Australian Securities and Investments Commission, in the matter of Whitebox Trading Pty Ltd v Whitebox Trading Pty Ltd

Federal Court of Australia (Full Court)|2017-06-21|Before: Mr J, Agency Ltd J, Allsop CJ, Bromwich JJ

Number of paragraphs: 74

Counsel for the Plaintiff: Mr S Donoghue QC SG with Mr J Halley SC, Mr T Begbie and Mr I Ahmed

Solicitor for the Plaintiff: Australian Securities and Investments Commission

Solicitor for the Defendants: Thompson Eslick Solicitors

Counsel for the Amicus curiae and Contradictor: Mr J Gleeson SC with Ms Z Heger

Solicitor for the Amicus curiae and Contradictor: Quinn Emanuel Urquhart & Sullivan

ORDERS NSD 383 of 2016 IN THE MATTER OF WHITEBOX TRADING PTY LTD ACN 139 567 598

BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff

AND: WHITEBOX TRADING PTY LTD ACN 139 567 598 First Defendant

JOHANNES HENDRIK BOSHOFF Second Defendant

QUINN EMANUEL URQUHART & SULLIVAN Amicus curiae and Contradictor

JUDGES: ALLSOP CJ, MIDDLETON AND BROMWICH JJ DATE OF ORDER: 21 JUNE 2017

The order made under Rule 30.01 of the Federal Court Rules 2011 (Cth) on 12 May 2017 for the hearing of a separate question be amended by substituting the following question for the question posed on 12 May 2017: In proceedings brought for the imposition of a civil penalty for a contravention of s 1041A or s 1041B of the Corporations Act 2001 (Cth) is Chapter 2 of the Criminal Code being the Schedule to the Criminal Code Act 1995 (Cth) engaged, subject to any contrary indication in the Corporations Act 2001 as to any specific provision thereof?
The above question be answered "no".
There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 On 18 March 2016, the plaintiff, the Australian Securities and Investments Commission (ASIC), commenced civil proceedings in this Court seeking relief against the defendants based on alleged contraventions of ss 1041A and 1041B of the Corporations Act 2001 (Cth) as proscribed in the 1 October 2012 compilation of that Act. Sections 1041A and 1041B of the Corporations Act proscribe market manipulation, false trading and market rigging. For convenience and ease of reference those and like provisions, both past and present, will be referred to in a generic way simply as "market manipulation provisions". The proceedings are listed for trial commencing on 4 September 2017, with an estimate of four weeks. 2 An alleged breach of either s 1041A or s 1041B may be made the subject of criminal proceedings by reason of the operation of s 1311 and the application of the balance of Part 9.4 of the Corporations Act. Such an alleged breach may also be made the subject of civil proceedings by reason of s 1317E and the application of the balance of Part 9.4B. In some circumstances, both criminal and civil proceedings may take place: see ss 1317M, 1317N and 1317P. Relevantly for present purposes, the relief sought by ASIC includes declarations of contravention under s 1317E and pecuniary penalties flowing from such declarations under s 1317G(1A). No allegation is made by ASIC in these proceedings that the defendants committed a criminal offence. There are no criminal proceedings on foot. 3 Rule 30.01 of the Federal Court Rules 2011 (Cth) provides that a party may apply to the Court for an order that a question arising in the proceeding be heard separately from any other questions. On 28 April 2017, ASIC filed an interlocutory application for an order that such a separate question be heard. On 12 May 2017, the Chief Justice acceded to the application and ordered that a separate question arising in the proceedings be heard separately by a Full Court. That question, as slightly modified in discussion with counsel at the hearing, is as follows: In proceedings brought for the imposition of a civil penalty for a contravention of s 1041A or s 1041B of the Corporations Act 2001 (Cth) is Chapter 2 of the Criminal Code being the Schedule to the Criminal Code Act 1995 (Cth) engaged, subject to any contrary indication in the Corporations Act 2001 as to any specific provision thereof? 4 The Chief Justice also ordered that ASIC arrange for solicitors and appropriate senior counsel to act as amicus curiae and contradictor in relation to the separate question. That order was made because the defendants did not wish to take an active role in the determination of the separate question. As will be apparent, the question was of sufficient importance to require an active and able contradictor, which has been duly provided at ASIC's expense. ASIC was also ordered to pay for the defendants' solicitor and senior counsel to appear on their clients' behalf at the hearing concerning the separate question, which ended up being a confined role. May we at the outset express our gratitude to counsel and solicitors for the clear and efficient argument of the matter. 5 The need for the determination of the separate question arose from obiter observations and conclusions made by a judge of this Court in Gore v Australian Securities and Investments Commission [2017] FCAFC 13; 341 ALR 189 at 231 [183]-[186], and endorsed by the other two members of the Full Court in the same case at 191 [3] and 201 [41]. Those obiter observations and conclusions were to the effect that Chapter 2 of the Criminal Code applied to civil proceedings brought in relation to allegations of being an accessory to contraventions of s 727(1) and (2) of the Corporations Act. A part of the reasoning in support of that conclusion was that s 727 was itself an offence-creating provision in circumstances where that provision was also designated as a civil penalty provision. It was therefore reasoned in Gore that the same provision created both civil and criminal liability. 6 ASIC contends that the correct answer to the separate question should be in the negative because, on the proper construction of the relevant provisions of the Corporations Act, Chapter 2 of the Criminal Code has no application to civil proceedings brought alleging a contravention of a civil penalty provision. Senior counsel in the role of contradictor effectively defends the conclusion reached in Gore, contending that Chapter 2 of the Criminal Code does apply to these proceedings and indeed to any civil proceedings pertaining to a contravention of a civil provision that is also a criminal offence, not just to civil penalty proceedings. 7 For the reasons that follow, we are respectfully of the view that Gore is wrong on this issue and the answer to the separate question is "no".

