1100 Mr Humphris agreed that it was sufficient to cause information of a transaction to be generally available if a company announced an intention to complete the transaction. There was no need for a further announcement when the transaction was completed.
1101 It was submitted that information of the intention of the James Hardie group to discharge the liability to the Foundation was generally available by the above announcements and there was no need to disclose any of the ABN 60 Information on and from 25 March 2003.
1102 But the settlement of the liability to the Foundation was but part of a series of steps approved at the 25 March 2003 Meeting, including the separation of JHIL from the James Hardie group by the cancellation of the partly paid shares. If there was a blight on the JHINV share value as a result of a perceived connection to asbestos through JHIL, then the separation of JHIL was just as significant as the discharge of the debt to the Foundation, if not more so.
1103 JHINV believed there was such a blight, irrational though it might have been. Mr Baxter's "Investor Relations Update" board paper of August 2002 stated:
· "the prospect of a residual asbestos exposure remains of significant interest to US investors - one broker has published a report that argues that these concerns are unwarranted and this view is being generally well received.
Note: CSR is generally a well-regarded stock in the USA where about 20% of its equity is held. However, brokers and CSR itself have confirmed that its asbestos liability is the reason why it is unable to attract additional US equity investment."
1104 JHINV's experience in renegotiating its notes was that the blight of asbestos affected their terms. Irrational or not, the blight was real. The James Hardie group lost approximately US$4m.
1105 JHINV's belief of a negative perception to its shares in the market place is also apparent from Mr Shafron's September 2002 board paper and its reference to the "unwelcome distraction". The paper went on to make clear that it was the negative perception that led to the recommendation to transfer JHIL to the ABN 60 Foundation and not the debt due to the Foundation. The paper stated:
" Recommended Action
1. To note this paper and discuss any issues.
2. Approve further work by management in relation to the steps discussed.
3. To make a final decision on: request to cancel partly paid shares; capital structure of ABN 60; and transfer of control of ABN 60 later this year once the board receives final external legal advice.
1. Transfer ABN 60 to Foundation and Settle Indemnity Obligations
· Advantages:
o Good for Foundation as it: reduces ongoing risk to JH group; allows Foundation to diversify its investments; gives Foundation opportunity to earn higher return that reflected in annual payments; and is most effective way to receive repayment of the indemnity amount;
o Good for JHI NV.
· Foundation required under the restructure documents to take the shares in ABN 60: Foundation receptive to transfer but will do legal, accounting and tax due diligence.
· ABN 60 being tidied up ready to transfer- e.g. undoing deeds of cross guarantee, tiding up balance sheet, transferring out subsidiaries, p-notes, etc etc.
· Intention is to transfer ABN 60 with around AUD98M in cash representing the liability under USGAAP in JHINV's books - all other liabilities will be settled prior to transfer.
· Main issues:
o Stamp duty (possible AUD 1.75M payable): hopeful of reducing - worst case ABN 60 pays (PwC and AAR advising on structural alternatives).
o Director duties for ABN 60 directors (Phillip Morley and Don Salter): canceling partly paids, adjusting capital structure): obtaining independent legal advice.
o Directors' duties for JHI NV directors (requesting cancellation of partly paid shares and transferring ABN 60 to Foundation): preliminary advice from De Brauw is that there are no impediments from the Dutch point of view.
o Passing control of ABN 60 to a third party: AAR reviewing documentation
o Receptiveness of Foundation to transfer and its due diligence: early indications are that Foundation is willing to receive ABN 60 - substantial upside for Foundation.
· Transfer will be structured so that JHI NV indemnifies Foundation for all non-asbestos liabilities of ABN 60; Foundation indemnifies JHINV for all ABN 60 asbestos liabilities."
1106 In his February 2003 board paper, Mr Shafron had pointed out that the mere existence of arrangements with the Foundation caused anxiety among certain lenders at least and prejudiced the position of and the terms available to the JHINV. A negative market perception of the value of JHINV shares was also clear from Peter Walraven's report of October 2002, Annexure F to Mr Shafron's February 2003 board paper.
1107 There is no reason to suppose that the considerations that led to the more stringent loan terms would not also have a depressing effect upon JHINV's share price.
1108 In approving the steps at the 25 March 2003 Meeting, the directors of JHINV must have seen an advantage to JHINV. That advantage was the hope that the separation of JHIL from the James Hardie group would have the effect of increasing the JHINV share price. It was the separation of JHIL rather than the discharge of the debt that was the significant element in the steps approved at the meeting.
1109 Mr Humphris was of the view that on and from 25 March 2003 the ABN 60 Information was information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of JHINV shares. He said the cancellation of JHIL's partly paid shares for no consideration removed the prospect of JHINV being required, under certain conditions, to inject further equity into JHIL. The payment of $1.5m by JHIL to JHINV increased the value of JHINV by that amount, albeit that the amount in itself was not material. He said the effective transfer of JHIL out of the James Hardie group would be likely to bring about a further reduction of perceived asbestos risk and uncertainty and enhanced sentiment in the minds of investors thereby leading to an expected increase in JHINV's market price by reducing the asbestos discount. He said that through the effective transfer of JHIL to the ABN 60 Foundation, JHINV would derive potential value benefit from the elimination of expected ongoing costs in JHIL in light of JHIL's apparent lack of surplus net assets. He said that, pursuant to the DOCIA, JHIL provided JHINV, subject to certain conditions, with a covenant and indemnity. He said the aggregate net effect of these items was that a reasonable person would expect them to have a positive material effect on the value and price of JHINV's shares.
1110 Allens gave advice in January 2003 that the ABN60 Information should be disclosed. A number of arguments against disclosure were put to Allens and in a second advice in March 2003 they said that if JHINV correctly held the view that announcing the transaction to the market would not affect the price of its shares nor affect any decision by persons who commonly invest, whether or not to buy them, disclosure was unnecessary.
1111 That lender sentiment was also investor sentiment was borne out by the first advice of Allens:
"(d) to the extent that effecting the transfer of ABN 60 is likely to be viewed positively by the JHI NV Group's principal and syndicated lenders, it is likely a reasonable person would expect the transaction to be disclosed to shareholders and be viewed similarly."
