In July 2013, the Commissioner of ICAC presented a report to the President of the Legislative Council and to the Speaker of the Legislative Assembly (the report) concerning the circumstances surrounding a decision made in 2008 by the then Minister for Primary Industries and Mineral Resources, the Honourable Ian Macdonald MLC (Mr Macdonald), to grant a coal exploration licence (the Mt Penny exploration licence), referred to as the Mt Penny tenement, including whether that decision was influenced by Mr Edward Obeid (Mr Obeid) or members of his family. For the purposes of this judgment, members of the Obeid family and companies in which they had a controlling interest shall be referred to as "Obeid related entities".
The Mt Penny exploration licence, EL7406, was granted to Mt Penny Coal, a wholly owned subsidiary of Cascade, on 21 October 2009. The individual appellants were directors of the latter company.
Prior to the grant of the Mt Penny exploration licence, Cascade, on 5 June 2009, had executed two letter agreements. The first of these agreements was between Cascade and Buffalo Resources Pty Ltd (Buffalo), a company associated with Mr Obeid and his family. That agreement, which was conditional upon Cascade or "an affiliate" being granted the Mt Penny exploration licence, provided for the establishment of a joint venture to explore and develop the licence and pursue the grant of a mining lease. It was provided that Buffalo would have a 25% interest in the joint venture. It also provided that Cascade would use its best endeavours to obtain an exploration licence in respect of areas contiguous to the area the subject of the Mt Penny exploration licence, which would also be dealt with in accordance with the terms of the joint venture. Subsequently, Glendon Brook Coal, another subsidiary of Cascade, acquired exploration licence EL7405 over an area known as the Glendon Brook tenement (the Glendon Brook exploration licence). However, this was not a contiguous area and so was not subject to the agreement.
The land the subject of the Mt Penny exploration licence comprised three properties: Cherrydale Park (Cherrydale), Donola and Coggan Creek. Obeid related entities owned the first of these properties and had been granted options to purchase the other two properties. By the second of the letter agreements of 5 June 2009, Cascade agreed, subject to conditions including receipt of mining approval, to purchase the properties at four times their improved value as at 1 June 2009. It will be necessary to refer to these agreements in more detail later in this judgment.
The Commission found that prior to 5 June 2009, following discussions with Mr Paul Obeid and Messrs Rocco Triulcio and Rosario Triulcio (the Triulcios), the Triulcios agreed to join in the purchase of Donola using a corporate trustee, Geble Pty Ltd, as the vehicle to complete the purchase. The Commission found that through a series of corporate trusts, 50% of the shares in Donola were beneficially held by Obeid related entities and 50% by entities associated with the Triulcios. The Commission found that this occurred prior to the publication of the government's intention to call for expressions of interest in respect of the Mt Penny area.
The Commission also found that the Obeid family arranged for a family friend, Mr John Lewis, to purchase Coggan Creek. The purchase was completed by a corporate vehicle, Justin Kennedy Lewis Pty Ltd. The Commission found that Mr Lewis had (orally or tacitly) agreed to pay the Obeid family 30% of the profit made from the sale of Coggan Creek. The Commission found these transactions occurred after expressions of interest from the Mt Penny tenement had been called for.
Subsequent to the grant of the exploration licences, Cascade began negotiations to enter into an agreement pursuant to which the shareholders in Cascade would sell their shares in that company to White Energy Company Ltd (White Energy), a company listed on the Australian Stock Exchange. The total consideration payable was $486 million, payable partly in cash and partly in shares. The proposed agreement was subject to a number of conditions and it will be necessary to refer to it and ancillary agreements entered into at the same time in more detail later in this judgment. However, three of the vendors were companies associated with the individual appellants who were directors of White Energy. In those circumstances, White Energy established an Independent Board Committee (the IBC) comprising Mr Graham Cubbin, Mr Hans Mende and Mr Vincent O'Rourke to consider whether the transaction was in the interests of White Energy. Ultimately the agreement to sell the shares did not proceed.
Prior to the commencement of substantive negotiations with White Energy, steps had been taken by Cascade to buy out the Obeid related entities in the joint venture. It appeared that the rights of Buffalo had been assigned to another company associated with Mr Obeid, Southeast Investments Group Pty Ltd (Southeast), although there was no documentation to support such an assignment. The solicitor retained for the Obeid related entities for the purpose of these negotiations, Mr Sevag Chalabian, stated in evidence at the Commission that the company was a shelf company purchased "to disguise the Obeid interest".
By an agreement dated 20 October 2010, which the parties agreed to keep strictly confidential, Southeast agreed to assign the right conferred on it by the agreement of 5 June 2009 to be issued 25% of the shares in Mt Penny to Coal and Mineral Group Pty Ltd (CMG), a company associated with Mr Poole. It should be noted that the letter agreement of 5 June 2009 did not contain an obligation that Buffalo would be issued 25% of shares in Mt Penny, rather, it provided that Buffalo would have a 25% interest in a joint venture in respect of the tenement. The purchase price for the rights was $60 million, payable in what was described as two tranches. It is unnecessary at this stage to set out details of the proposed method of payment. However, the Commission found that $30 million, being the first tranche, made its way into bank accounts of the Obeid family.
On the same day, CMG entered into an agreement with Cascade and Mt Penny Coal by which it agreed that the right to be issued 25% of the shares in Mt Penny Coal be terminated in consideration of a total payment of $62 million, $32 million in cash and $30 million in value of Cascade shares, which was said to be the equivalent of 9.3% of Cascade on a fully diluted basis. It is unnecessary to refer to the agreement in any greater detail at this stage.
In that way, the interest of Obeid related entities in the joint venture (the Obeid interest) was effectively terminated.
The Commission concluded that what had occurred involved corrupt conduct on the part of the individual appellants within the meaning of s 8(2) of the ICAC Act. The Commission's findings against Messrs Macdonald, Obeid, Moses Obeid and the individual appellants were summarised by it in the following terms:
"The Commission found that Mr Macdonald engaged in corrupt conduct by:
a) entering into an agreement with Edward Obeid Sr and Moses Obeid whereby he acted contrary to his public duty as a minister of the Crown by arranging for the creation of the Mount Penny tenement for the purpose of benefiting Edward Obeid Sr, Moses Obeid and other members of the Obeid family
b) entering into an agreement with Edward Obeid Sr and Moses Obeid whereby he acted contrary to his public duty as a minister of the Crown by providing Moses Obeid or other members of the Obeid family with confidential information for the purpose of benefiting Edward Obeid Sr, Moses Obeid and other members of the Obeid family
c) deciding to reopen the EOIs process for exploration licences in order to favour Mr Duncan
d) providing Mr Duncan with confidential information, being the document titled "Proposed NSW Coal Allocations", and advice that the process for EOIs in coal release areas was to be reopened.
The Commission found that Edward Obeid Sr engaged in corrupt conduct by:
a) entering into an agreement with Mr Macdonald whereby Mr Macdonald acted contrary to his public duty as a minister of the Crown by arranging for the creation of the Mount Penny tenement for the purpose of benefiting Edward Obeid Sr, Moses Obeid and other members of the Obeid family
b) entering into an agreement with Mr Macdonald whereby Mr Macdonald acted contrary to his public duty as a minister of the Crown by providing Moses Obeid or other members of the Obeid family with confidential information for the purpose of benefiting Edward Obeid Sr, Moses Obeid and other members of the Obeid family.
The Commission found that Moses Obeid engaged in corrupt conduct by:
a) entering into an agreement with Mr Macdonald whereby Mr Macdonald acted contrary to his public duty as minister of the Crown by arranging for the creation of the Mount Penny tenement for the purpose of benefiting Edward Obeid Sr, Moses Obeid and other members of the Obeid family
b) entering into an agreement with Mr Macdonald whereby Mr Macdonald acted contrary to his public duty as a minister of the Crown by providing Moses Obeid or other members of the Obeid family with confidential information for the purpose of benefiting Edward Obeid Sr, Moses Obeid and other members of the Obeid family.
The Commission found that Mr Duncan engaged in corrupt conduct by:
a) deliberately misleading Graham Cubbin (the chairman of White Energy's IBC) as to the Obeid family involvement in the Mount Penny tenement by failing to disclose the involvement to Mr Cubbin when Mr Cubbin raised the issue with him,
b) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement,
c) telling Anthony Levi that John McGuigan would directly contact Mr Cubbin and thereby relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement, and
d) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group Pty Ltd ('Coal & Minerals Group') and Southeast Investments Group Pty Ltd ('Southeast Investments'),
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement.
The Commission found that John McGuigan engaged in corrupt conduct by:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement,
b) telling Mr Levi that he (John McGuigan) would directly contact Mr Cubbin and thereby relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement, and
c) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement.
The Commission found that Mr Atkinson engaged in corrupt conduct by:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement,
b) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement.
…
The Commission found that Mr Poole engaged in corrupt conduct by:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement,
b) telling the IBC that he was not aware of any payments having been made to Edward Obeid Sr or any entities associated with him, and
c) arranging for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement."
The findings against Messrs Macdonald, Edward Obeid and Moses Obeid are not challenged on the appeal.
In a subsequent report, presented in December 2013 (the third report), the Commission recommended that the Mt Penny exploration licence and the Glendon Brook exploration licence be terminated or that a mining lease be refused. It is that recommendation which is the subject of the corporate appellants' appeal.
[2]
Corrupt conduct within the meaning of the ICAC Act
Sections 7 and 8 deal with the meaning of corrupt conduct for the purpose of the ICAC Act. At the time of the report, they were in the following terms:
"7 Corrupt conduct
(1) For the purposes of this Act, corrupt conduct is any conduct which falls within the description of corrupt conduct in either or both of subsections (1) and (2) in section 8, but which is not excluded by section 9.
(2) Conduct comprising a conspiracy or attempt to commit or engage in conduct that would be corrupt conduct under section 8 (1) or (2) shall itself be regarded as corrupt conduct under section 8 (1) or (2).
(3) Conduct comprising such a conspiracy or attempt is not excluded by section 9 if, had the conspiracy or attempt been brought to fruition in further conduct, the further conduct could constitute or involve an offence or grounds referred to in that section.
8 General nature of corrupt conduct
(1) Corrupt conduct is:
(a) any conduct of any person (whether or not a public official) that adversely affects, or that could adversely affect, either directly or indirectly, the honest or impartial exercise of official functions by any public official, any group or body of public officials or any public authority, or
(b) any conduct of a public official that constitutes or involves the dishonest or partial exercise of any of his or her official functions, or
(c) any conduct of a public official or former public official that constitutes or involves a breach of public trust, or
(d) any conduct of a public official or former public official that involves the misuse of information or material that he or she has acquired in the course of his or her official functions, whether or not for his or her benefit or for the benefit of any other person
(2) Corrupt conduct is also any conduct of any person (whether or not a public official) that adversely affects, or that could adversely affect, either directly or indirectly, the exercise of official functions by any public official, any group or body of public officials or any public authority and which could involve any of the following matters:
(a) official misconduct (including breach of trust, fraud in office, nonfeasance, misfeasance, malfeasance, oppression, extortion or imposition),
(b) bribery,
(c) blackmail,
(d) obtaining or offering secret commissions,
(e) fraud
(f) theft,
(g) perverting the course of justice,
(h) embezzlement,
(i) election bribery,
(j) election funding offences,
(k) election fraud,
(l) treating,
(m) tax evasion,
(n) revenue evasion,
(o) currency violations,
(p) illegal drug dealings,
(q) illegal gambling,
(r) obtaining financial benefit by vice engaged in by others
(s) bankruptcy and company violations
(t) harbouring criminals,
(u) forgery,
(v) treason or other offences against the Sovereign,
(w) homicide or violence,
(x) matters of the same or a similar nature to any listed above,
(y) any conspiracy or attempt in relation to any of the above.
(3) Conduct may amount to corrupt conduct under this section even though it occurred before the commencement of this subsection, and it does not matter that some or all of the effects or other ingredients necessary to establish such corrupt conduct occurred before that commencement and that any person or persons involved are no longer public officials.
(4) Conduct committed by or in relation to a person who was not or is not a public official may amount to corrupt conduct under this section with respect to the exercise of his or her official functions after becoming a public official.
(5) Conduct may amount to corrupt conduct under this section even though it occurred outside the State or outside Australia, and matters listed in subsection refer to:
(a) matters arising in the State or matters arising under the law of the State, or
(b) matters arising outside the State or outside Australia or matters arising under the law of the Commonwealth or under any other law.
(6) The specific mention of a kind of conduct in a provision of this section shall not be regarded as limiting the scope of any other provision of this section."
Section 9 imposes a limitation on Section 8. It provides as follows:
"9 Limitation on nature of corrupt conduct
(1) Despite section 8, conduct does not amount to corrupt conduct unless it could constitute or involve:
(a) a criminal offence, or
(b) a disciplinary offence, or
(c) reasonable grounds for dismissing, dispensing with the services of or otherwise terminating the services of a public official, or
(d) in the case of conduct of a Minister of the Crown or a member of a House of Parliament - a substantial breach of an applicable code of conduct.
(2) It does not matter that proceedings or action for such an offence can no longer be brought or continued, or that action for such dismissal, dispensing or other termination can no longer be taken.
(3) For the purposes of this section:
applicable code of conduct means, in relation to:
(a) a Minister of the Crown - a ministerial code of conduct prescribed or adopted for the purposes of this section by the regulations, or
(b) a member of the Legislative Council or of the Legislative Assembly (including a Minister of the Crown) - a code of conduct adopted for the purposes of this section by resolution of the House concerned.
criminal offence means a criminal offence under the law of the State or under any other law relevant to the conduct in question.
disciplinary offence includes any misconduct, irregularity, neglect of duty, breach of discipline or other matter that constitutes or may constitute grounds for disciplinary action under any law.
(4) Subject to subsection (5), conduct of a Minister of the Crown or a member of a House of Parliament which falls within the description of corrupt conduct in section 8 is not excluded by this section if it is conduct that would cause a reasonable person to believe that it would bring the integrity of the office concerned or of Parliament into serious disrepute.
(5) Without otherwise limiting the matters that it can under section 74A (1) include in a report under section 74, the Commission is not authorised to include a finding or opinion that a specified person has, by engaging in conduct of a kind referred to in subsection (4), engaged in corrupt conduct, unless the Commission is satisfied that the conduct constitutes a breach of a law (apart from this Act) and the Commission identifies that law in the report.
(6) A reference to a disciplinary offence in this section and sections 74A and 74B includes a reference to a substantial breach of an applicable requirement of a code of conduct required to be complied with under section 440 (5) of the Local Government Act 1993, but does not include a reference to any other breach of such a requirement."
Section 13(3A) provides for circumstances in which the Commission can find that a person had engaged in conduct falling within s 9(1). It is in the following terms:
"13 Principal functions
(3A) The Commission may make a finding that a person has engaged or is engaging in corrupt conduct of a kind described in paragraph (a), (b), (c) or (d) of section 9 (1) only if satisfied that a person has engaged in or is engaging in conduct that constitutes or involves an offence or thing of the kind described in that paragraph."
Sections 74, 74A and 74B of the ICAC Act deal with the preparation and contents of reports. They provide as follows:
"74 Reports on referred matters etc
(1) The Commission may prepare reports in relation to any matter that has been or is the subjective of an investigation.
(2) The Commission shall prepare reports in relation to a matter referred to the Commission by both Houses of Parliament, as directed by those Houses.
(3) The Commission shall prepare reports in relation to matters as to which the Commission has conducted a public inquiry, unless the Houses of Parliament have given different directions under subsection (2).
(4) The Commission shall furnish reports prepared under this section to the Presiding Officer of each House of Parliament.
(5), (6) (Repealed)
(7) A report required under this section shall be furnished as soon as possible after the Commission has concluded its involvement in the matter.
(8) The Commission may defer making a report under this section if it is satisfied that it is desirable to do so in the public interest, except as regards a matter referred to the Commission by both Houses of Parliament.
(9) (Repealed)
74A Content of reports to Parliament
(1) The Commission is authorised to include in a report under section 74:
(a) statements as to any of its findings, opinions and recommendations, and
(b) statements as to the Commission's reasons for any of its findings, opinions and recommendations.
(2) The report must include, in respect of each 'affected' person, a statement as to whether or not in all the circumstances the Commission is of the opinion that consideration should be given to the following:
(a) obtaining the advice of the Director of Public Prosecutions with respect to the prosecution of the person for a specified criminal offence,
(b) the taking of action against the person for a specified disciplinary offence,
(c) the taking of action against the person as a public official on specified grounds, with a view to dismissing, dispensing with the services of or otherwise terminating the services of the public official.
(3) An 'affected' person is a person described as such in the reference made by both Houses of Parliament or against whom, in the Commission's opinion, substantial allegations have been made in the course of or in connection with the investigation concerned.
(4) Subsection (2) does not limit the kinds of statement that a report can contain concerning any such 'affected' person and does not prevent a report from containing a statement described in that subsection in respect of any other person.
74B Report not to include findings etc of guilt or recommending prosecution
(1) The Commission is not authorised to include in a report under section 74 a statement as to:
(a) a finding or opinion that a specified person is guilty of or has committed, is committing or is about to commit a criminal offence or disciplinary offence (whether or not a specified criminal offence or disciplinary offence), or
(b) a recommendation that a specified person be, or an opinion that a specified person should be, prosecuted for a criminal offence or disciplinary offence (whether or not a specified criminal offence or disciplinary offence).
(2) A finding or opinion that a person has engaged, is engaging or is about to engage:
(a) in corrupt conduct (whether or not specified corrupt conduct), or
(b) in specified conduct (being conduct that constitutes or involves or could constitute or involve corrupt conduct),
is not a finding or opinion that the person is guilty of or has committed, is committing or is about to commit a criminal offence or disciplinary offence.
(3) In this section and section 74A, criminal offence and disciplinary offence have the same meanings as in section 9."
In Independent Commission Against Corruption (NSW) v Cunneen [2015] HCA 14; 89 ALJR 475 (Cunneen), a majority of the High Court held that the expression "adversely affects" in s 8(2) refers to conduct adversely affecting the probity of the exercise of an official function by a public officer: at [42], [50]. In that case, the majority, at [2], made the following remarks concerning the meaning of adversely affects in s 8(2):
"[2] 'Adversely affect' is a protean expression. In this context, however, there are only two possibilities. Either it means adversely affect or could adversely affect the probity of the exercise of an official function by a public official, or it means adversely affect or could adversely affect the efficacy of the exercise of an official function by a public official in the sense that the official could exercise the function in a different manner or make a different decision from that which would otherwise be the case."
Following the decision of the High Court, the parliament passed the Independent Commission Against Corruption Amendment (Validation) Act 2015 (NSW) (Validation Act). It was common ground that the effect of that Act, so far as is relevant to the present case, was to include, within conduct falling within s 8(2) of the ICAC Act, conduct which could adversely affect the efficacy of the exercise of official functions by a public official. The validity of that Act was upheld by the High Court in Duncan v Independent Commissioner Against Corruption (NSW) [2015] HCA 32; 89 ALJR 835.