The consequences of the answer to the separate question 8 To conclude that Gore is correct on this issue would inevitably lead to an affirmative answer to the separate question, such that Chapter 2 of the Criminal Code would apply to these civil proceedings concerning ss 1041A and 1041B. That in turn would mean that, in order to establish the alleged contraventions and obtain the declaratory and pecuniary penalty relief sought, ASIC would not only have to prove that the contraventions had in fact taken place in the sense of proving, on the balance of probabilities, that the conduct proscribed by each of ss 1041A and 1041B of the Corporations Act had taken place in the designated circumstances or with the designated results. ASIC would also have to prove criminal fault elements derived from Chapter 2 of the Criminal Code for each of the proscribed physical elements, rather than any state of mind as may be drawn from the terms of those two provisions. Such express statutory fault elements would be imposed by the operation of s 5.6 of the Criminal Code in relation to s 1041A, and by the operation of s 1041B(1A) in relation to s 1041B(1). 9 If Chapter 2 of the Criminal Code does not apply, then the question of any state of mind applicable to the proscribed conduct in the context of civil proceedings falls to be determined by way of ordinary statutory construction and interpretation of the terms of ss 1041A and 1041B. It was common ground that this Court should not, ahead of the pending trial, venture into any issue of state of mind required to be established in the event that Chapter 2 of the Criminal Code does not apply, that issue not having been the subject of full and proper consideration in the context of the pleadings, evidence and appropriate submissions. Accordingly, that topic will only be touched on to the limited extent necessary to address the arguments advanced. 10 The choice made by ASIC between commencing civil proceedings or criminal proceedings (which are ordinarily conducted by the Office of the Commonwealth Director of Public Prosecutions, and must be conducted by the Director on indictment) entails consideration of significant legal and practical issues of a kind that are likely to be affected by the answer given to the separate question. The need to prove state of mind in any kind of litigation is usually a significant issue because of the frequent need to resort to inferential reasoning based on circumstantial evidence and the corresponding need to exclude reasonable exculpatory explanations. 11 In federal criminal proceedings: (1) the prosecution must prove both physical and fault elements to the criminal standard of proof beyond reasonable doubt; (2) the proceedings are conducted in State and Territory courts, not in this Court; (3) if proceedings are defended and taken on indictment, the tribunal of fact must be a jury, following Alqudsi v The Queen [2016] HCA 24; 258 CLR 203; (4) sentence considerations are dictated by Part 1B of the Crimes Act 1914 (Cth), but the role of the prosecutor on sentence is constrained, following Barbaro v The Queen [2014] HCA 2; 253 CLR 58; and (5) a convicted offender may be sent to prison and/or pay the criminal sanction of a fine. 12 In ordinary civil proceedings: (1) the standard of proof is the balance of probabilities as to the elements required to be established; (2) the tribunal of fact is always a judicial officer; and (3) the proceedings may be conducted in this Court, as well as State and Territory courts. 13 Additionally, in civil penalty proceedings: (1) consequences are not confined to pecuniary penalties, but do not include imprisonment; and (2) the basis upon which a pecuniary penalty may be imposed, and its quantum, ordinarily turn upon quite different considerations to those relevant for criminal sentencing: Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 326 ALR 476 at 480-2 [16]-[24], 490-3 [51]-[64]. 14 In relation to the imposition of a pecuniary penalty for the contravention of a civil penalty provision of the Corporations Act, there is a two-stage process in cases in which pecuniary penalties are sought. A declaration must first be made, and then the requirements of the particular relevant provision in Part 9.4B must be met, requiring quite different considerations to those for sentencing for criminal offences. In relation to a contravention of either s 1041A or s 1041B(1), s 1317G(1A) requires additional preconditions for the imposition of a pecuniary penalty to be established. 15 A mental element being required to be established can be the difference between particular proceedings being viable or not. In criminal proceedings, the inability to prove a necessary state of mind beyond reasonable doubt is not just a significant reason for acquittal, but a significant reason for criminal proceedings not being commenced or maintained in the first place. If a similar requirement to prove criminal fault elements exists for civil penalty proceedings, then it may reasonably be anticipated this will have an important impact on the decision whether to commence criminal or civil penalty proceedings, not least by significantly narrowing the difference between the two types of proceedings. Accordingly, the separate question affects significant public interests because of the constraints that this may place on regulators successfully enforcing, and being seen to enforce, statutory proscriptions, especially by way of civil penalty proceedings. The answer is also likely to have importance to other forms of civil proceedings collateral to and arising out of an alleged contravention of a civil penalty provision. 16 The separate question therefore raises an issue of fundamental importance not just to the pending civil trial in this Court, but also to the operation of Part 9.4B of the Corporations Act, going well beyond cases concerning only ss 1041A and 1041B, including as to the operation of the regime of collateral civil consequences for contravening civil penalty provisions elsewhere in Part 9.4B.

The relevant provisions of the Corporations Act as at 1 October 2012 17 The key provisions of the Corporations Act for the purposes of the separate question are ss 1041A, 1041B(1) and (1A), 1308A, 1311(1), (1A) and (2), 1317DA, 1317E(1)(jb) and (jc) [now items 41 and 42 to the table to s 1317E(1)], 1317E(2), 1317F, 1317G(1A) and item 310 of Schedule 3, as set out below. Some of these provisions have changed in form, but not in relevant substance, since the 1 October 2012 compilation of the Corporations Act. Part 7.10 - Market misconduct and other prohibited conduct relating to financial products and financial services … Division 2 - The prohibited conduct (other than insider trading prohibitions) 1041A Market manipulation A person must not take part in, or carry out (whether directly or indirectly and whether in this jurisdiction or elsewhere): (a) a transaction that has or is likely to have; or (b) 2 or more transactions that have or are likely to have; the effect of: (c) creating an artificial price for trading in financial products on a financial market operated in this jurisdiction; or (d) maintaining at a level that is artificial (whether or not it was previously artificial) a price for trading in financial products on a financial market operated in this jurisdiction. Note 1: Failure to comply with this section is an offence (see subsection 1311(1)). Note 2: This section is also a civil penalty provision (see section 1317E). For relief from liability to a civil penalty relating to this section, see section 1317S. 1041B False trading and market rigging - creating a false or misleading appearance of active trading etc. (1) A person must not do, or omit to do, an act (whether in this jurisdiction or elsewhere) if that act or omission has or is likely to have the effect of creating, or causing the creation of, a false or misleading appearance: (a) of active trading in financial products on a financial market operated in this jurisdiction; or (b) with respect to the market for, or the price for trading in, financial products on a financial market operated in this jurisdiction. Note 1: Failure to comply with this subsection is an offence (see subsection 1311(1)). For defences to a prosecution based on this subsection, see Division 4. Note 2: This subsection is also a civil penalty provision (see section 1317E). For relief from liability to a civil penalty relating to this subsection, see Division 4 and section 1317S. (1A) For the purposes of the application of the Criminal Code in relation to an offence based on subsection (1): (a) intention is the fault element for the physical element consisting of doing or omitting to do an act as mentioned in that subsection; and (b) recklessness is the fault element for the physical element consisting of having, or being likely to have, the effect of creating, or causing the creation of, a false or misleading appearance as mentioned in that subsection. Note 1: For intention, see section 5.2 of the Criminal Code. Note 2: For recklessness, see section 5.4 of the Criminal Code. … … Part 9.4 - Offences Division 1A - Application of the Criminal Code 1308A Application of Criminal Code Subject to this Act, Chapter 2 of the Criminal Code applies to all offences against this Act. … Division 2 - Offences generally 1311 General penalty provisions (1) A person who: (a) does an act or thing that the person is forbidden to do by or under a provision of this Act; or (b) does not do an act or thing that the person is required or directed to do by or under a provision of this Act; or (c) otherwise contravenes a provision of this Act; is guilty of an offence by virtue of this subsection, unless that or another provision of this Act provides that the person: (d) is guilty of an offence; or (e) is not guilty of an offence. Note: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility. (1A) Paragraphs (1)(a), (b) and (c) only apply to a provision in the following list if a penalty, pecuniary or otherwise, is set out in Schedule 3 for that provision, or for a provision or provisions in which that provision is included: (a) Chapters 2A, 2B and 2C; (b) Parts 2F.2 and 2F.3; (c) Chapters 2G, 2H, 2J, 2M (other than Part 2M.4), 2N, 2P and 5A; (d) Parts 5B.1 and 5B.3; (daa) Chapter 5D; (da) Chapter 6CA; (db) Chapter 7; (dc) Chapter 8; (e) Chapter 10. (2) Subject to section 1312, a person who is guilty of an offence against this Act, whether by virtue of subsection (1) or otherwise, is punishable, on conviction, by a penalty not exceeding the penalty applicable to the offence. … … Part 9.4B - Civil consequences of contravening civil penalty provisions 1317DA Definitions In this Act: corporation/scheme civil penalty provision means a provision referred to in subsection 1317E(1), other than in paragraphs 1317E(1)(jaab) to (jg). financial services civil penalty provision means a provision referred to in any of paragraphs 1317E(1)(jaab) and (jaai) to (jg). 1317E Declarations of contravention (1) If a Court is satisfied that a person has contravened 1 of the following provisions, it must make a declaration of contravention: … (jb) section 1041A (market manipulation); (jc) subsection 1041B(1) (false trading and market rigging - creating a false or misleading appearance of active trading etc.); … These provisions are the civil penalty provisions. Note: Once a declaration has been made ASIC can then seek a pecuniary penalty order (section 1317G) or (in the case of a corporation/scheme civil penalty provision) a disqualification order (section 206C). (2) A declaration of contravention must specify the following: (a) the Court that made the declaration; (b) the civil penalty provision that was contravened; (c) the person who contravened the provision; (d) the conduct that constituted the contravention; (e) if the contravention is of a corporation/scheme civil penalty provision - the corporation or registered scheme to which the conduct related. 1317F Declaration of contravention is conclusive evidence A declaration of contravention is conclusive evidence of the matters referred to in subsection 1317E(2). 1317G Pecuniary penalty orders … Financial services civil penalty provisions (1A) A Court may order a person to pay the Commonwealth a pecuniary penalty of the relevant maximum amount if: (a) a declaration of contravention by the person has been made under section 1317E; and (b) the contravention is of a financial services civil penalty provision not dealt with in subsections (1E) to (1G); and (c) the contravention: (i) materially prejudices the interests of acquirers or disposers of the relevant financial products; or (ii) materially prejudices the issuer of the relevant financial products or, if the issuer is a corporation or scheme, the members of that corporation or scheme; or (iii) is serious. …