1112 Mr Humphris assumed that JHIL had a lack of surplus net assets at the time of transfer. He was wrong in this respect. It had $95m in assets with liabilities with an NPV of $75m reduced by the return of capital of $1.5m giving a surplus of $18.5m.
1113 Mr Humphris agreed that if a company made a payment that had an NPV in terms of foregone revenue expressed as a percentage of its market capitalisation of less than one percent he would not consider that to be material. JHINV's market capitalisation in March 2003 was in excess of $3,000m. $18.5m was approximately 0.6% of market capitalisation. But that was not the transaction in question: it was the cancellation of the partly paid shares after a reduction in share capital.
1114 In relation to Mr Humphris' third and fourth reasons which addressed the same subject, he agreed that he had assumed that there was a perceived asbestos risk which attached to JHIL that would be significantly removed from JHINV by the separation of JHIL. He assumed the sentiment but was not able to say whether it was rational or irrational.
1115 The market sentiment assumed by Mr Humphris was real, whether rational or irrational, as discussed above. And it was not without reason. There was not only the JHIL involvement before 1937 in the manufacture of asbestos products but also there was the prospect of liability in relation to the Wren decision and the management and board of JHIL had concerns that there might be government reaction if the Foundation was under-funded which it was since future asbestos claims were in excess of $1billion.
1116 It was submitted that Mr Humphris was unable to describe or quantify the reduction in risk to JHINV of the covenant and indemnity in the DOCIA. An assessment of materiality can be made without quantification. Particularly is this is so when, as here, one is concerned with the prospective effect on a negative perception in the market place which itself is unquantifiable.
1117 Mr Humphris expressed his opinion as the cumulative effect of the factors set out above. A criticism of the factors individually does not address the accumulation.
1118 As a matter of hypothesis in the circumstance of a market rationally or irrationally devaluing JHINV shares because of a perceived connection through JHIL with a liability for Asbestos Claims, a reasonable person is likely to have regarded knowledge that JHIL was to be separated from the James Hardie group as being important and as having a material effect on the price or value of JHINV shares.
1119 It was put to Mr Humphris that if he assumed that the company had assessed the value of the potential liability of JHIL at about $12m and it separated JHIL with net assets to provide for those liabilities the transaction would not be a material one. He agreed but said it depended on how good the calculation was. But the question is not what the management of JHINV believed to be a material transaction: the question is whether the investing public would regard the ABN 60 Information as having a material effect on the JHINV share price.
1120 It was submitted that Mr Humphris was not able to say what asbestos discount was applicable to JHINV's share price, nor was he able to say that it was removed or eliminated by the transfer of JHIL. But that there was an affectation upon the share price by the association of JHIL to the James Hardie group was established by internal documents and analysts' statements. The discounting effect of this market sentiment constituted the asbestos discount. That it could not be quantified is beside the point. The question is whether the disclosure of the ABN 60 Information would likely have had the effect of materially increasing the share price.
1121 It was submitted that the evidence did not establish that any negative perception attaching to the James Hardie group in relation to the general subject of its asbestos history was due to the connection with JHIL or that it extended beyond the actual and potential asbestos liabilities of JHIL. I reject that submission. It was JHINV's possible connection to Asbestos Claims and not the amount of debt owed by JHIL to the Foundation that gave rise to the negative perception and that connection was through JHIL. The severing of that connection was likely to reduce the negative sentiment.
1122 On 15 May 2003, JHINV released a preliminary final report. It contained the following note:
" ABN 60 Pty Ltd
On 31 March 2003, the company transferred control of ABN 60 Pty Limited ("ABN 60", formerly James Hardie Industries Limited) to a newly established company named ABN 60 Foundation Pty Ltd ("ABN 60 Foundation"). ABN 60 Foundation was established to hold the shares in ABN 60 and to ensure that ABN 60 meets its payment obligations to the Medical Research and Compensation Foundation. Following the establishment of the ABN 60 Foundation, JHI NV no longer owns any shares of ABN 60. ABN 60 and ABN 60 Foundation are managed by independent directors and operate entirely independently of the Company. The Company does not control the activities of ABN 60 or ABN 60 Foundation in any way. The Company has no economic interest in ABN 60 or ABN 60 Foundation, has no right to dividend or capital distributions, nor will it benefit in the event that there is ultimately a surplus of funds in ABN 60 Foundation or ABN 60. As a result of the change in ownership of ABN 60 on 31 March 2003, a loss on disposal of $0.4 million was recorded by the Company at 31 March 2003, representing the liabilities of ABN 60 (to the Medical Research and Compensation Foundation) of A$ 94.6 million ($57.2 million), the A$94.5 million ($57.1 million) in cash held on the balance sheet, and costs associated with the establishment and funding of ABN 60 Foundation.
JHI NV has agreed to indemnify ABN 60 Foundation for any non asbestos related legal claims made on ABN 60. There is no maximum amount of the indemnity and the term of the indemnity is in perpetuity. The Company believes that the likelihood of any material non asbestos-related claims occurring is remote. As such, the Company has not recorded a liability for the indemnity. The Company has not pledged any assets as collateral for such indemnity."
1123 It was submitted that JHINV's share price movement on 15 May 2003 favoured a finding that if the transfer of JHIL was disclosed, it was not material. The opening and closing range was only $0.20 with a high of $6.61 and a low $6.35 with an average trading price of $6.467. The volume of trades, however, was the highest it had been in a month. But the question is not an ex post facto one, whether the market did react to the disclosure of the information. The question is whether a reasonable person would expect the information to have a material effect on the market price.
1124 In similar vein was the submission that two analysts, one on 21 May 2003 the other on 3 July 2003, continued to refer to asbestos or the risk that future liabilities of the Foundation might not be fully covered. The actual effect of the information is not determinative and two instances suggest that the majority of analysts had regarded the information as material.
