Australian Stock Exchange Limited v Hudson Securities Pty Limited

_ REVISED - 16 December, 1999 IN THE SUPREME COURT OF NEW SOUTH WALES IN EQUITY

No. 4688/99 AUSTRALIAN STOCK EXCHANGE LIMITED (ACN 008 624 691) Plaintiff HUDSON SECURITIES PTY LIMITED (ACN 073 633 664) Defendant

Page INTRODUCTION AND PRINCIPAL CONTENTIONS The Central Issue SALIENT FACTS Agreed Facts RESOLUTION OF QUESTIONS Context of Business Rules An Historical Perspective Elaboration of Current Statutory Provisions of Pt 7.2 Application of Rule 13.1(1) Summing up CONCLUSION AND ORDERS

The Central Issue 1 How far can ASX go when seeking information from officers and employees in its disciplinary investigations of its member organisations, by imposing confidentiality undertakings and limiting those present at the interviews, in order to preserve the integrity of that investigation? This is a question of far-reaching implication for ASX self-regulation, required and underpinned as it is now by statute, in preserving an "orderly and fair market". It squarely arises in this case. 2 By Summons the Plaintiff, the Australian Stock Exchange Limited ("ASX"), seeks a declaration that the Defendant has failed to comply with its Business Rule 13.1(1) and mandatory orders requiring compliance, pursuant to s777 and s1114 of the Corporations Law. The alleged failure consists in the Defendant not requiring certain of its directors to appear before the ASX for interview "as directed". That direction requires certain undertakings from those, other than the interviewee, the ASX permit to be present at the interview, including the Defendant's legal advisers Atanaskovic Hartnell. The undertakings are in substance not to disclose what transpired at the interviews until they are completed or the ASX's Draft Inspection Report is provided to the Defendant for comment, whichever first occurs. They are sought by the ASX "to preserve the integrity of the investigation". The Defendant has refused such undertakings contending that there is no power to require them. 3 There is a further issue. ASX have declined approval for one particular person, Mr McLeod Managing Director of the Defendant's parent, responsible for the group's internal policies and procedures, to be present at the interviews or to provide instructions to the legal advisers. That refusal is because Mr McLeod is a prospective interviewee and may inhibit the answers of others for reasons elaborated below. 4 Can ASX insist on such undertakings and prevent Mr McLeod's presence, at least until he is examined? That turns on the proper interpretation of ASX Business Rule 13.1(1), which is in the following terms: "13 SUPERVISION 13.1 INSPECTIONS BY EXCHANGE (i) The Exchange may call upon any Participating Organisation to produce, without delay, for inspection by the Exchange or its duly appointed representatives, all books or copies thereof relating to the business of the Participating Organisation, and may also require Affiliates, Participating Organisations and their partners, officers, employees or securities representatives to appear before the Exchange or its delegates at any time, and to give such information as may be required relating to such business or to enable the Exchange to consider whether or not the Affiliate or Participating Organisation continues to comply with recognition requirements for the purposes of Rule 5A.1.2 or 5A.2.2."

5 The first question is therefore in two parts. First, whether that Business Rule, in its contractual, constitutional and statutory context (Pt 7.2 of the Corporations Law) entitles the ASX to require the Defendant Hudson Securities Pty Limited as the Participating Organisation to procure certain of its directors or employees to appear before the Exchange to provide information without there being also present an agent or representative of Hudson Securities Pty Limited, in circumstances where Hudson Securities insists upon that presence but refuses to give the undertaking earlier described. 6 The second, is whether the Defendant is entitled, without recourse to any requirement of procedural fairness, not only those it nominates but its legal adviser present, with the corollary that ASX could not, as a condition of that presence, insist on such an undertaking from those present including the legal adviser. In each case ASX contend that the undertaking - and the refusal to permit Mr McLeod to be present - are for the purpose of preserving the integrity of the investigation, which must be imported into any requirement of procedural fairness. The Defendant says that it does not need to rely on procedural fairness at all for the presence it seeks and there is no basis for implying a term in the Business Rule about preserving the integrity of the investigation. 7 This question arises where information is being sought by the ASX from Hudson Securities Pty Limited when investigating certain share trading effected by Hudson Securities in the shares of its listed parent, Hudson Investment Group Limited ("HIGL"). 8 Hudson Securities Pty Limited desires to appoint Mr McLeod, a former employee of the Defendant at the time of the events being investigated, and currently Managing Director of its parent with overall responsibility for the performance of all its subsidiaries including the Defendant, to be present at all the relevant interviews as the representative of Hudson Securities Pty Limited. The ASX wish to exclude Mr McLeod because he is a prospective examinee and by reason of his potentially inhibiting other examinees because of his senior executive authority and his own potential familiarity or involvement with the relevant events. The ASX also wish to exclude any other officer or employee not approved by the ASX who decline to give such an undertaking. 9 The ASX contend that his presence, and the presence of others who decline to give such an undertaking, would adversely affect the integrity or effectiveness of the examination. This is for reasons which include the risk of alerting prospective examinees of likely questions, premature disclosure of information at the investigator's disposal at a formative stage of the investigation and inhibiting frank and truthful answers by examinees in the presence of other prospective examinees or of persons senior to them, and particularly if both. 10 The Defendant contends that ASX has not satisfied the onus of showing that it can require the Defendant to procure Mr McLeod to present himself for an interview under Rule 13.1. This is because he is (relevantly) not shown to be an employee or officer or securities representative of Hudson Securities at the time the investigation commenced or at any time thereafter, though concededly he was such an employee during some of the period in 1998 covered by the investigation, and is presently Managing Director of HIGL with group responsibilities. The Defendant has offered Mr McLeod for examination - but without any undertaking. That so far has not been taken up. 11 The answer to the foregoing question also affects the position of the law firm of Atanaskovic Hartnell who are representing Hudson Securities Pty Limited. This is because ASX on the basis of minimum procedural fairness has no objection to the attendance at the examination of that law firm acting as legal representative for Hudson Securities (or indeed to the presence of a legal representative for an interviewee). But ASX again requires as a condition of that attendance an undertaking from that firm which would preclude that firm disclosing information derived from the interviews (other than to those persons who were personally present during the interview for examination). This is until such time as the ASX advises Hudson Securities Pty Limited that all such interviews have been completed or ASX's Draft Inspection Report provided to Hudson Securities for its comment, whichever is the earlier. This is similar to the undertaking required from any officer of the Defendant permitted to be present at the interviews. 12 ASX has offered that there may be present or available a nominated representative of Hudson Securities Pty Limited to whom Atanaskovic Hartnell may refer for instructions. That nominated representative is however to be approved by ASX and be someone who has given the above undertaking (a Mr Dunstan has been so approved). Thus ASX has sought to require that such person:

(a) not be one of the persons still to be examined and thus not Mr McLeod, and

(b) be precluded by the above undertaking from communicating with any persons save those present during the interview until all such interviews had finished.

