with offences against the Corporations legislation is conferred only in relation to:

(c) offences committed outside Australia; and

(d) offences committed, begun or completed in the State or the Territory concerned."

24 Subject to subs (8), subs (1) of s 1338B gives to the several courts of each State and Territory exercising jurisdiction in relation to criminal matters the equivalent jurisdiction with respect to offenders or persons charged with offences against the Corporations legislation.

25 The applicant sought and obtained the order nisi on the ground that there was no assertion or evidence in the material served on him by the respondent that the applicant had committed, begun or completed any of the alleged offences in Western Australia. In support of the submission, the applicant contended that the relevant focus should be solely upon the acts of the applicant alleged to satisfy the deeming provision in s 998(5)(a) of the Act. For the reasons given by Murray J, I agree that the correct focus is on the offences allegedly committed by the applicant, being that on a specified date at Perth he "created a false or misleading appearance of active trading in the ordinary fully paid shares of Intrepid Mining Corporation NL ... ".

26 The respondent contended that the offences were committed in (among other places) Perth or alternatively they were completed in Perth. The respondent also contended that the Magistrate has jurisdiction in relation to the offences charged because they were "properly alleged to have been committed within the forum", relying on two decisions of the Victorian Court of Criminal Appeal, R v Toubya [1993] VicRp 14; [1993] 1 VR 226 and R v Perfili (1995) 84 A Crim R 26. I have reservations as to the correctness of the proposition for which these cases are cited.

27 In Toubya the applicant was convicted in the Victorian County Court of being concerned in the importation into Australia of heroin contrary to s 233B(1)(d) of the Customs Act 1901 (Cth). Heroin was brought to Melbourne from overseas by an accomplice of the applicant with the intention that it be delivered to the applicant in Sydney. On appeal it was argued that the applicant's conviction and the sentence imposed on him were nullities because the County Court lacked jurisdiction to try him. The applicant relied on s 80 of the Commonwealth Constitution which provides that the trial on indictment of any offence against any law of the Commonwealth shall be by jury, and every such trial shall be held in the State where the offence was committed. The court held that the occurrence in Victoria of an element of the offence charged, being importation of a prohibited substance into Victoria, meant the offence had been committed in Victoria. However the court went on to consider a further argument to the effect that the relevant offence required classification as a "result crime" rather than a "conduct crime" with the consequence that the offence was committed in Victoria. The Court of Appeal said that dichotomy may afford a useful test where a question arises as to the territorial ambit of a law creating or defining a crime but not in a situation where territorial ambit was not in issue. Like the Customs Act, the Act is a law of the Commonwealth and no question as to the territorial ambit of the law arises. The court said:

"The question here is whether a Victorian court had jurisdiction, in the sense of power, to hear and determine the issues raised by the indictment charging a breach of s 233B(1)(d).

...

... Section 80 does not impose any requirement that an offence against Commonwealth law shall be proved to have been committed in a State before a trial on an indictment properly charging that offence may be had in that State. The jurisdiction of a State court to try a charge of a non-Commonwealth offence does not depend on proof that the offence charged was one actually committed against the law of the forum. The court has jurisdiction to try offences properly alleged against that law: Thompson v R, at p 22 per Brennan J and, at pp 33-4, per Deane J. Similarly, in our opinion, the jurisdiction of a State court to try offences against a law of the Commonwealth is not confined to those actually proved to have been committed within the forum. ... Counsel for the applicant ... conceded that the word 'committed' in s 80 means something such as 'properly alleged to have been committed'. The question whether an offence against a Commonwealth law has been properly alleged in an indictment to have been 'committed' in a State obviously depends as much upon the terms of the statute creating or defining the offence as upon the facts relied on as constituting a breach of it."

28 The jurisdiction of a court in relation to a criminal offence and the territorial ambit of the law which creates the offence are two distinct questions. However, they are often closely related and were in the High Court decision of Thompson v R [1989] HCA 30; (1989) 169 CLR 1, which was relied on by the Full Court in Toubya. In Thompson the accused was charged with the murder of two women whose bodies were found in the Australian Capital Territory, a short distance from its border with New South Wales. Under relevant legislation, the offence charged could be dealt with as if it had been committed within the Territory only if the death or the cause of death happened within the Territory. In the course of the trial the accused challenged the jurisdiction of the Territory Supreme Court to try him on the ground that the Crown had not shown beyond reasonable doubt that the deaths or the cause of death had occurred in the Territory. If the relevant Territorial connection was not proved, the accused would not have committed an offence against the law of the Territory and the Territory Supreme Court would not have jurisdiction. The High Court held by majority (Mason CJ, Dawson and Gaudron JJ) that the standard of proof applicable to the establishment of the jurisdiction of a criminal court is the civil standard. The majority concluded that the territorial connection (death or cause of death in the jurisdiction) was not an element in proof of the commission of the offence charged but a fact proof of which was essential to the existence of the jurisdiction of the court to enter judgment.