1125 There were a number of filings of documents with ASIC by JHINV and JHIL as follows:
· On 17 March 2003 notification of the issue of 22 JHIL fully paid ordinary shares for $69,903.3182 per share signed on 15 March 2003;
· On 17 March 2003 notification of special and general meetings of shareholders of JHIL to be held on 17 March 2003 to pass resolutions that the share capital of JHIL be reduced in 14 days after lodgement by cancelling the one fully-paid ordinary share held by JHINV for no consideration signed on 17 March 2003;
· On 17 March 2003 notification of a resolution that the share capital of JHIL be reduced by cancelling all its partly paid ordinary shares for no consideration signed on 15 March 2003;
· On 17 March 2003 notification of resolution that the share capital of JHIL be consolidated by converting all its fully-paid ordinary shares into one fully-paid ordinary share signed on 15 March 2003;
· On 17 March 2003 notification of capital reduction of JHIL by cancellation of 100,000 partly-paid ordinary shares for no consideration signed on 15 March 2003;
· On 31 March 2003 notification of resolution that the share capital of JHIL be reduced after 14 days by cancelling one fully-paid ordinary share held by JHINV for no consideration signed on 31 March 2003;
· On 31 March 2003 notification of special and general meetings of shareholders to be held on 31 March 2003 to pass resolutions that the share capital of JHIL be reduced in 14 days after lodgement by cancelling the one fully-paid ordinary share held by JHINV for no consideration signed on 29 March 2003;
· On 31 March 2003 notification of resolution that the share capital of JHIL be reduced without cancelling any shares by A$1,430,425 with such amount to be paid to the Company's shareholder signed on 31 March 2003;
· On 31 March 2003 notification of issue of 1,000 JHIL fully-paid ordinary shares for $1 per share signed on 31 March 2003; and
· On 14 April 2003 notification of capital reduction of JHIL by cancellation of one fully-paid ordinary share for no consideration signed on 14 April 2003.
1126 It was submitted that information contained on a publicly accessible register was readily observable matter and therefore generally available and the combination of the filings revealed the steps approved at the 25 March 2003 Meeting.
1127 There are a number of answers to this submission. First, the filings did not reveal the execution of the DOCIA nor its covenant and indemnity.
1128 In March and April 2003, JHIL was a private company. ASIC maintains a register of private company filings. They may be in an electronic form. It charges a prescribed fee for persons to access documents it maintains through electronic means or at its Business Centre. Upon payment of the fee, any person may inspect and copy or electronically extract any document filed with ASIC. From 1 March 2003 any person could have received an electronic transmission notifying any of the documents in the electronic database and including an electronic copy of that document.
1129 While JHIL maintained its Australian Business Name, it changed its name on 4 January 2002, again on 30 April 2002 and again on 8 April 2003. It was submitted that an ABN search would have revealed the filings that JHIL made under its different names.
1130 In Firns a judgment of the Supreme Court of Papua New Guinea was held to be readily observable matter. Mason P said at [78]:
"Even if ready observability were to be limited to perceptibility by the unaided human senses, the published judgment of a Supreme Court is readily observable. A fortiori if, as I believe to be the case, one is not confined to the unaided human senses. Since the demise of the pony express and semaphore and the advent of telephone, telex, facsimile, television and the internet we have come to observe information immediately yet indirectly. Our human senses are engaged, but with the aid of modern means of telecommunication. Absent statutory clarification or restriction, there will be cases where failure to advert to this modern reality skews the true scope of s 1002B(2)(a) despite emphasis on the modifying adverb "readily"."
1131 But the President recognised that there were exceptions. As well as his analogies at [73] of a message widely published yet encrypted and a gold nugget lying in a remote corner of desert, his Honour observed at [88] that depositing information in an obscure portion of a public library might not establish ready observability. His Honour said the issue is a factual or jury one.
1132 The circumstances that led to the finding of ready observability of the Court judgement are quite different from the present case. The question was whether the information that a favourable judgment had been delivered by the Supreme Court of Papua New Guinea was generally available in the sense that it was readily observable matter when one of the directors of the company arranged share purchases allegedly in breach of insider trading laws. The existence of the litigation was well known to the market. It had been notified throughout the proceedings by a number of press releases that were sent to the ASX. There were articles in the Australian press referring to the litigation. There was an anticipation in the market because of the pre-existing generally available information that there would be a judgment in the ordinary course.
1133 In my view information on an ASIC register that might, on payment of a fee, be searched and might reveal relevant information if the searcher was sufficiently astute to consider name changes and conducted a search for the ABN of JHIL, was not readily observable matter. The legislation aimed at preventing selective disclosure of market sensitive information should not be understood as treating as readily observable a complex series of filings by a private company that had changed its name on a number of occasions. As French J observed in Re Chameq Ltd; Australian Securities and Investments Commission v Chemeq Ltd [2006] FCA 936; (2006) 234 ALR 511 at [46] the importance attached to continuous disclosure by the legislation is emphasised by the penalties for their contravention. That importance should not be downgraded by an entitlement to exemption from disclosure because filings with ASIC required by the legislation for other purposes have been made.
1134 Nor was the information in the filings made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invested in securities of a kind whose price or value might be affected by the information and a reasonable period for its dissemination had elapsed. Again, a complex series of filings with ASIC is not presented in a manner likely to be brought to the attention of the investing public, entitled to assume that information will be made available in accordance with the listing rules. A member of the investing public should not be required to pay a fee for the privilege of conducting a search of the filings by private companies held by ASIC.
1135 Finally, the information in the filings did not consist of deductions, conclusions or inferences made or drawn from readily observable matter, or information made known in a manner likely to bring it to the attention of the investing public. JHINV has failed to establish that on 25 March 2003 the ABN 60 Information was generally available because of its filings with ASIC.
1136 ASIC has made out its charge that on and from 25 March 2003 until 30 June 2003, JHINV failed to notify the ASX of the ABN 60 Information in accordance with the ASX listing rules and thereby contravened Section 674(2).
12 Jones v Dunkel
1137 The failure to call Mr Wilson, Mr Sweetman and Mr Robb led to the submission that the rules in Jones v Dunkel (1959) 101 CLR 298 should be applied. Two inferences are involved. First, a Court might infer that the evidence of the absent witness would not have assisted the party that failed to call that witness. Secondly, a Court might draw, with greater confidence, any inference unfavourable to the party that failed to call that witness, if that witness appears to be in a position to cast light on whether the inference should be drawn (Manly Council v Byrne and Anor [2004] NSWCA 123 at [51]).