It is submitted by ASX that the foregoing accords with the minimum procedural fairness which ASX acknowledges must be accorded at this investigative stage, taking into account the need to preserve the integrity of the investigation. 13 However, that arrangement is not acceptable to Hudson Securities, insofar as Mr McLeod is precluded from being that person. 14 The Defendant contends that Atanaskovic Hartnell, as well as Mr McLeod, are entitled to be present without any such undertaking. This is on the basis that ASX Rule 13.1(1) permits that representation and presence without any such undertaking as of right - in order to effectuate the procurement by the Participating Organisation of its officers and employees to attend and give information - or at least that Rule does not preclude it. If not precluded, it must be permitted in the absence of any implied term to the contrary. It is, says the Defendant, ASX that needs to imply such a term to Rule 13.1 to enable ASX to impose the requirement to approve attendees and require the confidentiality undertaking. The Defendant contends that the implication of such a term is not justified by the traditional tests for implying terms in contracts, and a fortiori a statutory contract such as this. In particular the Defendant contends that such a term is not necessary to give business efficacy to the Business Rules. Nor, contends the Defendant does it need the rules of minimum procedural fairness to enable it to be represented by its solicitor at such interviews; this is contrary to the ASX's contention that procedural fairness can be the only source of such a right to legal representation and attendance. It is therefore not to the point (says the Defendant) for ASX to contend that such rules of minimum procedural fairness do not preclude the imposition of reasonable conditions designed to protect the integrity and effectiveness of the investigation. 15 Hudson Securities contend that the only way in which it can procure attendance and answers from its employees is to be present via whomsoever it chooses as a nominated representative. It insists on Mr McLeod being present as having the necessary authority and knowledge to perform that function. It does so, notwithstanding ASX's concern that the integrity of the investigation would be thereby jeopardised.

Agreed Facts 16 What follows is an agreed statement of facts. 17 On 12 April 1999, Mr Martin Kinsky, National Manager of the Investigations and Enforcement Division of the ASX instructed Mr Michael Somes, Assistant Manager of the Investigations and Enforcement Division, to conduct an investigation under its Business Rules concerning the conduct of Hudson Securities Pty Ltd ("Hudson"), a stockbroking firm, in relation to its trading in the shares of Hudson Investment Group Limited ("HIGL") during the period from 23 February 1998 to 2 December 1998 ("the relevant period"). 18 Hudson is a Participating Organisation of the ASX, as that term is defined in the ASX's Business Rules. 19 The issued shares in Hudson were wholly owned by HIGL during the relevant period. 20 During July and August 1999, in response to requests from the ASX, Hudson provided documents to ASX relating to the subject matter of the investigation. 21 By letters dated 1 September 1999 [PX1, MJS2 at 2] and 13 September 1999 [PX1, MJS2 at 4] ASX notified Hudson of the names of various persons who were required to appear before ASX and provide information to ASX relating to the investigation, pursuant to Rule 13.1(1) of the ASX Business Rules and inquired as to the availability of other such persons to so appear.

ASX requested confirmation that the interviewees would not discuss matters raised during their interviews with any other persons at Hudson. ASX stated that copies of tape recordings of interviews shall be provided at an appropriate time. 22 Those persons were: Mr Brendan Wong Ms Huang Mr Frank Dunstan Mr Robert Andrews Mr Bruce McLeod Mr David Hughes Mr Glen McGrath Mr Peter Holland Mr John Farey Mr David Sutton Mr Vincent Tan 23 Messrs Dunstan, Andrews and Sutton are Affiliates of the ASX (as defined in the Business Rules) and are also directors of the Defendant. Mr McLeod is a director of HIGL, the holding company of the Defendant and holds shares equivalent to approximately 1.4% of the issued shares in HIGL. 24 By letter dated 13 September 1999, ASX stated that copy tape recordings shall be provided at an appropriate time and requested that Hudson inquire as to the availability of Messrs McLeod, Hughes, McGrath, Holland, Farey, Sutton and Tan for interview over a period covering 4 weeks. 25 By letter dated 16 September 1999 [PX1, MJS2 at 6], Hudson advised the ASX that Mr McLeod, Mr McGrath and Mr Holland were not employees or officers of Hudson and should not be included in the list of persons to be interviewed (having regard to the wording of Rule 13.1(1)). The question of whether Hudson is obliged under that Rule to make these three persons available for interview does not arise for determination in these proceedings. Hudson also advised the ASX in this letter that Mr McLeod is not involved in trading and settlement and was to attend as Hudson's representative as no other appropriate persons were available. 26 Mr McLeod testifies that although he normally does not participate in the running of Hudson's business, for the last several months during the relevant period, he was responsible for running that business. 27 Mr Dunstan attended at the ASX's offices for interview on 16 September 1999, accompanied by Hudson's solicitors, a consultant to Hudson named Mr Paul Tatum and Mr McLeod. Mr Michael Somes, an Exchange Inspector from the Investigations and Enforcement Division of the ASX and who was carrying out the ASX investigation, advised those present that the interview would not be conducted in the presence of Mr McLeod. After some discussion, Mr Simmons of Hudson's solicitors requested that the record show that Dunstan was ready to be interviewed. Mr Dunstan and those accompanying him departed without Mr Dunstan being interviewed (see Simmons affidavit paragraph 3(c) and second Somes affidavit at paragraph 11). 28 On 16 September 1999, ASX interviewed Mr Andrews in the absence of a representative of Hudson or a legal representative. 29 An exchange of correspondence between the ASX, Hudson and Hudson's solicitors followed [PX1, MJS2 at 8 to 52], commencing on 16 September 1999, in relation to whether Hudson would require Mr Dunstan, Mr Huang and Ms Wong (whose interview times had already been arranged) to attend for interview without Mr McLeod being permitted to be present. 30 By letter dated 16 September 1999 [PX1, MJS2 at 9] from ASX to Hudson, ASX stated that it would be grateful to receive, by close of business on that day, Hudson's advice on whether it would comply with ASX's request for Mr Dunstan, Mr Wong and Ms Huang to appear for interview in the presence of legal representatives and Mr Tatum but in the absence of Mr Mcleod. 31 By letter dated 16 September 1999, Atanaskovic Hartnell stated that it was always envisaged by Hudson that a representative of Atanaskovic Hartnell would attend the interviews together with a representative of the Hudson Group [MJS2 at 11]. 32 On 17 September 1999 Atanaskovic Hartnell addressed a letter to ASX stating that although ASX was not entitled to interview McLeod, he would nonetheless be willing to be interviewed if he were interviewed first and thereafter would be able to attend all interviews as the representative of the Hudson Group. He would not other wise be making himself available for interview [PX1,MSJ2 at 20]. 33 On 29 September 1999 Atanaskovic Hartnell confirmed its request for the tapes and transcript of the Andrews interview and stated that Andrews was not authorised to attend or disclose confidential information. [PX1, MSJ2 at 46]. 34 By letter dated 6 October 1999 the ASX declined to provide tapes and transcript on the claimed basis that it was inappropriate to do so at that stage [PX1,MSJ2 at 48]. 35 On 13 October 1999 Atanaskovic Hartnell complained about ASX's decision not to provide tapes and transcripts and stated that in the result it would bring its own tape recording device to subsequent interviews unless there was an agreement to provide copies of tapes and transcripts. [PX1, MSJ2 at 51]. Atanaskovic Hartnell also stated that ASX was not entitled to interview Mr McLeod and that Mr McLeod would not be making himself available to be interviewed, stating that they had previously offered to make Mr McLeod available for interview on a particular basis which ASX had chosen to reject [PX1, MJS2 at 52]. 36 On 22 October 1999, the ASX's solicitors wrote to Hudson's solicitors [PX1, MJS2 at 53] asking [at 56-7] that Hudson advise by 27 October 1999 whether Hudson would require Mr Dunstan, Mr Wong and Ms Huang (being the three persons whose interview times had previously been arranged [PX1, MJS2 at 4]), to appear before the ASX for interview on the basis that