ASIC's approach 18 On ASIC's approach, there was no need to go beyond the plain text of ss 1041A, 1041B(1), 1308A and 1311 of the Corporations Act reproduced above in order to conclude that the present proceedings did not relate to any offence and therefore that Chapter 2 of the Criminal Code has no application. On that reasoning, it followed that the history of the various market manipulation provisions leading up to the introduction of ss 1041A and 1041B in March 2002, after the commencement of the Criminal Code in December 2001, could not and did not affect that conclusion. Accordingly, the only correct answer to the separate question was negative, such that Chapter 2 of the Criminal Code did not apply to these proceedings (or indeed to any other proceedings brought in relation to a civil provision, including a civil penalty provision). 19 ASIC's textual analysis led to the submission that the reasoning in Gore at 231 [183]-[186] was fatally flawed at the outset and could therefore be readily departed from. That was said to be because the reasoning in Gore depended upon the incorrect premise that s 727 itself created an offence. Rather, ASIC submitted, the offence created by s 1311(1) based upon s 727 arose from the combination of those two provisions. This error of characterisation led to incurably flawed reasoning in Gore to the effect that s 727 could not "somehow transmute into other elements" in civil proceedings. ASIC submitted that, in fact, no such transmutation was required because there was no question of there being different elements for criminal or civil contraventions "of the same section". Because there was no offence "under" s 727 simpliciter, but rather an offence based on s 727 by virtue of the operation of s 1311(1), the conclusion reached in Gore was dependent upon an incorrect characterisation. 20 For completeness, it should be noted that s 727 was not and is not a civil penalty provision, but can nonetheless be contravened for the purposes of other civil proceedings, giving rise to other forms of relief. That included proceedings alleging a person was an accessory to a contravention. That was the allegation under consideration in Gore, rather than a civil penalty contravention. To that extent, Gore is technically distinguishable as it could not concern the application of Chapter 2 of the Criminal Code to a civil penalty provision.

The contradictor's approach 21 The contradictor's submissions were properly and overtly directed to presenting (forcefully) an alternative view to that advanced by ASIC to assist the Court in arriving at the correct conclusion. The contradictor was not acting on instructions from any party, nor advancing any particular interest. 22 The approach of the contradictor was to interpret the text of the relevant provisions both on their face and in a historical context. On the latter argument, if the historical approach continued to prevail, the source of criminal and civil liability for market manipulation being the same would lead to the same elements being required to be established for each. On that reasoning, the Criminal Code applied equally to civil penalty proceedings as to criminal proceedings based on the same provisions giving essential content to the prohibition. This would lead to a positive answer to the separate question, such that Chapter 2 of the Criminal Code applied both to these proceedings and to any other proceedings brought in relation to a civil provision, including a civil penalty provision, which was also a provision to which the Criminal Code applied. 23 The contradictor suggested three propositions to frame and guide the historical and contextual analysis which, if accepted, would probably mean that Gore was correctly decided: (1) for 30 years between 1970 and immediately prior to the commencement of the Criminal Code on 15 December 2001, the content of the market manipulation provisions was the same whether they were enforced civilly or criminally; (2) the application of Chapter 2 of the Criminal Code to the Corporations Act on 15 December 2001 did not alter that position; and (3) the re-enactment of the market manipulation provisions in the form of s 1041A and the immediately following provisions in March 2002 did not alter the law, such that ASIC did not have to prove something extra in criminal proceedings than was required for civil proceedings. 24 In support of the above three propositions, the contradictor provided the Court with an analysis of key provisions enacted in the period from 1970 to 2002, and to corresponding authority. Those submissions are reflected in the reasoning as to history and context below.

Principles of statutory construction 25 The principles of statutory construction involved in answering the separate question were not in doubt as requiring a consideration of the statutory text, purpose and context: see Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at 381 [69]; Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; 250 CLR 503 at 519 [39]; Thiess v Collector of Customs [2014] HCA 12; 250 CLR 664 at 671-2 [22]-[23]; Military Rehabilitation and Compensation Commission v May [2016] HCA 19; 257 CLR 468 at 473 [10]; North Australian Aboriginal Justice Agency Ltd v Northern Territory [2015] HCA 41; 256 CLR 569 at 581 [11]. 26 It was similarly not in doubt that statutory construction must begin and end with the statutory text: Thiess at 671 [22] (quoting Consolidated Media Holdings at 519 [39]). The starting point is therefore the textual analysis urged by ASIC, and argued differently by the contradictor, followed by the historical contextual analysis urged by the contradictor in order to ascertain whether that either confirms or produces any different conclusion to the primary textual analysis.