1138 The failure of Mr Macdonald, Mr Shafron, Mr O'Brien and Mr Terry to give evidence led to similar submissions.
1139 I have come to conclusions on each of the issues raised in these proceedings without the need to draw a Dunkel inference. I am not compelled to draw an inference if the bases for its operation are established. The drawing of such an inference is a facility. It is not an obligation in the reasoning of a decision maker (Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 343).
1140 As explained in Manly at [53], while Glass JA dissented as to the application of the principles in Dunkel to the facts in Payne v Parker (1976) 1 NSWLR 191, his analysis of the principles is a correct statement of the law. At 200-202 his Honour deduced nine principles. His sixth and seventh were as follows:
"(6) Whether the principle can or should be applied depends upon whether the conditions for its operation exist. These conditions are three in number: (a) the missing witness would be expected to be called by one party rather than the other, (b) his evidence would elucidate a particular matter, (c) his absence is unexplained.
(7) The first condition is also described as existing where it would be natural for one party to produce the witness: Wigmore, par. 286, or the witness would be expected to be available to one party rather than the other: O'Donnell v. Reichard [1975] V.R. 916, at p. 921, or where the circumstances excuse one party from calling the witness, but require the other party to call him: ibid. [1975] V.R. 916, at p. 920, or where he might be regarded as in the camp of one party, so as to make it unrealistic for the other party to call him: ibid. [1975] V.R. 916, at p. 920, Regina v. Burdett (1820) 4 Barn. & Ald. 95; 106 E.R. 873, or where the witness' knowledge may be regarded as the knowledge of one party rather than the other: Earle v. Castlemaine District Community Hospital [1974] V.R. 722, at p. 733, or where his absence should be regarded as adverse to the case of one party rather than the other: ibid. [1974] V.R. 722, at p. 734. It has been observed that the higher the missing witness stands in the confidence of one party, the more reason there will be for thinking that his knowledge is available to that party rather than to his adversary: ibid. [1974] V.R. 722, at p. 728. If the witness is equally available to both parties, for example, a police officer, the condition, generally speaking, stands unsatisfied. There is, however, some judicial opinion that this is not necessarily so: ibid. [1974] V.R. 722, at p. 728. Evidence capable satisfying this condition has been held to exist in relation to a party's foreman: Café v. Australian Portland Cement Pty. Ltd. (1965) 83 W.N. (Pt. 1) (N.S.W.) 280; his safety officer: Earle v. Castlemaine District Community Hospital [1974] V.R. 722; his accountant: Steele v. Mirror Newspapers Ltd. [1974] 2 N.S.W.L.R. 348; his treating doctor: O'Donnell v. Reichard [1975] V.R. 916, at p.921."
1141 Mr Wilson, Mr Sweetman, Mr Robb, Mr Blanchard and Mr Frangeskides were not in ASIC's camp and, in the absence of a duty akin to prosecutorial fairness, I would have inclined to the view that they should not have been expected to have been called by ASIC rather than a defendant. They were independent experts and the general rule that there is no property in a witness of fact applies also to an expert (Harmony Shipping Co SA v Saudi Europe Line Ltd [1979] 1 WLR 1380, Phipson on Evidence 16th ed (2005) Sweet & Maxwell, London at [33-49]). They should have been equally available to both sides of the bar table.
1142 It was suggested that Mr Robb had indicated that he was not prepared to meet with some of the defendants. But that does not make him a witness expected to be called by ASIC rather than a defendant. He was subject to a subpoena to give oral evidence served by ASIC. He could have been served with a subpoena by a defendant.
1143 I chose not to draw a Dunkel inference against ASIC. Had I been minded to do so, I would have inclined to the view that the first condition for its operation was not established.
1144 The second principle deduced by Glass JA concerned the treatment of a failure to adduce evidence as a reason for increasing the weight of the proofs of the opposite party or reducing the weight of the proofs of the party in default. His Honour said at 201:
"The principle may be invoked for a deficiency in the evidence either of a party bearing the legal onus of proving an issue, or of a party bearing the evidentiary burden only: Ibid. [1975] V.R. 916, at p. 921; Steele v. Mirror Newspapers Ltd. [1974] 2 N.S.W.L.R. 348, at pp. 360, 367. If the failure is of the latter kind, the direct evidence of the party with the onus of proof can be more readily accepted, and inferences in his favour may be more confidently drawn: Jones v.Dunkel (1959) 101 C.L.R. 298, at pp. 308, 312. If the failure is of the former kind, a consonant formulation would be that the direct evidence of the party carrying the onus may be more readily rejected, and the inferences for which he contends may be treated with greater reserve. The default "brings a great slur on his cause": Ward v. Apprice (1704) 6 Mod. Rep. 264; E.R. 1011."
1145 It was submitted that Mr O'Brien and Mr Terry bore no legal or evidentiary onus. If it had been necessary for me to decide the issue I would have tended to agree.
1146 It was further submitted that the decision in Adler at [661] that it was open to the judge at first instance to draw Dunkel inferences in civil penalty proceedings should not be followed since the decision of the High Court in Rich.
1147 That is an important matter into which I should not venture by way of obiter dictum.
13 Subsequent events and credit issues
1148 ASIC relied upon events subsequent to the matter in issue that called for a response that was not forthcoming as an admission that the matter in issue occurred or as damaging the credit of the non-responding person.
1149 There is a difficulty in this line of submission in a multi-party proceeding such as the present. Does the attack on the credit of one party affect the credit of all other parties who failed to respond? Is it significant if the matter in issue is the intention of the board of directors of JHIL? Is the intention of one director indicative of the collective intention of all the directors?
1150 I have reached my decision without resort to this evidence. But where a response was called for if my decision on a matter in issue was incorrect and none was forthcoming, I drew support for my decision from that circumstance.
1151 Likewise, if the credit of a witness was damaged, I drew comfort for my rejection, on other grounds, of that person's evidence on a matter in issue.