(a) Mr McLeod was not invited to attend and would not be permitted by the ASX to attend the interviews;

(b) legal representatives of the interviewees could be present upon providing a confidentiality undertaking.

The letter also advised [at 57] that if Hudson was not willing to require Mr Dunstan, Mr Wong and Ms Huang to appear before ASX on the above basis, ASX reserved the right to take steps to enforce Business Rule 13.1 without further notice. 37 Hudson's solicitors responded by letter dated 27 October 1999 [PX1, MJS2 at 58], advising [at 59-60] that Hudson agreed to Mr McLeod not being present at the interviews on the basis, inter alia, that

(a) Hudson's solicitors would attend the interviews and would have the ability to seek instructions from Mr McLeod or any other officer of the Hudson Group during an interview such that if Hudson objected to a particular question they could seek instructions as to whether to maintain that objection and following the interview would be able to seek instructions on other relevant matters upon which it might wish to re-examine the interviewee.

(b) Hudson, Hudson's solicitors, Mr Tatum and the interviewees did not propose giving any confidentiality undertakings. 38 ASX's solicitors responded to this letter by letter dated 1 November 1999 [PX1, MJS2 at 61] asking [at 62] if Hudson's solicitors would tell ASX's solicitors that they would refrain from disclosing, until the interview process was complete, the information imparted during each interview to persons who were not present at the interview. The letter also advised [at 62] that in the absence of such an intimation, Hudson's solicitors and the interviewee's solicitors (if any), could be present at the interviews upon first providing a confidentiality undertaking. The letter also advised that an officer of Hudson, other than Mr McLeod, and approved by ASX, could also be present upon first providing a confidentiality undertaking. The letter also advised that Mr Paul Tatum could be present on the same basis. The letter also advised that if Hudson did not confirm by 3 November 1999 that it was willing to produce Mr Dunstan, Mr Wong and Ms Huang for interview on this basis, the ASX reserved the right to take steps to enforce Rule 13.1(1) without further notice. 39 Hudson's solicitors responded by letter dated 3 November 1999 [PX1, MJS2 at 64] advising that their position was set out in full in their letter dated 27 October 1999 and advised that they would not give the confidentiality undertakings sought, on the claimed basis that they would have the effect of precluding Hudson's solicitors from obtaining instructions from their client. 40 The within proceedings were issued on 16 November 1999. 41 By letter dated 6 December 1999 [PX3] Hudson's solicitors nominated Mr Dunstan as the officer of Hudson who could attend the interviews with ASX's approval. By this letter, Hudson also proposed that Mr McLeod could be included among the pool of persons, being directors of Hudson (if Hudson was inclined to appoint Mr McLeod as a director ) from whom an Additional Director could be nominated to receive information imparted during interviews and provide instructions to Hudson's lawyers. The letter also proposed that confidentiality undertakings should expire six weeks after the commencement of remaining interviews. 42 ASX's solicitors responded by letter dated 7 December 1999 (PX3), advising, among other matters, that Mr McLeod was not a person acceptable to ASX to fulfil the role of the Additional Director as proposed, but that it was willing to consider any other person who might fulfil that role.

Context of Business Rules 43 Does the statutory basis which underpins the Business Rules and addresses the public functions of the Stock Exchange have any implications for whether the Business Rules are to be construed purposively? Clearly the Rules are not themselves statutory, so as to be subject to the purposive interpretation application to provisions of the Corporations Law, by s109H. Nonetheless, must the Rules be construed as subject to an overriding requirement that they should operate so as not to prejudice the integrity of the investigation? 44 It could not be controverted that the Business Rules find constitutional support in the constitution of ASX, which is essentially its articles of association. In that sense the rules start as self-regulation. Article 13.1 of that Constitution mandates the making and promulgation of such rules for, inter alia, "the maintenance and operation of markets and facilities operated by the Company". Then Article 13.2 mandates their content in purposive terms which parallels much of Pt 7.2 of the Corporations Law, so providing a primary source for their interpretation. Article 13.2 provides: "Mandatory content 13.2 Notwithstanding any other provision, the business rules made and promulgated by the Company must: (a) set standards of training and experience and educational qualifications to be possessed by persons administering the activities of any corporation or partnership granted admission as a participating organisation; (b) provide for exclusion from the position of participating organisation of: (i) any organisation where a director or a person concerned in management or having control or substantial control of the organisation is not of good character and high integrity; and (ii) any person who is not of good character and high business integrity; and (c) provide for the expulsion, suspension or disciplining of a participating organisation for conduct inconsistent with just and equitable principles in the transaction of business or for a contravention of the Company's business rules, of a provision of Chapter 7 of the Corporations Law or of the conditions of a licence granted under the Corporations Law; (d) provide for the monitoring of compliance with, and the enforcement of the Company's business rules; (e) contain provisions calculated to ensure that dealings in securities by participating organisations are engaged in on a basis that is efficient and honest; (f) contain provisions calculated to ensure that the activities of participating organisations as such are consistent with the interest of the public; (g) otherwise define the rights, privileges, duties and obligations of participating organisations; (h) prescribe (or provide for the prescription of) rules, regulations, practices and procedures by reference to which participating organisations are to deal in securities; ….. (j) provide for the expulsion, suspension or disciplining of an affiliate for breach of obligations or conduct likely to bring into disrepute the profession of stockbroking; and (k) to the extent that they contain provisions conferring powers of the kind referred to in Article 13.7, require that those powers be exercised in the manner stated in that article."

45 I quote Article 13.7 below: "Exercise of powers 13.7 Powers conferred upon the Company by the business rules in respect of participating organisations and affiliates (and, in particular, admission, exclusion, expulsion, suspension and disciplining) must be exercised: (a) fairly and impartially; (b) in the interests of the public; and (c) with due regard for principles of natural justice."