However, there remain a number of issues of construction relevant to the appeal which are dealt with below.
[3]
The Commission Report
As I have indicated, the report dealt not only with conduct of the individual appellants but also that of Messrs Macdonald, Obeid, Moses Obeid and other members of Mr Obeid's family. In the first chapter of the report, the Commission identified the range of matters into which it inquired. They included the following:
"1. The circumstances surrounding a decision made in 2008 by the then minister for primary industries and minister for mineral resources, the Hon Ian Macdonald MLC, to grant a coal exploration licence, referred to as the Mount Penny tenement, in the Bylong Valley. The circumstances in question include whether that decision was not impartially made and was influenced by the Hon Edward Obeid MLC ('Edward Obeid Sr') or members of his family (whether on Edward Obeid Sr's behalf or otherwise).
2. Mr Macdonald's role in the decision of the NSW Department of Primary Industries (DPI), in about September 2008, to call for limited expressions of interest (EOIs) for the awarding of exploration licences in respect of the coalmining allocation areas known as Mount Penny, Glendon Brook and Yarrawa.
3. The circumstances surrounding the tenders made by Monaro Mining NL ('Monaro Mining') for exploration licences in respect of the coalmining allocation areas known as Mount Penny, Glendon Brook and Yarrawa and the awarding of those licences.
4. The roles of Mr Macdonald and Travers Duncan in the decision in November 2008 to reopen the EOI process for the awarding of exploration licences in 11 coalmining areas and to extend further invitations to additional mining companies, including Cascade Coal Pty Ltd ('Cascade').
…
7. Whether Mr Macdonald, or any member of his personal staff, or any employee of the DPI, improperly provided confidential information relating to the reopening of the EOI process and other confidential information in respect of the Mount Penny exploration licence to Mr Duncan or any other person.
8. The circumstances under which Voope Pty Ltd ('Voope') acquired an interest in Monaro Coal Pty Ltd ('Monaro Coal'), and under which the Yarrawa exploration licence was awarded to Loyal Coal Pty Ltd ('Loyal Coal'). The name of Loyal Coal was formerly Monaro Coal.
9. The circumstances surrounding the bid made by Cascade for the Mount Penny exploration licence and the awarding of that exploration licence to Cascade.
10. The circumstances relating to the entering into of a joint venture involving Monaro Mining, the Obeid family, or any members of that family or entities associated with that family such as Buffalo Resources Pty Ltd ('Buffalo Resources'), and Cascade.
…
13. The circumstances relating to the intended sale of shares in Cascade to White Energy Company Ltd ('White Energy').
14. The roles played by Mr Macdonald, members of the Obeid family, Mr Duncan, Richard Poole, John McGuigan, James McGuigan, John Kinghorn, John Atkinson and Greg Jones in the transactions described in paragraphs 9 to 13 above."
In Appendix 2 to the report, the Commission stated its approach to the inquiry was first, to make relevant findings of fact on the balance of probabilities, then to determine whether these facts came within the terms of s 8(1) or s 8(2) of the ICAC Act. If they did, the Commission stated that it then considered s 9 of the Act and the jurisdictional requirements in s 13(3A).
The Commission also said that the civil standard of proof had been applied by it in making factual findings. The Commission stated that because of the seriousness of the findings, it had regard to what was said by Dixon J in Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336 (Briginshaw) at 362, and by the High Court in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; 67 ALJR 170 at 171.
Chapter 2 of the report sets out the background of the investigation, the course of the investigation and the evidence obtained as a result.
The Commission recorded in that chapter that in February 2011, it received an allegation from a private individual that confidential information regarding the 2008 public tender for the awarding of the Mt Penny tenement had been "leaked" to members of Mr Obeid's family.
The Commission recorded that the tenement covered Cherrydale, owned by the Obeids, and Donola and Coggan Creek, finding, as I indicated above, that the Obeid family had an interest in each of those properties. The Commission found that the grant of the Mt Penny exploration licence substantially increased the value of the properties.
In that chapter, the Commission also indicated that the Minister for Primary Industries and Mineral Resources, Mr Macdonald, determined that the call for expressions of interest (EOIs) for the award of exploration authorities in the area should be confined to junior miners. It indicated that there was evidence that Mr Moses Obeid had come into possession of confidential information identifying the companies to be invited to lodge a tender. The Commission found that a merchant banker acting on behalf of Mr Moses Obeid, Mr Paul Gardner Brook (Mr Brook), had used the information to agree with Monaro Mining NL (Monaro), one of the companies to be invited to lodge EOIs, that in the event of its bid being successful, Voope Pty Ltd (Voope), a company associated with the Obeid family and Mr Brook, would acquire 88% of Monaro. The Obeid family held 80% of the shares in Voope and Mr Brook held 12%.
The Commission stated that it discovered that what it described as a series of complex transactions had occurred with respect to Monaro's rights to the bids it had made. It stated that it discovered that Monaro transferred the benefit of its bids to a subsidiary, Monaro Coal Pty Ltd. That company's shares were acquired by Voope and its name was changed to Loyal Coal Pty Ltd (Loyal Coal).
The Commission found that the EOI process was reopened so that Cascade and other parties could participate. It found that following the agreement of 5 June 2009, to which I have referred above at [6], Loyal Coal withdrew its bids for Mt Penny and Glendon Brook and on 19 June 2009, the licences for those areas were awarded to Cascade.
The Commission indicated that it became aware of the transactions referred to above at [12] and [13], and the proposed sale to White Energy referred to above at [10]. It stated that it obtained evidence that investors in Cascade were concerned that the Obeids' involvement in the creation of the Mt Penny tenement or their involvement in the joint venture may become public. It said the investors feared two risks: first, that the independent shareholders of White Energy might not go through with the purchase and second, that the NSW Government might investigate the creation of the Mt Penny tenement and set it aside or refuse to grant a mining lease. It stated that there was evidence that the Cascade investors took steps to ensure the Obeid involvement remained hidden.
Chapter 4 of the report dealt, among other things, with the credibility of Messrs Macdonald, Obeid, Moses Obeid and other members of the Obeid family. The Commission indicated that it regarded all of them as unreliable witnesses.
In Chapter 6 of the report, the Commission found that Mr Obeid and members of his family stood to benefit from at least "four avenues" relating to the Mt Penny tenement: first, on the sale of Cherrydale, Donola and Coggan Creek, second, by the $30 million paid by Cascade through CMG under the agreement referred to above at [12], third, through receipt of the balance owing under that agreement and fourth, from a recent acquisition of shares in Cascade.
Chapter 7 of the report dealt with the relationship between Messrs Macdonald, Obeid and Moses Obeid. The Commission found that there was a close and long-term relationship between Messrs Macdonald and Obeid and that, as from May 2008, the relationship between Messrs Macdonald and Moses Obeid developed into one of friendship and frequent contact. The Commission summarised its findings, which were dealt with in more detail in subsequent chapters of the report, that Mr Macdonald agreed with Mr Obeid that he would create the Mt Penny tenement over Cherrydale, that Moses Obeid became a party to that agreement and that the agreement extended to Mr Macdonald agreeing to provide confidential information to Mr Moses Obeid relating to the creation of mining tenements in the Bylong Valley, including over Cherrydale and properties in its vicinity. As this finding was not disputed, it is unnecessary to deal with the evidence which led the Commission to that conclusion.
In Chapter 9 of the report, the Commission referred to the evidence of Mr Moses Obeid that Mr Macdonald told him, in late May or early June 2008, that the Department of Primary Industries intended to open exploration licences in the Bylong Valley and, as a result, Mr Moses Obeid thought the best course was to "option up", namely to take options over Donola and Coggan Creek. It noted that Mr Moses Obeid admitted the information was not publicly available and stated that the information was of a highly confidential nature which enabled the Obeid family to make a great deal of money. The Commission also inferred that Mr Macdonald told Mr Moses Obeid that the licence would cover Cherrydale.
In Chapter 10, the Commission concluded that when Mr Macdonald called for information on the coal resources in the Mt Penny area, he did so at the instigation of Mr Obeid and in terms of the agreement he reached with him and Mr Moses Obeid to create the tenement over Cherrydale. The Commission found that at the time he did so, he was fully aware of the location of Cherrydale, that there was coal under and around that property and that Messrs Obeid and Moses Obeid had sought information from him with the intent they could profit from it. Although issue was taken on the appeal with the concept of "creating" the tenement, no challenge was made to the factual findings.
In Chapter 15, the Commission concluded that it was Mr Macdonald who directed that a Mt Penny tenement be created. It found that the decision was made without notice, without deliberation and without a Department of Primary Industry briefing. It also concluded that Mr Macdonald was responsible for the idea of reducing the tenement in size so that it would fit the criterion of a small to medium sized mine. The Commission concluded that Mr Macdonald gave that instruction with the specific intent that the instruction would result in the Mt Penny tenement being created over Cherrydale. Once again, these findings were not disputed on the appeal.
In Chapter 16 of the report, the Commission noted that there were two other aspects of the EOI process that were the subject of particular direction by Mr Macdonald. The first was that participation in the EOI process would be by invitation only. The second was that the invitation would be limited to junior miners. It noted that the limitation on invitees was contrary to NSW Government policy, which called for an open process, and undermined Mr Macdonald's express desire to create competitive tension. It referred to the evidence of the Chief Executive Officer of the New South Wales Minerals Council that the decision to limit the process to small or medium sized companies was unprecedented and that the decision was contrary to the interests of the State. However, it concluded that it had the effect of Mr Macdonald knowing who was on the list of invitees which, it said, was convenient if Mr Macdonald wished to supply information to a third party. It also concluded that the limitation to junior miners meant that the type of companies on the list were those that might be more amenable to entering into a joint venture, for example, with one of the landowners of the tenement.
In Chapter 17 of the report, the Commission asserted that owning land within the boundaries of a newly declared mining tenement can bring large and rapid financial rewards. It stated that coal mining companies are willing to pay multiples of the ordinary value of rural properties. It stated that that made early knowledge of the likely creation of a coal mining tenement extremely valuable information. It concluded that members of the Obeid family were given early information by Mr Macdonald that a new tenement was to be created in the Bylong Valley, which was sufficiently detailed to enable the Obeid family to know where the tenement was to be located.
In that chapter, the Commission referred to the fact that the files of the Obeids' family solicitors, Colin Biggers & Paisley, demonstrated that Mr Moses Obeid and his brothers had advance knowledge of the Mt Penny tenement and were using it as the basis to purchase Donola and Coggan Creek in order to make windfall profits once the creation of the tenement became public knowledge.
In relation to the purchase of Donola, the Commission concluded that the adoption of a trust structure was done for the sole purpose of disguising the Obeid involvement and because it may otherwise have surfaced that the Obeids had received confidential information from Mr Macdonald.
None of the findings in Chapter 17 were disputed on appeal.
In Chapter 19 of the report, the Commission concluded that Mr Moses Obeid sought the list of companies who were to be invited to lodge EOIs because he wanted to provide it to Mr Brook to initiate a mining venture and that Mr Macdonald willingly provided the list. The Commission also found that Mr Moses Obeid provided the list to Mr Brook and that it was used successfully to identify a potential "medium for their introduction into coal mining", namely Monaro.
Chapter 20 of the report dealt with the involvement of Monaro. The Commission recorded that on 20 August 2008, Mr Warwick Grigor, the non-executive Chairman of Monaro, entered into an agreement with Voope on behalf of Monaro entitled "Option Deed Over Shares", which the Commission described as extraordinarily lopsided. It was said to impose a large number of obligations on Monaro which carried with them substantial financial commitments, whilst entitling Voope to obtain 80% of the benefit of those tenements at no cost. The Commission found that the circumstantial evidence pointed strongly to the conclusion that Mr Grigor was being provided with confidential information. It concluded that the Obeid family was using the information to enable them to enter into the agreement with Monaro, which it said became the key to the Obeid family receiving a massive payout.
In Chapter 22 of the report, the Commission noted that Monaro resolved to make bids in respect of nine of the 11 new coal areas, including Mt Penny and Glendon Brook. The Commission stated that it seemed to be Monaro's intention to seek financial backing if and when it was awarded exploration licences.
The EOI process required responses to be made by 24 November 2008. Despite this, the Commission found, in Chapter 24 of the report, that in October 2008 Mr Macdonald began to speak of reopening the EOI process to allow other mining companies to compete. The Commission concluded that it was Mr Macdonald's decision to reopen the process and that he was motivated to do so as a favour to Mr Duncan. In support of the conclusion that Mr Macdonald reopened the EOI process at the request of Mr Duncan, the Commission pointed to the fact that Messrs Macdonald and Duncan had a close working relationship which, it said, extended beyond an ordinary working relationship.
The Commission noted that each of Messrs Macdonald and Duncan denied that Mr Duncan had made a request to reopen the process. However, it concluded that at times, the evidence of Mr Duncan was demonstrably unreliable and as such, it did not accept his evidence on this matter.
In support of its conclusion, the Commission relied on an email of 1 October 2008 from Mr Craig Munnings, a Department of Primary Industries liaison officer in Mr Macdonald's office, to Mr Jamie Gibson, Mr Macdonald's Deputy Chief of Staff, to the effect that he had been advised that Mr Alan Coutts, the Deputy Director General of Mineral Resources, was not prepared to give EOI packages to four companies: Amerod Resources, White Energy, Real Brand Holdings and Cascade. The email noted that Mr Coutts had already informed Mr Gibson of that fact.
The Commission referred to the evidence of Mr Gibson that he made the request of Mr Coutts on the instruction of Mr Macdonald and that prior to that instruction, he had not heard of the four companies. The companies were all companies associated with Mr Duncan and the Commission inferred that Mr Macdonald became aware of these companies as a result of Mr Duncan speaking to him. The Commission also relied on the evidence of Mr Coutts, to the effect that Mr Gibson told him that Mr Duncan wanted to obtain the opportunity for the tenements, and to a note from the Managing Director of Monaro that the Department of Primary Industries had reopened the process to allow the "White Group" to participate.
However, the Commission found that there was insufficient evidence to establish that Mr Duncan put any pressure, inappropriate or otherwise, on Mr MacDonald to reopen the EOI process, which it said precluded a finding of corrupt conduct against him in connection with the reopening.
In Chapter 25 of the report, the Commission found that Mr Duncan had accessed government information that came directly from Mr Macdonald. The Commission referred to evidence that Mr McGuigan gave a document titled "Proposed NSW Coal Allocation" to his son, Mr James McGuigan, on 29 November 2008, saying at the time that he had heard rumours that the allocation process was going to be reopened. Mr McGuigan said that the likely source of the information was Mr Duncan. The Commission concluded that the information came from Mr Macdonald through Mr Duncan.
The Commission concluded that the information was valuable as indicating where the government was considering opening areas for the grant of exploration licences. However, it should be noted that the areas in question did not turn out to be part of the EOI process.
In the circumstances, the Commission found that Mr Macdonald made a partial decision to benefit Mr Duncan when he reopened the EOI process and disclosed the confidential information.
In Chapter 26, the Commission referred to the fact that the EOI Evaluation Committee decided Monaro should succeed in respect of six of its nine bids, including its bids for Mt Penny and Glendon Brook. However, before these arrangements could be finalised, Monaro withdrew its bids in respect of these tenements. The Commission found that the board of Monaro concluded that with no firm finance facility for the bids, it should seek to get out of its obligations on the best possible terms. As a result, Monaro entered into an agreement with Voope, which provided that the Monaro subsidiary, which was successful in the bid process, was to change its name to Loyal Coal and its shares were to be transferred by Monaro to Voope.
The Commission found that following that transaction, a series of meetings took place between Messrs Moses Obeid, McGuigan and Jones, the latter being another investor in Cascade. The Commission found that Messrs McGuigan and Jones had been introduced to Mr Moses Obeid in connection with another unrelated transaction.
The Commission found that at the second meeting, Mr McGuigan drew up a form of Heads of Agreement which formed the basis of the agreement of 5 June 2009. The document was described as the "Key Principles" document. The Commission said the second meeting was important because all of the parties were open about the fact that the Obeids were linked to the mining side of the transaction; a fact which it said was quite evident from the Key Principles document.
The Commission found that after the second meeting, Mr Poole took over the negotiations on behalf of Cascade. The Commission found that at one of the meetings, agreement was reached that the Obeids would use a "cleanskin" company, Buffalo, to cover their involvement. The Commission also referred to the two agreements of 5 June 2009. In relation to the agreement referred to above at [6], the Commission made the following remarks:
"The key components to the mining venture agreement were that, in the event that an exploration licence were granted to Cascade in respect of Mount Penny, the parties agreed to form a joint venture "to explore and develop" the area with a view to obtaining mining approval. It was further agreed that, as joint venturers, they would, if they could, pursue the development "over the area contiguous to" Mount Penny. The agreement then went on to provide as follows:
In recognition of Buffalo's intellectual property contribution and in consideration of Buffalo:
● and its associates or related parties including Gardner Brook and Loyal Coal Pty Ltd withdrawing any existing applications in relation to Mount Penny and Glendon Brook Coal Release Areas and undertaking not to pursue the grant of any mining rights to the Area or any Contiguous Area, or the Glendon Brook EOI Coal Release Area;
● agreeing to assist Cascade to explore and develop the Exploration Licence and obtain the Mining Approvals;
● agreeing to make available and provide their expert knowledge of the Area to assist with further exploration and review of the Contiguous Area.
Cascade agrees to:
● vest 100% of its interest in the Exploration Licence in the JV; and
● grant to Buffalo a 25% interest in the JV
There are several troubling aspects to the above part of the agreement. Buffalo Resources was receiving a substantial benefit under the agreement - 25% of a potentially extremely valuable coalmining tenement - but what was it giving in return? Part of the consideration is said to be 'Buffalo's intellectual property contribution', but it was readily conceded that nobody behind Buffalo Resources had any experience or knowledge in the area of coalmining or coalmine development. It does not appear that Buffalo Resources truly had any 'intellectual property' that it could contribute. Similarly, Buffalo Resources did not have skills that would enable it to 'assist Cascade to explore and develop the area' and did not have any 'expert knowledge' that could enable exploration of contiguous areas. In short, these items specified as consideration were shams and no consideration at all.
That leaves only one item that Buffalo Resources was providing in return - arranging the withdrawal of the bids made by Loyal Coal in respect of Mount Penny and Glendon Brook."
The Commission rejected Mr Duncan's denial that he had knowledge of the negotiations which led to the 5 June 2009 agreements. The Commission referred to the fact that Mr Duncan gave evidence that he was critical of a proposal to give the Obeids a 30% interest in the venture and Mr McGuigan subsequently told him he had negotiated a 25% interest.
The Commission referred to what it described as the critical feature of the agreement, namely that Loyal Coal would withdraw its bid. The Commission found that Messrs Moses Obeid and Brook ramped up negotiations by telling Cascade that they had inside information that Monaro was going to succeed and Cascade would come second.