1152 Ms Wheeler said ASX announcements were distributed to each of the JHIL directors by facsimile with pre-set distribution lists set up in the facsimile machine in corporate affairs and through an external facsimile provider. It was put to her that there should be facsimile coversheets for all distributions that went out to directors. She said that was not so because it was all done electronically through an internet based programme. She agreed that she did not have a single piece of paper captured electronically or in hard copy that showed that that had occurred.
1153 Ms Wheeler said that on 16 February 2001, emails with web links to the Final ASX Announcement were sent to each of the JHIL directors from her email address. Ms Cole recalled that she copied the web links into pre-drafted emails located in Ms Wheeler's draft email box. Ms Cole was not required for cross-examination.
1154 Ms Wheeler said she recalled this because an email to one of the JHIL directors "bounced back."
1155 It was put to her that since there was no record of any email being sent to any director on 16 February 2001, she was probably mistaken. She said:
"It is possible that I have mistaken it, but I can remember clearly that a director's email had bounced in the distribution, because I can remember walking into Mr Baxter's office really nervous that the director didn't receive the email. That is my recollection of the event and how I can recall that an email had bounced to a director."
1156 She agreed that she did not know what the contents of the email were, from which director the email bounced back, or whether there were attachments or reference to websites or the like in it.
1157 An email that Ms Wheeler sent to Ms LJ Locke of Hawker Britton attaching the Final ASX Announcement bounced back and she had to send it again. It was put to her that was the email that bounced back. She denied this:
"No, my recollection - LJ used to work for James Hardie. L knew her of a personal level. I would have rung her, but because it was a director and it was very important, I can recall a bounce-back coming from a director."
1158 I was impressed by Ms Wheeler's account of her concern that an email to a director had not been received. It is the sort of experience I can well understand that she would remember.
1159 Mr Koffel agreed that in the normal course he would have received the Final ASX Announcement. Yet there is no evidence that any of the directors complained that they had not received their copy.
1160 Mr Brown said he had no recollection of receiving the Final ASX Announcement. Mr Gillfillan had no recollection of seeing it or being provided with a copy. Ms Hellicar said she believed she first saw the Final ASX Announcement in the report of the Special Commission. Mr Koffel did not recall receiving a copy. Mr Willcox believed that he had received a copy of the Final ASX Announcement but during preparation for this case he came to believe that he might not have received it based upon the absence of any documentary evidence of its dispatch.
1161 It is extraordinary that none of the non-executive directors who gave evidence recalled seeing the document that announced a most significant event in the life of the James Hardie group, an event that they were at pains to ensure was well received by the market. Had they received copies of the Final ASX Announcement, and had it been true that they would not have approved the Draft ASX Announcement, they would have expressed the concern that it made forward-looking statements with which they disagreed. There is no evidence that any of the non-executive directors complained about the content of the Final ASX Announcement on or soon after 16 February 2001, or at all.
1162 What is also extraordinary is that the usual practice was for directors to be sent copies of ASX announcements and yet there was no complaint from any of non-executive directors who gave evidence that they had not received their copy of the Final ASX Announcement.
1163 To feign a lack of recollection was in the interests of non-executive directors. By it they escaped the problem of explaining why, according to them, the document contained material so unequivocal and unqualified that they never would have approved it and yet they raised no complaint about its content.
1164 But the fact of the matter is that they did approve the Draft ASX Announcement and the receipt of a copy of the Final ASX Announcement would not have surprised them.
1165 I accept Ms Wheeler's evidence that copies of the Final ASX Announcement were sent to the non-executive directors.
1166 Susan Jane Rescorl Stevenson was the personal assistant to Mr Donald Cameron. On her personalised JHIL letterhead, listing her telephone, facsimile and email details, a facsimile was sent to Mr Brown and Mr Willcox that stated:
"At the last meeting it was agreed that there would be a teleconference set up for Tuesday morning, Australian time, so that interested Directors could hear a report on the aftermath of the separation announcement. Accordingly, a call has been arranged as follows."
1167 There followed Australian time Tuesday 9 am with times in other countries together with a free call number for Australia and those countries and a pass code for the teleconference.
1168 Mr Brown said he had no recollection of the facsimile. He had a diary entry "JHI hook-up" at 9 am on 20 February 2001. He said he believed this was probably a follow-up hook-up for any members of the board who wanted to dial in to get a report back as to how the announcement of the Foundation had been received by various interested parties at the time. But he said he had no recollection of any arrangement to hold the teleconference being made at the 15 February 2001 Meeting, nor any recollection of participating in the teleconference.
1169 Mr Gillfillan said he had no recollection of a directors' hook-up to discuss the reaction to the announcement of the establishment of the Foundation. Had there been one that would have been an unusual event.
1170 Ms Hellicar also had a diary entry "JHIL teleconference" at 9 am on 20 February 2001.
1171 Ms Hellicar said she had absolutely no memory of an agreement being reached at the 15 February 2001 Meeting to hold a teleconference for interested directors to hear a report on the reaction to the separation announcement.
1172 An email in the same terms as the facsimile from Ms Stevenson was sent to Ms Hellicar. She maintained the email never came to her attention because she was at Maroochydore attending a forum.
1173 Telephone records of Ms Hellicar, admitted only against her, record her telephoning Ms Stevenson's telephone number just prior to 9 am on Tuesday 20 February 2001 and then calling the free call number three times at around 9 am on that day. When faced with the telephone records, Ms Hellicar was asked whether she adhered to her evidence that she was in Maroochydore in the morning of 20 February 2001. She said:
"Well, I mean, the phone records would indicate not, but I am flabbergasted at that. I know I have been to several conferences, Maroochydore - at Coolum, so I can only assume I might have been confusing that, but it is odd and, yes, I've got, you know, no rational explanation for it other than that I must have been mistaken."
1174 This incident tells against Ms Hellicar's credit. It was not the only incident in her testimony that an adamant statement made by her turned out to be wrong.
1175 Mr Koffel said he did not recall discussion at the 15 February 2001 Meeting of a follow up meeting to hear a report on the aftermath of the separation announcement. He said it was unusual for a board to become involved in tactical information in that way, but it may have occurred.
1176 Mr Willcox said he did not recall receiving the facsimile from Ms Stevenson and he had no recollection of participating in a telephone conference on 20 February 2001.
