Prerogative writs - Prohibition - Application for order nisi - Test - Prosecution on complaint before Stipendiary Magistrate - Committal hearing - Creating false or misleading appearance with respect to market for securities - Whether offence "committed, begun or completed" in Western Australia - Whether Magistrate has jurisdiction

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

Investments Commission : Commonwealth Director of Public Prosecutions

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

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

Re Capobianco, Principal Building Surveyor of the City of Melville; Ex parte Castelli, unreported; SCt of WA; Library No 980567; 25 September 1998

Re Matthews; Ex parte Mackenzie [2000] WASC 147

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

Sankey v Whitlam (1978) 142 CLR 1

1 ROBERTS-SMITH J: This is an application by way of originating motion for an order nisi for a writ of prohibition to prevent a Stipendiary Magistrate further hearing certain complaints in the Perth Court of Petty Sessions.

2 The application came on for hearing before me on 23 July 2003. As the matter was listed for hearing in Petty Sessions on Friday 25 July, I gave my decision granting the order nisi at the conclusion of the hearing and reserved my reasons until later. These are now those reasons.

3 The originating motion was dated 15 July 2003 and sought orders that the Deputy Chief Stipendiary Magistrate at the Perth Court of Petty Sessions show cause before a single Judge why a writ of prohibition should not issue prohibiting her from further proceeding with the hearing of complaints no 9290 to 9310 (inclusive) of 2003 all dated 18 December 2002 and that the Australian Securities & Investments Commission ("ASIC") pay the applicant's costs of the application to be taxed.

"1. Complaints 9290-9295, 9297-9302 and 9306-9308 allege that on a particular date between 2 February 1998 to 24 February 1998 at Perth, Western Australia and elsewhere the applicant created a false and misleading appearance of active trading in the ordinary fully paid shares of Intrepid Mining Corporation NL ('Intrepid') in that he caused to be made an offer to buy (or an offer to sell) a specified number of ordinary fully paid shares in Intrepid at an identified price per share (in the range of $1.24 to $1.42) and thereby caused to be carried out a transaction that did not involve any change in the beneficial ownership in respect of the specified number of ordinary fully paid shares in Intrepid contrary to section 998(1) of the Corporations Act 2001.

2. Complaints 9296, 9393-9305 and 9309-9310 allege that on a particular date between 2 February 1998 to 24 February 1998 at Perth, Western Australia and elsewhere the applicant created a false and misleading appearance of active trading in the ordinary fully paid shares of Intrepid in that he caused to be carried out a transaction that did not involve any change in the beneficial ownership of a specified number of ordinary fully paid shares in Intrepid contrary to section 998(1) of the Corporations Act 2001.

3. Pursuant to section 1338B(8) of the Corporations Act 2001 the jurisdiction conferred on a Court of a State by section 1338B(1) in relation to the examination and commitment for trial on indictment and the trial and conviction on indictment of offenders or persons charged with offences against the Corporations legislation is conferred only in relation to offences committed, begun or completed in the State concerned.

4. There is no assertion or evidence in the:

(a) Statement of Facts issued by ASIC under section 100 of the Justices Act 1902 (WA) and served on the applicant's solicitor on 24 February 2003;

(b) Committal Mention Brief served on the applicant's solicitor on 29 April 2003; or

(c) in any of the additional material served by ASIC on the applicant's solicitor thereafter for inclusion in the Committal Mention Brief,

that the applicant committed, began or completed any of the alleged offences the subject of the complaints in the State of Western Australia."

5 Although this was an ex parte application under O 56 r 1 of the Rules of the Supreme Court ("the Rules"), notice was given to ASIC and Ms Needham from the Office of the Commonwealth Director of Public Prosecutions ("the CDPP") appeared for ASIC at the hearing.

6 The only evidentiary material before me is an affidavit of Ainslie Marie Van Onselen sworn 14 July 2003, although there appears to be no dispute about the essential facts. The question seems to be what inferences or conclusions can be drawn from the facts and what do they mean in the context of the proceedings in issue.

7 ASIC issued a complaint dated 18 December 2002 against the applicant and Dean George Scook ("Scook") jointly, charging the applicant with 21 offences and Scook with some 297 offences contrary to s 998(1) of the Corporations Act (Cth) ("the Corporations Act"). Those against the applicant fall into the two categories described above.

8 At all relevant times s 998(1) of the Corporations Act was in the following terms:

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

(3) A person shall not, by means of purchases or sales of any securities that do not involve a change in the beneficial ownership of those securities or by any fictitious transactions or devices, maintain, increase, reduce, or cause fluctuations in, the market price of any securities.