The Commission found that on 28 May 2009, there was a meeting at the office of Mr Macdonald at which he was informed of the successful bidders. The Commission found that there was no evidence the names of the companies which came second in the evaluation process were read out at that meeting. However, the Commission concluded that Mr Macdonald told Mr Moses Obeid the companies which were successful in the bidding process. This finding was not challenged on the appeal. The Commission also found that Messrs Moses Obeid and Brook were using the information as part of a negotiating strategy. The Commission however declined to find that Mr Macdonald told Mr Moses Obeid who had come second in the bidding process.
In Chapter 27, the Commission found that, as at 5 June 2009, each of Messrs McGuigan and Poole knew Cascade was entering into a mining venture backed by the Obeid family and that, as at 5 June 2009, they knew that Buffalo was a corporate entity, majority controlled by that family. The Commission referred to: the evidence of Mr Brook, who participated in the negotiations, that there was no doubt that the Obeids were on the other side of the transaction with Cascade; the evidence of Mr Jones that the Obeids were behind the 25% interest in the joint venture and that he discussed that matter with Messrs McGuigan and Poole; and finally the evidence of Messrs Moses Obeid and James McGuigan to similar effect. The Commission concluded that it was evident from the Key Principles Document, drafted by Mr McGuigan, that Mr McGuigan knew of the involvement of the Obeids both on the mining side and property side of the transaction. It rejected the evidence of Mr McGuigan to the effect that he thought that sometime after 31 May 2009, the Obeids may have dropped out of the mining venture.
The Commission also rejected the evidence of Mr Poole that he did not know the Obeids were involved in the mining venture as at 5 June 2009 and did not actually know until after August 2010. It referred to the evidence of Mr Duncan indicating to Mr Poole that he wished to have the Obeids removed from the venture and the negotiations with Mr Chalabian on that issue. It also considered that it was inconceivable that Mr Poole did not know of the Obeids' involvement by 5 June 2009 having regard to the evidence of Messrs Jones, James McGuigan and McGuigan on this issue. It also stated that its conclusion was supported by an email from Mr Brook on 3 June 2009 sent by Mr Brook to Mr James McGuigan and copied to Mr Poole, which spoke of Mr Brook "consulting with Moses" upon the terms of the mining transaction.
In Chapter 29 of the report, the Commission referred to the relationship between the individual appellants and White Energy. It pointed to the fact that each of the individual appellants, together with Messrs Jones, John Kinghorn (Mr Kinghorn) and Brian Flannery, were the investors in Cascade. It also pointed to the fact that White Energy was a major company with an interest in coal technology and that there was a close connection between the management and ownership of White Energy and the circle of investors involved in Cascade. It pointed to the fact that Mr Duncan was the Chairman of Directors of White Energy; Mr Atkinson had been its Managing Director and remained on the board and Mr McGuigan was also a Director of that company. It also pointed out that Mr Poole had a pre-existing connection with White Energy as a financial advisor and as the controller of a "substantial" shareholding in White Energy.
The Commission stated that it was not clear who amongst the Cascade investors first had the idea to sell the asset to White Energy, although it noted that Mr Atkinson said that it may have been him. It stated that there were records provided by Arthur Phillip Pty Ltd (a company controlled by Mr Poole) that it was advising on the sale as early as February 2010.
The Commission found that the initiation and course of negotiations between Cascade and White Energy remained obscure. It referred to the evidence of Mr Duncan that he, Messrs McGuigan, Kinghorn, Atkinson and Poole arrived at the number of $500 million. However, it pointed out that Mr Duncan could not explain who it was at White Energy who agreed to take out an option at that price.
The Commission referred to the following evidence of Mr Duncan concerning the negotiations:
"Now I'm talking about after the deal was announced with White Energy I'm talking about before the deal was announced. You were a director of Cascade at the time - were you the person who put the valuation on the asset for Cascade? --- I was involved in the valuation of Cascade.
Who else was involved? --- I think all the shareholders were involved.
Well, who, name them? --- I think Mr Poole, Mr Atkinson, Mr McGuigan, I think Mr Kinghorn.
Mr Flannery? --- No, I don't believe so.
All right. Mr Jones? --- I don't recall discussing the price with him.
…So McGuigan, Kinghorn, Atkinson, Poole and Duncan were the people at Cascade Coal who put the valuation on the Cascade Coal asset? --- Arrived at a number that was offered."
Mr Duncan could not explain who it was at White Energy who agreed to take out an option at a price of $500 million:
"At the time it was agreed that White Energy would take the option of $500 million? Who were the people at White Energy who worked out the value of Cascade Coal? --- I don't know who worked out - - -
…
Well, you see, when it was presented to the Independent Board Committee that Independent Board Committee was looking at an option which put a value on Cascade of $500 million, do you accept that? --- Yes.
I want to know who were the people at White Energy who put the valuation on Cascade? --- I believe Cascade Coal made an offer to White Energy - - - Sorry, stop for a second, we know, we know these sorts of things. I want, you want to buy my car, I offer this, you offer that, a bit of negotiation.
…
Who at White Energy thought that this was worth looking at in the sense that they looked at it and thought the offer presents a reasonable offer at a valuation of $500 million? Who was that? Was that you? --- No, the board received it and there was abstentions from people having discussions on it and I asked for Graham Cubbin, I specifically asked Graham Cubbin to form an independent committee of the three directors on the board of White's that did not have an interest in Cascade and for him to make the - well, for that to make the decision whether they would accept the month's long option to examine the exercise."
As for the negotiations, Mr Duncan gave this evidence:
"Now you were a shareholder [sic] Cascade Coal and you were the chairman of the board of White Energy? --- Yes.
I'm asking you who was involved with the discussions on the side of Cascade Coal the company of which you were a shareholder?
THE COMMISSIONER: You see, Mr Duncan, this is before the board was appointed so the question that Mr Watson is asking you concerns a period before the board was appointed. Who was involved in those discussions? --- Well, I would have been.
On behalf of whom? --- On behalf of White's.
Right. But you were also a shareholder of Cascade? --- But I wasn't a director of Cascade.
…
No. But you - this refers to discussions between White Energy and shareholders of Cascade. Do you see that? --- Yes, but it doesn't say all the shareholders of Cascade.
…
MR WATSON: Well, you were a shareholder of Cascade and the head of the board at White Energy, did you have the discussion with yourself --- That would have been a very interesting discussion I would have been able to arrive at a decision straightaway.
Who else was there? --- I don't recall who was there.
Are you trying? --- No, and I don't even recall the discussion but it says it in the letter so it must have occurred.
Well, you, I think agreed that you were probably there wearing a White Energy hat? --- That's correct.
And who would you have been likely to discuss this with? --- Most likely with Mr Poole."
The Commission stated that it was clear from that evidence that even Mr Duncan did not have a clear idea whether he was acting on behalf of Cascade or White Energy when the deal was negotiated. The Commission concluded that the most likely position was that the most active of the investors in Cascade, which the Commission said included the individual appellants, were acting on both sides of the transaction and agreed the price would be $500 million.
Chapters 30 and 31 of the report are critical to the findings against the individual appellants. Chapter 30 dealt with the removal of the Obeid interest from the venture.
The Commission pointed out that by early 2010, Mr Obeid was a controversial figure and any transaction in which he was involved that concerned State assets was bound to attract publicity. It stated that members of the Obeid family acknowledged this, and gave it as a reason why they insisted on privacy. At the time of the proposed transaction with White Energy, there had been some public discussion concerning the Obeids' involvement in the Bylong Valley. The Commission pointed to an article in the Australian Financial Review, published on 19 December 2009, (the AFR article) and what it described as a pointed question asked in the Legislative Council on 19 May.
The Commission found that in early 2010, Mr Duncan initiated the process under which the Obeids' involvement was terminated. Mr Duncan claimed that he was motivated to act because that was the first time he discovered that the Obeid family were involved with Cascade in the Mt Penny exploration licence. The Commission stated that Mr Duncan's decision to remove the Obeids was a decision on behalf of Cascade and solely for its benefit. It stated that each of the individual appellants were involved in the transaction, relying on the following evidence from Mr Duncan:
"When you discovered it did you have a conversation with your knowledge that they [sic] Obeids were involved in the mining venture with anybody else from Cascade? --- Yes.
With whom? --- Mr McGuigan, Mr Poole and Mr Atkinson.
All at once? --- I'm not sure.
…
THE COMMISSIONER: What generated the heat? --- I felt upset about the matter and I demanded that it get fixed.
What were you upset about? --- I didn't believe that they were parties we ought to be involved in if we are going to try and develop this as a property and as a major mine and we go out and try and borrow from the banks that the - their reputation with the bankers would not - would make it very difficulty [sic] for us.
…
Did you suggest how it should be fixed? --- I said we have got to get them out of this place."
The Commission found that it was clear the reason it was necessary to remove the Obeids from the transaction was that their involvement posed a risk to the value of the Mt Penny tenement. It identified two risks. The first, which was described as a small risk, was that the Mt Penny exploration licence might be cancelled and the second was that a mining lease would not be granted. The Commission pointed to the fact that there was an election pending in March 2011 and that there was likely to be a change of government and the incoming government would not view the Obeid family favourably. It was in this context and in the context of questions being asked in parliament that the decision makers at Cascade felt they had to act. The Commission relied in particular on the following evidence:
(a) Mr Duncan
"…What it meant was that if it became public knowledge that the Obeids had historically been involved or were involved that might be a powerful factor against the chances of getting a Mining Lease. Do you agree? --- It was a risk.
And let's face it if the Exploration Licence was cancelled or if a Mining Lease wasn't issued the asset was worth nothing. Do you agree? --- It, if there was no lease the money spent on the exploration would have been lost."
(b) Mr Atkinson
"Well you just said yourself that the fear was that if the Obeids were involved that the mining licence would never issue to Cascade Coal? --- I think that was the fear, yes.
…
You also believed that if the Obeids were the co-venturer with Cascade Coal that the government would not proceed to issue a mining licence? --- I thought there was a high risk that - - -
And if the government did not proceed to issue a Mining Licence the value of that tenement would collapse to nothing, correct? --- It's worthless if the government doesn't.
…
And why is that because? --- Because I believe it would've been very difficult for, I think the risk of a Department, they would've, I believe they would've judged the mining, granted the mining lease on an objected [sic] basis, but the political nature of it I think would've been very hard ultimately for that mining lease to have been granted."
c) Mr McGuigan
"I'm not - - -? --- And I, look I think the concern grew as publicity grew, as, so there was certainly a point and in my case, Commissioner, by early 2010 it, it was my strong view that we had a major problem with this particular project if the Obeids continued to retain their equitable interest."
The Commission rejected submissions that the reason for extracting the Obeid interest from the joint venture was to make it easier to control or value the asset or to present the asset to bankers to obtain financial backing. It stated that if the true reason was basically a financial one, there would be no reason to keep it secret.
The Commission found that there were one or two meetings between Messrs Duncan, McGuigan and Poole with Moses Obeid and his solicitor, Mr Chalabian. Thereafter, it found the responsibility for negotiating the removal of the Obeids was given to Mr Poole, who conducted negotiations with Mr Chalabian.
The Commission declined to rely upon the evidence of Mr Poole, but placed reliance on the evidence of Mr Chalabian. The latter was described as an important witness because he gave direct evidence of statements made by Mr Poole as to the purpose underlying the termination of the joint venture. It concluded that the evidence of Mr Chalabian was honest and reliable.
The Commission concluded that the parties agreed on the price fairly easily. It recorded that the investors in Cascade agreed to pay the Obeid family $60 million in respect of the rights they had in the joint venture. It stated that these rights, on exercise, would have entitled the Obeids to a one quarter share in the joint venture to develop the mine. It stated that this implied that the value of the venture was $240 million.
The Commission stated that the means agreed on to terminate the Obeid interest involved the introduction of the two cleanskin companies: Southeast and CMG. The Commission found that CMG was an inactive company, owned by Mr Poole and his family, and as I indicated above at [11], Southeast was incorporated to disguise the Obeid interest.
The Commission concluded that the reason for the transaction was to hide the Obeids' involvement so as to reduce the risk that the government might take action against the Mt Penny exploration licence or not grant the mining licence. In reaching that conclusion, the Commission relied on the following evidence given by Mr Chalabian at his compulsory examination. First, it relied on the evidence as to why it was necessary to use a cleanskin company. That evidence was in the following terms:
"That's why the company, Southeast Investments Group Pty Ltd was incorporated? --- Correct.
It was incorporated for the sole purpose of facilitating disguising the Obeid involvement at Mount Penny? --- Correct.
And to disguise that involvement for fear that it would alert people to the chance that this Exploration Licence had been corruptly obtained? --- It was to disguise the Obeids' interest.
But that was because of this whiff of corruption which surrounded the whole of the transaction? --- Yeah, that was the concern Poole had, yes."
Second, the Commission relied on Mr Chalabian's evidence of what was said to him by Mr Poole:
"He explained to you, didn't he, that the beneficial ownership of the Obeids had to be disguised? --- That's correct.
And he explained to you that the beneficial ownership of the Obeids had to be disguised because it would have been unpalatable to investors had they known that the Obeids were involved? --- Correct.
He explained to you that was because there was a fear that there would be an association drawn between the Obeids and corruption? --- That's an inference he drew but yes, that, that was his - - -
That's what he said? --- That's what, that was his view, yes, yes, yes.
And what it was was that there [sic] a fear that people would say that the Exploration Licence had been acquired corruptly and it might be set aside? --- That was their fear.
And he told you that because of that it was important that this interest of the Obeids be disguised, is that so? --- Yes.
…
Was it done with a view to disguising their involvement? --- Yes.
Did you have conversations with Richard Poole on this very subject? --- Yes.
Richard Poole from your dealings with him from the outset - did he know that the Obeid's were involved? --- Yes.
He mentioned it several times to you, didn't yes? --- Yes.
THE COMMISSIONER: That's in the mining[?] --- Yes, yes Commissioner.
The mining aspect of Mount Penny? --- Yes Commissioner.
…
MR WATSON:…What I'm trying to establish here is that throughout your discussions with Richard Poole is this a fair summary - first he knew the Obeids were involved. --- Yes.
This is the mining joint venture of Mount Penny and the extraction. To [sic] - he was the one who was telling you that the Obeids interests had to be carefully disguised. --- Yes.
He told you it had to be carefully disguised because otherwise the government might set aside the exploration license. --- That was his concern Mr Watson.
And he was telling you that because of that you had to go through this kind of elaborate installation of trustees and companies so no one could find the Obeid name? --- Yes."
In that context, the Commission found that the individual appellants knew full well the transaction with Southeast was a transaction with the Obeid family. It also found that it was carried out with a view to disguising the Obeid involvement from the government and other investigating agencies. Neither of these findings was challenged by the individual appellants with the exception of Mr Atkinson who challenged the second finding.
In Chapter 30, the Commission also dealt with the knowledge of Mr Kinghorn. Although that question is not relevant to the proceedings, the Commission there referred to an intercepted telephone conversation of 11 April 2011 concerning an enquiry directed to White Energy by the Australian Stock Exchange (ASX). The conversation is relevant to Mr Duncan's appeal and was recorded as follows:
"DUNCAN: Right and - and, eh, the - we can't answer it without disclosing the various steps that, eh, the money went to CMG which is -
KINGHORN: Yeah.
DUNCAN: - which traces back to Richard Poole and his family.
KINGHORN: Right.
DUNCAN: And if anyone goes behind that, it goes back to the guys that dropped out of the tender.
KINGHORN: Are - are they likely to get behind Richard Poole's?
DUNCAN: Eh, well only if they ask the question and he answers it.
KINGHORN: Yeah, yeah well I guess if they ask him a straight question he's got to - he's got - he's got to give them a straight answer hasn't he?
DUNCAN: That's right. Right, now we - we tried all sorts of weasel words and everything else to -
KINGHORN: Trav they - they're - they're obviously being - I mean this - this is - this is not a question that's got anything to do with ASIC whatsoever. It's got nothing to do with the ASX whatsoever.
DUNCAN: That's right.
KINGHORN: It's just - it's - it's a - it's a question that's been - it's a - it's a question that's been, um, you know, deliberately placed there, eh, eh, by people who are mischievous, yeah."
In Chapter 31, the Commission found that the investors held the belief that the transaction with White Energy would founder if it emerged the Obeids had been or were involved. It concluded that the transaction ultimately collapsed because it was realised the Obeid involvement was likely to be revealed.
The Commission referred to the fact that on 30 November 2010, White Energy announced to the ASX that it had signed an option to acquire two significant coal deposits in NSW. It pointed out that Cascade was owned by a syndicate of investors including entities associated with the current White Energy directors.
I referred earlier to the establishment of the IBC. The Commission found that the IBC identified four major issues which had to be resolved. The first was the circumstances in which the Mt Penny exploration licence was granted to Mt Penny Coal. The second was whether or not there was any involvement by the Obeid family in the grant of the Mt Penny exploration licence. The third was whether the Obeids were, or had been, involved in any joint venture to which Cascade was, or had been, a party. The fourth was to work out why Cascade had paid $28 million to CMG. The Commission indicated the sum was part of the $30 million which ended up in the hands of the Obeid family. The Commission referred to the evidence of Mr Cubbin and the solicitor retained by the IBC, Mr Phillip Podzebenko, stating the importance of this issue. The evidence of Mr Cubbin was in the following terms:
"Now, this was a critical issue for White Energy as I'll come to in some documents later but just because you can [sic] an Exploration Licence doesn't mean you're going to get a Mining Lease, is that right? --- Absolutely.
And if there was a bit of a stink surrounding the grant of the Exploration Licence your fear, tell me if I'm wrong, your fear was when the government came to grant a Mining Lease they may not grant a Mining Lease at all? --- Absolutely, that was my major concern.
I'm going to come to some documents which suggest that in those circumstances you feared that you could be payment [sic] $500 million for an asset worth nothing? --- Exactly, exactly."
Whilst Mr Podzebenko expressed his concerns in these terms:
"And the concern there was that if it was granted in suspect circumstances it might render the Exploration Licence liable to cancellation by the Government? --- That was one concern although we also were concerned that it would render the Government unwilling to grant other approvals necessary to build a mine and also to allow the licence to lapse without renewal."
The Commission found that the investors in Cascade were not forthcoming with information concerning the Obeids' involvement. It accepted Mr Cubbin as a reliable witness. His evidence on this issue was as follows:
"At any time did any of these people Atkinson, John McGuigan, Travers Duncan, Brian Flannery, did any of them tell you that there was an Obeid involvement apart from or in addition to the mere ownership of Cherrydale Park? --- To the best of my recollection, no.
Well, let's put it this way, Mr Cubbin, as head of the Independent Board Committee and given the concerns that you'd had if any of those men had ever told you of an involvement by the Obeid family in the mining venture what would you have done? --- I'd become very worried.