1177 Mr Morley said he had no recollection of any discussion about a telephone hook-up at the 15 February 2001 Meeting. And he said he did not think he participated in any such telephone conference.
1178 A teleconference was arranged. The combination of Ms Stevenson's facsimile, the entries in the diaries of Mr Brown and Ms Hellicar and, as against her, the telephone records establish that. Ms Hellicar participated in the teleconference on 20 February 2001. The time she was on the telephone is consistent with that.
1179 As Mr Gillfillan and Mr Koffel said, it was an unusual event. One would have expected, therefore, that some of the non-executive directors would have a recollection of it. I do not accept the chorus of denial of recollection to be genuine.
1180 This was another opportunity on which one would have expected the non-executive directors to voice their disapproval of the Final ASX Announcement if their testimony that they would not have approved the Draft ASX Announcement were true.
1181 While I reject the chorus of non-recollection from the non-executive directors who gave evidence, my non-acceptance of their evidence does not establish the identity of any other person who participated in the teleconference.
1182 All that is established is that Ms Hellicar participated in the teleconference and there is no evidence that she took the opportunity to complain about the content of the Final ASX Announcement. If her evidence that she would not have approved the Draft ASX Announcement was true, one would have expected a complaint from her at the teleconference if she had not already complained upon receipt of the Final ASX Announcement.
1183 Again, the reason for her lack of complaint about the content of the Final ASX Announcement during the teleconference was because she had approved the Draft ASX Announcement and the terms of the Final ASX Announcement caused her no concern.
1184 I held that evidence of the teleconference did not establish what was discussed at the 15 February 2001 Meeting in relation to the Draft ASX Announcement (Australian Securities and Investments Commission v Macdonald (No 5) [2008] NSWSC 1169 at [12]; Australian Securities and Investments Commission v Macdonald (No 6) [2008] NSWSC 1175 at [10]). Having found, however, that the board of directors approved the Draft ASX Announcement, the failure of Ms Hellicar to complain about the content of the Final ASX Announcement during the teleconference supports my conclusion.
1185 As well as the evidence of Ms Wheeler that ASX announcements were distributed to each of the JHIL directors by facsimile from a pre-set distribution list, Mr Macdonald attached the 23 February 2001 ASX Announcement to an email sent to Mr Gillfillan, Ms Hellicar, Mr Koffel, Mr O'Brien and Mr Terry for their information, saying it was in response to recent and anticipated media articles. Mr Macdonald gave an instruction to Ms Stevenson to send a facsimile to Mr Willcox and to forward the document to Mr Brown's new email address.
1186 Mr Brown said he did not recall receiving the 23 February 2001 ASX Announcement. Mr Gillfillan said he could not recall seeing it. Ms Hellicar said she did not know whether she read it or not. Mr Koffel said he did not recall reading it. He said he might not have been given the press release by his assistant and even if he had, he may not have looked at it. He said it would not have had any immediacy to it.
1187 There was no evidence that any of the non-executive directors objected to the content of the 23 February 2001 ASX Announcement or took the opportunity to respond to Mr Macdonald with a complaint about the content of the Final ASX Announcement or the Press Conference Statements.
1188 If the non-executive directors considered the Draft ASX Announcement to be over-emphatic such that they would not have approved it, one would have expected them to have had the same attitude to the 23 February 2001 ASX Announcement and to have voiced their concern upon receipt of Mr Macdonald's email.
1189 Instead, again we have a chorus by most of the non-executive directors (the issue was not explored with Mr Willcox) saying they had no recollection of reading the email.
1190 I do not accept that not one of them read the attached 23 February 2001 ASX Announcement.
1191 The fact of the matter is that if they had read the 23 February 2001 ASX Announcement it would have given them no concern because, having approved the Draft ASX Announcement, they would have endorsed the content of the 23 February 2001 ASX Announcement or, at least, they would not have objected to it.
1192 The draft minutes of the 15 February 2001 Meeting were prepared by Allens before the event. In the expectation that it would be, the draft minutes contained the resolution that the Draft ASX Announcement was approved.
1193 At the JHIL board meeting on 3 April 2001 the draft minutes of the 15 February 2001 Meeting were approved by all the directors with the exception of Mr Willcox who was absent. None of them raised any concern with the resolution approving the Draft ASX Announcement. The draft minutes had been included in the April 2001 board packs sent to each of the defendants with the exception of JHIL and JHINV. The approved minutes were in identical form to the draft minutes with the exception that the mistaken reference to a meeting of 15 February 2000 had been corrected.
1194 Mr Brown said he reviewed the first couple of pages of the draft minutes but noted that the remaining six pages were in the nature of legal documentation and he only flicked through those pages to recognise that they were formal legal resolutions affecting the intent of what had been agreed. He said he did not notice the resolution approving the Draft ASX Announcement. Mr Brown accepted that the 15 February 2001 Meeting was one of the most important he had attended.
1195 Mr Gillfillan gave similar evidence. He said he believed that he did not study that portion of the draft minutes appearing below the heading "Creation of the Foundation" once he had ascertained that it dealt in the main with formalities in relation to the creation of the Foundation. He said he did not even review the bold headings on the fourth to eighth pages of the minutes which included the bold heading "ASX Announcement" on the seventh page.
1196 Ms Hellicar said she always wanted to make sure that minutes reflected the substantive decisions that had been taken. But she said her practice was only to skim read minutes recording formal preambles and resolutions required to implement decisions taken by the board and she only skim read that portion of the minutes below the heading "Creation of Foundation" as she believed it reflected a lawyer's drafting of the steps considered necessary and not a record of what actually transpired at the meeting.
1197 Mr Koffel said he did not read the draft minutes. He said it was his practice not to read minutes. He did not think an individual director had an obligation or responsibility for the minutes. He said he relied on the managing director and other directors to ensure the minutes were correct.
1198 Mr Willcox had no recollection of reviewing the draft minutes when he read the board papers for the April 2001 Meeting. His normal practice was to read minutes to assure him that the essence of major decisions had been recorded. He said he did not recall seeing anything in the minutes so badly misleading that he had cause to do anything about it.