29 The minority in Thompson took a different view. As proof of the jurisdictional fact (the locality of the deaths or cause of death) was required to establish an offence against the Territory law in question, it was an element of the offence charged: per Brennan J at 27; per Deane J at 34. Brennan and Deane JJ concluded that in certain circumstances a jurisdictional fact had to be proved beyond reasonable doubt. Further, according to the minority, if the allegation made by the Crown in the charge expressly or implicitly asserts a breach of the law of the territory, then a court of that territory has jurisdiction to try (hear and determine) the charge. That statement in isolation is ambiguous. I do not read the minority judgments as authority for the proposition that provided the charge alleges on offence within the territorial ambit of the law area (as in this case and Toubya) it is sufficient to allege, but not prove at trial, that the court has jurisdiction to enter judgment and sentence. On my reading of the minority judgments, their reference to the jurisdiction to "try" or "hear and determine" does not include jurisdiction to enter judgment or sentence unless the relevant jurisdictional facts are proven at trial (or admitted on a plea of guilty). Jurisdiction in the first sense means the jurisdiction to determine jurisdiction at trial, which at common law required a finding by the jury. That is, where the Crown has to prove a locality factor to bring the conduct within the territorial scope of the relevant law area, and that is expressed or implied in the charge itself, then the court by virtue of the simple allegation alone, has jurisdiction to try (hear and determine) the charge. However, if the locality factor is not proved at trial to the requisite standard, the Court does not have jurisdiction to enter judgment of conviction or sentence an accused. I presume this bifurcated approach to jurisdiction results from the common law rule that where there is a special plea to the jurisdiction whereby an accused asserts that the Court does not have jurisdiction to try him, the plea is determined by the jury. That is not now inevitably the case in Western Australia: see s 616(7) and s 621 of the Criminal Code 1913 (WA).

30 On my reading of Thompson, the question before the Court of Appeal in Toubya should not have been whether the County Court had jurisdiction to "hear and determine", but rather whether it had jurisdiction to enter a judgment of conviction and sentence the appellant. I am unsure as to whether the "properly alleged" test in Toubya is intended to require more than a mere allegation however I infer it is less than proof to the requisite standard. If Toubya is authority for the proposition that a court has jurisdiction to enter judgment of conviction and sentence where an offence is properly alleged to have been committed in the relevant jurisdiction, then in my respectful opinion it is inconsistent with Thompson.

31 This is not a case involving the territorial ambit of the offence. In this case the territorial nexus is required solely for the purpose of establishing that Western Australian courts have jurisdiction. Neither the majority nor minority judgments in Thompson support the proposition that a court has jurisdiction to enter judgment or sentence an accused provided the offence is alleged or properly alleged to have a jurisdictional nexus.

32 The question in this case is whether the mere allegation in the charges suffice to enable the Magistrate to commit the applicant to trial. It may be inferred from the minority in Thompson that all steps prior to the final determination of the relevant facts fall within the jurisdiction to "try" the charges. There is much to be said in favour of this approach at the committal stage, particularly having regard to the very limited role of the Magistrate following the changes made by the Criminal Law (Procedure) Amendment Act 2002 (WA). However, in this case the answer is to be found in the statutory language. The jurisdiction of the Magistrate is expressly confined to offences with the specified territorial connection. Against that background I am not persuaded that jurisdiction to commit is established by mere (or proper) allegation. However, it is appropriate to have regard to the fact that the jurisdictional facts are to be authoritatively determined elsewhere. I am satisfied that, on a proper construction of s 1338B(8)(a) of the Act, if jurisdiction is in issue the Magistrate must be satisfied on the material relied on by the State that on the balance of probabilities he or she has jurisdiction before making an order under s 104(3) of the Justices Act 1902 (WA) to commit a defendant to a court of competent jurisdiction for trial. If such a finding is open on the material served by the State on the applicant, it should be made. The Magistrate's finding on the jurisdictional issue is not conclusive and will arise again for determination in the District Court.

33 In this case the Magistrate will have jurisdiction if the respondent proves on the balance of probabilities that the transactions and offers particularised in the charges were published to a person or persons in Perth on or about the days specified. The evidence establishes that this information was available to be downloaded from all SEATS terminals in Perth. That is, the information was available to be seen if downloaded by trading participants in Perth. There is also evidence that one or more specified trading participants with SEATS terminals in Perth had traded in Intrepid Mining shares on SEATS on the dates specified in the charges against the applicant. The respondent relies on this evidence to support an inference that one or more of the trading participants would have seen on SEATS the transactions and offers made by the applicant. Such an inference is, as was properly conceded by counsel for the applicant, clearly open.

34 Further, I am satisfied that it would be open to the fact finder to rely on summaries appearing in the print media of source information published on SEATS relating to Intrepid Mining. There was evidence before us that the print media available in Western Australia, including but not limited to "The West Australian", "The Australian Financial Review" and "The Australian", reported data in the relevant period relating to the previous day's trading session for most listed securities, including the fully paid shares of Intrepid. The data, originating from SEATS included, inter alia, the best bid and best ask at the close of trading, the last sale price at the close of trading, the movement in security price and the volume traded. The transactions directly or indirectly effected by the applicant would it appears be reflected in the volumes traded if nothing else.

35 Finally, I see no reason in principle why the authorities concerning where an offence is committed for the purpose of determining whether it was committed within the territorial scope of the law would not also apply to the determination of where an offence is committed for the purposes of s 1338B(8) of the Act. In particular, I see no reason why the result/conduct dichotomy does not afford a useful test in the circumstances: see, in particular, Lipohar v R (1999) 200 CLR 485. Applying that test, the alleged offences would have been committed in Perth.

36 As a matter of statutory construction of s 998 of the Act and having regard to the relevant authorities, I am satisfied on the balance of probabilities on the material before this Court that it is open to infer and the inference should be drawn that the alleged offences, if proved, were committed in, inter alia, Perth. Accordingly, the Magistrate has jurisdiction to commit the applicant to the District Court for trial.