Well, would you - - -? --- But, well, I think the best way to answer that is to say that I think that probably would have been the end of the transaction because you know from a practical viewpoint, if, if I was informed of that to use your words [as] the head of IBC then I would be required to inform Deloittes who are doing the independent assessment of the deal and it would have to go into the notice of meeting to the shareholders and that would have meant a number of things including I think Deloitte would have said that it wasn't a fair and reasonable deal and I obviously when, when in the notice of meeting the, there would have been a lot of adverse publicity and I think that would have meant the end of the transaction.
Well, just surely as a director of White Energy and in your role as the head of the IBC would you have been recommending that the deal proceed had you known that fact? --- No."
The Commission referred to the fact that each of Messrs Duncan, McGuigan and Atkinson were directors of White Energy and owed a fiduciary duty to that company. The Commission found that each of them must have been aware that the IBC was interested in the question of any historical involvement of the Obeid family in Mt Penny. The Commission said that they must have been aware that Mr Cubbin and the IBC were trying to ascertain whether there had been any Obeid involvement in the tenement and why Cascade had paid $28 million to CMG. It concluded that each must have understood that this information was vital to White Energy.
In relation to Mr Duncan, the Commission found that he was well aware of the importance of this issue. It referred to the following evidence of Mr Duncan:
"THE COMMISSIONER: Well did he raise it with you at all? --- I think he did.
What did he say? --- I told him that they weren't in there, I think I told him that they weren't in there.
MR WATSON: You told him they weren't in there? --- I think I told him they weren't in there.
Well if you did that then you would've lied to him? --- Why would I have lied to him?
Well you knew they were? --- I thought you used the tense that they - he raised the question with me that they were in there.
…
THE COMMISSIONER: Well did you notice he was asking you questions about the Obeids involvement? --- I think so.
In the mining aspect? --- I think so.
MR WATSON: Did you tell him that you knew they had been involved? --- No I don't believe I did, I don't recall.
Why not? Why wouldn't you do that? --- Why would I?"
The Commission said this evidence showed that Mr Cubbin was seeking information and assistance from Mr Duncan and Mr Duncan was misleading Mr Cubbin and the IBC for his own financial advantage.
The financial advantage that the Commission concluded was brought about by the concealment of the Obeid involvement was that disclosure of the involvement would constitute a risk to the value of the tenement, by virtue of possible government intervention and the failure to grant a mining lease. It concluded that public awareness of that risk would have reduced the value of the Cascade shares held by each of the investors.
In relation to Mr McGuigan, the Commission noted that his evidence was that he told Mr Cubbin, in February 2010, that the Obeids were involved in the joint venture. The Commission rejected this evidence in favour of the evidence of Mr Cubbin to the effect that he was unaware of any involvement by the Obeids in the tenement. The Commission also referred to the fact that Mr McGuigan must have known that Mr Cubbin was looking for the information in November 2010, yet did nothing about it. The Commission referred to the following evidence concerning his knowledge that Mr Cubbin was looking for such information in November 2010:
"You must have been disappointed that after telling Cubbin this that he did not reveal it, even though it was a matter of primary concern for the independent board? --- I was surprised. I, I, I did not repeat the conversation that I'd had with Mr Cubbin in February, I did not repeat that in November.
…
Did, did that later on become a factor in your mind? --- Well, I, I endeavoured to answer it just now in the way that I did and I believe I said yes, it did become a factor.
MR WATSON: So when it did become a factor what did you then [do] to inform the shareholders of White Energy? --- I, I did nothing.
But you're under a fiduciary relationship with them weren't you? --- Well, let, let me - - -
Were you or were you not in a fiduciary relationship with the shareholders of White Energy? --- I obviously was."
The Commission referred to the evidence of Mr Anthony Levi, the Divisional Director of Corporate Finance at Arthur Phillip Pty Ltd. Mr Levi said that following a conversation with Mr Podzebenko, he was aware that the IBC wanted to know if there was any "Obeid involvement" in the deal. Mr Levi said he sought instructions from Messrs Duncan and McGuigan as to what he should tell Mr Podzebenko and he was told effectively that Mr McGuigan would deal with the matter and that he should not reply to Mr Podzebenko. The Commission said that it interpreted this episode as an occasion when the IBC came close to getting the truth but Messrs Duncan and McGuigan stepped in to prevent the truth from emerging.
The Commission concluded that in those circumstances, Mr McGuigan breached his fiduciary obligation to White Energy. The Commission summarised its findings as follows:
"The Commission finds that John McGuigan misled Mr Cubbin and the IBC by taking active steps to conceal from them the Obeid involvement in the Mount Penny tenement. The active steps involved preventing Mr Levi from telling Mr Cubbin about the Obeid involvement. This concealment was carried out for John McGuigan's personal advantage. His personal advantage was, as is the case concerning Mr Duncan, the avoidance of any reduction in the value of his shares in Cascade. That reduction was likely to have resulted had he made full disclosure to Mr Cubbin.
John McGuigan was a director of White Energy and had a fiduciary duty to the company. The Commission is satisfied that, despite this, John McGuigan deliberately concealed the Obeid involvement in the Mount Penny tenement from Mr Cubbin and the IBC."
So far as Mr Atkinson was concerned, the Commission pointed out that he was a director of White Energy and had been its managing director. The Commission pointed out that he agreed that he knew the IBC was looking for information on a potential Obeid involvement and that the information was important to it. The Commission referred to his evidence that his duty was to protect the interests of Cascade, not the shareholders of White Energy.
The Commission concluded that as a director of White Energy, Mr Atkinson owed that company a fiduciary duty. It concluded that Mr Atkinson deliberately concealed the Obeid involvement in the Mt Penny tenement from Mr Cubbin and the IBC.
The Commission concluded that its findings were not affected by the guarantees given by the individual appellants to White Energy in respect of the transaction. The Commission observed that the guarantees required investors in Cascade to return their benefits if the asset was adversely affected in the first 12 months after the sale.
The Commission noted the submission that this demonstrated that the investors in Cascade had complete faith in the integrity and value of the asset. However, it stated the argument did not address the real issue. It stated it was clear that several of the investors in Cascade had formed the view that the Obeids' involvement presented a real risk to the value of the asset, but nonetheless were prepared to proceed and disguise the Obeid involvement. It stated that reaching an agreement with White Energy gave them the chance of windfall profit and in a sense they had little to lose by giving the guarantees. It said that the complex arrangements reached with the Obeids gave them some confidence that the Obeid involvement would not emerge.
The Commission referred to the fact that Mr Poole was not a director of White Energy. However, it pointed to the fact that a meeting was arranged between Messrs Cubbin and Podzebenko, on behalf of the IBC, and Mr Poole.
The Commission referred to evidence that Mr Poole had prepared for the meeting by discussing the relevant issues with Messrs Duncan, McGuigan and Atkinson. At that meeting, it was resolved that the existence of the rights termination deed should not be revealed. The reason, according to Mr Poole, was that the truth might adversely affect the value of the asset. There was no challenge to this finding.
The Commission found that on 16 March 2011, Messrs Cubbin and Podzebenko met with Mr Poole. The Commission noted that there were three items on the agenda: the circumstances of the grant of the Mt Penny exploration licence; whether there had been any Obeid involvement in the Mt Penny exploration licence; and the circumstances behind the payment of $28 million by Cascade to CMG. The Commission referred to Mr Poole's response as recorded in a file note prepared by Mr Podzebenko. In relation to the second item, Mr Poole said he personally had no issue disclosing the nature of the services CMG had provided to Cascade to which the $28 million payment related, but had been asked by other investors not to do so. He said he did not believe there was any political sensitivity in relation to the payment.
As regards the third agenda item, Mr Poole told Messrs Cubbin and Podzebenko he was not aware of any payments having been made to Mr Obeid, any Obeid related entities or any other Australian Labour Party politician. He said as far as he was aware, none of the $28 million had been paid to Mr Obeid or Obeid related entities.
The Commission found that Mr Poole did not tell Messrs Cubbin or Podzebenko the true facts, but rather, deliberately misled them. The Commission found that Mr Poole feared that if he told Messrs Cubbin and Podzebenko the truth, it was likely the Obeid involvement in the Mt Penny tenement would become public, which would probably have led to a reduction in the value of Cascade shares.
On 16 March 2011, the ASX requested a breakdown of $41,761,000 of capitalised mining costs which were disclosed in Cascade's accounts. A follow up enquiry was made on 1 April 2011.
The Commission found that Messrs Cubbin and Podzebenko sought information on this subject from Mr Duncan who deferred a response. There followed the intercepted telephone conversation between Messrs Duncan and Kinghorn to which I have referred above at [82]. The Commission expressed the view that the concern expressed by Messrs Duncan and Kinghorn was that a straightforward answer would enable the ASX to get behind the involvement of Mr Poole. It was in light of that concern that a decision was made to terminate the option agreement.
The Commission stated that it found this aspect of the conversation disturbing for three reasons. The first was that it was impossible to know on whose behalf, White Energy or Cascade, the decision was made to terminate the agreement. The second was the fact that directors of a public company had sought to evade an ASX enquiry by the use of "weasel words". The third was that the fear of exposure of the payment meant the better option was to cancel the transaction. The Commission concluded that this was because the persons involved were so concerned about the need, eventually, to reveal an Obeid involvement that they were not willing to risk providing answers to the ASX.
On 12 April 2011, White Energy announced to the ASX that the agreement with Cascade was terminated. The reason given was uncertainty in respect of "hydrology, cultural heritage, transportation, social impact, agricultural land" issues. It stated the IBC had been seeking additional clarity in relation to those matters and negotiating amendments to address these risks in the sale agreement.
The ultimate findings by the Commission against each of the individual appellants were in the following terms:
"Mr Duncan
The Commission is satisfied that Mr Duncan knew that, if the NSW Government found out that the Obeids had been involved in the creation of the Mount Penny tenement or in the allocation of the Mount Penny exploration licence or had a beneficial interest in the Mount Penny tenement, the NSW Government might take action to set aside the Mount Penny exploration licence or not grant a mining lease in which case the assets of Cascade, of which Mr Duncan was an investor, would be jeopardised. He therefore intended to hide from the NSW Government and relevant public officials the Obeid family involvement. The Commission is satisfied that the steps he took to do this included:
a) deliberately misleading Mr Cubbin as to the Obeid family involvement in the Mount Penny tenement by failing to disclose the involvement to Mr Cubbin when Mr Cubbin raised the issue with him
b) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement
c) telling Mr Levi that John McGuigan would directly contact Mr Cubbin and thereby relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement
d) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments
The Commission is satisfied that a substantial purpose in taking these steps was to prevent public officials and public authorities from learning of the Obeid family involvement in the Mount Penny tenement and that Mr Duncan thereby intended to deceive relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in that tenement.
Mr Duncan's conduct as set out in a) to d) above with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement, is corrupt conduct for the purpose of s 8(2) of the ICAC Act. This is because his conduct could have adversely affected, either directly or indirectly, the exercise of official functions by any public official or public authority reviewing the creation of the Mount Penny tenement or the grant of exploration licences over the Mount Penny tenement (including the circumstances surrounding the granting of such licences) or the official functions of any public official or public authority considering whether to grant a mining lease over the Mount Penny tenement and could also involve fraud or company violations and therefore comes within s 8(2)(e) and s 8(2)(s) of the ICAC Act.
…
The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found relating to the deliberate misleading of Mr Cubbin, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Duncan committed a criminal offence of obtaining a financial advantage by deception contrary to s 192E(1)(b) of the Crimes Act 1900. The advantage was to prevent the loss in the value of his holding in Cascade should the sale to White Energy not proceed or if the NSW Government found out about the Obeid involvement and took steps to cancel the exploration licence or announced that it would not grant a mining lease.
The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found, relating to authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture so that the NSW Government would not become aware of their involvement in that tenement, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Duncan committed a criminal offence of obtaining a financial advantage by deception contrary to s 192E(1)(b) of the Crimes Act 1900. The advantage was the removal of the risk to the retention of the exploration licence and the reduction in the risk that a mining licence might not be granted over the Mount Penny tenement.
The Commission is also satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found in relation to deliberately misleading Mr Cubbin, deliberately failing to disclose to the IBC the Obeid family involvement in the Mount Penny tenement and relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement in that tenement, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Duncan committed criminal offences under s 184(1) of the Corporations Act 2001. This is because, as a director of White Energy, he was intentionally dishonest or, alternatively, reckless and failed to discharge his duties in good faith and in the best interests of that company or for a proper purpose by withholding information about the Obeid family involvement so that the value of his holding in Cascade Coal would not be adversely affected.
The Commission therefore finds that Mr Duncan engaged in corrupt conduct by:
a) deliberately misleading Mr Cubbin as to the Obeid family involvement in the Mount Penny tenement by failing to disclose the involvement to Mr Cubbin when Mr Cubbin raised the issue with him,
b) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement,
c) telling Mr Levi that John McGuigan would directly contact Mr Cubbin and thereby relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement, and
d) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement.
John McGuigan
The Commission is satisfied that John McGuigan knew that, if the NSW Government found out that the Obeids had been involved in the creation of the Mount Penny tenement or in the allocation of the Mount Penny exploration licence or had a beneficial interest in the Mount Penny tenement, the NSW Government might take action to set aside the Mount Penny exploration licence or not grant a mining lease in which case the assets of Cascade, of which John McGuigan was an investor, would be jeopardised. He therefore intended to hide from the NSW Government and relevant public officials the Obeid family involvement. The Commission is satisfied that the steps he took to do this included:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement
b) telling Mr Levi that he (John McGuigan) would directly contact Mr Cubbin and thereby relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement
c) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments.
The Commission is satisfied that a substantial purpose in taking these steps was to avoid public officials and public authorities from learning of the Obeid family involvement in the Mount Penny tenement, and that John McGuigan thereby intended to deceive relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in that tenement.
John McGuigan's conduct as set out in a) to c) above, in each case with the intention of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement, is corrupt conduct for the purpose of s 8 of the ICAC Act. This is because his conduct could have adversely affected, either directly or indirectly, the exercise of official functions by any public official or public authority reviewing the creation of the Mount Penny tenement or the grant of exploration licences over the Mount Penny tenement (including the circumstances surrounding the granting of such licences) or the official functions of any public official or public authority considering whether to grant a mining lease over the Mount Penny tenement and could involve company violations and therefore comes within s 8(2)(s) of the ICAC Act.
The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found in relation to the deliberate failure to disclose information to the IBC and relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement in the Mount Penny tenement were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that John McGuigan committed criminal offences under s 184(1) of the Corporations Act 2001. This is because, as a director of White Energy, he was intentionally dishonest or, alternatively, reckless and failed to discharge his duties in good faith and in the best interests of that company or for a proper purpose by withholding information about the Obeid family involvement so that the value of his holding in Cascade would not be adversely affected.
The Commission is also satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found, relating to authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture so that the NSW Government would not become aware of their involvement in that tenement, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that John McGuigan committed a criminal offence of obtain a financial advantage by deception contrary to s 192E(1)(b) of the Crimes Act 1900. The advantage was the removal of the risk to the retention of the exploration licence and the reduction in the risk that a mining licence might not be granted over the Mount Penny tenement.
The Commission therefore finds that John McGuigan engaged in corrupt conduct by:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement,
b) telling Mr Levi that he (John McGuigan) would directly contact Mr Cubbin and thereby relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement, and
c) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement.
Mr Atkinson
The Commission is satisfied that Mr Atkinson knew that, if the NSW Government found out that the Obeids had been involved in the creation of the Mount Penny tenement or in the allocation of the Mount Penny exploration licence or had a beneficial interest in the Mount Penny tenement, the NSW Government might take action to set aside the Mount Penny exploration licence or not grant a mining lease in which case the assets of Cascade, of which Mr Atkinson was an investor, would be jeopardised. He therefore intended to hide from the NSW Government and relevant public officials the Obeid family involvement. The Commission is satisfied that the steps he took to do this included:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement
b) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through Coal & Minerals Group and Southeast Investments.
The Commission is satisfied that a substantial purpose in taking these steps was to avoid public officials and public authorities from learning of the Obeid family involvement in the Mount Penny tenement and that Mr Atkinson thereby intended to deceive relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in that tenement.
Mr Atkinson's conduct as set out in a) and b) above with the intention in each case of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement, is corrupt conduct for the purpose of s 8(2) of the ICAC Act. This is because his conduct could have adversely affected, either directly or indirectly, the exercise of official functions by any public official or public authority reviewing the creation of the Mount Penny tenement or the grant of exploration licences over the Mount Penny tenement (including the circumstances surrounding the granting of such licences) or the official functions of any public official or public authority considering whether to grant a mining lease over the Mount Penny tenement and could involve company violations and therefore comes within s 8(2)(s) of the ICAC Act.
The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found in relation to the deliberate failure to disclose information to the IBC were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Atkinson committed a criminal offence under s 184(1) of the Corporations Act 2001. This is because, as a director of White Energy, he was intentionally dishonest or, alternatively, reckless and failed to discharge his duties in good faith and in the best interests of that company or for a proper purpose by withholding information about the Obeid family involvement so that the value of his holding in Cascade Coal would not be adversely affected.
The Commission is also satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found, relating to authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture so that the NSW Government would not become aware of their involvement in that tenement, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Atkinson committed a criminal offence of obtain a financial advantage by deception contrary to s 192E(1)(b) of the Crimes Act 1900. The advantage was the removal of the risk to the retention of the exploration licence and the reduction in the risk that a mining licence might not be granted over the Mount Penny tenement.
The Commission therefore finds that Mr Atkinson engaged in corrupt conduct by:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement, and
b) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement.
…
Mr Poole
The Commission is satisfied that Mr Poole knew that, if the NSW Government found out that the Obeids had been involved in the creation of the Mount Penny tenement or in the allocation of the Mount Penny exploration licence or had a beneficial interest in the Mount Penny tenement, the NSW Government might take action to set aside the Mount Penny exploration licence or not grant a mining lease in which case the assets of Cascade, of which Mr Poole was an investor, would be jeopardised. He therefore intended to hide from the NSW Government and relevant public officials the Obeid family involvement. The Commission is satisfied that the steps he took to do this included:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement
b) telling the IBC that he was not aware of any payments having been made to Edward Obeid Sr or any entities associated with him
c) arranging for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments.
The Commission is satisfied that a substantial purpose in taking these steps was to avoid public officials and public authorities from learning of the Obeid family involvement in the Mount Penny tenement and that Mr Poole thereby intended to deceive relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in that tenement.
Mr Poole's conduct as set out in a) to c) above with the intention in each case of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement, is corrupt conduct for the purpose of s 8(2) of the ICAC Act. This is because his conduct could have adversely affected, either directly or indirectly, the exercise of official functions by any public official or public authority reviewing the creation of the Mount Penny tenement or the grant of exploration licences over the Mount Penny tenement (including the circumstances surrounding the granting of such licences) or the official functions of any public official or public authority considering whether to grant a mining lease over the Mount Penny tenement and could involve fraud and therefore comes within s 8(2)(e) of the ICAC Act.