Clearly the investigative power is required to be exercised in accordance with all three requirements. There is no suggestion that "the interests of the public" are to be subordinated to procedural fairness as embodied in "due regard for principles of natural justice". 46 These ASX Constitutional provisions and the Business Rules flowing from them are underpinned by Pt 7.2 of the Corporations Law. The Corporations Law provides a statutory source for their interpretation, reinforcing the paramount public and regulatory purpose to be served by the Business Rules. Thus there is s769A titled "ongoing requirements to be observed by securities exchange", s770 providing for Ministerial approval of such business rules if satisfied they make satisfactory provision for the matters specified, s772A giving the business rules contractual force as a statutory contract between ASX and member and s777 rendering the business rules enforceable not only by the deemed contracting parties but also ASIC and any "person aggrieved by the failure" to "comply with or enforce the business rules". I later elaborate on these statutory provisions. It suffices to emphasise that the ASX Business Rules are both called for by the legislative scheme and are underpinned by it. 47 What then is the impact on the integrity of the investigation of the absence of the earlier mentioned undertakings and/or Mr McLeod's presence at interviews or other involvement? And what implication does that have under the Business Rules? 48 I am satisfied that absence of such undertakings and the unrestricted presence of Mr McLeod (see below) would prejudice the integrity of the investigation. This is in the sense of undermining the capacity of such investigation to fulfil the evident public purpose of the business rules as set forth in Article 13.2 of the ASX Constitution and in particular paras (c), (d), (e), (f), (j) and (k) as well as Article 13.7(b) and reinforced by Pt 7.2 of the Corporations Law. This is because those undertakings are the only means of preventing a person, being either the legal representative of the Defendant or an interviewee, or an officer of the Defendant or its parent company, from disclosing to others still to be examined the kind of questions likely to be asked from the answers given by others so putting at risk the effectiveness of the investigation. 49 Such indeed was assumed by the Full Federal Court, albeit in the context of an ASIC examination under ASIC Law where there is an express statutory code (ss19, 22 and 23 of ASIC Law); Australian Securities Commission v Bell (1991) 6 ACSR 281. It was not there doubted that an inspector may, as a condition of permitting a lawyer to be present, give the lawyer a similar direction as to confidentiality. Furthermore, it has more recently been accepted that an inspector may exclude a particular lawyer pursuant to s22(1) of ASIC Law where there are reasonable grounds for a bona fide belief by the inspector that the presence of a lawyer will or is likely to prejudice the investigation of which the examination is part. That the correctness of that decision may be challenged in the courts, where the onus will lie on the inspector to show that there were reasonable grounds for the decision, does not detract from that underlying premise; see ASC v Bell (supra) approved in Macquarie Advisory Group Pty Ltd (Receiver appointed) & Ors v Australian Securities and Investments Commission (1999) 33 ACSR 106 at 108, para 6. 50 For reasons developed below, I do not consider that the absence of a statutory code of the particularity applicable to ASIC investigations alters the application of a similar approach to ASX investigations. This is because the Business Rules in their constitutional and statutory context have enlisted self-regulation for a public purpose. They are directed inter alia to providing "adequate arrangements for monitoring and enforcing compliance" with those Business Rules (s769A(1)(b); directed to ensure that each stock market of the exchange is an orderly and fair market" (s769A(1)(a)). The investigations provided by Rule 13.1(1) would cease to be adequate arrangements serving the statutory purpose if their integrity were undermined either by being procedurally unfair or by being ineffective and procedural fairness can accommodate reasonable requirements for confidentiality. 51 It is self-evident that the integrity of the investigation would be at risk absent the undertaking for confidentiality sought by ASX, or if there were unrestricted attendance at the interviews. 52 That leads me to the position of Mr McLeod. The Defendants contend that ASX have not as yet established definitively that Mr McLeod is a partner, officer, employee or securities representative of the Defendant as a "Participating Organisation". The ASX have sought to have that issue dealt with if necessary in future proceedings. Clearly he is not caught as an "affiliate". Rule 5A requires that Mr McLeod must first have applied to be recognised as an affiliate in accordance with the relevant rule and there is no evidence that he has done so. However, they have sufficiently demonstrated that there is a real possibility that Mr McLeod is a shadow director of the Defendant insofar as he is managing director of the parent, was until relatively recently a director of the Defendant and while playing no active role in its management is clearly the senior executive for the group, to whom other executives would ordinarily be answerable. Specially significant is that he has admitted his position "enables me to ensure that the persons attending interviews provide such information as they are called upon to furnish" (see Mr McLeod's affidavit 29 November 1999 paras 8 to 12 and in particular para 17(b)). 53 Australian Corporations Law Principles and Practice (Butterworths), Vol. 1 at 3.2.0005 conveniently describes the basis for identifying a shadow director: "he concept of a 'shadow director", or person in accordance with whose directions or instructions the directors of a body corporate are accustomed to act might include, for example, the chairman of the board or chief executive of a holding company, if the directors of a subsidiary typically acted in accordance with that person's directions. It appears that a person will only fall within this limb of the definition of director if all of the directors of the body corporate are accustomed to act in accordance with that person's directions or instructions. In Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504; 133 ALR 1; 18 ACSR 459; 13 ACLC 1822, the Federal Court (Finn J) held that, where the directors of a trustee company were accustomed to act in accordance with the directions of a particular person, that person was a shadow director, although it could not be said that his influence extended to all board decisions or that the board did not exercise any independent discretion. Finn J observed that the reference in CL s60, to a person in accordance with whose directions or instructions and directors are "accustomed to act", did not require that there be directions or instructions embracing all matters involving the board. Rather, it only required that, as and when the directors are instructed, they are accustomed to act as the section required. His Honour noted that it was not necessary that a person give formal directions or instructions in matters in which he or she involved himself, since compliance with what was sought could be obtained by other means; and that the idea of CL s60 is that "the third party calls the tune and the directors dance in their capacity as directors … The question the section poses is: Where, for some or all purposes, is the locus of effective decision making?" (ACSR at 509-10; ACLC at 1838)."

