(c) Meaning of "reckless"
248 There is a debate between ASIC and the defendants concerning whether the concept of "reckless" as used in s 631(2)(b) refers to a subjective test or an objective test. There is a subsidiary debate as to what the content of such a subjective test or objective test is, depending upon that selection.
249 In my opinion, the test for "reckless" is a subjective test as used in s 631(2)(b). There are a number of reasons for this.
250 Given that one is construing a statutory phrase, both the text and context are controlling. There are a number of indications that a subjective concept is being used.
251 First, the heading to the sub-section indicates a subjective state of mind.
252 Second, in s 631(2)(a), the concept of "knows" and the alternate "reckless as to whether…" are coupled, suggesting that "reckless" is used in terms of a subjective state of mind short of knowledge. Again, the heading fortifies that construction. But if it is so used in s 631(2)(a), then it should be given a similar meaning in s 631(2)(b).
253 Third, a contravention of s 631(2) can be a criminal offence, suggesting a subjective state of mind. Section 631(2) does not say so in terms. But this seems to be implied from the prefatory words to s 670F. The other route is through s 1311(1) and Sch 3. It would be an odd result to construe "reckless" as a purely objective test in that light. It would also be odd to give it an objective construction in the civil context, but when one came to consider the fault element in the criminal context to use a concept of "reckless" in tension therewith. Conceptual cohesion ought to be facilitated. Contrastingly, ASIC's construction tends in the opposite direction.
254 Fourth, by a more direct route, the concept in the Criminal Code Act 1995 (Cth) (the Criminal Code) applies. Section 5.4 of Ch 2 of the Criminal Code provides as follows:
5.4 Recklessness
(1) A person is reckless with respect to a circumstance if:
(a) he or she is aware of a substantial risk that the circumstance exists or will exist; and
(b) having regard to the circumstances known to him or her, it is unjustifiable to take the risk.
(2) A person is reckless with respect to a result if:
(a) he or she is aware of a substantial risk that the result will occur; and
(b) having regard to the circumstances known to him or her, it is unjustifiable to take the risk.
(3) The question whether taking a risk is unjustifiable is one of fact.
(4) If recklessness is a fault element for a physical element of an offence, proof of intention, knowledge or recklessness will satisfy that fault element.
255 Section 1308A of the Act provides that "Chapter 2 of the Criminal Code applies to all offences against this Act". Section 631(2)(b) creates an offence. Alternatively, by operation of s 1311(1), a contravention of s 631(2) is an "offence"; pursuant to s 1311(3), the relevant penalty is set out in Sch 3. Accordingly, s 1308A operates to make Ch 2 of the Criminal Code applicable. ASIC asserts that the Criminal Code does not apply and refers to Mercedes Holdings Pty Ltd v Waters (No 2) (2010) 186 FCR 450. Mercedes is not of direct assistance.
256 There is a further possible argument which may suggest that the Criminal Code applies. If "reckless" as referred to in s 631(2)(b) was not a fault element for the purposes of the Criminal Code, then there would not be a specified fault element for the offence under s 631(2)(b) or s 1311. But then s 5.6(1) of the Criminal Code would suggest that intention was required; s 5.6(2) would seem to be inapplicable as s 631(2) is dealing with the conduct of making the relevant public proposal, although I accept that the matter is debatable. But, if that is right, then one would have an intention to engage in conduct which was reckless. In my view, the more harmonious operation is that "reckless" in s 631(2)(b) is the fault element and is to be given the meaning set out in s 5.4 of the Criminal Code. Alternatively, if s 5.6(2) applies, then cohesion suggests that "reckless" in s 631(2)(b) should be given the same meaning as in the Criminal Code. In the present case, "reckless" should be given the same meaning even though no criminal proceedings are involved. But of course it only needs to be proved to the civil standard.
257 I should say that even if I was incorrect on the applicability of the Criminal Code definition, I would still hold that "reckless" was being used in a subjective sense and apply a meaning similar to how it has been used in the Criminal Code informed by case law as to the use of "reckless" in relation to criminal and quasi-criminal conduct.
258 In a criminal or quasi-criminal context, for recklessness to be established the risk of a particular result must be subjectively understood by the defendant. Further, there must be a conscious disregard of or indifference to that risk.
259 In Pollard v Commonwealth Director of Public Prosecutions (1992) 28 NSWLR 659 at 669 to 675, Abadee J discussed the ambiguity in the word "reckless" and that it must take its colour from the text and context of the particular statute (see also Giudice v Legal Profession Complaints Committee [2014] WASCA 115 at [42] to [45] per Martin CJ, [81] to [103] per Buss JA and [130] per Edelman J).
260 In Dreezer v Duvnjak (1996) 6 Tas R 294 at 299 to 300, it was observed that:
It is clear that, in the context of the criminal law, the word "reckless" means more than mere carelessness or negligence in the sense in which it is used in the civil law (Pollard v Commonwealth Director of Public Prosecutions (1992) 28 NSWLR 659 at 670-671). The Australian authorities take approaches which have an underlying common feature, namely that recklessness is doing an act whilst contemplating the chance of it having the relevant consequence or quality with indifference to that consequence or quality.
261 The common law analysis of "reckless" in criminal and quasi-criminal contexts is largely consistent with the Criminal Code exposition of the concept (see also Banditt v The Queen (2005) 224 CLR 262 (Banditt v The Queen) at [2] to [7] and [36] to [39] and Gillard v The Queen (2014) 308 ALR 190; [2014] HCA 16 at [26]). At the least, what must be shown is some awareness of the risk and indifference or "not caring" as to the risk or its consequences. Recklessness is an actual advertence to risk but a conscious disregard of or indifference to the risk. Contrastingly, negligence or carelessness is where there may be no advertence to or conscious awareness of the risk at all. Accordingly, it is necessary for ASIC to establish that Mariner was aware of a substantial risk that the result identified by s 631(2)(b) would occur and that, on what was known to Mariner, it was unjustifiable to take that risk or it went ahead in conscious disregard of or indifference to the risk.