1199 On the other hand, Mr Morley, who attended the 3 April 2001 board meeting said that he always believed that the minutes of the 15 February 2001 Meeting were correct.
1200 There was no suggestion from Mr Shafron, who was involved in the preparation of the draft minutes, or Mr Morley, that anyone suggested at the 3 April 2001 board meeting that the draft minutes were incorrect. Mr Morley said he did not raise any objection to the draft minutes and he did not recall anybody else suggesting that they were incorrect.
1201 Mr Robb, who had attended both meetings and was involved in the preparation of the minutes of the 15 February 2001 Meeting, did not suggest any amendment to the draft minutes sent to him by Mr Shafron on 30 March 2001. That document included the ASX announcement resolution.
1202 That none of the non-executive directors who gave evidence were aware of the resolution approving the Draft ASX Announcement in the minutes of the 15 February 2001 Meeting, meant that they did not have to explain why they did not seek an amendment to the minutes if their contention that they would not have approved the Draft ASX Announcement was true.
1203 On each occasion when one would have expected the non-executive directors to challenge statements if their contention was true, they have professed ignorance of the statements that should have caused them to complain. This was one such occasion. I do not accept that not one of the non-executive directors who gave evidence was aware of the recorded resolution in the draft minutes approving the Draft ASX Announcement.
1204 It was submitted that the minutes of the 15 February 2001 Meeting contained inaccuracies that rendered them not a reliable contemporaneous record of the matters that took place at the meeting.
1205 The simple answer is that I have found that the ASX announcement resolution accurately recorded what happened at the meeting. That there may have been inaccuracies with respect to other matters recorded in the minutes does not detract from this finding.
1206 Since some emphasis was placed on the inaccuracies, however, I set them out.
1207 First, the minutes reported a resolution in relation to the DOCI that identified an NPV of $65m whereas the figure in the slide presentation with respect to the Cashflow Model for the 15 February 2001 Meeting was an NPV of $72m.
1208 Mr Morley said when he returned to work on 16 February 2001, Mr Harman told him that he had made a change to the figures as the extraordinary loss to be entered in JHIL's books was required to be determined at a risk free discount rate which led to the $8m difference between $285m and $293m.
1209 It was submitted that this explained a like change in the $65m to $72m. I do not accept that submission. First, that difference is $7m. More importantly, the NPV of $72m had been displayed in the slide presentation at the 15 February 2001 Meeting and predated any discussion with Mr Harman after the conclusion of the meeting.
1210 Secondly, the minutes recorded Mr McGregor tabling a power of attorney that appointed Mr Macdonald, Mr Shafron, Guy Jarvi and Joanne Marchione as attorneys for the company. But Mr Jarvi was not appointed in the tabled power of attorney. The matter was rectified at the April 2001 board meeting.
1211 Thirdly, the figure of $65m instead of $72m was repeated on the third page of the minutes.
1212 Fourthly, the minutes recorded a substantial shareholder notice for Merrill Lynch dated 28 February 2001 whereas the notice was dated 29 December 2000.
1213 Fifthly, the minutes recorded a chronological sequence of events in accordance with the agenda whereas Mr Morley gave unchallenged evidence that items 6, 7 and 10 were deferred until after the discussion of Project Green, item 11 on the agenda. Material documents, item 5 on the agenda, were recorded in the minutes as happening after Sir Llewellyn Edwards retired from the meeting whereas that item was dealt with before he retired.
1214 Sixthly, item 8 on the agenda was the chief executive officer's report. The minutes recorded it being considered prior to Mr Baxter, Mr Harman, Mr Wilson, Mr Sweetman, Mr Cameron and Mr Robb joining the meeting. Mr Morley's unchallenged evidence was that item 8 was considered after they joined the meeting.
1215 Seventhly, in incorrect sequence was item 10 on the agenda, "Australia/Asia Restructure". It was deferred until after discussion on Project Green.
1216 Eighthly, Mr Morley said that item 7 on the agenda, "Finance", was deferred until after the discussion on Project Green. The minutes recorded it as being considered before Project Green.
1217 Ninthly, it was submitted that the minute recording approval of the Draft ASX Announcement was incorrect, as Mr Morley had said that his best recollection was that no Draft ASX Announcement was tabled at the meeting. That is not an inaccuracy. I have found that the minutes are accurate in this respect.
1218 Tenthly, the minutes recorded a decision to explore strategic options for the gypsum business whereas the board had decided to adopt a strategy to commence a process for the sale of the business.
1219 Eleventhly, the minutes did not record a consensus of the board for the continuation of preparation for restructuring.
1220 The rescheduling errors are to be expected when, as here, the minutes were drafted before the meeting. Some of the errors such as the date of the substantial shareholder notice are relatively immaterial. But, in any event, it does not follow that because there were inaccuracies with respect to some events, the minutes could not be regarded as accurately recording other events and, in particular, the resolution approving the Draft ASX Announcement.
1221 In September 2004 the supervisory board of JHINV received advice from its Dutch lawyers that the directors were required to disclose conflicts of interest in relation to matters the subject of investigation by the Special Commission. A draft of a declaration to be made by Mr Brown, Mr Gillfillan and Ms Hellicar was prepared by JHINV's solicitors. It was attached to an email Ms Hellicar sent to Mr Brown and Mr Gillfillan amongst others. It said:
"Directors, subject to any corrections from John A, attached is my declaration which I will sign and provide to whomever john advises (john, do we need to send these to each other or table them with secretariat?). I thought you might find the other attachments useful in working out relevant dates of appointment.
cheers meredith."
1222 The attached draft declaration stated that in her capacity as a supervisory director JHINV and as a director of JHIL she participated in certain decisions and acts of those companies, certain of which had been, or might become, subject to criticism, including during the Special Commission.
1223 Paragraph 6 of the draft declaration was in the following terms:
"By way of example of the decisions described in paragraph 4, but without limiting the declaration made under paragraph 5, in my capacity as a director of JHIL, I participated in the deliberations leading to the decision taken by the Board of Directors of JHIL on 15 February 2001, and in the decision itself, to approve the terms of the press release made by JHIL to the Australian Stock Exchange Limited on that day announcing the establishment of the Foundation."