54 It is clear that Mr McLeod could come within these indicia of a shadow director. Mr McLeod was an employee at the time of the events in 1998 giving rise to the investigation for some months thereof. But that of itself does not satisfy Rule 13.1(1) as it is clear that the Participating Organisation is the only party who can be made subject to the obligations there imposed. From that it necessarily follows that the reference to partners, officers, employees, etc. must refer to those who are such at the time of the investigation, not some previous time. Otherwise, it would not be possible to give efficacy to the implied requirement or correlative obligation that the Participating Organisation procures its officers or employees, etc. to appear before the ASX or its delegate. 55 While it is true that Mr McLeod is a director of the Participating Organisation's parent, it is not contended by the ASX that it is a Participating Organisation. 56 But whether shadow director or not, I am satisfied that Mr McLeod, as a person who was an employee at the time of the relevant events, may have been involved in them and occupying the position as managing director of the parent with overall authority for the group could, by his presence alongside the interviewees, inhibit or affect their answers. And it is simply nonsense to say that those employees would not answer questions unless he were present. The opposite is more likely true. Are those circumstances sufficient for a conclusion to be drawn that to permit him to be present would affect the integrity of the investigation? In my judgment that does suffice. In saying that, I wish to be clear that I make no criticism of Mr McLeod or aspersions upon his integrity. What I do conclude is that there is sufficient risk that the investigation could be adversely affected that I would conclude that his presence would affect its integrity in the sense of prejudicing its efficacy and reliability for the public purpose it is intended to serve. 57 That leaves however the question, would the integrity of the investigation be adversely affected if Mr McLeod were not present at interviews, possibly but not necessarily given a copy of the transcript but in any event enabled to give instructions to the legal representative of the Defendant? What follows proceeds on the assumption that in those circumstances ASX is entitled to do what is necessary - but no more - to preserve the integrity of the investigation. I will return later to the basis for that assumption. 58 There are several things to weigh up, in considering on the one hand minimum procedural fairness and on the other possible prejudice to the investigation. Thus Atanaskovic Hartnell necessarily need to be able, contemporaneously with the interviews and not merely thereafter, to investigate for itself the events that happened. It is clear that Mr McLeod would be someone who could potentially provide material information to Atanaskovic Hartnell, but he need not be the principal source of instructions. The questioning of Mr McLeod should not require handing over the transcript. But the problem is that in the course of such questioning, it may well be clear what kind of questions were asked by the ASX or its representative of the other examinees as well as revealing the answers so far received to Mr McLeod. Provided Mr McLeod is not given the transcripts and gives an undertaking not to communicate with any of those persons who are yet to be the subject of investigation but who have been identified as likely to be interviewed and amenable to Rule 13.1 via the Defendant, the risk to the integrity of the investigation is reduced. But it is in my judgment, not sufficiently removed. 59 It might have been that Mr McLeod could first have been interviewed before any such instruction were given. But ASX say that their investigation requires a different order of questioning and that ASX may in any event need to ask Mr McLeod further questions at the end. If it is still seriously disputed as to whether Mr McLeod is a shadow director, I could give leave to proceedings to determine definitively whether or not he is an officer of the Defendant so that the matter could be finally resolved as to his amenability to being required by the Defendant to answer. On the present state of the evidence, there are strong indications that he might be, but it would be unsafe to express a final view on that aspect at this point. This could be before Mr McLeod were spoken to about the interviews by the solicitors. 60 The foregoing is in answer to the question, what steps would need to be taken, so far as Mr McLeod is concerned, to preserve the integrity of the investigation on the assumption ASX were entitled to do what was necessary in that regard. But does ASX have power under Rule 13.1(1) to insist on preservation of the integrity of the investigation? It is to that question I now turn. 61 The particular matter of interpretation which is at the heart of the present case is this. Does the Defendant depend upon an implied term conferring minimal procedural fairness (aided by Cl 13.7 of the Constitution) to be added to Rule 13.1(1) in order to have legal representation at the interviews and to have present or available for instructions other persons than those being interviewed? If so, is that implied term itself qualified by the requirement that the content of that minimum procedural fairness must be such as does not prejudice the integrity of the investigation? Or instead does ASX require an implied term to be empowered to preserve the integrity of the investigation by insisting on the relevant undertakings and the right to approve who else is present at the interviews? 62 The Defendant's contention is that Rule 13.1(1) is silent as to any preclusion of other persons being present at the interview. It is silent likewise as to preclusion of a legal adviser being present. Because the obligation is imposed on the Participating Organisation it is contended that Rule 13.1(1) could have not efficacy unless the Participating Organisation were able to be present via whomsoever it nominates as its agent in order to ensure that its employees or officers do respond to the questions asked. 63 The Defendant has been at pains to avoid relying upon an implied term of procedural fairness in contending for an unqualified right to have a legal adviser present or other persons present. However, it has not rejected that implied term as an alternative source of this right, contending rather that it does not need it. 64 The ASX, for its part, contends that Rule 13.1(1) simply requires that the Participating Organisation procures the relevant officers or employees, etc. to give such information as may be required and attend interviews for that purpose. But Rule 13.1(1) does not thereby require the Participating Organisation to be present through its nominated agent, whether for the purpose of procuring officer or employee answers or otherwise. In my view, Rule 13.1(1) does not, as a matter of its proper interpretation, require such presence. Rather it permits such presence. But this is only to the extent procedural fairness requires it and then only to the extent the integrity of the investigation is not thereby prejudiced. I expand on the basis for that conclusion below.

An Historical Perspective 65 First that conclusion derives from the contractual, constitutional and statutory context of Rule 13.1(1). I have already referred to the constitutional context, with brief reference to statute. Some elaboration is necessary starting with an historical perspective of the process whereby the stock exchanges evolved from self-regulation as a private club to what may be described as "controlled self-regulation", or self-regulation enlisted for a public purpose. That evolution is described in the earlier edition of "An Introduction to the Securities Industry Codes (Butterworths, 1982) at 68 by Baxt, Ford, Samuels and Maxwell in these terms: "At one time the stock exchanges were entirely private markets unregulated by any public legislation. The management of each stock exchange owed no legal duty to the public and the business of the exchange was subject only to those regulations which the members of the stock exchange thought right to impose on themselves. Anybody was free to start new stock exchanges. The complexity of stock markets provides such opportunities for sharp practice that the conducting of them calls for a measure of control in the public interest. The extent of governmental control can vary. The volume of potential business may be so great that there should be comparative freedom of entry to organisations seeking to enter upon the activity of conducting a stock market. In the absence of competing stock markets the range of matters of internal management in a stock exchange which may be controlled may be wider than is the case where stock markets compete. In Australia the pattern of control of stock exchange and stock markets is best described as controlled self-regulation. The enactment of the uniform securities industry legislation in 1975 confirmed the approach adopted in the securities industry legislation introduced in New South Wales, Victoria, Queensland and Western Australia in 1970/1971 which subjected the organisation and management of stock exchanges to a measure of governmental control. That approach has been maintained in the Commonwealth/State co-operative legislation. Stock exchanges are under a statutory duty to assist the NCSC: s41(1). They must allow access to their trading floors to any person authorised by the NCSC: s41(3). The NCSC can prohibit trading in particular securities: s40.

Then describing the position as of 1975, we have the basis for that control over self-regulation which now finds its counterpart in Pt 7.2 of the Corporations Law . As of 1975 it was described as follows (at 69-70): "Before a body corporate may be approved by the Ministerial council as a new stock exchange, the Council must be satisfied (i) as to its business rules governing its activities, the activities of its members and the activities of other persons in relation to the exchange's stock market; (ii) as to its listing rules governing the bodies or persons admitted to the exchange's list for the purpose of securities issued by them being quoted by the exchange; and (iii) that the interests of the public will be served by the granting of the approval: SIA s38(2). ….. To be acceptable to the Ministerial Council the business rules must make satisfactory provision for various matters. The business rules must provide: (i) for the exclusion from membership of persons who are not of good character and high business integrity; (ii) for the expulsion, suspension or disciplining of members for conduct inconsistent with just and equitable principles in the transaction of business or for a contravention of or failure to comply with the business rules of the proposed stock exchange or the provisions of the Act; (iii) with respect to the conditions under which securities may be listed for trading in the stock market of the proposed stock exchange; (iv) with respect to the conditions governing dealings in securities by members; (v) with respect to the class or classes of securities that may be dealt with by members; and (vi) generally for the carrying on of the business of the proposed stock exchange with due regard to the interests of the public: s38(2)."