262 In addition to analysing the text and context, there are other considerations that support the notion that a subjective test is being used.
263 The history of s 631(2)(b) is instructive in a number of respects.
264 The language of the provision was changed from "no reasonable grounds for believing" to "reckless". The legislature must be taken to have intended some difference in concept flowing from the difference in the language used.
265 Further, in s 52(1) of the CASA (and s 746 of the Corporations Law), the first limb used both concepts of knowledge and recklessness. The second limb used "no reasonable grounds for believing". Clearly, recklessness in the first limb was a subjective test; when the legislature wanted to use an objective test in the second limb, they used different language. Subsequently, what occurred when s 631(2) was enacted in its current form was to retain the two subjective tests in the first limb, to delete the objective test in the second limb and to substitute for it the second of the two subjective tests from the first limb.
266 I accept that the extrinsic material does not assist me to confirm one way or the other why the change in language was made. Accordingly, I can only proceed to glean the legislative intent from the change of language used. I should say that the general purpose in s 602(a) is of no assistance to me on this construction question. Such a purpose could be facilitated on either construction.
267 Finally, and more generally, I am fortified in my construction by several other matters. First, this provision is criminal or quasi-criminal in nature. If there is an ambiguity I should construe it narrowly. Contrastingly, ASIC has contended that this is "beneficial" legislation and should be construed broadly. In priority, the former approach prevails. Second, the heading to the sub-section suggests that it was intended to apply to egregious conduct, thereby supporting a subjective approach. It may be said that the heading has a greater resonance with the first limb, but it is not unhelpful to the defendants on the construction of the second limb.
268 ASIC has referred to various authorities to support an objective construction.
269 In Banditt v The Queen at [36], it was said that:
It may well be said that "reckless" is an ordinary term and one the meaning of which is not necessarily controlled by particular legal doctrines. However in its ordinary use, "reckless" may indicate conduct which is negligent or careless, as well as that which is rash or incautious as to consequences: the former has an "objective", the latter a "subjective" hue…
270 In R v Nuri [1990] VR 641 at 643 it was said in relation to "recklessly" that:
…It has for long been employed in statutory offences. Presumably conduct is relevantly reckless if there is foresight on the part of an accused of the probable consequence of his actions and he displays indifference as to whether or not those consequences occur…
(see also Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) (2008) 39 WAR 1 at [928] to [929]).
271 I do not see how these passages really assist ASIC. Banditt v The Queen is to be read in the context of its discussion at [2] to [7]. Further, many of the cases stress the need for it to be shown that there is actual awareness or advertence to the risk, with an indifference thereto or its consequences.
272 ASIC has contended that in some statutory contexts, for example, income tax legislation, the question of recklessness has been held to be objective even where recklessness is regarded as something more than a failure to exercise reasonable care, but less than an intentional disregard (see for example Hart v Commissioner of Taxation (2003) 131 FCR 203 at [44]). In those circumstances, a finding of recklessness may be made without the need for any subjective inquiry. Perhaps that is so, but it does not greatly assist me to construe the concept as applied in the different statutory framework before me.
273 ASIC has contended that recklessness may be established even where a person is not aware of their obligations as a result of complete indifference to those obligations. There was reference to some observations in Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 at 702 to 704, where it was said in an entirely different context:
The question which arises is whether the trustees had a consciousness of breach of duty or negligence, or were reckless in the performance of a duty in the sense to which I have referred. I have come to the conclusion that the trustees acted with complete indifference to their obligations. I am satisfied that they were never aware what these full obligations were, that they made no attempt to ascertain what they were, and that they were content to pay over money held in trust without taking any steps to seek to ensure that the contractual documents, which underpinned the trusts, were ever received. … All of these matters indicate to me a complete indifference on the part of PTWA to the performance of its obligations as trustee … I am satisfied that this indifference amounted to recklessness and, accordingly, that there was "wilful default" on its part…
274 Wilkinson is not of much assistance given its different context. But in any event, in my view it cannot be said that Mariner acted with "complete indifference" to its obligations under s 631(2).
275 The subjective test requires awareness or knowledge of the risk. But I do accept that there may be a case where recklessness in a subjective sense may be established where a defendant deliberately chose not to inform himself of the risk.
276 In summary, ASIC contends that the test is objective and that ASIC is only required to establish that Mariner:
(a) ought to have been aware of the risk that it would not be able to perform its obligations relating to the takeover bid if a substantial proportion of the offers under the bid were accepted; and
(b) proceeded with the proposal regardless.
277 I do not accept ASIC's contention that the text is objective. But in any event, even if the test is as ASIC has formulated it, its claim fails in any event for reasons that I will later explain.
278 In summary, a subjective test for "reckless" applies. That test is either the Criminal Code test for "reckless" or the common law subjective meaning which requires an awareness of the risk and a conscious disregard or indifference to that risk. On either the Criminal Code usage or such common law meaning, Mariner was not "reckless" within the meaning of s 631(2)(b).
279 Finally, ASIC asserted a version of a "subjective test" that looked at whether there was "any basis for a reasonable belief that Mariner would be able to fund a substantial proportion of offers if accepted". That is not the relevant subjective test for "reckless". But even if it was, it fails for reasons that I will discuss later.