The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that if the facts it has found, in relation to the deliberate failure to disclose information to the IBC and telling the IBC that he was not aware of any payments having been made to Edward Obeid Sr or any entities associated with him, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Poole committed criminal offences under s 192E(1)(b) of the Crimes Act 1900. The advantage, in each case, was to prevent the loss in the value of his holding in Cascade should the sale to White Energy not proceed or if the NSW Government found out about the Obeid involvement and took steps to cancel the exploration licence or announced that it would not grant a mining lease.
The Commission is also satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found, relating to Mr Poole arranging for the Obeids to be extracted from the Mount Penny joint venture so that the NSW Government would not become aware of their involvement in that tenement, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Poole committed a criminal offence of obtain a financial advantage by deception contrary to s 192E(1)(b) of the Crimes Act 1900. The advantage was the removal of the risk to the retention of the exploration licence and the reduction in the risk that a mining licence might not be granted over the Mount Penny tenement.
The Commission therefore finds that Mr Poole engaged in corrupt conduct by:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement,
b) telling the IBC that he was not aware of any payments having been made to Edward Obeid Sr or any entities associated with him, and
c) arranging for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement."
The Commission also found that the ASX release, to which I have referred above at [108], was untrue. It found that this was yet another attempt to prevent knowledge of the Obeid involvement in the granting of the Mt Penny exploration licence and the operation of the joint venture between Cascade and Buffalo escaping into the public domain.
As I indicated above at [17], in the third report, the Commission expressed the view that the granting of the authorities for Mt Penny and Glendon Brook was so tainted by corruption that the authorities should be expunged or cancelled and any pending application regarding them should be refused.
The Commission recommended legislation to expunge the authorities, which it said would have the benefit of reducing risks arising from challenges in the courts to any ministerial decision to cancel or not renew current authorities. It said a secondary option would be for the minister to consider cancelling the relevant authorities and refusing pending applications for mining leases under s 380A of the Mining Act 1992 (NSW) (Mining Act).
The Commission's reasons, with respect, were sparse and can be set out in full:
"In the First Jasper Report, the Commission found that the Mount Penny tenement was created by Mr Macdonald in accordance with a corrupt agreement with Edward Obeid Senior and Moses Obeid. Mr Macdonald did so contrary to his public duty as an officer of the Crown. The decision to create the tenement was not justified by reference to proper planning, mining, environmental, local or economic considerations.
The Commission does not accept that Cascade Coal Pty Ltd has any valid argument capable of justifying the continued existence of the Mount Penny tenement in its present form. As Counsel Assisting submitted:
At the time Cascade Coal Pty Ltd entered into its agreement with Buffalo Resources Pty Ltd, its management knew that the Obeid family was involved in the mining venture and [it] was given and [improperly] used confidential information.
On these grounds, the Commission considers, as Counsel Assisting submitted, 'the Government [should] take all those measures which are necessary to make certain that the Mount Penny tenement [as presently constituted] is not developed into a mine'.
With regard to the Glendon Brook tenement, Counsel Assisting submitted:
Cascade Coal has acquired the benefit of the Glendon Brook tenement because it entered into the agreement with Monaro Coal, Moses Obeid, Paul Obeid and Gardner Brook in respect of the Mount Penny tenement. That…was a corrupt agreement…[For] the same considerations that would apply in respect of the Mount Penny tenement, it would be inappropriate to permit Cascade Coal to retain the benefits of the Glendon Brook tenement."
[4]
The primary judgment
The primary judge stated that discretionary relief of the type sought by the individual appellants in the court below may be granted where:
1. There is a material error on the face of the record, which includes the reasons given for the decision;
2. The reasoning is not objectively reasonable in the sense that the decision was not one which could have been reached by a reasonable person acquainted with all the facts and having a proper understanding of the statutory function, or was not based on a process of logical reasoning from proven facts or proper inferences from those facts;
3. There is no evidence which could rationally support the impugned findings;
4. Relevant matters have not been taken into account, or irrelevant matters have been taken into account;
5. There has been a material denial of natural justice.
The primary judge pointed to the requirement in s 13(3A) of the ICAC Act that it was necessary to be satisfied that an offence of the kind referred to in s 9(1) had been committed as a pre-condition to making a finding of corrupt conduct. He pointed out that if the conclusion of the Commission on that jurisdictional fact was not soundly based, the Court may intervene.
The primary judge noted the submission of the individual appellants that s 8(2) required the Commission to identify with precision "the official function" the exercise of which might be adversely affected by the conduct; the "public official" by whom those functions were exercisable; and how it was that the conduct could adversely affect those functions.
The primary judge agreed with the submission that neither Mr Cubbin nor the IBC was a public official. He accepted that although official functions are not defined in s 8(2) or otherwise in the ICAC Act, these functions must be functions lawfully exercisable by public officials. He stated that for s 8(2) to be satisfied it must be possible to say the conduct suggested to be corrupt adversely affects, or could adversely affect, the exercise of official functions so understood.
The primary judge stated that as a matter of language, conduct could not be characterised as conduct that has, or could have, an adverse effect on the exercise of official functions unless those functions are identifiable with some degree of precision. The primary judge concluded that the word could, where it first appears in s 8(2), is intended to refer to possibility rather than futurity, which, he said, left open the question as to what was the necessary degree of possibility.
The primary judge concluded that the first two categories of functions suggested by the Commission as official functions for the purpose of s 8(2), namely reviewing the creation of the tenement and reviewing the grant of the Mt Penny exploration licence, did not have any statutory foundation. The primary judge concluded that, in respect of those functions, the first report did not comply with the requirements of the ICAC Act because it did not identify, in the way that s 8(2) on its proper construction requires, either the official function that could have been affected adversely or the public official by whom that function was exercisable.
In relation to what the primary judge described as the third category, official functions relating to the grant of a mining lease, the primary judge noted that it was common ground that a lease could not be granted unless there was in place an appropriate development consent, and the effect of the repealed Pt 3A of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) was that if the responsible Minister (the Minister) had given approval under that part, a mining lease could not be refused. The primary judge also referred to the fact that in determining whether or not to grant approval, the Minister was required to consider a report that the Director-General of the Department of Planning (the Director-General) was required to prepare.
The primary judge pointed to the fact that the Director-General was required by cl 8B of the Environmental Planning and Assessment Regulation 2000 (EPA Regulation) to consider any aspect of the public interest that the Director-General considers relevant to the project. He also noted that it was not disputed that the Minister would be entitled to take a different view of the public interest to that taken by the Director-General.
The primary judge identified the essential controversy between the parties as whether cl 8B of the EPA Regulation extended beyond environmental concerns to more general concerns, including the corrupt process by which the Mt Penny tenement had been created and the circumstances of corruption leading to the grant of the Mt Penny exploration licence.
The primary judge rejected the submission that planning law was only concerned with the use of the land itself and that the identity or character of the applicant for a mining lease was irrelevant.
In reaching this conclusion, the primary judge accepted that, at a level of basic principle, the focus of planning approval is on the proposed use to be made of the land, rather than the identity or character of the applicant. However, he pointed to the fact that the present issue was not concerned with planning consents in general, but with a process of assessment and approval under Pt 3A of the EPA Act.
The primary judge pointed out that once the environmental assessment process mandated by ss 75F and 75H of the EPA Act had taken place, the Director-General was required to report to the Minister, dealing at least with the matters in s 75I(2) of the EPA Act.
The primary judge pointed out that in general terms, the matters to which s 75I(2) directed attention were environmental matters. He pointed out that s 75I(2)(f) referred to an environmental assessment undertaken by the Director-General or any other matter the Director-General considers appropriate.
The primary judge concluded that whilst it might be thought the words "other matters" ought to be read as limited to environmental aspects of the proposal, cl 8B of the EPA Regulation required the Director-General to consider the four topics stated in it, unless they were included in the report in any event. The matters referred to in cl 8B included any aspect of the public interest the Director-General considered relevant to the project.
The primary judge stated that if the concept of public interest was limited to public interest arising out of environmental concerns, it would have been expected to have been canvassed in the process leading up to the Director-General's report. He concluded that that suggested cl 8B of the EPA Regulation was not referring only to environmental aspects but rather, as it stated, any aspect the Director-General considered relevant.
The primary judge essentially rejected the proposition that the legislation required a public official to shut his eyes even to clear evidence of corruption and make his or her decision solely on the basis of environmental considerations. He pointed to the fact that the effect of s 75V of the EPA Act was that, in the circumstances of the present case, approval under s 75J effectively decided any other question that might have arisen under the legislation, including those relevant to the grant of a mining lease.
The primary judge drew attention to s 63(2) of the Mining Act, which he said did not limit the matters a decision-maker may take into account in deciding to grant or refuse an application for a mining lease. He noted, however, that it drew attention to circumstances of dishonesty surrounding the application. He pointed out that one of the effects of the mining lease was to give the lessee the right to extract and deal with the mineral wealth of the state, saying that there was a clear public interest in having such grants made by an open and transparent process and not made as a result of, or a consequence of, corrupt dealings.
In that context, the primary judge held that the circumstances associated with the grant of the Mt Penny exploration licence were matters which could be taken into account by the Director-General in his report under s 75I of the EPA Act, or by the Minister, in considering whether or not to grant approval under s 75J.
The primary judge next dealt with a question of whether, assuming the public interest considerations could extend beyond environmental concerns, it was open to the Commission to conclude that the conduct it found to have occurred could have affected directly or indirectly the exercise of those official functions.
In making the submission that the conduct could not have had that effect, the individual appellants relied on the AFR article and the question asked in the Legislative Council in support of the proposition that the Obeid involvement in the Mt Penny tenement was already in the public domain. The primary judge described the AFR article as suggesting, in no uncertain terms that there were, to put it neutrally, suspicious circumstances indicative of collusion between Messrs Macdonald and Obeid relating to the Obeids' ownership interest in Cherrydale and other nearby properties. The primary judge stated that the question in the Legislative Council raised the issue of dealings between Messrs Macdonald and Obeid in relation to the Mt Penny exploration licence and the preferred tenderer. He noted that Mr Macdonald denied that there were any such discussions between him and Mr Obeid.
The individual appellants also challenged the proposition that disclosure to Mr Cubbin or the IBC would have resulted in greater publicity or knowledge of the dealings in question.
The primary judge accepted the submission that what Mr Cubbin and the IBC were concerned to know about were the details of the joint venture Cascade had made with the Obeid family and the details of the payments made to CMG.
The primary judge concluded that if details of these matters had come into the public domain, both the store of public knowledge and its "explosive quality" would have increased very substantially. He stated that it was open to the Commission to consider that disclosure, to Mr Cubbin or the IBC, of information concerning the Obeids' involvement in, and extraction from, the joint venture could have adversely affected the exercise of the official function relating to the grant of the mining lease and would likely, if not inevitably, have led to the mining lease not being granted.
The primary judge also referred to the evidence of Mr Cubbin, to which I have referred above at [86], as providing strong support for the proposition that revelation of the full truth would have put what was revealed into the public domain. The primary judge stated that this was what the individual appellants feared.
In those circumstances, the primary judge held that it was open to the Commission to conclude that the public revelation, and details of those facts, could well have affected the exercise of official functions in relation to the granting of a mining lease.
The primary judge rejected the submission that the findings of corruption were based on all the matters set out in the first report and it was not possible to read them distributively, or to separate them. He concluded that the Commission's disjunctive statement of its conclusions was deliberate and should be read as written. He stated that it was not correct to read the Commission's findings as saying the individual concerned knew of and failed to disclose to the IBC each of the three elements comprised within the expression "the Obeid family involvement" namely, the involvement in the creation of the tenement, the involvement in the allocation of the Mt Penny exploration licence and the beneficial interest in the Mt Penny tenement. He stated that a reference to a particular appellant's failure to disclose the Obeid family involvement should be taken as a failure to disclose to the extent the particular appellant had knowledge of one or more of the three separate elements involved.
The primary judge also concluded that the Commission posited three categories of official functions namely, reviewing the creation of the tenement, reviewing the grant of exploration licences and considering the grant of a mining lease. He concluded that it was not necessary to find that each of these three official functions existed rather, it was sufficient that at least one could have been adversely affected by the conduct.
In dealing with the question of whether the individual appellants' conduct could constitute a contravention of s 192E(1)(b) of the Crimes Act 1900 (NSW) (Crimes Act), the primary judge noted that it was not contested that a financial advantage might be obtained by avoiding a financial loss.
The primary judge noted that in relation to Mr Duncan, one of the findings made was that he obtained a financial advantage by prevention of "the loss in value of his holding in Cascade should the sale to White Energy not proceed, or if the NSW Government found out about the Obeid involvement and took steps to cancel the exploration licence or announced that it would not grant a mining lease." In the context of that finding, he noted that it did not matter that ultimately the advantage was not held.
However, the primary judge noted that this finding was not expressly made against the other individual appellants, the only express finding made against them being "the removal of the risk to the retention of the exploration licence and the reduction in the risk that a mining lease might not be granted". He noted that this finding did not in terms characterise the advantage as being the loss in value of the holding in Cascade by removal or reduction of that risk, however, he stated that the crystallisation of the risk would have an obvious financial impact on Cascade because the evidence showed its value would be wiped out, which would be a financial detriment to its shareholders. Thus, he held the financial advantage could be characterised in the same way as it was in respect of Mr Duncan.
The primary judge concluded that by concealing the information and seeking through an "absurdly complex scheme" to extricate the Obeid interest, the individual appellants, with the exception of Mr Poole, kept at least on a temporary basis the financial advantage which they had. He stated that the analysis was the same in respect of Mr Poole except that his wife obtained the advantage.
The primary judge also rejected the submission that the conduct could not be held to be dishonest. The primary judge stated that even accepting that none of the individual appellants had direct knowledge of the corrupt arrangements between the Obeid family and Mr Macdonald, they knew of the Obeids' involvement in the joint venture and each of them appreciated that public knowledge of that involvement was likely to imperil his investment. The primary judge found that it was this fear which led the individual appellants to seek to prevent that knowledge becoming public. He concluded it would be open to a jury to conclude that the conduct in those circumstances was dishonest.
However, the primary judge declined to hold that there was a contravention of s 184 of the Corporations Act 2001 (Cth) (Corporations Act). He stated that fiduciary duties in essence have two components: the first, not to put the interest of the fiduciary in conflict with the interests of the person or entity to whom the fiduciary duty is owed; and second, not to make a profit at the expense of that entity. He accepted there may be some circumstances where, to observe the proscriptive obligations imposed on fiduciaries, it may be necessary for the fiduciary to perform some positive act.
However, the judge concluded that in the present case, the individual appellants who were directors of White Energy were not acting in any way as directors of White Energy in relation to the transaction. He said that even if the individual appellants were intentionally dishonest in their dealings with Mr Cubbin and the IBC, that did not occur in the discharge of their duties as a director of White Energy.
In those circumstances, the primary judge found that the conclusion of the Commission with respect to s 184(1) of the Corporations Act could not be sustained.
The primary judge also noted that the individual appellants submitted that they had been denied natural justice (or procedural fairness) in that they had not been given notice, prior to receiving closing written submissions from counsel assisting the Commission, spelling out the way they were said to have acted corruptly or the nature of the alleged criminality and that they had not been cross-examined on the elements of the offence.
The primary judge stated that the correct approach to the question was set out by Wood J in Glynn v Independent Commission Against Corruption (1990) 20 ALD 214 at 218-219. He stated that once the submissions of counsel assisting the Commission were distributed, the individual appellants were in a position to answer them by submissions on the evidence or by making an application to reopen the public hearing. The primary judge pointed out that no such application was made to the Commission and the appellants did not identify any evidence they may have called. The primary judge also stated that although it was not put to any of the individual appellants that they had committed the offences in question, they were cross-examined on the relevant facts that underpinned the Commission's findings.
For these reasons, the primary judge concluded that there had been no denial of procedural fairness.
The primary judge also rejected the challenge made by the corporate appellants to the recommendations in the third report. He gave three reasons for such rejection. The first was that there was no decision or finding which was amenable to review. The second was that the challenge of the individual appellants had failed. The third was that any declaratory relief lacked utility.
[5]
Leave to appeal
Each of the appellants sought leave to appeal. There was no opposition to the grant of leave and it should be granted.
[6]
The appeal of the individual appellants
Each of the individual appellants filed draft amended Notices of Appeal, which shall be referred to as the Duncan notice, the Atkinson notice and, in the case of Messrs McGuigan and Poole who appeared together, the joint notice. The grounds overlap but in essence they assert that the primary judge made the following errors:
1. The primary judge misconstrued the Commission's report in three material respects:
1. First, which only related to Messrs McGuigan and Atkinson, the primary judge erred in failing to take into account the absence of any express finding by the Commission that the conduct found against them involved fraud, rather than only company violations. The result was said to be that, having regard to the rejection by the primary judge of the Commission's conclusion that the conduct involved a contravention of s 184 of the Corporations Act, there was no basis for a finding of corrupt conduct against them: joint notice, Ground 1; Atkinson notice, Ground 9 (the first issue).
2. Second, the primary judge erred in concluding that the Commission's finding of the existence of three official functions, reviewing the creation of the Mt Penny tenement; reviewing the creation of exploration licences; and considering whether to grant a mining lease over the Mt Penny tenement, ought to be read disjunctively: joint notice, Grounds 4(a) and 5; Atkinson notice, Grounds 4 and 6 (the second issue).
3. Third, the primary judge erred in concluding that the expression used by the Commission "the Obeid family involvement", which included involvement in the creation of the tenement, involvement in the allocation of the Mt Penny exploration licence and a beneficial interest in the Mt Penny tenement, could be read disjunctively: joint notice, Grounds 4(b) and 6; Atkinson notice, Grounds 5 and 7 (the third issue).
In the case of the second and third issue, it was contended the primary judge should have concluded the elements were inseverable.
1. The primary judge erred in concluding that the Director-General and the Minister were entitled, in considering whether it was in the public interest to approve a development project in respect of Mt Penny under ss 75I and 75J of the EPA Act, to take into account the involvement of Obeid related entities in the Mt Penny tenement or the means by which the Obeid interest was terminated: joint notice, Ground 3; Atkinson notice, Grounds 2 and 3; Duncan notice, Ground 2 (the fourth issue).
2. Assuming the conduct of Obeid related entities in relation to the Mt Penny tenement or the dealings of the individual appellants with the Obeid related entities were matters which the Director-General could take into account in reporting on a development project under s 75I of the EPA Act, or the Minister could take into account in approving a project under s 75J of that Act, the primary judge erred in his conclusion that it was open to the Commission to conclude that the conduct of the individual appellants could have adversely affected, either directly or indirectly, official functions relating to the grant of a mining lease in respect of the Mt Penny tenement: joint notice, Grounds 2 and 7; Atkinson notice, Grounds 1, 8 and 10; Duncan notice, Ground 1 (the fifth issue).