66 Section 772A of the Corporations Law in its latest form was inserted in the Law in 1997, in anticipation of the demutualisation of ASX, which occurred in October 1998. The Stock Exchange had earlier been incorporated as Australian Stock Exchange Ltd in 1987; see "Securities Industry Law" (Butterworths) by Baxt, Ford and Black at para 502, p 139 for elaboration of that history. It is by s772A of the Corporations Law introduced in 1997 that the current Business Rules of the ASX "have effect, by force of this section as a contract under seal: (a) between the Exchange and each member; and (b) between a member and each other member; under which each of those persons agree to observe and perform the provisions of the Business Rules as in force for the time being, so far as those provisions are applicable to that person."

67 The commentary to the Corporations Law Amendment (ASX) Bill 1997, noted: "47. By virtue of section 180 of the Corporations Law, presently the business rules of a securities exchange have the legal effect of a contract under seal between the exchange and its members … On the commencement of this Bill, stockbrokers will not be required to be members of a securities exchange in the traditional company law sense contemplated by the term 'member' in section 180 … 48. Proposed section 772A will address this situation by providing that the business rules of a securities exchange have effect as a contract under seal between the exchange and each member and between a member and each other member."

68 Thus "member" is defined by s9 of the Corporations Law which since the 1997 amendments includes: "(i) a person who is a member organisation of that Exchange [meaning Securities Exchange or Stock Exchange]; or (ii) a person who is a partner in a partnership that is a member organisation of that Exchange; or (iii) a person who is recognised under the Business Rules of the Exchange as a suitably qualified affiliate of the Exchange and who is involved in the carrying on of the business dealing in securities (where there is an employee, director or in any other capacity); …. "

69 Prior to s772A the same legal result was achieved more generally for any company by virtue of s180 of the Corporations Law. It thus applied to the then business rules as incorporated in the Articles of Association of ASX Limited. So Business Rule 13.1 found its counterpart in Article 57. Section 180(1) of the pre-1997 Corporations Law provided that: "Subject to this Law, the constitution of a company has the effect of a contract under seal: (a) between the company and each member; (b) between the company and each eligible officer; and (c) between a member and each other member; under which each of the abovementioned persons agrees to observe and perform provisions of the constitution as in force at the time being so far as those provisions are applicable to that person."

Elaboration of Current Statutory Provisions of Pt 7.2 70 Section 772A is a provision to similar effect, but specifically applicable to a "securities exchange". It appears in Pt 7.2 of the Corporations Law alongside linked statutory provisions applicable to Stock Markets and a Stock Exchange, in particular the ASX. That serves to emphasise the connection between the deemed contractual status of the Business Rules and the statutory purposes which they serve. That purpose transcends the private purposes of the Stock Exchange and its "Participating Organisations". 71 Business Rule 5.2.4(1) provides that: "A Participating Organisation shall, when requested so to do by the Exchange exercise the powers it has under the provisions required by Rule 5A 2.1(2)(d) to obtain appropriate information from its members."

72 Business Rule 5A 2.1(2)(d) provides that the Exchange shall recognise a company as a Participating Organisation if the Exchange is satisfied as to various matters including: "… (d) …. that the constitution of the applicant contains provisions which require continued compliance by the applicant for the requirements of these Rules, and contain provisions authorising the applicant, on its own initiative or at the request of the Exchange, to obtain from its members any information which could be obtained if Pt 6.8 of the Corporations Law, applied to the applicant."

73 While the expression "members" is not defined directly by the Business Rules, under "interpretation" at the commencement thereof, para 1 provides: "Division 10 of Pt 1.2 of the Corporations Law applies in relation to these Rules as if they were an instrument under the Law."

74 Division 10 of Pt 1.2 of the Corporations Law imports s9 and in particular the definition of "member" earlier quoted. Thus it follows from Rule 5.2.4(1) that a Participating Company must obtain any "appropriate information" requested by the Exchange from its members in that statutory sense of member. But "member" may include members in the ordinary sense of a shareholder in the Participating Organisation. If so, it would follow that the Defendant would be obliged to obtain that information from its parent company HIGL, though the conclusions I have reached do not depend on that interpretation. While also there is no express provision deeming "member" to include "an employee, director, or in any other capacity", in contrast to that extended definition applying to an affiliate recognised as such in the Business Rules of the Exchange, nonetheless by necessary implication from Rule 13.1(1) itself it must be the case that a Participating Organisation is obliged to cause officers or employees to provide the relevant information. 75 I have earlier referred to the legislative history of s772A with its general predecessor s180, which in turn had its equivalent in s78 of the Companies Code and which in turn replaced s33 of the Companies Act 1961. I pointed out that s772A has been inserted in Pt 7.2 making even more explicit the linkage between it and its related provisions underpinning ASX Business Rules. It is to those related provisions that I now turn, in order to flesh out the statutory context for the deemed contract constituted by the Business Rules. 76 Section 769A(1) of the Corporations Law repeats that "A securities exchange must: … (b) have adequate arrangements for monitoring and enforcing compliance with its business rules and listing rules; and (c) have adequate arrangements for the expulsion, suspension or disciplining of a member for conduct inconsistent with just and equitable principles in the transaction of business or for a contravention of: (i) the Exchange's Business Rules; or (ii) this Chapter; or (iii) the conditions of a licence held by the members; and … (e) have adequate arrangements for investigating complaints by investors relating to the transaction of the business of investors on a stock market of the Exchange."

77 That provision is reinforced by s770 which provides for Ministerial approval of a securities organisation for it to be "an approved securities organisation". Amongst the Minister's criteria for approval are requirements that the body's Business Rules make satisfactory provision "for the monitoring of compliance with, and for enforcement of, the body's Business Rules" (see s770(2)(b)(iii)). 78 Furthermore, s770(2)(d)(ii) requires that the Listing Rules made or adopted make satisfactory provision "generally for the protection of the interests of the public". 79 Then s774 makes it obligatory for the Minister to approve any alteration to the Business Rules with notification also to ASIC. 80 Section 776 requires securities exchanges including the ASX to provide assistance to ASIC including notification where it believes that a serious contravention, inter alia, of the Exchange's Business Rules has been committed. 81 Finally, s777(1) on the application of ASIC, the securities exchange, or a person aggrieved by the failure, empowers the court to make an order giving directions concerning compliance with or enforcement of the Business Rules, This is "where a person who is under an obligation to comply with or enforce the Business Rules … of a securities exchange fails to comply with or enforce any of those business rules…". 82 As the Laws of Australia point out in contending that judicial review applies to breaches of the business or listing rules at para 176: "The question of the availability of such remedies is a developing area of law, and depends on whether there is a public element present in the exercise of contractual powers. The matter has to be resolved at common law, there being no statutory provision for review by a court or other public authority. The matter turns on whether or not the decision in question can be characterised as not simply one of a private or domestic nature, rooted in contractual relations, but rather the discharge of a public duty, affecting more than those bound by contract to observe the rules. On the basis of the public importance of the national stock market, and the statutory context to its position, it is strongly arguable that disciplinary decisions of the ASX at least are subject to judicial review. The argument derives further support from the statutory requirement for a securities exchange which has taken disciplinary action against a member or, has formed a belief that a serious contravention of the Business or Listing Rules or of the Corporations Law has been or is being committed, to file particulars with the ASC under Corporations Law , s776.8 8 See Corporate Law Reform Bill 1993 (Cth), Explanatory Memorandum, paras 209-211. See also Corporations Law , s862. See also the view (without further elaboration) of Young J in Fire & All Risks Insurance Co Ltd v Pioneer Concrete Services Ltd (1986) 10 ACLR 760 (SC NSW) that the Court had jurisdiction to correct an error of law leading to a de-listing. See also Ford HAJ and Austin RP, Ford's Principles of Corporations Law (6 ed, Sydney: Butt, 1992), 896.