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

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

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

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

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

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

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

(8) In a prosecution for a contravention of subsection (3) in relation to a purchase or sale of securities that did not involve a change in the beneficial ownership of those securities, it is a defence if it is proved that the purpose or purposes for which the securities were bought or sold was not, or did not include, the purpose of creating a false or misleading appearance with respect to the market for, or the price of, securities.

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

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

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

9 Following the laying and serving of the complaints there was correspondence between the applicant's solicitors, Atanaskovic Hartnell, and the CDPP, in which the former requested that the charges against the applicant be heard separately from those against Scook, and that they be heard in Sydney. The CDPP declined to take that course.

10 The complaints came before the Court of Petty Sessions on 31 January 2003 when the applicant was remanded on bail and the proceedings were adjourned to 28 February for the CDPP to serve on the defendants the Statements of Facts under s 100 of the Justices Act 1902 (WA) ("the s 100 Statement"). Apparently, counsel for the applicant flagged the issue of a challenge to the jurisdiction of the court in the course of submissions to the presiding Magistrate.

11 The s 100 Statement was served on the Applicant's solicitors by letter from the CDPP dated 24 February 2003 together with a schedule of the charges against him.

12 On 28 February the proceedings were adjourned to 14 May 2003 for committal mention.

13 On 29 April 2003 the applicant's solicitors received the committal mention brief pursuant to s 103 of the Justices Act. That comprised 20 lever arch volumes containing an index (one volume), copies of the statements in evidence to be relied upon by the prosecution in relation to the charges against both the applicant and Scook (18 volumes) and additional disclosure papers (one volume).

14 On 14 May the proceedings were further adjourned to 16 July in order to allow the defendants and their solicitors sufficient time to read and consider the prosecution brief for committal mention.

15 Further material for inclusion in the brief was provided by the CDPP on 29 April, 3 June and 2 July 2003. There are currently 56 prosecution witness statements in total.

16 Ms Van Onselen deposes that she has read the witness statements and documentary evidence and that there is in that material no assertion nor evidence that the applicant committed, began or completed an offence the subject of the complaints, in the State of Western Australia.

17 Section 1338B of the Corporations Act provides that subject to that section, the courts of each State, the ACT and the Northern Territory exercising jurisdiction with respect to (inter alia) the examination and commitment for trial on indictment or the trial and conviction on indictment of persons charged with offences against the laws of the State or Territory, have the equivalent jurisdiction with respect to persons charged with offences against the Corporations legislation.

18 Importantly, so far as this application is concerned, s 1338B(8) specifies the basis of territorial jurisdiction of a State or Territory court. It provides that:

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

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

(b) the trial and conviction on indictment;

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

(c) offences committed outside Australia; and

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

19 It is not necessary for present purposes to relate the facts alleged. It is sufficient to note that the alleged offences involved trading in Intrepid shares by two companies Challiston Pty Ltd ("Challiston") and Walthamstow Pty Ltd, which traded as Reliance Finance & Mortgage Services ("Walthamstow"). Both of those corporate entities are registered companies with their principal place of business in Western Australia. Challiston is controlled and owned by Scook. There was a loan agreement dated 11 December 1997 whereby Walthamstow provided bridging finance to Scook and his companies, including Challiston.

20 Scook is a businessman involved in property developments. The applicant had met Scook in the mid-1980s. Scook began trading in Intrepid shares from October 1997. In early January 1998 he contacted the applicant for the purpose of acquiring some of the Intrepid placement shares being sponsored by Paul Morgan. The applicant arranged to open for Scook a trading account with Paul Morgan. The applicant became Scook's advisor/broker. The trading account was in the name of Challiston.

21 The applicant is an authorised securities trader with the stockbroking firm Paul Morgan Securities located in Sydney. At the relevant time, Paul Morgan Securities did not have a Perth office. All of the trading conducted by Scook through the applicant at Paul Morgan was financed by loans extended by Wathamstow.

22 By separate agreements between Walthamstow and Challiston, the former took a security in each instance, the Paul Morgan sell contract note for the sale of Challiston's Intrepid shares. To ensure the security of the bridging loan, Walthamstow required that the buy contract note of the originally purchased Intrepid shares be rebooked from Challiston's name into the name of Walthamstow, together with the sale contract note for the shares sold or to be sold, the subject of the bridging loan. The rebooking of the purchase and subsequent sale of the shares thereby into the name of Walthamstow at Paul Morgan is alleged to have been to enable Walthamstow to hold the script for those sold Intrepid shares as security for recovery of the funds due under the bridging loan. Challiston remained the beneficial owner of those Intrepid shares pursuant to the loan facility.