1224 Mr Brown signed the declaration after having read it carefully and believing it to be true at the time, he said. Mr Gillfillan said he did not recall signing the declaration but most likely he did. Ms Hellicar said, to the best of her recollection, she did not sign the declaration although its contents were disclosed at the meeting of the supervisory board of JHINV on 28 September 2004 as is recorded in the minutes.
1225 In accordance with my findings, the declarations stated the matter accurately.
1226 I had limited the use that ASIC could make of these documents to its case against Mr Brown, Mr Gillfillan and Ms Hellicar. ASIC submitted that Mr Brown's oral evidence in relation to his declaration was admissible against all defendants as a prior inconsistent statement to what was to come in relation to revised declarations in 2005, or as an admission.
1227 I reject those submissions. If the declaration was a prior inconsistent statement, it could only go to Mr Brown's credit. It could have no relevance to the cases ASIC mounted against the other defendants. If it was an admission its use was, like the document itself, confined to ASIC's case against him.
1228 Early in 2005, Ms Hellicar said that she was informed by Mr Butterfield, the recently appointed James Hardie group's general counsel, that the directors of JHINV were required under Dutch law to lodge further standing disclosure notices. There is mention of some discussion whether or not this was required in the minutes of the meeting of the JHINV supervisory board on 10 May 2005.
1229 Ms Hellicar said she then considered the possibility that she may have provided an earlier disclosure notice that was incorrect to the extent that it acknowledged that she had participated in a decision at the 15 February 2001 Meeting to approve the terms of a press release to be made by JHIL. She said she recalled that her state of mind at the time was that she had no recollection of participating in a resolution or agreement of directors at that meeting to approve the terms of a press release.
1230 Ms Hellicar approached Mr Brown and Mr Gillfillan about a potential inaccuracy in the minutes of the 15 February 2001 Meeting. Each considered a revised declaration a draft of which was circulated at the meeting of 16 May 2005. Solicitors settled the final form of the declarations and an accompanying letter. Each declaration contained a paragraph 7 the opening portion of which was as follows:
"By way of example of the decisions described in paragraph 4, but without limiting the declaration made under paragraph 5:
· in my capacity as a director of JHIL, I participated in the deliberations leading to the decisions taken by the Board of Directors of JHIL on 15 February 2001, and in those decisions themselves. However, in certain respects I and other directors present at that meeting have raised an issue concerning a potential inaccuracy of the minutes of that meeting as previously adopted by the Supervisory Board. We have raised our concerns in that regard with the company secretary by way of a separate letter to the Supervisory Board …."
1231 The letter to be signed by Mr Brown, Mr Gillfillan and Ms Hellicar contained the following:
"In this respect, each of the undersigned directors has discussed an issue of potential inaccuracy of the minutes of the JHIL board meeting of 15 February 2001 as previously adopted by the JHIL board. That discussion occurred for the limited purpose of testing whether our memories were accurate, since while each of us recalls being in attendance at that meeting and having given the matter significant thought over the extended period of time since the occasion of our September 2004 Declarations, none of us could possibly recall, when we signed the September 2004 Declarations and we cannot now recall, our involvement as being as extensive as that described in the September 2004 Declarations. On reflection we currently have no positive recollection of the following matter recorded in the 15 February 2001 board minutes as having actually occurred…."
1232 While suggestions were made as to the reasons for these documents being brought into existence, no ulterior motive for them was established by ASIC.
1233 ASIC sought to rely upon evidence of subsequent conduct to prove anterior intentions of individual members of the board of directors of JHIL. Reference was made to Cross on Evidence, Australian ed, Butterworths at [1170] in the discussion of retrospectant evidence:
"The argument for the reception of this kind of evidence is the converse of that which demonstrates the relevance of prospectant evidence: the subsequent occurrence of an act, state of mind or state of affairs justifies an inference that the act was done, or that the state of mind or affairs previously existed. Thus, a driver's excessive speed may be proved to support the conclusion that he was going too fast a short distance further back."
1234 Thus, for example, ASIC sought to use evidence that Mr Macdonald instigated steps to put JHIL to the Foundation as soon as gypsum proceeds had been secured and were shortly to be received as evidence against Ms Hellicar and her assertion that the proposed exercise of the Put Option was prompted by new circumstances that first arose in September 2002.
1235 That use of evidence does not fall within the principle. It allows a subsequent act of a person to establish the anterior intention of that person. Here ASIC seeks to prove the anterior intention of Ms Hellicar by subsequent acts of Mr Macdonald.
1236 In any event any doubt as to Ms Hellicar's assertion of events in September 2002 does not establish that she had an intention on 23 July 2001 that JHIL be put to Coy under the Put Option.
1237 Furthermore, it is the intention of the directors of JHIL collectively that is in point and not the individual view of one director.
1238 In cross-examination of Ms Hellicar with respect to the board papers for the January 2001 meeting, Ms Hellicar denied knowledge of certain portions of the papers stating: "I have an absolute recollection of what I didn't read in this paper". Categorical statements like this made in the course of Ms Hellicar's testimony I find hard to accept. An absolute recollection of one particular document some eight years after the event is not readily believable.
1239 Ms Hellicar said that she believed the earliest she saw the Final ASX Announcement was in the report of the Special Commission. I find it difficult to accept this evidence. The announcement of the formation of the Foundation was a highly significant event in the life of the James Hardie group. ASX announcements were automatically sent to directors. There were the Press Conference Statements, the 23 February 2001 ASX Announcement and the 21 March 2001 ASX Announcement that ought to have alerted Ms Hellicar to the need to look at the Final ASX Announcement, if she had not already done so.
1240 Ms Hellicar said she was shocked when shown in the course of her cross-examination the allegations made in the Special Commission in relation to Mr Macdonald's involvement in the Final ASX Announcement. It was contained in a submission of counsel assisting the Special Commission that she had not seen before.
1241 Ms Hellicar met with Mr Macdonald prior to the meeting of the board of JHINV on 24 May 2004. He told her what he was going to say at that board meeting. She received a copy of a memorandum he was to give to the directors. Item 6 was as follows:
"That executives of JHIL misled investors, government and the broader community by falsely promoting the ability of the MRCF to meet future claimants' costs."