83 That affirms the establishment of a public dimension to what were once the rules of a private "club". For the clearest indication of their public character is that they are enforceable not merely as a private contract, but by any third party aggrieved, and the Exchange itself may be called to account for inadequacies in its rules or their enforcement.

Application of Rule 13.1(1) 84 That statutory context is a vital part of the factual matrix under which the Business Rules operate. It bears directly upon their interpretation. In particular, an interpretation of Rule 13.1(1) which permitted the integrity of the Exchange's investigations to be prejudiced would subvert the public purpose of that investigation as identified by s769A(1)(a) and (b). That in turn may lead to intervention in the Exchange's affairs by ASIC and the Minister under the relevant statutory powers in Pt 7.2. Such an interpretation is manifestly absurd. For it would assume a Business Rule designed to fail in the very purpose of its existence with serious consequences for its promulgator, ASX. 85 This point is reinforced when Rule 13.1 is viewed in its overall contractual context of the Business Rules as a whole with their constitutional base. Rule 13.1 and its predecessor, Article 57, requires information "relating to such business" of the relevant Participating Organisation, or, "to enable the Exchange to consider whether or not the Affiliate or the Participating Organisation continues to comply with recognition requirements for the purposes of Rule 5A 1.2 or 5A 2.2." We are here concerned with the first of these. 86 The investigative phase appears under the heading "Supervision" and is the prelude, if warranted, to action against the Participating Organisation (Rule 13.3.2). Furthermore, Rule 13.5 provides for disciplinary action in relation to breaches of the Rules or prohibited conduct. A serious case can involve cancellation of recognition. Appeal rights to the Appeal Tribunal are set out in Rule 13.7. A record of disciplinary action is required by Rule 13.9. 87 In MJS2-53 the solicitors for the ASX write to Atanaskovic Hartnell on 22 October 1999 as to how they conduct investigations and the view that was formed concerning Mr McLeod. I quote the relevant paragraphs below: "In conducting investigations concerning the conduct of Participating Organisations for the purpose of monitoring and enforcing compliance with the Business Rules, consistent with its obligations under the Corporations Law (see s769A), ASX strives to act fairly, and strives to be seen to be acting fairly. It also strives, through the work undertaken by its Exchange Inspectors, to gather all relevant evidence relating to the particular matter under investigation, which the Exchange Inspector customarily collates in the form of a Draft Inspection Report ("DIR"). The DIR has annexed to it transcripts of relevant interviews conducted under Business Rule 13.1 together with any other documents relevant to the investigation. The DIR (including the transcripts of interview) is provided to the Participating Organisation for its comment, and any comments received are considered by the Exchange Inspector in finalising the DIR as a Final Inspection Report ("FIR"). The FIR is then considered by members of ASX's senior management and decision is taken on whether to charge the Participating Organisation with a breach of the Business Rules pursuant to Business Rule 13.5.1. If charges are laid, a hearing is held before ASX's National Adjudicatory Tribunal, at which the Participating Organisation has an entitlement to be heard and an entitlement to legal representation. In the present matter, the Exchange Inspector Mr Somes has formed a view in good faith that for reasons which include maintaining the integrity of the investigation, it would be inappropriate for Mr McLeod to be present during the interviews. That stance does not, in ASX's view, prejudice the interests of the interviewees or Hudson or give rise to any unfairness. The interviewees' interests may be protected by their legal representatives, who will be permitted to re-examine the interviewees before the Exchange Inspector to draw out any additional information which might otherwise be overlooked. Hudson will in due course obtain access to the transcripts of interview and may make submissions regarding their contents to the Exchange Inspector before the DIR is finalised. We are instructed that Mr Somes' view regarding the inappropriateness of Mr McLeod attending the interviews, would not be different merely by reason of Mr McLeod's offer to submit to an interview prior to the interviews of Mr Dunstan, Mr Wong and Ms Huang. Mr Somes wishes to interview Mr Dunstan, Mr Wong and Ms Huang before any interview of Mr McLeod. But even if Mr McLeod was interviewed first, Mr Somes considers in good faith that it would be inappropriate for Mr McLeod to be present during the subsequent interviews. ASX Business Rules do not contain a provision entitling Participating Organisations to have an additional officer or other representative present when an officer, employee or securities representative appears before an ASX delegate pursuant to Rule 13.1. Although ASX does not consider that Hudson has an entitlement, under the Business Rules or otherwise, to have an officer of Hudson, (other than the interviewee) present at the interviews, we are instructed that the Exchange Inspector, at his discretion, is willing to consider permitting such an officer (but not Mr McLeod) to be present. Hudson would need to submit the name of that officer to ASX for consideration by the Exchange Inspector."