Textual analysis 27 Sections 1041A and 1041B of the Corporations Act on their face create statutory norms which prohibit particular conduct, but do not themselves specify any civil or criminal consequences for a breach. Section 1317E(1) designates both s 1041A and s 1041B(1) to be civil penalty provisions. By contrast, s 1311(1)(c), when read with s 1311(1A) and item 310 in Schedule 3, does not designate either s 1041A or s 1041B(1) to be a criminal offence, but rather provides that a person who contravenes either "is guilty of an offence by virtue of this subsection". Criminal offences arising from conduct forbidden by s 1041A and s 1041B(1) are therefore created by s 1311(1), and not by either norm provision itself. 28 Part 9.4, by heading and content, deals only with "offences". The first provision in that Part, s 1308A, provides that subject to the Corporations Act itself, Chapter 2 of the Criminal Code applies to all offences against the Corporations Act. The balance of Part 9.4 deals with offences generally, including the creation of offences, penalties for bodies corporate, penalty notices, offences committed partly within and partly outside of Australia, continuing offences, how proceedings for an offence may be taken, the time for instituting proceedings, denial of privilege against self-incrimination to bodies corporate and provisions requiring persons to assist in a prosecution. 29 Part 9.4B, by heading and content, deals only with the civil consequences of contravening civil penalty provisions, including, but not limited to, the bringing of proceedings by ASIC for declarations of contravention of a civil penalty provision and seeking pecuniary penalty orders. Part 9.4B also provides for certain private litigation remedies and therefore consequences apart from those arising in proceedings brought by ASIC. 30 The provisions of the Corporations Act that are civil penalty provisions were listed in s 1317E (now in a table), relevantly including ss 1041A and 1041B (but as already noted, not including s 727, considered in Gore). The trigger for civil penalty provision consequences for contravening the prohibitions in s 1041A or s 1041B is brought about by the operation of the chapeau to s 1317E, which provides that if a Court is satisfied that a person has contravened a civil penalty provision, it must make a declaration of contravention. Based on such a declaration, only ASIC may seek pecuniary penalty orders by reason of s 1317J(1) and (4), although there are separate private rights both to intervene and to be heard in such proceedings and to seek compensation. There is also a right to seek injunctive relief and also relief from the consequences of a contravention. 31 Criminal consequences are brought about by the operation of s 1311(1), set out above. Following the express terms of s 1311(1), a criminal offence under the Corporations Act does not arise merely from a proscription of particular conduct, but rather from the combination of that proscription and s 1311(1), or from the proscription provision itself stating that the conduct constitutes an offence. Neither s 1041A or s 1041B contain any statement that a contravention is an offence: cf, e.g., s 184(1). A person may only be guilty of a criminal offence in respect of either s 1041A or s 1041B(1) "by virtue of" s 1311(1). There is no offence under s 1041A or s 1041B simpliciter. It follows that any offence by reason of the contravention of either s 1041A or s 1041B arises from the operation of s 1311(1). The same reasoning applies to s 727(1). 32 The contradictor argued that the application of Chapter 2 of the Criminal Code by the operation of s 1308A of the Corporations Act was not expressed in terms that were dependent upon whether the offence was the subject of criminal proceedings under Part 9.4, civil proceedings under Part 9.4B (including civil penalty proceedings) or civil or administrative proceedings provided for elsewhere in the Corporations Act. However, that submission proceeds upon the implicit assumption that criminal proceedings may be commenced for anything other than a criminal offence and that civil proceedings may be commenced for anything other than a civil contravention of some kind, rather than separate streams of proceedings being maintained for each kind of breach, noting the differences between civil and criminal proceedings described above. If that assumption, which is inherently counterintuitive, cannot be grounded in the text of the legislation permitting such an approach, as opposed to the text of the legislation merely not expressly precluding it, the absence of any such specific reference of the kind relied upon by the contradictor is intractably neutral in its effect. It does not advance the argument. 33 The maintenance of separate streams for criminal and civil proceedings is to be derived from a construction of the provisions as a whole, in the context of the differences between civil and criminal proceedings outlined above, and paying particular heed to the structure adopted by the Corporations Act whereby Part 9.4 relates only to criminal proceedings and Part 9.4B relates only to civil consequences of contravening civil penalty provisions. That structure alone is a telling indicator that such a crossing of the criminal and civil streams is not contemplated by the Corporations Act. 34 It was further reasoned by the contradictor, building upon the preceding argument (and implicit assumption), that since a contravention of s 1041A or s 1041B(1) is an "offence", s 1308A applies to it regardless of the nature of the proceedings in which the contravention is alleged, relying in part upon the reasoning in Australian Securities and Investments Commission v Mariner Corporation Ltd [2015] FCA 589; 241 FCR 502 at 553 [255]. However, that submission (and the reasoning in Mariner Corporation in relation to s 631(2)(b) there under consideration), necessarily depended upon the offence in question being characterised as a contravention of the norm provision as though, without more, that also either constituted the offence provision or created the offence. It does not properly acknowledge, for the reasons set out above, that an offence based on s 1041A or s 1041B(1) is expressly created by s 1311(1) and not by either of those norm provisions, albeit with the content of the conduct proscribed being supplied by the text of each of those norm provisions. The norm provision only creates an offence when it contains express language to that effect, a legislative approach that was not utilised for either s 1041A or s 1041B(1), nor for s 631(2)(b) considered in Mariner Corporation. 35 The contradictor's reasoning on this point squarely relies upon an erroneous characterisation of the basis for a criminal offence of the same kind expressed in Gore. That characterisation cannot survive a careful reading of the express terms of s 1311(1), carried out above. The reasoning in Gore proceeded upon the erroneous premise that s 727(1) itself created an offence, creating a perceived commonality between the criminal offence provision and the civil penalty provision which did not in fact exist. That error in characterisation was essential to the conclusion reached and cannot be overlooked. Once the erroneous premise of an offence arising from the terms of s 727(1) alone is discarded, the rationale for this aspect of the decision in Gore cannot be maintained, and the like argument advanced by the contradictor cannot be accepted. 36 The "offences" referred to in s 1308A, when read with the terms of s 1311(1), are confined to those either stated in their own terms to be such offences, or created by the combination of the particular provision and s 1311(1). Otherwise there is no "offence" in contemplation and therefore no occasion for Chapter 2 of the Criminal Code to apply. The application of s 1311(1) does not arise in civil proceedings, including those for the contravention of the civil penalty provision in either s 1041A or s 1041B(1). Based on textual analysis alone, the answer to the separate question must therefore be in the negative. Upon a textual basis, Chapter 2 of the Criminal Code has no application to these proceedings. 37 In light of the importance of this issue not just to all civil proceedings for a pecuniary penalty, but also to any civil ancillary relief based on statutory norms of the kind created by ss 1041A and 1041B(1), it is important to ensure that there is no compelling contextual reason, including one derived from legislative history, to depart from the textual conclusion that Chapter 2 of the Criminal Code does not apply.