23 The arrangements as set out in the s 100 Statement were of course more complicated than this, but the effect is summarised at [25] - [27] of that Statement:

"25. Sales of Intrepid shares carried out by the Defendant from the Walthamstow account at Paul Morgan (as vendor) to the Challiston account at Paul Morgan (as purchaser) were transactions that involved no change in beneficial ownership. This is because the Intrepid shares being sold through Walthamstow were beneficially owned by Challiston, who had purchased them utilising Walthamstow's funds. At all material times, the Defendant was aware of this. As the broker/client adviser the Defendant accepted the instructions on the buy order or sell order from Challiston or Walthamstow respectively and by relaying the instruction to the SEATS operator onto the SEATS computer terminal caused the respective offers to be placed on SEATS and cause the resulting trades to be carried out on ASC contrary to section 998(1) of the Corporations Act 2001. SEATS is an acronym for Stock Exchange Automated Trading System which allows computer access by broker member organisations to ASX.

26. On each of the trades the subject of a charge the Defendant received both the buy order on the Challiston account and the sell order on the Walthamstow account and acted upon them by carrying out the transaction or causing it to be carried out.

27. As a result, the Defendant created a false or misleading appearance of active trading in Intrepid shares on ASX. The trades the subject of the charges are contained in the table attached hereto."

24 For the applicant it was said that all instructions to buy or sell securities were received by him in Sydney by way of a telephone call. Any orders written by him were written at the time in Sydney. The instructions received by him were conveyed to the Paul Morgan Securities' SEATS operator who was located in the same office in Sydney as the applicant. That operator would then enter the relevant buy or sell order into his SEATS computer terminal in Sydney in accordance with the instructions given to him by the applicant. The buy or sell order message would then be electronically transferred from the SEATS operator's computer terminal to the Australian Stock Exchange ("ASX") for entering into the SEATS Exchange system which is situated in New South Wales. The buy or sell order message would then be matched on the SEATS Exchange system with a corresponding buy or sell order message entered on the same system, at which point a trade would result. Notification of a successful trade would then be electronically transmitted to the Paul Morgan Securities SEATS operator via that firm's SEATS computer terminal. The operator would then electronically transfer notification of the successful trade to the Paul Morgan Securities' computer system for booking to the client. This booking process took place in Sydney. As a result of the booking of a successful trade, the applicant generated or caused to be generated, a contract note in his Sydney office, which was then mailed to the client from Sydney.

25 Ms Needham said ASIC took no objection to the facts asserted in Ms Van Onselen's affidavit although it did not accept that SEATS worked in the way described.

26 I note that s 998(1) of the Corporations Act was repealed by the Financial Services Reform Act 2001 (Cth). As Ms Needham pointed out however, that did not result in a mere repeal of s 998(1) because the offence provision was re-enacted s 1041B in the subsequent legislation. She explained that ASIC had chosen to proceed under the provisions of s 998 because they contained a defence which was not available to a defendant or accused under the re-enacted provision and as a model litigant, the Commonwealth did not wish to deprive the defendants of a defence which might otherwise have been available to them.

27 It can be appreciated from the above that the offences charged against the applicant assert that he carried out transactions of securities which did not involve any change in their beneficial ownership. In that way, it is said, he is deemed by virtue of s 998(5)(a) to have created a false or misleading appearance of active trading in those securities on a stock market.

28 The fundamental contention of the applicant is quite simply that there is no allegation nor evidence of the commission, commencement, or completion by the applicant of an offence in Western Australia and consequently the courts of this State have no jurisdiction to entertain such a prosecution. Mr Hancy, for the applicant, submits that there is no allegation nor evidence of any conduct of the applicant, nor transaction by the applicant, in this State.

29 Against that Ms Needham submits that ASIC's case is that the offences were both "committed" and "completed" in Western Australia. She emphasises that the nature of the offence alleged is critical. Here it is to create "an active appearance of trading" on a stock market.

30 "Stock market" was defined at the relevant time in s 9 of the Corporations Act and Law as meaning a market, exchange, or other place at which, or a facility by means of which (inter alia) offers to sell, purchase, or exchange securities are regularly made or accepted.

31 The submission is that the facility in this case was SEATS and the market was the ASX. Thus the allegation at [25] of the s 100 Statement that the transactions were conducted on the ASC (sic) and made through the use of SEATS is a claim that they were conducted in every Australian jurisdiction. The question then becomes one of choice of venue - but that is not an appropriate subject for prerogative relief.

32 In addition, Ms Needham submits, there are two further relevant considerations. The first is that both of the relevant corporate entities are companies registered in Western Australia with their principal place of business in this State and that the beneficial ownership remained in Western Australia (in Challiston).

33 In response to these submissions, Mr Hancy says that the place of beneficial ownership is not an element of the offence and does not go to jurisdiction. Furthermore, the fact that the transaction might have occurred on a national market does not mean it was a national transaction - it still occurred in a particular place (namely New South Wales).