3. The primary judge erred in concluding that it was open to the Commission to be satisfied that the conduct of the individual appellants constituted a contravention of s 192E(1)(b) of the Crimes Act: joint notice, Ground 8; Atkinson notice, Grounds 11 and 12; Duncan notice, Grounds 3 and 4 (the sixth issue).
4. In addition, by Notice of Contention, the Commission contended that the primary judge erred in finding it was not open to it to conclude that the conduct of those individual appellants who were directors of White Energy constituted a contravention of s 184 of the Corporations Act (the seventh issue).
5. The primary judge erred in failing to find that the individual appellants had been denied procedural fairness: joint notice, Ground 9; Atkinson notice, Grounds 13 and 14 (the eighth issue).
[7]
The statutory requirements for a finding of corrupt conduct
Prior to dealing with the issues raised in the appeal, it is convenient to deal with certain matters of construction of ss 7, 8, 9 and 13(3A) of the ICAC Act which arise in the proceedings.
I have set out ss 7 and 8 of the ICAC Act above at [18]. Section 7 defines corrupt conduct by reference to s 8, whilst its ambit is limited by s 9.
Of relevance in the present case is s 8(2). As the primary judge correctly pointed out, for there to be corrupt conduct within the meaning of that subsection, it is necessary to identify the official function said to be adversely affected and the public official, group or body of public officials or public authority responsible for carrying out that official function. As I indicated above at [23], the effect of the Validation Act in the present case was to include within the ambit of the subsection conduct which could adversely affect the efficacy of the exercise of official functions by a public official if the other preconditions in ss 8(2) and 9 are made out. As was pointed out in Cunneen at [2], in that context the expression "adversely affects the exercise of an official function" means that the official could exercise the function in a different way or make a different decision from what would otherwise be the case. There was no dispute between the parties that any different decision had to be one which could lawfully be made.
Section 8(2) provides that corrupt conduct is conduct that could adversely affect, either directly or indirectly, the exercise of official functions by any public official. The primary judge concluded that the word "could" in that phrase referred to a possibility, although he said the question of the necessary degree of possibility was left open.
With respect to his Honour, in my opinion, the word "could" where it first appears in s 8(2) refers to the capacity of the conduct to adversely affect the exercise of the official function. It is not a question of weighing the possibilities. The task of the Commission in making a finding under s 8(2) is to determine whether or not, on the material before it, the conduct had that capacity.
The word "could" where it is used the second time in s 8(2) has a similar meaning. However, consideration of whether conduct could involve one or other of the matters referred to in s 8(2)(a)-(y) needs to be undertaken in conjunction with the limitation in s 9(1), which, relevantly for the present case, requires that the conduct could constitute a criminal offence. Thus, in the circumstances of the present case, the question to be answered is whether on the material before the Commission it would be open to a judge or a jury properly instructed to convict the person concerned of an offence involving any of the matters in s 8(2)(a)-(y). I have not dealt with the alternatives in s 9(1)(b), (c) and (d) as they are irrelevant to the present case.
That approach to the construction of the section is consistent with what was said by this Court in Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125 at 136, 186-187.
However, it is necessary to consider the introduction of s 13(3A) of the ICAC Act. The section provides that the Commission can only make a finding of corrupt conduct if it is satisfied the person has engaged in, or is engaging in, conduct that constitutes or involves an offence of the kind described in s 9.
The section was introduced in 2005 following a report by Mr Bruce McClintock SC. The Second Reading Speech contained the following remarks concerning the introduction of the section:
"… The bill inserts section 13(3A) into the Act to require ICAC to be satisfied that a person has engaged in, or is engaging in, conduct that constitutes or involves a criminal offence, disciplinary offence, reasonable grounds for dismissal or a substantial breach of an applicable code of conduct before making a finding of corrupt conduct in relation to conduct referred to in section 9(1).
Proposed section 13(3A) addresses Mr McClintock's concern that it is inappropriate to base a finding of corrupt conduct on the mere possibility that the relevant conduct has occurred. It is consistent with the ICAC's approach to making findings of corrupt conduct. Section 13(3A) does not affect the ICAC's power to make a finding under section 9(5)."
Read literally, the section on one view sits uneasily with s 9(1), which refers to conduct which could constitute a criminal offence and s 74B, which precludes a finding that a person has committed a criminal offence. However, there is nothing in the words of the section to suggest it should be read down. Indeed, to read it down to mean no more than that the Commission was required to be satisfied that it was open to a jury to conclude that an offence had been committed would render the section otiose as that issue is already covered by s 9.
It seems to me the section requires, as a necessary precondition to a finding of corrupt conduct, that the Commission is satisfied that the relevant offence has occurred. That does not mean that it is making a finding of criminal guilt or declaring any criminal liability. The section does not require the determination to be made to the criminal standard but requires the Commission itself, as a precondition to jurisdiction at least, to be satisfied the offence has been committed rather than merely that it would be open to a jury to so consider: Australian Communication & Media Authority v Today FM (Sydney) Pty Ltd [2015] HCA 7; 89 ALJR 382 at [44], [79]-[80].
[8]
The first issue: Did the primary judge err in failing to take into account the absence of any express finding by the Commission that the conduct found against Messrs McGuigan and Atkinson involved fraud rather than only company violations?
The issue does not appear to have been dealt with directly by the primary judge. However, he held that although an express finding of financial advantage made against Mr Duncan was not made against Mr McGuigan or Mr Atkinson, the findings against them could be characterised in the same way: see above at [143]. It seems in those circumstances, the primary judge assumed that the Commission found that the conduct of each of those two appellants involved a contravention of s 192E(1)(b) of the Crimes Act.
[9]
The submissions
The submissions of Messrs McGuigan and Poole (the joint submissions), which were adopted by Mr Atkinson on this point, pointed out that it was necessary for two questions to be answered affirmatively before conduct could be regarded as corrupt conduct: first, that the conduct could adversely affect the exercise of official functions by a public official and, second, that it could involve one or more of the matters specified in s 8(2)(a)-(y). It was submitted that all that was relied upon by the Commission in respect of Mr McGuigan was company violations under s 8(2)(s), the only company violation identified being a contravention of s 184(1) of the Corporations Act. He submitted that once the primary judge overturned that finding, there was no basis for a finding of corrupt conduct against Mr McGuigan.
Mr McGuigan submitted that even if it were possible to treat the findings made by the Commission in relation to s 9(1)(a) of the ICAC Act as satisfying the second requirement of s 8(2), it would not be appropriate to do so because first, the finding that conduct could contravene s 192E(1)(b) of the Crimes Act only related to the finding against Mr McGuigan contained in par (c) of the findings against him (see above at [109]) and second, it was not open to the primary judge or this Court to make findings the Commission did not make. It should be noted that in respect of Mr Atkinson, a finding of a contravention of s 192E(1)(b) was only made in respect of par (b) of the findings against him.
The Commission submitted that, as a matter of substance, the Commission had made findings that the conduct of Messrs McGuigan and Atkinson could involve fraud and thus fell within s 8(2)(e) of the ICAC Act. It pointed to the fact that the Commission's similar findings against Mr Duncan were said to involve conduct falling within s 8(2)(e) of that Act. It submitted the failure to refer to s 8(2)(e) in respect of Messrs McGuigan and Atkinson was an oversight.
[10]
Disposition
In D'Amore v Independent Commission Against Corruption [2013] NSWCA 187; 303 ALR 342, Beazley P, with whom I agreed, emphasised that the expressed reasons of an administrative decision-maker should make it apparent that the appropriate reasoning process has been undertaken. Her Honour stated this was particularly the case where the process involves a formal public hearing and where the consequences of adverse findings are grave: at [105]. However, in the succeeding paragraph she stated that the reasons of an administrator should not be over-scrutinised to the extent that infelicity of expression is equated with legal inadequacy: at [106].
In making that comment, Beazley P referred to Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; 185 CLR 259. In that case the plurality made the following remarks at 271-272:
"When the Full Court referred to 'beneficial construction', it sought to adopt an approach mandated by a long series of cases, the best exemplar of which is Collector of Customs v Pozzolanic. In that case, a Full Court of the Federal Court (Neaves, French and Cooper JJ) collected authorities for various propositions as to the practical restraints on judicial review. It was said that a court should not be 'concerned with looseness in the language … nor with unhappy phrasing' of the reasons of an administrative decision-maker. The Court continued: 'The reasons for the decision under review are not to be constructed minutely and finely with an eye keenly attuned to the perception of error.'
These propositions are well settled. They recognise the reality that the reasons of an administrative decision-maker are meant to inform and not to be scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed."
See also Kirby J at 291.
Notwithstanding these remarks and however liberally the findings of an administrative body such as the Commission can be read, the Court in reviewing its decision cannot make findings the Commission did not make, irrespective of whether the findings are available on the evidence before it.
It is in that context that the findings of the Commission relevant to this ground fall to be considered. The question is whether, on a fair reading of the reasons of the Commission, the primary judge erred in concluding that the Commission found that the conduct in question amounted to a contravention of s 192E(1)(b) of the Crimes Act and was conduct which fell within s 8(2)(e) of the ICAC Act.
The Commission's conclusion in relation to all the findings made by it against Messrs McGuigan and Atkinson included findings that the identified conduct was undertaken with the intention of deceiving the IBC as to the involvement of the Obeids in the Mt Penny tenement and that they thereby intended to deceive relevant public officials as to that involvement. In respect of the third finding against Mr McGuigan and the second finding against Mr Atkinson, there was a specific finding that that conduct could contravene s 192E(1)(b) of the Crimes Act which is essentially an offence involving fraud.
It follows in my opinion that in relation to those particular findings, the Commission did conclude that the conduct fell within s 8(2)(e). The fact that it did not state specifically that it did so does not, in my view, affect the validity of that conclusion.
The position is different in respect of the first and second findings against Mr McGuigan and the first finding against Mr Atkinson. In respect of these findings, not only was there no reference to s 8(2)(e) but in contradistinction to the other findings, the Commission stated it was satisfied it involved a contravention of s 184 of the Corporations Act as distinct from s 192E(1)(b) of the Crimes Act. Having regard to the specific nature of the findings, it does not seem to me it is possible to conclude that the Commission did find a contravention of s 192E(1)(b) in respect of those matters. To so conclude would involve the Court making a finding which, on the face of the report, the Commission expressly refrained from making. The Court has no jurisdiction to do so. Indeed to do so would ignore the careful distinction the Commission made in respect of each of the individual appellants as to conduct which contravened s 184 of the Corporations Act and that which contravened s 192E(1)(b) of the Crimes Act.
Thus, if the primary judge was correct in his conclusion concerning s 184 of the Corporations Act, the first and second findings of corrupt conduct against Mr McGuigan and the first finding against Mr Atkinson must be set aside.
[11]
The second and third issues: Did the primary judge err in concluding that the Commission's findings as to the official functions adversely affected and its findings as to the Obeid family involvement could be read disjunctively?
These grounds of appeal were only raised in the joint notice and in the Atkinson notice.
[12]
The submissions
As I indicated earlier, the Commission's findings of the Obeid family involvement encompassed three matters: involvement in the creation of the Mt Penny tenement, involvement in the allocation of the Mt Penny exploration licence and the Obeid family's beneficial interest in the Mt Penny tenement.
The joint submissions referred to the repeated use of the expression "the Obeid family involvement" as encompassing all three elements without any relevant distinction. It was submitted that this demonstrated that they were inseverable.
In support of this submission, senior counsel for Messrs McGuigan and Poole pointed to the opening paragraph of the findings against Mr McGuigan (see above at [109]) where all three elements of involvement, creation, allocation and beneficial interest, are set out together. He submitted that these three elements were prefaced by words to the effect that Mr McGuigan knew of all three matters.
Senior counsel for Messrs McGuigan and Poole then referred to the finding that Mr McGuigan intended to hide the Obeid family involvement, stating that in this formulation there was no specific consideration of any of the three individual elements involved. He continued to point out a number of instances where the generalised reference to the Obeid family involvement was used without any distinction between the three elements and drew particular attention to the finding that Mr McGuigan "failed to discharge his duties … by withholding information about the Obeid family involvement".
In that context, it was pointed out in the joint submissions that the primary judge accepted there was no finding that either Mr McGuigan or Mr Poole had any notice of the corrupt arrangements between Messrs Macdonald and Obeid and that there was no finding of any Obeid involvement in the allocation of the tenement.
Senior counsel for Messrs McGuigan and Poole referred to the reliance placed by the primary judge, and the Commission in its submissions, on the word "or" in the opening paragraph of the findings against the individual appellants as supporting the proposition that the three elements should be read disjunctively and applied to the individual appellants to the extent that each of the matters fell within their respective knowledge. He submitted that that did not take account of the way the report was constructed, which involved making individual findings against each appellant but referring in all cases to the three elements without distinction. He submitted it would have been an elementary task to make separate findings on each element against each appellant.
Similar submissions were made in respect of the three official functions the Commission found were adversely affected. It was submitted that a composite finding was made and no separate consideration was given to the function of granting a mining lease.
It was submitted that in those circumstances, the finding of corrupt conduct could not be sustained.
[13]
Disposition
In dealing with what I have described as the first issue on the appeal, I have already referred to the manner in which the report should be read.
It is important to bear in mind that the report did not only relate to the conduct of the individual appellants but also relevantly to the role of Mr Macdonald and members of the Obeid family.
I have summarised the report and there is no suggestion in it of any involvement by Messrs McGuigan, Poole or Atkinson in matters relating to the tenements until the events leading up to the entry into the Heads of Agreement in June 2009: see above at [58]-[60]. In Chapter 27 of the report, the Commission made express findings as to the knowledge of Messrs McGuigan and Poole as at that date: see above at [64]. The Commission then dealt in detail with the steps taken by the individual appellants to remove the Obeids from the joint venture and the failure to disclose their involvement to the IBC.
Importantly, the Commission made no finding that Obeid related entities were involved in the initial allocation of the Mt Penny exploration licence to Monaro.
Further, in Chapter 33 of the report, the Commission made an express finding of an agreement between Messrs Macdonald, Obeid and Moses Obeid, including that Mr Macdonald acted improperly in his public duty as a Minister by arranging for the creation of the Mt Penny tenement for the benefit of the Obeid family and supplying confidential information in respect of the bid process. The findings are particularised in some detail and there is no suggestion that any of the individual appellants, with the exception of Mr Duncan, were involved. In relation to Mr Duncan there is an express finding that although he requested the bid process be reopened and received confidential information, it did not amount to corrupt conduct.
It is in that context that the finding of the Commission against Messrs McGuigan, Poole and Atkinson falls to be considered. The first finding against each of these appellants was that they were aware that if the NSW Government knew that the Obeids had been involved in any of the three ways comprised in "the Obeid family involvement", the disjunctive element being provided by the use of the word "or" in the opening paragraph, then the exploration licences or potential mining lease would be in jeopardy. That is not a finding which goes to the actual knowledge of any corrupt conduct on behalf of the individual appellants but rather, a statement that the individual appellants knew that if the NSW Government was aware, for example, that the Obeids had a beneficial interest in the Mt Penny tenement, the Mt Penny exploration licence would be in jeopardy. It was a finding that, in my opinion, was open to the Commission to make. It was open for the Commission to infer that Messrs McGuigan and Poole had that knowledge from the relatively secret manner in which the Obeids were bought out of the venture (a transaction in which Messrs McGuigan and Poole, at least, were involved), the conversation between Messrs Chalabian and Poole to which I have referred above at [81], and the evidence of Messrs McGuigan and Atkinson to which I have referred above at [74].
Further, in considering the findings of non-disclosure of the Obeid involvement made against each of Messrs McGuigan, Poole and Atkinson, any non-disclosure would be limited to the actual knowledge of those involved as found by the Commission. There is no reason to read the report as finding that Messrs McGuigan, Poole or Atkinson concealed from the IBC matters which were not within their respective knowledge, particularly where the Commission had given detailed consideration to the actual knowledge of the Obeid involvement held by each of the individual appellants.
The same conclusion can be reached in relation to the official functions. The findings are expressed as alternatives. The fact that only one of the three alternative official functions was in fact an official function does not, in my view, vitiate the finding so far as that particular function is concerned.
In those circumstances, these grounds of appeal are not made out.
[14]
The fourth issue: Did the primary judge err in concluding that the Director-General or the Minister were entitled to take into account the involvement of Obeid related entities in the Mt Penny tenement and the means by which that involvement was terminated in considering whether it was in the public interest to approve a development project in respect of Mt Penny under Pt 3A of the EPA Act?
[15]
The legislation
Part 3A of the EPA Act was inserted into the Act in 2005 to deal with what were described as major infrastructure projects. Section 75B of the EPA Act set out the scope of its operation. The section, so far as is relevant, provided as follows:
"75B Projects to which Part applies
(1) General
This Part applies to the carrying out of development that is declared under this section to be a project to which this Part applies:
(a) by a State environmental planning policy, or
(b) by order of the Minister published in the Gazette (including by an order that amends such a policy).
The carrying out of particular or a class of development, or development for a program or plan of works or activities, may be so declared.
(2) Kinds of projects
The following kind of development may be declared to be a project to which this Part applies:
(a) major infrastructure or other development that, in the opinion of the Minister, is of State or regional environmental planning significance,
(b) major infrastructure or other development that is an activity for which the proponent is also the determining authority (within the meaning of Part 5) and that, in the opinion of the proponent, would (but for this Part) require an environmental impact statement to be obtained under that Part."
It is common ground that the development of the Mt Penny tenement into a coalmine was brought within the ambit of Pt 3A by Sch 1 of the State Environmental Planning Policy (Major Development) 2005 (NSW).
Section 75H provided for the proponent of such a project to submit to the Director-General an environmental assessment of the project. The section provided as follows:
"75H Environmental assessment and public consultation
(1) The proponent is to submit to the Director-General the environmental assessment required under this Division for approval to carry out the project.
(2) If the Director-General considers that the environmental assessment does not adequately address the environmental assessment requirements, the Director-General may require the proponent to submit a revised environmental assessment to address the matters notified to the proponent.
(3) After the environmental assessment has been accepted by the Director-General, the Director-General must, in accordance with any guidelines published by the Minister in the Gazette, make the environmental assessment publicly available for at least 30 days.
(4) During that period, any person (including a public authority) may make a written submission to the Director-General concerning the matter.
(5) The Director-General is to provide copies of submissions received by the Director-General or a report of the issues raised in those submissions to:
(a) the proponent, and
(b) if the project will require an environment protection licence under Chapter 3 of the Protection of the Environment Operations Act 1997 - the Department of Environment, Climate Change and Water, and
(c) any other public authority the Director-General considers appropriate.