The contradictor's first proposition 38 The contradictor's first proposition was that for 30 years between 1970 and immediately prior to the commencement of the Criminal Code on 15 December 2001, the content of the market manipulation provisions was the same whether they were enforced civilly or criminally. 39 The relevant legislative history advanced by the contradictor commenced prior to the introduction of the 1970 market manipulation provisions. Section 369 of the Companies Act 1961 (NSW) (and like provisions in other States and Territories) had some similarity to the present s 1311(1) of the Corporations Act in that it provided that a person who did something forbidden, failed to do something required, or otherwise failed to comply with that statute "shall be guilty of an offence against this Act". Section 124 contained now familiar obligations imposed on company officers pertaining to honesty, due diligence and misuse of information, with corresponding civil liability and criminal sanctions for breach. At that time there were no specific market manipulation provisions. However, for the provisions that did exist, the elements of each statutory command were indistinguishable as between civil and criminal proceedings, with both containing state of mind components. That identity between civil and criminal proceedings may account for the contradictor being unable to find instances of civil enforcement when the regimes were the same. If so, that highlights the difficulty in having little or no difference of practical importance between civil and criminal proceedings. In such circumstances the distinction between the criminal and civil standard of proof may, as a practical matter, be illusory. The requirement to prove a criminal mental element is often a more substantial hurdle than differences in the burden of proof as between civil and criminal proceedings. 40 The lack of specific market manipulation provisions was addressed by the introduction of Part VIII of the Securities Industry Act 1970 (NSW), which dealt with trading in securities. Sections 70 to 72 contained earlier versions of the present market manipulation proscriptions. Section 74 provided that a person who contravened any of the provisions of that Part would be guilty of an offence against that Act and liable on conviction on indictment to a fine and/or imprisonment. Section 75 provided that a person who was convicted of an offence was liable to pay compensation to a person who had purchased or sold securities at a price affected by the act or transaction the subject of the offence for the damage suffered. In that way, civil enforcement was dependent upon prior criminal enforcement resulting in a conviction, at least when used as a sword rather than a shield. Section 70 in particular provided as follows A person shall not create or cause to be created or do anything which is calculated to create, a false or misleading appearance of active trading in any securities on any stock market in the State, or a false or misleading appearance with respect to the market for, or the price of, any securities. 41 North v Marra Developments Limited (1981) 148 CLR 42 is an example of a case under a regime of civil consequences flowing from the commission of a criminal offence, but no separate civil penalty sanction. In that case, a contravention of s 70 (and also common law illegality) was successfully pleaded as a shield in defence of a claim for payment of a stockbroker's fees in circumstances in which the share purchases in question had taken place for the purpose of securing the success of a takeover by maintaining the market price of the company's shares. In the course of upholding that outcome, the High Court considered what was required to constitute a criminal offence breach of s 70, which had a bearing on the outcome of the civil proceedings. 42 Mason J in Marra Developments at 58-59 pointed out that the generality of the language in s 70 did not easily translate into a specific prohibition against injurious activity by way of giving the market or price of securities a false or misleading appearance, whilst at the same time allowing for legitimate commercial activity which would have the same effect. The way to achieve the necessary distinction between proscribed and legitimate activities was to confine the operation of the provision to buyers and sellers whose transactions were undertaken for the sole or primary purpose of setting or maintaining the market price. The requirement of such a purpose unavoidably entailed a proscribed mental element being found to exist. To that end, the word "calculated" in s 70 was interpreted to mean "designed" or "intended", being the language of a state of mind of fault or responsibility, rather than the neutral concepts of "adapted" or "suited". 43 The contradictor relied upon Marra Developments, and in particular on the interpretation given to the word "intended", to demonstrate, in support of his first proposition, that a progenitor provision to the present market manipulation provisions had the equivalent of a fault element in both a criminal and a civil context. The meaning was the same irrespective of the form in which proceedings were brought. However Marra Developments was not concerned with a legislative regime like the present, which, as discussed below, entails two quite separate civil and criminal streams. To the contrary, that case was concerned with the public interest doctrine that the law will not ordinarily countenance the enforcement of rights which rely upon an illegal act, producing a civil consequence flowing from criminal behaviour. 44 Marra Developments may still provide useful guidance in ascertaining what, if any, state of mind is required to be established either when none is specifically provided, or the ambit of the state of mind language that has been used requires determination. However, such reasoning cannot have much, if any, application if Chapter 2 of the Criminal Code does apply, because that code "assumes that it is apparent on the face of the offence, as interpreted in the light of the Criminal Code, precisely what are the physical elements of an offence and to precisely which of those physical elements a fault element, if any, attaches and what that fault element is": R v JS [2007] NSWCCA 272; 230 FLR 276 at 301 [129]. 45 A similar statutory approach was reflected in the successor Securities Industry Act 1976 (NSW), namely of providing for prohibitions, a general offence provision and a compensation remedy, albeit no longer with the need for a conviction first to be obtained before reliance could be placed on a criminal contravention, such that this statute did not require separate consideration. 46 The 1981 Securities Industry (New South Wales) Code, being the New South Wales version of this aspect of a quasi-national cooperative scheme, introduced new market manipulation proscription provisions containing specific elements of intention, coupled with a general offence provision and a corresponding compensation provision. Again there was no need for a conviction to be obtained for the compensation remedy to be available, but a contravention had to be established having the same elements as the criminal offence. A civil remedy of injunctions was also introduced. In parallel, the Companies (New South Wales) Code 1981, being another part of the same overall quasi-national cooperative scheme, contained familiar provisions for the duty and liability of company officers with common elements for civil and criminal liability. An injunction could be obtained where a person had engaged, was engaging, or was proposing to engage in conduct that constituted or would constitute an offence. It followed that the 1981 regime across two statutes continued to require a fault element to be established for civil contraventions and remedies as for criminal sanctions. 47 Almost a decade later, the first truly national legislative arrangement for companies law was legislated by way of the Corporations Act 1989 (Cth), which introduced the Corporations Law. Directors' duties were contained in ss 229 to 232, and market manipulation provisions for both securities and for the futures industry in ss 997 to 998 and 1259 to 1260, respectively. Section 997 in particular had an express additional element of intention. There was a civil compensation remedy, a general offence provision attaching to proscriptions within the statute, being an earlier version of s 1311 using the same section number, and the civil remedy of injunctions in s 1324. 48 The landscape further changed a few years later with the enactment of the Corporate Law Reform Act 1992 (Cth), which in 1993 inserted a new Part 9.4B into the Corporations Law. This introduced, for the first time, a limited number of civil penalty provisions, including for directors' duties. The market manipulation provisions remained only criminal with no civil penalties, but were supplemented by the option of other ancillary civil remedies. Section 1317FA provided that a contravention of a civil penalty provision would also constitute a criminal offence if additional fault elements were established as follows: Division 3 - Criminal proceedings 1317FA When contravention of civil penalty provision is an offence (1) A person is guilty of an offence if the person contravenes a civil penalty provision: (a) knowingly, intentionally or recklessly; and (b) either: (i) dishonestly and intending to gain, whether directly or indirectly, an advantage for that or any other person; or (ii) intending to deceive or defraud someone. (2) A person who contravenes a civil penalty provision is not guilty of an offence except as provided by subsection (1). 49 It may be seen that the legislative design of the initial Part 9.4B was that, apart from purely criminal offences such as the market manipulation provisions, there was a single norm created by the civil penalty provisions to which additional fault elements were attached making a breach also a criminal offence. Section 1317FA was the sole criminal offence provision relating to civil penalty contraventions. 50 The issue of how the state of mind component of a civil penalty provision under the Corporations Law should be construed was considered by Merkel J in Re Tasmanian Spastics Association; Australian Securities Commission v Nandan (1997) 23 ACSR 743. His Honour applied R v Byrnes (1995) 183 CLR 501, and thus criminal law reasoning, to the terms of the civil penalty provision in s 232(6) to the effect that the same concept applied to "improper use" of position to gain an advantage or cause detriment to a company of an objective rather than subjective test of impropriety. It was therefore found that there was no distinction as to the mental element as between civil and criminal proceedings for that particular provision. That approach may again be useful when there is a need to determine the content of a stated, or implied, state of mind element, but it does not assist in deciding whether such a process is required by reason of it not being expressly provided for, such as by the application of Chapter 2 of the Criminal Code. 51 In Australian Securities Commission v Nomura International plc (1998) 89 FCR 301, Sackville J considered the then market manipulation provisions in ss 998 and 1260 of the Corporations Law in the context of declarations and injunctions being sought by the Australian Securities Commission (which later became ASIC). The conduct took place prior to the introduction of civil penalty provisions for market manipulation. Each of the substantive provisions contained mental components, referring respectively to "intended" and "calculated". His Honour concluded at 405-6 that the use of the word "intended" in s 998(1) did not require proof that the defendant knew that the false or misleading appearances were likely to be created by the conduct, however that did not mean that there was no mental element. It was necessary to show that the alleged wrongdoer intended to carry out the conduct relied on as creating the likelihood of a misleading or deceptive appearance. That reasoning was relied upon by the contradictor to contest the suggestion said to have been made on behalf of ASIC that there was no fault element in the provisions presently under consideration, as opposed to a question as to what the fault element was. However, beyond making that point, this again does not assist in determining whether or not Chapter 2 of the Criminal Code applies to civil proceedings relating to a contravention. 52 The above legislative history informed the reforms brought about by the Corporate Law Economic Reform Program Act 1999 (Cth) amendments to the Corporations Law, which relevantly commenced in March 2000. The contradictor argued that ss 180 to 184 carried through the idea of creating what he described as "express bifurcated norms", many of which would be civil obligations informed by their history of being derived from criminal offence provisions. In relation to general duties, civil norms and obligations were set out in ss 180 to 183, and separate criminal norms referable in content to each of the civil norms were set out in s 184, but with additional elements of recklessness or intentional dishonesty imposed for criminal liability. 53 The March 2000 amendments repealed s 1317FA and adopted a different mechanism for creating criminal offences for all of the proscriptions after the general duty proscriptions in ss 180 to 183 (civil penalty provisions) and s 184 (criminal offence). Instead of creating criminal offences by referring to all civil penalty provisions globally and in one place in the manner of s 1317FA, the creating of criminal offences took place either adjacent to the individual norm, or, by virtue of s 1311(1), by being based on such norms, rather than by any reference to civil penalty provisions or contraventions. Each offence designated adjacent to the norm or by virtue of s 1311(1) was listed in Schedule 3 where the applicable penalty was set out. The conduct constituting a civil contravention was separately stated adjacent to the norm, with the designation of an increased number of those contravention provisions as being a civil penalty provision by s 1317E(1). This was a step towards the current drafting mechanism of mostly having a wholly stand-alone statutory norm to which civil penalty or criminal consequences could separately attach. A norm of behaviour was stated, the impact of a contravention on the legality or validity of any underlying transaction was provided for, and separate provisions based on the norm constituted civil penalty provisions (by the operation of s 1317E(1)) or criminal offence provisions (by the operation of either the terms of each dispersed provision itself, or by the terms of s 1311(1)): see, e.g., ss 208 and 209. None of the civil penalty provisions listed in s 1317E(1) were also criminal offences and none of the criminal offence provisions listed in Schedule 3 were civil penalty provisions. Accordingly, there was no need for a provision such as s 1317FA. 54 The position after the March 2000 amendments was described by the contradictor as a very different structural world to the provisions in this case. It is, perhaps, overstating it to describe the provisions at that time as being so structurally different in substance, as opposed to form, to those now in place. The drafting mechanism adopted in March 2000 produced a set of provisions that were laborious and difficult to follow. Each criminal offence was created in either of two places, being either in the dispersed provision itself or by virtue of s 1311(1). However, the criminal and civil penalty streams were clearly separate, as they are now. 55 It may be seen from the foregoing that the contradictor has made good his first proposition, as far as it goes, namely that for 30 years between 1970 and 14 December 2001 (immediately prior to the application of Chapter 2 of the Criminal Code), the content of the market manipulation provisions was the same whether they were enforced civilly or criminally. The position was somewhat different for other proscriptions, and in particular, as already noted, there were separate criminal sanctions for general duty provisions in s 184, with express additional elements of fault. However, what the first proposition does not address is that for the relevant period of time there were no civil penalty provisions for market manipulation proscriptions. Nor does the contradictor's first proposition in terms acknowledge that by March 2000 there were separate streams for civil penalty provisions and criminal offence provisions.