88 The last three paragraphs quoted indicate the position that ASX has taken. The question is whether it is justified by Rule 13.1(1) either by its express terms or by way of an implied term. In so interpreting Rule 13.1 I have already indicated that it must be interpreted by reference to its public purpose. 89 In concluding that the Participating Organisation need not be present by a nominated person at the time of any interview of an employee or officer, it is true that Rule 13.1(1) does not in express terms either permit or preclude such presence. Moreover there is no express provision that the hearing is private with its implication in that regard - compare s36(2) of the ASIC Act dealt with in National Companies and Securities Commission v Bankers Trust Australia Ltd & Ors (1989) 24 FCR 217 (Full Federal Court). However, I am satisfied that the proper interpretation of the provision is that the Participating Organisation is merely required to procure the presence of an officer or employee at interview and that procurement certainly does not require the Participating Organisation otherwise to be present. Furthermore, I am satisfied that if a Participating Organisation were to have the right to have present a representative of that Participating Organisation whose presence could adversely affect the integrity of the investigation, such as where a person were nominated who was himself or herself likely to be examined, or who was not prepared to give an undertaking of confidentiality in relation to passing on information from the interview to persons who were likely to be examined, that would destroy the integrity of the investigation. I consider that the silence of Rule 13.1(1) as to any right on the Participating Organisation's part to be present means that no such right exists, save as implied by rules of minimal procedural fairness and subject to those rules accommodating the requirement of not prejudicing the integrity of the investigation for its public purpose. That then represents an implied term to Rule 13.1(1), whether or not it needs to qualify Rule 13.1(1) or simply to expand it. 90 Thus I consider that where the integrity of the investigation is affected, minimal rules of procedural fairness would not require such presence, save where appropriate undertakings could be given which removed any material risk to the integrity of the investigation. Thus in NCSC v News Corporation Ltd [1984] 156 CLR 296 (at 316) the High Court held it was not unfair for the NCSC to exclude News (the subject of NCSC's investigation) and its lawyer from inquisitorial hearings, having regard to the legitimate concern that a hearing may be frustrated if all the information at the investigator's disposal is prematurely disclosed. I also here adopt what was said by Bryson J in Shaw Stockbroking v Australian Stock Exchange Ltd (1998) 26 ACSR 702 at 719 (approved by the South Australian Full Court in McLachlan v Australian Stock Exchange & Anor (1998) 30 ASCR 26) when he dealt with subdelegation under Article 57: "The proceedings under art 57 took place in a procedural framework formed by the business rules, the articles and by practice in which the determinations of an examining inspector and the preparation of a draft report and a final report can be clearly recognised as an investigative stage. There is a collection of information and consideration of its effect, but there is not a determination of any facts or of what the consequences of the facts are to be; the proceedings lay the ground for consideration whether charges are to be made. If charges are made other procedural arrangements clearly recognisable as a determinative stage begin. Those procedures can lead to determination of facts and the imposition of penalties and other adverse consequences. What is required as a matter of procedure to achieve fairness is quite different for these two stages. ….. There are detailed prescriptions for securing procedural justice at a later stage and their existence is a large factor against judicialising the investigative stage to any extent. Article 57 shows that a right of ASX to require information is an established feature of the relationship between ASX and its members. Concepts of procedural justice must be accommodated to this. ….. Shaw's counsel referred me to several judicial statements dealing with the nature and variable content of procedural fairness: O'Rourke v Miller (1985) 156 CLR 342 at 352-3; 58 ALR 269 (Gibbs CJ), Salemi v MacKellar (No 2) (1977) 137 CLR 396 at 444-5; 14 ALR 1 (Stephen J). These observations are directed to the determinative stage of proceedings. The investigative stage is not entirely separate from the process of determination and not exempt from requirements on procedural fairness, but much less is required, and inquiries made in good faith and for proper purposes, without trickery or bias are unlikely to require judicial control. In relation to art 57, if information falling within art 57 is obtained in good faith for purposes of ASX it is difficult to suppose that there could be any control."

91 Whether Rule 13.1(1) in its silence denies a right for non-interviewees to be present, (save where mandated by procedural fairness requirements accommodating preservation of the integrity of the investigation), or would otherwise permit such presence, I would in either case imply a term to the effect contended by the Plaintiff. That is to say, to give business efficacy to Rule 13.1 with its procedural fairness overlay and to ensure that it satisfies the statutory purpose of the Business Rules, I would preclude any presence on behalf of a Participating Organisation as would undermine or threaten the integrity of the investigation in terms of it satisfying the statutory requirement of "adequate arrangements for monitoring and enforcing compliance with [its] Business Rules and Listing Rules". I would likewise require appropriate undertakings of confidentiality of the kind ASX seek. 92 Quite clearly such a term is reasonable and equitable insofar as it leaves proper scope for minimal procedural fairness, gives business efficacy to the contract for the contract would not be effective otherwise in terms of satisfying the statutory requirements, is sufficiently obvious that it goes without saying, is capable of clear expression and does not contradict any express term of the contract. It thus satisfies the requirements for implying a term in BP Refinery (Western Port) Pty Limited v Hastings Shire Council (1977) 16 ALR 363 at 365. 93 While it may be accepted that the test for implication of terms into statutory contracts are more stringent (see, for example, Stanham v The National Trust of Australia (NSW) (1989) 15 ACL 87 at 90-91 per Young J) here we have passed from a conventional statutory contract for corporations generally to one which performs a statutory public purpose. 94 What I have said applies also in relation to the presence of Atanaskovic Hartnell. Unless Atanaskovic Hartnell gives an undertaking in the terms sought, it would not satisfy the requirement to maintain the integrity of the investigation.

Summing up 95 Business rule 13.1(1), taking into account its contractual, constitutional and statutory context, neither requires nor permits a Participating Organisation to have anyone other than the interviewee present at the interview, save as required by requirements of procedural fairness accommodating the requirement of not prejudicing the integrity of the investigation. 96 Such requirements of procedural fairness would ordinarily permit a legal adviser to be present and the legal adviser in turn to have access to those it needs in the Participating Organisation, in order to obtain instructions or to advise. Likewise others from the Participating Organisation may be present or have access to the transcripts if this is required to provide procedural fairness insofar as the investigation and any ultimate disciplinary proceedings are concerned. 97 The Corporations Law (Pt 7.2) and the ASX constitution require the Business Rules to provide "adequate arrangements for monitoring and enforcing compliance" directed to ensuring that "each stock market is an orderly and fair market". The Corporations Law underpins the Business Rules rendering them subject to such a public purpose. The ASX Business Rules, like the Listing Rules , represent self-regulation enlisted by statute for a public purpose; for stock exchanges have long ceased to be private clubs in performing their important public role. 98 Consistent with that public purpose, ASX is entitled to impose such requirements including undertakings of confidentiality to the extent necessary to preserve the integrity of the investigation. By preserving the integrity of the investigation is meant its efficacy in providing adequate arrangements for monitoring and enforcing compliance with the Business Rules and Listing Rules for the public purpose, mandated by the Corporations Law, of ensuring that "each stock market of the exchange is an orderly and fair market". 99 Rule 13.1(1) thus imports an obligation on the ASX to observe minimum procedural requirements of fairness. They are the basis, and arguably the only basis, for permitting a legal adviser to be present at interviews and able to obtain instructions from others in the Participating Organisation. But such procedural requirements of fairness must accommodate the overriding requirement that the integrity of the investigation is not to be prejudiced in furtherance of its public purpose. And such overriding requirement is also an implied term imported into rule 13.1(1), necessary to give it business efficacy in fulfilling that public purpose.

CONCLUSION AND ORDERS 100 It follows that the ASX is entitled to the orders it seeks under s777 of the Corporations Law or in the alternative s1114 of the Corporations Law. This is subject to hearing from the parties in relation to Mr McLeod including whether it will be seriously disputed that he is a shadow director or otherwise amenable to being examined. Indeed if either the Defendant desired him to be examined or he were determined to be a shadow director, that would be decisive in requiring his being quarantined from information about the other examinations until he had been finally interviewed. 101 So far as costs are concerned, ordinarily they should follow the event but I give leave to the parties to address me on costs if they wish. 102 I direct the parties to submit orders giving effect to this judgment as soon as possible, in view of the urgency.

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