34 I take the law to be as set out in Seaman: "Civil Procedure in Western Australia" at [56.1.1]:

"The purpose of the order nisi or threshold stage by way of the ex parte application required by r 1 is to prevent the time of the court being wasted by busy-bodies with misguided or trivial complaints of administrative error. The court will not go into the matter in depth and the applicant for an order nisi for a writ of prohibition or certiorari need only demonstrate an arguable case for the relief sought: Re Capobianco; Ex parte Castelli (SC (WA), Parker J, Lib No 980567, 25 September 1998, unreported). That case holds that there is no necessity that the arguable case has some reasonable or real prospect of success, unless prerogative relief is sought in respect of quasi-criminal proceedings." (my emphasis)

35 The subject proceedings are of course criminal in nature. Thus, I take the test here to be that the applicant must show its case is capable of being argued and has some reasonable prospect of success.

36 The higher threshold test is also apt because it tends to prevent the unnecessary fragmentation of the criminal process. In such cases the court should consider the case from a starting position of a reluctance to interfere (Re His Honour Judge Hammond & Ors; Ex parte Roddan (1996) 17 WAR 50 at 60; Re Lawrence; Ex parte Moltoni & Anor, unreported; SCt of WA (Murray J); Library No 980010; 16 January 1998).

37 The purpose of the order nisi stage on an application for prohibition or certiorari is to prevent the court's time from being wasted by misguided or trivial complaints. The court's role at this stage is therefore to assess the material to determine whether it discloses an arguable case; it is not to go into the material in depth (Talbot v Lane (1994) 14 WAR 120, 152). Even so, extensive argument may be necessary to determine whether the applicant meets the test (Ex parte Moltoni, supra and General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 130).

38 Unlike King-Brooks v Roberts (1991) 5 WAR 500, the point raised here does not depend upon disputed questions of fact, nor does it raise possible defences which it would be for the learned Magistrate to determine within her own jurisdiction. Indeed, under the new statutory regime for committal proceedings introduced in 2003 (Criminal Law (Procedure) Amendment Act 2002 (WA)) a Stipendiary Magistrate is not required to make any evaluation of the evidence on a preliminary hearing for a charge of an indictable offence. Committal for trial or sentence is now a purely automatic formality. That, of course, does not mean a Magistrate would not have to rule on whether he or she has jurisdiction if such a point were raised. That is something the applicant seems not to have seriously considered, but it is to my mind an important consideration on this application and would be so on the return of an order nisi.

39 Likewise, this case is not one in which it is submitted the Magistrate has general jurisdiction, but prohibition is needed to prevent the exercise of power in a way which would be outside that jurisdiction. Rather, it is submitted the Magistrate has no jurisdiction at all, and that is what makes this an apt case for prohibition at this stage, given the Magistrate has already evinced an intention to exercise her purported jurisdiction.

40 As Malcolm CJ said in King-Brooks v Roberts, supra, at 504:

"The primary purpose of a writ of prohibition is to prevent an inferior court or tribunal from exceeding its jurisdiction. Thus in R v Electricity Commissioners; Ex parte London Electricity Joint Committee Co (1920) Ltd [1924] 1 KB 171 at 206, Atkin LJ said:

'I can see no difference in principle between certiorari and prohibition, except that the latter may be invoked at an earlier stage. If the proceedings establish that the body complained of is exceeding its jurisdiction by entertaining matters which would result in its final decision being subject to being brought up and quashed on certiorari, I think that prohibition will lie to restrain it from so exceeding its jurisdiction.'

See also Estate & Trust Agencies (1927) Ltd v Singapore Improvement Trust [1937] AC 898 at 917."

41 The jurisdictional point raise here will arise again in the District Court if the applicant is committed for trial (as he inevitably will be if the matter remains with the Magistrate). That is because s 1338B(8) of the Corporations Act grounds jurisdiction of the trial on indictment in the District Court in the same way as it grounds jurisdiction in the Magistrate for the committal.

42 Although I initially tended to the view that the order nisi should be refused because the applicant is able to argue the point before the learned Magistrate, and subsequently again, if necessary, before the District Court, I have come to the conclusion the fragmentation of proceedings and delay would be minimised by having the point dealt with by the Full Court at this stage. The issue is an important one. It is fundamental to the exercise of jurisdiction by the Magistrate and subsequently by the District Court on this prosecution and it has potential application to other prosecutions under the Corporations Act. In my view the point is arguable and has a reasonable prospect of success. I say no more about the merits of it than that. It is a short point. It can be resolved on the factual material already available, perhaps supplemented by some further brief material to be provided by the parties. I have already given liberty to the parties to apply for directions in that regard. For these reasons I granted the order nisi for prohibition and ordered a stay of the proceedings in respect of the applicant before the learned Magistrate.