The contradictor's second proposition 56 The contradictor's second proposition was that the application of the Criminal Code to the Corporations Act on 15 December 2001 did not alter the position that the content of the market manipulation provisions was the same whether they were enforced civilly or criminally. Importantly, however, there was at that time still no separate civil penalty regime for market manipulation and therefore no scope for differential elements for the market manipulation criminal provisions. Chapter 2 of the Criminal Code applied to the criminal offence provisions of the Corporations Act (taken from the Corporations Law with effect from 15 July 2001) dealing separately with market manipulation in securities in ss 997 to 998 and with market manipulation in the futures industry in ss 1259 to 1260. Each of those provisions was informed by their legislative antecedents. Each was made an offence by virtue of s 1311(1), also able to be enforced civilly by declarations, injunctions and compensation. The Treasury Legislation Amendment (Application of Criminal Code) Act (No. 3) 2001 introduced the present s 1308A, providing: Subject to this Act, Chapter 2 of the Criminal Code applies to all offences against this Act. 57 The contradictor relied upon the legislative decision reflected in the terms of s 1308A to apply Chapter 2 to the offence, rather than to the prosecution for an offence, which he described as a "narrower creature". It was submitted that this difference should be given some weight in the textual exercise as being a significant choice. However, the contradictor accepted that s 1308A sat somewhere between applying Chapter 2 of the Criminal Code to a prosecution as a process on the one hand, and applying the same to the provision containing the statutory norm on the other. The fact that s 1308A applied to the offences, rather than to the statutory norms upon which the present offences were based, formed an important part of ASIC's case in response to the contradictor's arguments to the effect that legislative history could not alter the product of textual analysis in this case. 58 It was submitted by the contradictor that what Parliament had done by the enactment of s 1308A was to apply the Criminal Code, subject to any contrary intention to be derived from the text of the Corporations Act itself, to the offence. By so doing, it was submitted that Parliament has said that, to the extent that elements of the offence can be found in Chapter 2 of the Criminal Code, they complete the offence. It was asserted that the conduct that is forbidden can only be fully understood by applying Chapter 2 to the text of the norm, in this case supplied by ss 1041A and 1041B. Thus, it was submitted, when s 1311(1) provides that if the forbidden conduct is engaged in that makes the person guilty of an offence, for that not to be circular the person needs to know fully what it is that is forbidden before guilt can be ascertained. In that way, s 1308A, amongst other things, was said to complete a specification of what is forbidden, and complete the statutory command. It was said that this specification of what is forbidden goes beyond the criminal proscription. However, in the case of the market manipulation provisions, as at the commencement of Chapter 2 of the Criminal Code on 15 December 2001, none of them were yet civil penalty provisions. 59 The final step in the "puzzle", as it was described, is that when Part 9.4B provides that to contravene the command is a civil penalty proscription, if that has become part of the command by virtue of the two provisions working together (s 1041A or s 1041B, with s 1311) there is no difficulty in saying it is that command from that combined source which then attracts a civil penalty, or an injunction or any other civil remedy. As noted below, that submission begs the question as to the effect of the March 2002 amendments, rather than supplying the answer. 60 It was submitted by the contradictor that had the outcome of Chapter 2 of the Criminal Code applying to civil provisions, and thus civil penalty provisions, not been desired, ASIC in its role of advising Treasury in relation to going through the entire Corporations Act, being the statute that it was responsible for, for the purposes of the application of the Criminal Code, in effect could, would and should have provided advice to ensure legislative clarity. ASIC, in deciding which provisions needed to be made strict liability or have their fault elements tailored in a bespoke fashion, knew that Chapter 2 of the Criminal Code would otherwise apply to everything and in particular apply its fault elements to such provisions. No step had been taken to make any express provision which excluded the application of the Criminal Code to the statutory norm provisions under consideration in this case. There was no provision to change the pre-existing law by which mental elements applied to both civil and criminal provisions when they were the single source of the proscription. Accordingly, the pre-existing law continued. Upon this basis it was submitted that the second proposition was made out. 61 The contradictor's second proposition is also made out, to the extent that the application of Chapter 2 of the Criminal Code from 15 December 2001 did not change the content of the market manipulation provisions whether they were enforced civilly or criminally. Chapter 2 of the Criminal Code introduced mandatory statutory concepts of physical elements and fault elements to replace the common law concepts of actus reus and mens rea. Critically, however, this was still in the context of there being no civil penalty provisions for market manipulation at that stage. The difficulty with the contradictor's second proposition is therefore that it begs the question of statutory construction required to be carried out for the provisions that did not come into existence until March 2002, rather than answering it. Either those later provisions on their face carry the meaning contended for by ASIC and accepted above as being the correct textual analysis, or they carry the contrary meaning contended for by the contradictor. It may be doubtful that any aspirational sentiments in secondary legislative materials, such as not to change the law by the enactment of the March 2002 amendments, will enable a meaning to be arrived at not otherwise plainly present on the face of the provisions: see R v JS at 303 [142]-[146].