(6) The Director-General may require the proponent to submit to the Director-General:
(a) a response to the issues raised in those submissions, and
(b) a preferred project report that outlines any proposed changes to the project to minimise its environmental impact, and
(c) any revised statement of commitments.
(7) If the Director-General considers that significant changes are proposed to the nature of the project, the Director-General may require the proponent to make the preferred project report available to the public."
Section 75I required the Director-General to give a report on the project to the Minister for the purpose of him or her considering whether to approve it. It was in the following terms:
"75I Director-General's environmental assessment report
(1) The Director-General is to give a report on a project to the Minister for the purposes of the Minister's consideration of the application for approval to carry out the project.
(2) The Director-General's report is to include:
(a) a copy of the proponent's environmental assessment and any preferred project report, and
(b) any advice provided by public authorities on the project, and
(c) a copy of any report of the Planning Assessment Commission in respect of the project, and
(d) a copy of or reference to the provisions of any State Environmental Planning Policy that substantially govern the carrying out of the project, and
(e) except in the case of a critical infrastructure project - a copy of or reference to the provisions of any environmental planning instrument that would (but for this Part) substantially govern the carrying out of the project and that have been taken into consideration in the environmental assessment of the project under this Division, and
(f) any environmental assessment undertaken by the Director-General or other matter the Director-General considers appropriate, and
(g) a statement relating to compliance with the environmental assessment requirements under this Division with respect to the project."
Section 75J provided for ministerial approval of the carrying out of the project, relevantly, it provided as follows:
"75J Giving of approval by Minister to carry out project
(1) If:
(a) the proponent makes an application for the approval of the Minister under this Part to carry out a project, and
(b) The Director-General has given his or her report on the project to the Minister,
the Minister may approve or disapprove of the carrying out of the project.
(2) The Minister, when deciding whether or not to approve the carrying out of a project, is to consider:
(a) the Director-General's report on the project and the reports, advice and recommendations (and the statement relating to compliance with environmental assessment requirements) contained in the report, and
(b) if the proponent is a public authority - any advice provided by the Minister having portfolio responsibility for the proponent, and
(c) any findings or recommendations of the Planning Assessment Commission following a review in respect of the project."
Section 75V provided that particular authorisations could not be refused if they were necessary to carry out an approved project. Section 75V(1)(c) provided that one such authorisation was a mining lease under the Mining Act. It should be noted that this section did not apply to an application for a renewal of an authorisation: s 75V(3)(a).
Section 75Z contained a power to make regulations for the purpose of the Act. Of relevance is cl 8B of the EPA Regulation which was in the following terms:
"8B Matters for environmental assessment and Ministerial consideration
The Director-General's report under section 75I of the Act in relation to a project is to include the following matters (to the extent that those matters are not otherwise included in that report in accordance with the requirements of that section):
(a) an assessment of the environmental impact of the project,
(b) any aspect of the public interest that the Director-General considers relevant to the project,
(c) the suitability of the site for the project,
(d) copies of submissions received by the Director-General in connection with public consultation under section 75H or a summary of the issues raised in those submissions.
Note. Section 75J(2) of the Act requires the Minister to consider the Director-General's report (and the reports, advice and recommendations contained in it) when deciding whether or not to approve the carrying out of a project."
It is also necessary in considering this issue to have regard to the provisions of the Mining Act. Section 13 deals with applications for an exploration licence. At the relevant time, it provided as follows:
"13 Application for exploration licence
(1) Any person may apply for an exploration licence.
(2) To avoid doubt, the owner of privately owned minerals may apply for an exploration (mineral owner) licence or any other exploration licence with respect to those minerals.
Note. The owner of privately owned minerals may choose to apply for an ordinary exploration licence with respect to those minerals, rather than an exploration (mineral owner) licence. In relation to exploration (mineral owner) licences see section 24(4).
(3) An application that relates to land in a mineral allocation area may not be made, except with the Minister's consent, in relation to any group of minerals that includes an allocated mineral.
(4) An application for an exploration licence must:
(a) specify the group or groups of minerals in respect of which the application is made, and
(b) be lodged with the Director-General, and
(c) be accompanied by the required information and the application fee prescribed by the regulations, and
(d) if the application is for an exploration (mineral owner) licence with respect to privately owned minerals that have more than one owner, be made by all the owners.
(5) The required information is as follows:
(a) a description, prepared in the approved manner, of the proposed exploration area,
(b) particulars of the financial resources and relevant technical advice available to the applicant,
(c) particulars of the program of work proposed to be carried out by the applicant in the proposed exploration area,
(d) particulars of the estimated amount of money that the applicant proposes to spend on prospecting in that area,
(e) if the application is for an exploration (mineral owner) licence, evidence that the minerals to which the application relates are owned by the applicant,
(f) any other information that is prescribed by the regulations.
(6) If there is more than one applicant for the licence, a reference in subsection (5) to the applicant is a reference to each applicant."
Section 51 deals with applications for a mining lease. It was in the following terms:
"51 Application for mining lease
(1) Any person may apply for a mining lease.
(2) To avoid doubt, the owner of privately owned minerals may apply for a mining (mineral owner) lease or any other mining lease with respect to those minerals.
Note. The owner of privately owned minerals may choose to apply for an ordinary mining lease with respect to those minerals, rather than a mining (mineral owner) lease. In relation to mining (mineral owner) leases see section 68(4).
(3) An application that relates to land in a mineral allocation area may not be made in relation to an allocated mineral except:
(a) by the holder of an exploration licence or assessment lease over that land in respect of that mineral, or
(b) with the Minister's consent.
(4) An application for a mining lease must:
(a) specify the mineral or minerals, or the mining purpose or mining purposes, in respect of which the application is made, and
(b) be lodged with the Director-General, and
(c) be accompanied by the required information and the application fee prescribed by the regulations, and
(d) if the application is for a mining (mineral owner) lease with respect to privately owned minerals that have more than one owner, be made by all the owners.
(5) The required information is as follows:
(a) a description, prepared in the approved manner, of the proposed mining area,
(b) an assessment of the mineral bearing capacity of land in that area and of the extent of any mineral deposits in that land,
(c) particulars of the financial resources and technical advice available to the applicant,
(d) particulars of the program of work proposed to be carried out by the applicant in the proposed mining area,
(e) if the application is for a mining (mineral owner) lease, evidence that the minerals to which the application relates are owned by the applicant,
(f) any other information that is prescribed by the regulations.
(6) If there is more than one applicant for the lease, a reference in subsection (5) to the applicant is a reference to each applicant."
Section 63 deals with the power of the decision-maker in relation to applications. Relevantly, it was in the following terms:
"63 Power of decision-maker in relation to applications
(1) After considering an application for a mining lease, the decision-maker:
(a) may grant to the applicant a mining lease over all or part of the land over which a lease was sought, or
(b) may refuse the application.
(2) Without limiting the generality of subsection (1) or any other provision of this Act, an application may be refused on any one or more of the following grounds:
(a) that the applicant (or, in the case of an applicant that is a corporation, a director of the corporation) has contravened this Act or the regulations (whether or not the person has been prosecuted or convicted of any offence arising from the contravention) or has been convicted of any other offence relating to mining or minerals,
(b) that the decision-maker reasonably considers that the applicant provided false or misleading information in or in connection with the application or any report provided under this Act for or with respect to the lease."
Section 65 provides that the Minister must not grant a mining lease unless an appropriate development consent is in force in respect of the land in question. It was common ground that such consent was required to be given under Pt 3A of the EPA Act and that once such approval was given, there was no power to refuse a mining lease.
[16]
The submissions
The joint submissions on this ground were adopted by Mr Atkinson in his submissions. Mr Duncan relied on separate submissions which were essentially to the same effect.
Senior counsel for Messrs McGuigan and Poole identified the central controversy as being whether the public interest for the purpose of cl 8B of the EPA Regulation extended beyond environmental concerns to include general concerns such as the matters identified by the Commission. He submitted that, insofar as these findings related to corrupt dealings in the grant of the Mt Penny exploration licence, there was no necessary connection between an application for the grant of a mining lease and the holder of an exploration licence as s 55 of the Mining Act did not require an applicant for a mining lease to be the holder of an exploration licence over the tenement in question.
In the joint submissions, Messrs McGuigan and Poole submitted that, in that context, the primary judge erred in relying on s 63(2) of the Mining Act in light of the clear terms of s 75V(2) of the EPA Act. The joint submissions also referred to the limited class of matters referred to in s 63(2) of the Mining Act, namely, either a contravention of that Act (s 63(2)(a)) or what senior counsel for Messrs McGuigan and Poole described as a specific and limited species of dishonest conduct (s 63(2)(b)). They submitted that it was not capable to draw from this provision an inference that the matters found by the Commission could be taken into account in considering whether or not to grant development approval.
In relation to cl 8B of the Regulation, senior counsel for Messrs McGuigan and Poole accepted that the report of the Director-General could deal with aspects of the public interest which had not been dealt with by the earlier processes, but submitted that that did not mean that the public interest to be considered went beyond planning and environmental matters.
Senior counsel for Messrs McGuigan and Poole also submitted that the meaning and effect of the expression "public interest" is derived by reference to the subject matter, scope and purpose of the statute, but did not extend to matters extraneous to any object the legislation had in view.
Senior counsel for Messrs McGuigan and Poole also submitted that the conclusion of the primary judge on this issue seemed to be based on the assumption that the ability to take the matters in question into account was desirable. He submitted that it was a long bow to draw to reach that conclusion based on the EPA Regulation, in circumstances where neither the EPA Regulation itself, nor the EPA Act, made any such suggestion. He submitted that cl 8B of the EPA Regulation is to be found in the context of legislation which is essentially impersonal and not concerned with the identity of the applicant but rather the land itself and its use, with any approval enuring for the benefit of subsequent landholders and occupiers.
In the joint submissions, Messrs McGuigan and Poole submitted that the various provisions in Div 2 of Pt 3A of the EPA Act reinforced the proposition that the public interest for the purpose of cl 8B of the EPA Regulation was confined to environmental matters. They pointed to the fact that s 75H was directed to an environmental assessment, whilst the other matters referred to in that section and s 75I were also directed to environmental matters. Senior counsel for Messrs McGuigan and Poole submitted that if the criminality or possible criminality of an applicant was a relevant matter to be taken into account, it would have been expected that the legislation would state so.
In his written submissions, Mr Duncan referred to the fact that s 5 of the EPA Act included amongst its objects the promotion and co-ordination of the orderly and economic development of the land, but submitted that there was nothing to suggest that either the Director-General or the Minister were empowered under Pt 3A to review or even second-guess decisions by other authorities pursuant to other legislation. He submitted that if that proposition was correct, the circumstances in which the tenement was created, or the Mt Penny exploration licence granted, was a matter extraneous to their decision.
The Commission submitted that the general principle that planning law is concerned with the use of the land as opposed to the identity of the users does not determine the scope of permissible considerations under Pt 3A. It submitted that the applicant's proposition depended upon public interest in Pt 3A being construed narrowly such that the Minister and the Director-General were precluded from taking into account the circumstances of the creation of the tenement and the removal of the Obeid interest. It submitted there was nothing in the scope or purpose of the Act to require it to be so constrained.
The Commission submitted that the language of cl 8B of the EPA Regulation and the structure of the Act indicated that the Director-General and the Minister were not confined to aspects of the public interest that involved environmental assessments. It also submitted, referring to Minister for Planning v Walker (2008) 161 LGERA 253 at [39], that irrespective of the content of the report, it is implicit in the statutory scheme that the Minister's decision whether or not to grant approval depends on a consideration of the public interest and that this requirement operates at a higher level of generality.
The Commission submitted that the breadth of the concept of public interest is reinforced by the special character of Pt 3A approval, which effectively trumps the operation of various other Acts by virtue of s 75V of the EPA Act. It submitted that in exercising his powers under s 75J, the Minister would be entitled to consider matters ordinarily relevant in granting a mining lease. Having regard to the broad scope of s 63 of the Mining Act, the Commission argued that it could hardly be suggested that the Minister could not have regard to corruption in the process which led to the creation of the tenement and to the grant of the Mt Penny exploration licence.
The Commission submitted that when faced with a discretionary question of whether or not it was in the public interest to approve the project, the Minister could take into account the fact that the application involved the exploitation of a tenement that existed as a result of a corrupt process. It submitted that the contention that this could not be taken into account was not only surprising but absurd and that this conclusion was supported by an examination of the objects of the legislation set out in s 5 of the EPA Act.
Senior counsel for the Commission emphasised that the Minister was not obliged to grant project approval even if recommended by the Director-General. He submitted that to suggest that the Minister, in considering the public interest, could only take into account the mandatory considerations that the Director-General's report was required to consider under cl 8B of the EPA Regulation was not something required by the Act. He submitted that if the matter in question could rationally be engaged in considering the public interest, then the Minister is entitled to take it into account.
The Commission submitted that the primary judge did not rely on s 63(2) in reaching his conclusion, but rather, found it confirmatory of the conclusion he reached. In any event, it submitted that the primary judge's reliance on s 63(2) was not misplaced. It submitted the primary judge was correct in concluding that the reference to particular forms of dishonesty in s 63(2) counted against the submission that the Minister should be precluded from having regard to a particular form of dishonesty, namely corrupt conduct of the nature found by the Commission, in considering whether the grant of the mining lease was against the public interest.
The Commission referred to cl 2A in Sch 6A of the EPA Act which, it submitted, confirmed that even if the Director-General's report did not deal with the public interest under cl 8B(b), the Minister was authorised to take the public interest into account in deciding whether or not to approve a project under Pt 3A. Clause 2A of Sch 6A was inserted into the Act as part of transitional arrangements consequent upon the repeal of Pt 3A. It commenced operation in May 2014.
In the joint submissions, Messrs McGuigan and Poole submitted that even if in form cl 2A of Sch 6A purported to have a retrospective operation, a finding of corrupt conduct could not be maintained by reference to a legislative provision which was not in existence at the time of the conduct. They submitted the clause did not extend or otherwise define what constitutes the public interest. They also submitted that, in amending the legislation, the legislature sought to amend a perceived deficiency, namely that the identity of the applicant for approval was not a matter which could be taken into account. They submitted this tended to support the construction of the legislation for which they contended, as it stood at the relevant time
Messrs McGuigan and Poole also submitted that the primary judge erred by considering the ambit of the public interest by reference to what the Commission found concerning the Obeid involvement, rather than by reference to the actual knowledge of the appellants. It is convenient to address this matter in dealing with the fifth issue.
[17]
Disposition
It is important to bear in mind that the question raised by this ground is not a question of whether the decision-maker must take conduct of the nature of that found by the Commission into account in determining whether to approve the development application, but rather, whether he or she was entitled to do so: Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; 162 CLR 24 (Peko-Wallsend) at 39-40.
It also must be borne in mind that the approval of a development project in the present case carried with it the grant of a mining lease. When the ongoing relationship and obligations imposed under such a lease, entered into in accordance with s 72 of the Mining Act and Pt 5 Div 4 of that Act, are considered, it is apparent that approval did not amount merely to the approval of a development project.
It is convenient to deal with the issue first by reference to the requirement in cl 8B of the EPA Regulation that the Director-General report on any aspect of the public interest he or she considers relevant to the project. In O'Sullivan v Farrer [1989] HCA 61; 168 CLR 210 at 216, the plurality pointed out that the expression "the public interest", when used in a statute, imports a value judgment to be made by reference to undefined factual matters confined only "in so far as the subject matter and the scope and purpose of the statutory enactments may enable … given reasons to be [pronounced] definitely extraneous to any objects the legislature could have had in view": citing Water Conservation and Irrigation Commission (NSW) v Browning [1947] HCA 21; 74 CLR 492 at 506; see also Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2012] HCA 36; 246 CLR 379 at [42].
It is correct that planning approvals generally are concerned with the use of the land as distinct from the identity of the applicant for approval. In Eaton & Sons v Warringah Shire Council [1972] HCA 33; 129 CLR 270, Stephen J said a consent is essentially impersonal in the sense it is not limited to the applicant but is a consent to the world at large and thus essentially impersonal: at 293; see also House of Peace Pty Ltd v Bankstown City Council [2000] NSWCA 44; 48 NSWLR 498 (House of Peace) at [22]-[24]; Jonah Pty Ltd v Pittwater Council [2006] NSWLEC 99; 144 LGERA 408 at [19]-[20] and Kouflidis and Jenquin Pty Ltd v Corporation of the City of Salisbury (1982) 29 SASR 321 at 323-324. In the latter two cases, the Court held that prior unlawful use of the land was not a relevant factor to be taken into account in considering whether to grant a development application.
In Minister for Planning v Walker [2008] NSWCA 224; 161 LGERA 423, this Court considered the validity of an approval under Pt 3A of the EPA Act. Hodgson JA, with whom Campbell and Bell JJA agreed, said that it was a condition of validity of the approval that the Minister consider the public interest. He made the following remarks at [39]-[41]:
"[39] In my opinion, it is a condition of validity that the Minister consider the public interest. Although that requirement is not explicitly stated in the EPA Act, it is so central to the task of a Minister fulfilling functions under a statute like the EPA Act that, in my opinion, it goes without saying. Any attempt to exercise powers in which a Minister did not have regard to the public interest could not, in my opinion, be a bona fide attempt to exercise his or her powers, and so would not even pass the Hickman test.
[40] There is some confirmation of this from Regulation 8B; and also from s 79C of the EPA Act, dealing with development consents by consent authorities, which specifies the public interest as a factor to be taken into account. Similarly, the Land and Environment Court, dealing with appeals under s 75L and s 75Q of the EPA Act, is required to have regard to the public interest: Land and Environment Court Act 1979 (NSW), s 39(5).
[41] However, this requirement, so stated, operates at a very high level of generality, and does not of itself require that regard be had to any particular aspect of the public interest: cf Walsh v Parramatta Council [2007] NSWLEC 255 at [60] … One would generally presume that a Minister making a decision does have regard to the public interest, and one would look for substantial evidence to make out a case that the Minister had not had regard to the public interest."
In dealing first with cl 8B of the EPA Regulation, the authorities to which I have referred do provide support for the proposition that the identity of the applicant and his or her past conduct is irrelevant to consideration of an approval under Pt 3A of the EPA Act. However, this does not take into account the fact that the approval in the present case effectively carries with it the grant of a mining lease. Such a lease will carry with it ongoing obligations on the lessee. Further, it is only transferrable with the consent of the relevant decision-maker: Mining Act, s 121. Thus, unlike a development consent simpliciter, it cannot be said that a mining lease is not personal to the applicant: cf House of Peace at [23].