The contradictor's third proposition 62 The contradictor then turned to the third proposition that the re-enactment of the market manipulation provisions in the form of s 1041A and the immediately following provisions in March 2002 did not alter the law, such that ASIC did not have to prove something extra in criminal proceedings than was required in civil proceedings. It was submitted that there was nothing in the introduction of the post-Criminal Code provisions presently under consideration to mark an intention to create a very different regime to that which had existed previously, including prior to the commencement of the Criminal Code itself. In substance, this was a submission that the maintenance of a single set of elements for criminal and civil penalty market manipulation proscriptions had not been clearly and deliberately departed from, such that the interpretation should continue as before. 63 The contradictor relied upon the absence of a provision such as s 1317FA, referred to and quoted at [48] above, in support of his argument that a separation of fault elements as between civil penalty provisions and offence provisions could have been maintained but was not. ASIC countered by submitting that the reason for the continued absence of language such as in the former s 1317FA was that it remained unnecessary. That was because s 1308A ensured that fault elements for criminal offences based on provisions that were also civil penalty provisions were supplied by Chapter 2 of the Criminal Code. The substance of ASIC's submission was that rather than offences being based on civil penalty provisions, they were separately created. That was either by express statement in the provision itself or by virtue of s 1311(1), based on doing an act or thing forbidden under a provision of the Corporations Act. It was only such separately created offences to which Chapter 2 of the Criminal Code applied. 64 ASIC's submissions on this point should be accepted. The structure of the Corporations Act when Part 9.4B was first introduced in 1993, including s 1317FA, was to legislate for a set of norms which were civil penalty provisions, and then to make a contravention of such a civil penalty provision a criminal offence if additional fault elements could be established. Section 1317FA was dispensed with when the civil and criminal streams became entirely separate in March 2000. Once the two streams were separate, there was no need for a provision such as s 1317FA. The absence of such a provision therefore does not support the contradictor's position. 65 It was suggested by the contradictor that the criticism made by ASIC of the reasoning in Gore at 231 [183]-[186] was unfair because earlier at 225-6 [160] it had been acknowledged that ASIC was arguing that the offence was not derived from the statutory norm provision, but rather from s 1311(1) which made it an offence to contravene s 727(1). The difficulty with that submission is that whilst ASIC's submission was acknowledged in Gore at 225-6 [160], it does not appear that this submission was accepted, or given effect to, because each of 231 [183]-[186] contain a direct or indirect reference to the offence being under s 727(1), rather than being under s 1311(1) and based on s 727(1). The reasoning in 231 [183]-[186] in Gore depends upon the norm provision being the offence provision, because that is the only way in which the civil penalty provision and criminal offence provision can be regarded as being the same provision but with (said to be impermissible) different elements. As has already been concluded, that reasoning cannot be sustained. 66 While the first and second propositions are correct, as far as they go, as to the historical approach and position up until the time immediately prior to the March 2002 amendments, the third proposition cannot be accepted. That is because, on a proper analysis, the March 2002 legislative changes did mark out a different approach to that which had applied historically for market manipulation proscriptions, albeit in a legislative framework that had already changed in the direction of its current structure, but not for market manipulation. The March 2002 amendments brought about by the Financial Services Reform Act 2001 (Cth) replaced ss 997 and 1259 with s 1041A (based on s 1259) and replaced ss 998 and 1260 with ss 1041B and 1041C (based on s 1260). It is convenient to focus on the change which took place by the replacement of ss 997 and 1259 with s 1041A in the form in which they were at the time of repeal and at the time of replacement respectively (emphasis added; by the time of repeal there was no subsection 997(2), (3), (5), (6), (8) or (9)): 997 Stock market manipulation (1) A person must not enter into or carry out, either directly or indirectly, 2 or more transactions in securities of a body corporate, being transactions that have, or are likely to have, the effect of increasing the price of securities of the body corporate on a stock market, with intention to induce other persons to buy or subscribe for securities of the body corporate or of a related body corporate. (4) A person must not enter into, or carry out, either directly or indirectly, 2 or more transactions in securities of a body corporate, being transactions that have, or are likely to have, the effect of reducing the price of securities of the body corporate on a stock market, with intent to induce other persons to sell securities of the body corporate or of a related body corporate. (7) A person must not enter into, or carry out, either directly or indirectly, 2 or more transactions in securities of a body corporate, being transactions that have, or are likely to have, the effect of maintaining or stabilising the price of securities of the body corporate on a stock market, with intent to induce other persons to sell, buy or subscribe for securities of the body corporate or of a related body corporate. (10) A reference in this section to a transaction, in relation to 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. … 1259 Futures market manipulation A person must not, in this jurisdiction or elsewhere, take part in, be concerned in, or carry out, whether directly or indirectly: (a) a transaction (whether a dealing in a futures contract or not) that has, is intended to have, or is likely to have; or (b) 2 or more transactions (whether any of them is a dealing in a futures contract or not) that have, are intended to have, or are likely to have: the effect of: (c) creating an artificial price for dealings in futures contracts on a futures market in this jurisdiction; or (d) maintaining at a level that is artificial (whether or not it was previously artificial) a price for dealings in futures contracts on a futures market in this jurisdiction. … Part 7.10 - Market misconduct and other prohibited conduct relating to financial products and financial services … Division 2 - The prohibited conduct (other than insider trading prohibitions) 1041A Market manipulation A person must not take part in, or carry out (whether directly or indirectly and whether in this jurisdiction or elsewhere): (a) a transaction that has or is likely to have; or (b) 2 or more transactions that have or are likely to have; the effect of: (c) creating an artificial price for trading in financial products on a financial market operated in this jurisdiction; or (d) maintaining at a level that is artificial (whether or not it was previously artificial) a price for trading in financial products on a financial market operated in this jurisdiction. Note 1: Failure to comply with this section is an offence (see subsection 1311(1)). Note 2: This section is also a civil penalty provision (see section 1317E). For relief from liability to a civil penalty relating to this section, see section 1317S. 67 An immediately notable change was that the references to "intention" or "intent" in s 997(1), (4) and (7), emphasised above, were dispensed with. Section 1311(1) had operated to make a breach of ss 997 or 1259 an offence, and with the advent of the Criminal Code, criminal fault elements applied by that mechanism. However, neither ss 997 or 1259 was ever a civil penalty provision. That consequence was confined to a relatively small number of provisions set out in s 1317E(1), not including any civil penalty consequence for market manipulation. 68 The legislature, in deciding to make market manipulation provisions also civil penalty provisions, had available to it a number of different possible models used in the past. Instead, the legislature chose to maintain and extend the simplified separate streams created in March 2000, with statutory norms remaining dispersed throughout the Corporations Act. The new market manipulation provisions were the basis for criminal offences created by virtue of s 1311(1), in common with their predecessors. Those norm provisions also became civil penalty provisions by that designation in s 1317E(1). In that way, the new market manipulation provisions provided a norm both constituting civil penalty provisions and forming the basis for separate criminal offence provisions. The same approach was taken with a number of other new civil penalty provisions. 69 In expanding the number of civil penalty provisions, the legislature evidently made a deliberate choice to maintain separate norms which constituted most of the civil penalty provisions and upon which most of the criminal offence provisions were based, and to make the market manipulation proscriptions also civil penalty provisions. The effect was the same as if a civil penalty provision subsection had been added to the former market manipulation provisions as they existed prior to the March 2000 amendments. If that had been the means by which civil penalty consequences were enacted for market manipulation proscriptions, there is no question that this would have been separate from the criminal market manipulation provisions. In that event, s 1308A would not have applied Chapter 2 of the Criminal Code to such civil penalty provisions. 70 The norm simpliciter on this legislative approach does not of itself attach any consequences, any more than it had done so when market manipulation was only a criminal offence. Rather the norm provision simply describes what is proscribed in one way or another. The consequences then separately attach. There are civil consequences, including by way of civil penalty proceedings, and criminal consequences, by way of proceedings for a criminal offence. 71 Thus, for market manipulation, instead of having the same elements applied criminally, and only in a collateral way civilly, as had been the earliest iterations referred to above, the legislative approach in March 2002 for market manipulation was to maintain a standalone norm, and to add civil consequences, including civil penalty consequences, in addition to the criminal offence consequences created by virtue of s 1311(1). That approach was clear and deliberate and must be given full force and effect according to its terms. It follows that the third proposition advanced by the contradictor must be rejected. Contextual and historical legislative considerations support the textual analysis above, rather than affording any basis for departing from the text.

Conclusion 72 In the case of those norms which are listed as civil penalty provisions in s 1317E(1) of the Corporations Act, proof to the civil standard of a failure to comply with the norm on the balance of probabilities suffices to establish a contravention. That leaves for determination at the trial what is required to be established based on the text of the individual norm provision, including as to any mental element. In the case of those norms in the Corporations Act which are made offences, either by express language within the norm provision (such as for s 184), or by virtue of the operation of s 1311 to create an offence based on the norm (such as for ss 1041A and 1041B(1)), criminal proceedings may ensue. In that event, Part 9.4 applies, and by virtue of s 1308A, Chapter 2 of the Criminal Code applies to such offences and to proceedings for such offences, but no further. 73 The answer to the separate question must therefore be in the negative. Chapter 2 of the Criminal Code is not engaged in, and does not apply to, proceedings brought for a contravention of a civil provision, including a civil penalty provision, and therefore necessarily does not apply to s 1041A or s 1041B(1) when made the subject of such proceedings. 74 Given the basis upon which the separate question order was made, there should be no separate order as to costs. I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop, and Justices Middleton and Bromwich.

Companies Act 1961(NSW)

Securities Industry Act 1970(NSW)

Securities Industry Act 1976(NSW)

Corporate Law Economic Reform Program Act 1999(Cth)

Financial Services Reform Act 2001(Cth)

At a glance

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Judgment (25 paragraphs)

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Legislation Cited (11)

Cases Cited (14)