In that context, I am of the view that the Director-General would be entitled, in considering the public interest, pursuant to cl 8B to take into account the circumstances in which the Mt Penny exploration licence was acquired and the dealings which led up to the application for a development consent, carrying with it the grant of a mining lease. Even if that is incorrect and the Director-General was limited to a consideration of strictly environmental matters, the Minister, in my opinion, could take the other matters into account in considering whether the mining lease should be granted. The Minister's discretion, in my opinion, is only limited by the scope and purpose of the statutory enactment in question: see the cases cited above at [226]. As was pointed out in Warkworth Mining Ltd v Bulga Milbrodale Progress Association Inc [2014] NSWCA 105; 86 NSWLR 527 at [299], the range of matters relevant to the public interest is very wide. The objects of the EPA Act are stated to include the proper development of natural and artificial resources for the purpose of promoting the social and economic welfare of the community (s 5(a)(i)) and the promotion and co-ordination of the orderly and economic use and development of land (s 5(a)(ii)). It seems to me that having regard to these objects, it would be appropriate for the Minister, in considering the public interest, to take into account the fact that the steps leading up to the application for development consent and the associated grant of a mining lease were tainted by corrupt conduct, something hardly consistent with the orderly economic use and development of the land.
The appellants contended that the primary judge erred in what was described as his reliance on the Mining Act. However, the fact that approval under Pt 3A of the EPA Act led without more to the grant of a mining lease, does not mean that the Minister in granting approval under Pt 3A cannot take into account public interest considerations which would be relevant if approval was sought under s 63 of the Mining Act. To the contrary, having regard to the effect of the approval under Pt 3A, such considerations would seem to me to be directly relevant.
If approval was required under the Mining Act, s 63(2) of that Act specifies particular criminality or misconduct which may be taken into account in refusing to grant a mining lease. The provision was expressly stated not to limit the generality of the discretion conferred on the decision-maker by s 63(1) of that Act. It seems to me that the decision-maker, in those circumstances, would be entitled to take into account other forms of criminality or misconduct which he or she considered led to the conclusion that the grant of the lease was against the public interest.
The appellants also contended that the circumstances surrounding the grant of the Mt Penny exploration licence were irrelevant. Messrs McGuigan and Poole pointed to the fact that it was not a prerequisite to the grant of a mining lease that the applicant for such a lease hold an exploration licence and Mr Duncan submitted it was not within the power of the Minister or Director-General to second-guess the decision of other authorities. Both these matters may be accepted. However, that does not mean that it would not be open to the Minister to take into account the circumstances in which an exploration licence was granted in considering whether it was in the public interest to approve a development application which would result in the grant of a mining lease over the tenement in question to the holder of that licence.
The appellants also criticised the approach of the primary judge, submitting that he concluded that it was desirable for the matters raised by the Commission to be taken into account in considering the public interest rather than determining whether those matters fell within the public interest having regard to the scope and purpose of the statute. I agree that even if it seems desirable that a particular matter be considered, that matter cannot be taken into account if it is extraneous to the approval contemplated by the statute. However, for the reasons which I have given, I do not think that conduct of the nature complained of falls within that category.
It follows that the primary judge did not err in concluding that the findings by the Commission could be taken into account in considering whether it was in the public interest to grant a mining lease.
In reaching this conclusion, I have not found it necessary to deal with the effect of cl 2A of Sch 6A of the EPA Act. However, contrary to the appellants' submissions, I do not think the insertion leads to the conclusion that it sought to remedy a perceived deficiency in the Act, as distinct from clarifying what always was the position: Allina Pty Ltd v Commissioner of Taxation (1991) 28 FCR 203 at 212.
[18]
The fifth issue: Did the primary judge err in concluding that the conduct of the individual appellants in failing to disclose the involvement of Obeid related entities in the Mt Penny tenement could have adversely affected official functions relating to the grant of a mining lease in respect of that tenement.
There are essentially three questions involved in this issue. First, did the Commission and the primary judge err in proceeding on the assumption that the relevant disclosure comprised all matters surrounding the involvement of Obeid related entities in the tenement, rather than the involvement of Obeid related entities to the extent it was known to the individual appellants. Second, having regard to what was already in the public domain concerning the Obeid involvement, would the conduct concerned, namely the relevant non-disclosure, have the capacity to affect the exercise of official functions in relation to the grant of a mining lease over the tenement and third, where it was contended that disclosure was only required to be made to the IBC, could that disclosure indirectly affect the official functions in respect of the grant of a mining lease for the land.
[19]
The submissions
In the joint submissions, it was contended that the primary judge erred in treating the individual appellants as knowing what the Commission found regarding the involvement of Mr Obeid and Obeid related entities. The joint submissions pointed to the fact that there was no finding that Mr McGuigan or Mr Poole had any knowledge of the involvement of Obeid related entities in the creation of the tenement or of the deliberations which resulted in the tenement being granted to Cascade. It was submitted that all that could be inferred from the knowledge of Messrs McGuigan and Poole was that the Obeid family had some involvement in the tenement and that the public might think the Obeids played some part, perhaps improperly, in the creation of the tenement. It submitted that a public official could not reject an application for a mining lease on that basis. It was submitted by senior counsel for Messrs McGuigan and Poole that in those circumstances, the conduct could not adversely affect the exercise of official functions in the grant of a mining lease.
In dealing with the transactions between Mr Obeid, his associates and Cascade, senior counsel for Messrs McGuigan and Poole submitted that the only information his clients had concerning the Obeid involvement was that Cascade had come second in the evaluation rankings. He described the land agreement between Cascade and the owners of Cherrydale, Donola and Coggan Creek (see above at [7]) as a not unusual transaction between a prospective miner and a landholder and submitted it was difficult to see why simply granting an interest in a prospective venture consequent upon the approval of exploration licences could amount to corrupt conduct.
In relation to what I have described as the third question arising under this issue, the joint submissions pointed out that the conduct the primary judge found was capable of amounting to corrupt conduct was the failure to disclose the "Obeid involvement" to the IBC and the conduct in arranging for the extraction of the Obeids from the Mt Penny joint venture.
The joint submissions pointed out that the primary judge failed to answer the question of the necessary degree of probability or possibility imposed by the use of the word "could" where it is first used in s 8(2) of the ICAC Act. It was submitted that, in the context of legislation exposing citizens to the possibility of being declared to have engaged in corrupt conduct, the ICAC Act should not be construed so as to make the outcome turn upon individualistic opinions as opposed to an objective standard.
It was submitted in the joint submissions that the word "adversely" required, at a minimum, that the degree of probability or possibility of the effect of conduct on an official function be capable of objective identification on rational grounds. It was submitted the possibility of adverse effect must be real and sensible.
Senior counsel for Messrs McGuigan and Poole submitted that the word "could", where first used in s 8(2) of the ICAC Act, referred to present capability and that absent actual effect, the subsection will only apply if there is a capability for an adverse effect to result. He submitted the more remote the impugned conduct was from the process of administration contemplated by the statute, the greater the need to identify the precise conduct which could adversely affect the exercise of the function. He emphasised that in the present case, the suggested non-disclosure was to the IBC, not the government. He submitted that the reasoning of the primary judge went no higher than the "possibility perhaps probability" that the information if it had been given to the IBC could or would have got into the public domain. He referred to the press release issued by White Energy on the termination of the negotiations to acquire the shares in Cascade (see above at [107]) and noted that the announcement contained no reference to the reasons for termination.
In that context, it was submitted in the joint submissions that the evidence of Mr Cubbin was not that the Obeid involvement would have been disclosed to the ASX had it become known, but rather, that the transaction would have been terminated to avoid the adverse publicity which disclosure would have involved. It was submitted that the primary judge was referred to the evidence of Mr Flannery to the effect that there was no need to refer to the reasons for termination involving a possible payment of $28 million to Mr Obeid or others, nor was there any requirement to do so, but the primary judge did not take account of that evidence.
It was submitted that a mere failure to provide information to a public official that might be of interest to the official in the possible future exercise of an official function, where the information is not legally required to be disclosed and not legally requisite to the exercise of the function, does not negatively affect, impair or prejudice the exercise of that function. In those circumstances, it was submitted that satisfaction of the requirement of an "adverse" effect was not established.
Senior counsel for Messrs McGuigan and Poole also criticised the conclusion of the primary judge that the Commission was entitled to reason in the manner I have set out above at [74]. He submitted the essence of the reasoning was in effect not to tell the IBC the Obeids were involved because it might get out to the NSW Government and there was a possibility that they would be interested. He submitted it was farfetched and fanciful to suggest that the requirement that conduct could adversely affect the exercise of official functions by a public official extends to possibilities of that nature.
The primary submissions on what I have described as the second question were made by Mr Duncan.
Senior counsel for Mr Duncan submitted that it was essential for any analysis of the report to identify what his client could disclose. He pointed to the fact that Mr Duncan had no knowledge of, or any involvement with, the corrupt dealings between Messrs Macdonald and Obeid concerning the creation of the Mt Penny tenement or the grant of the Mt Penny exploration licence. He accepted that Mr Duncan knew of the Obeid interest in the joint venture and their ownership interest in the land. He also accepted that it was open to find that Mr Duncan was involved with Mr Obeid in putting together the joint venture and in extracting the Obeid interest from it. He submitted that in those circumstances, what must be posited is some interim process of investigation which could have produced some facts which could have influenced a public official to refuse to grant approval in the public interest. He submitted the Commission did not undertake any investigation to see if that would have occurred.
Mr Duncan, in his written submissions, pointed to s 13(3A) of the ICAC Act which provided for what he described as a jurisdictional fact, namely that the Commission is only permitted to make a finding of corrupt conduct if satisfied the person concerned has engaged in or is engaging in a criminal offence. He submitted, referring to R v Connell; Ex parte The Hetton Bellbird Collieries Ltd [1944] HCA 42; 69 CLR 407 (Connell) at 430, that where the existence of a particular opinion is made a condition of the exercise of power, legislation conferring the power is treated as referring to an opinion which can be formed by a reasonable person who correctly understands the meaning of the law under which he or she acts.
Mr Duncan noted that the fact that the Obeid family had interests in the land the subject of the Mt Penny tenement was in the public domain. He referred to the AFR article and to the question asked by the Honourable Lee Rhiannon MLC in the Legislative Council to the following effect:
"Following the call for tenders for the exploration licence at Mount Penny near Bylong did the Minister have any conversations with Mr Eddie Obeid in relation to the Mount Penny licence or the preferred tenderer, a company called Monaro Mining? Is the Minister aware that Locaway, a company owned by members of Mr Obeid's family, had bought property in the Bylong area immediately prior to the tender process for Mount Penny and that a childhood friend of Mr Obeid's son Moses, Mr Justin Lewis, has bought property adjacent to the Locaway property at Bylong?"
Mr Duncan submitted that, in those circumstances, there was ample basis for inquiry to be made as to the possibility of corrupt conduct involving Messrs Macdonald and Obeid in the creation of the tenement and the process by which the Mt Penny exploration licence was granted. He submitted that if that was correct, the failure to disclose the joint venture to the IBC could not possibly have affected the prospect of the government uncovering circumstances involving the corruption by Messrs Macdonald and Obeid.
Mr Duncan, in his written submissions, also referred to the finding of the primary judge that the details of the joint venture and the extraction of the Obeid interest from it were of an explosive quality and far more damning in terms of leaning towards corruption than what was suggested by the AFR article and Ms Rhiannon's question: see above at [136]. He submitted the Commission made no finding that the information had an explosive quality and more importantly, it did not deal with the question of whether it would cause a public authority to pursue a course different to what otherwise would have been contemplated. He submitted that having regard to the Commission's concession as to the inevitability of action responding to the Obeids' potential profit from the venture, the question could only be answered in the negative.
The concession referred to was contained in a submission made to the primary judge in the following terms:
"Putting to one side for the moment questions about the particular official functions that could be exercised in relation to [the matters allegedly concealed by the Applicant], it cannot be seriously contested as a factual proposition that the NSW Government would have been interested to know that the Obeids had been involved in the creation and grant of, and/or stood to gain financially from the exploitation of, the Mt Penny exploration licence. Such knowledge would inevitably have prompted investigation and, unless the circumstance was found to be an innocent and extraordinary coincidence, action."
Mr Duncan submitted that what the Commission described as the inevitability of investigative and other action meant that the non-disclosure by his client of matters within his knowledge could not have adversely affected the exercise of official functions by a public official.
Mr Duncan also submitted that the primary judge was incorrect in concluding that the disclosure of the joint venture would have made clearer the corrupt conduct underlying the creation of the tenement and the grant of the Mt Penny exploration licence. He pointed to the fact that the joint venture was entered into some 12 months after the corrupt dealings between Messrs Macdonald and Obeid and that Mr Macdonald had no involvement in the joint venture. In those circumstances, it was submitted that failure to disclose the fact of the joint venture to the IBC could not have produced an adverse effect within the meaning of s 8(2) of the ICAC Act.
Mr Duncan submitted that the Commission, in answering the question posed by s 8(2) of the ICAC Act, or for the purpose of ensuring that all relevant considerations were taken into account, was required, but failed, to direct attention to what, on its own understanding of the facts, was the inevitability of an investigation capable of revealing the corrupt dealings between Messrs Macdonald and Obeid.
In that context, senior counsel for Mr Duncan submitted there were no findings of fact necessarily antecedent to the conclusion required by the statutory formula. He submitted that the expression "adversely affects" in s 8(2) suggests an inquiry involving an evaluation of an event or circumstance being a comparably worse or undesirable exercise of an official function, although he accepted it could just mean different. Either way, he said, it involved a consideration of an alternative hypothesis or a counterfactual. He submitted the inquiry necessarily involves an analysis of the relationship between the corrupt conduct and a decision, whether it has taken place or could have taken place. He submitted the evaluation of the capacity of the conduct to adversely affect the exercise of official functions had to be evaluated by "Briginshaw concerns". In that context, he submitted "could", where first used in s 8(2), means "realistically has the capacity to".
Senior counsel for Mr Duncan submitted that the reasoning of the primary judge to the effect that the material had an explosive quality was not based on any factual finding by the Commission, rather, the primary judge was effectively replacing an argument for the report. He submitted that to reach the conclusion necessary for a finding of corrupt conduct, it was necessary to identify the fact which had to be disclosed and that there was no suggestion that what was required to be disclosed was the fact of corruption. He submitted what had to be considered was the effect disclosure of that fact to the IBC would have in the real world.
In that context, he submitted that in the real world, because of what was already in the public domain, there would have been an inquiry into the conduct of Messrs Macdonald and Obeid long before any question of the grant of a mining lease came before a relevant public official. He submitted that the inquiry mandated by s 8(2) of the ICAC Act had to take place in the real world, which was aware of the Obeid involvement, and that no such reasoning had taken place.
Mr Duncan, in his submissions, rejected the proposition that his submission effectively amounted to a factual challenge to the findings of the Commission and the primary judge. He submitted that to answer the question posed by s 8(2), it was necessary to consider whether the information allegedly withheld could have caused a public official to embark on a different course than he or she would have otherwise pursued, armed only with the publicly available knowledge, namely, that the Obeids were the owners of the relevant land at the time of creation of the tenement and as a consequence stood to make a significant profit. It was submitted that no consideration was given to that issue, rather, the report simply recited the words of s 8(2).
The Commission submitted that the appellant's submissions did not demonstrate that the primary judge fell into error. In dealing with the submission that s 8(2) must be considered in the context of what the individual appellants knew, the Commission accepted that the primary judge had referred to the possibility of the Director-General finding out about the corrupt dealings that the Commission found to have occurred, but submitted that if the individual appellants had disclosed what they knew about the Obeid family involvement, it would have added to the quantity and quality of public knowledge about those matters. It submitted that this would have increased the likelihood of the government refusing to grant a mining lease as it would have increased the likelihood that more information concerning the Obeid family involvement would come to light.
The Commission submitted that s 8(2) of the ICAC Act does not require a direct connection between the relevant conduct and the official function, rather, it is sufficient that the adverse effect could be indirect. It submitted that if the IBC found out about the Obeid involvement, that would have increased the risk of that information becoming available to the public and the government. It submitted that the risk was well-founded in light of the evidence of Mr Cubbin to which I have referred above at [88]. It submitted that the primary judge was correct in concluding that that evidence provided strong support for the proposition that revelation of the full truth to the IBC would have put what was revealed into the public domain. It noted that the primary judge concluded that if those facts had come out at the relevant time, no mining lease would have been granted. It submitted that the risk was enough to establish that there was a rational basis for the Commission's conclusion that the individual appellant's conduct in concealing the information from the IBC could have indirectly affected the exercise of official functions concerning the grant of the mining lease.
In relation to this ground, and particularly what I have described as the second issue, the Commission submitted that Mr Duncan's submissions amounted to a direct attack on the factual conclusions reached by the Commission. It said that in order to succeed, the appellants would need to establish the factual conclusion was so unreasonable or perverse as to constitute judicial error. It submitted it was necessary for the appellants to demonstrate that the Commission's conclusions were one which no rational or logical decision-maker could arrive at on the same evidence.
The Commission contended that Mr Duncan merely advanced a merits based argument which itself was flawed. It submitted that once it was appreciated that the concealed information was relevant to the exercise of the function and qualitatively different to what was in the public domain, it could not be said that the concealment of the information was incapable of affecting the exercise of that function.
The Commission referred to the findings of the primary judge, to which I have referred above at [132]-[137], and submitted that it dealt logically with the argument advanced below that the information would not have resulted in greater publicity or knowledge of the dealings in question. The Commission submitted that it was incorrect that this was not reflective of a finding made in the report. It submitted that the Commission's findings were predicated upon an appreciation that there was a qualitative difference between the information in the public domain and the information which was sought to be concealed and that Mr Duncan himself was found to be alive to the distinction when he was concerned that the transaction with White Energy would be terminated if it became known that the Obeids were involved in the mining venture as distinct from only being the landholders of the tenement.
It was submitted that it was reasonably open to conclude that the disclosure of information that was additional to, as well as being confirmatory of, existing suspicions about the Obeid involvement could have been relevant to those considering whether to approve the Mt Penny tenement project. It was submitted that it was thus capable of constituting a relevant adverse effect within the meaning of s 8(2) of the ICAC Act and that that conclusion was not perverse merely because suspicions had already been raised.
Senior counsel for the Commission emphasised that the case was an appeal and an appeal in judicial review proceedings rather than a rehearing. He described the reference to Briginshaw principles as nothing other than a complaint that the conclusions reached by the Commission were against the weight of the evidence, something not within the scope of such proceedings.
Senior counsel for the Commission submitted that the word "could", where it first appears in s 8(2), refers to capacity while "adversely" refers to materiality. He submitted that it would be wrong to say that the requirement in s 8(2) could not be made out if it was possible the outcome would be the same, albeit the process corrupted, or if the Commission was satisfied that the outcome would be the same. He submitted it would be a misreading of what was said in Cunneen at [2] (see above at [22]) to require a different outcome in the exercise of the function for the section to apply.
Senior counsel for the Commission submitted that the proposition that because there was no finding that the individual appellants were either involved in or aware of the corrupt conduct of Messrs Macdonald and Obeid there could be no finding of corrupt conduct against them ignored the approach taken by the Commission. He submitted that, rather, what the Commission did was to act on the evidence of the appellants themselves, submitting there was a growing awareness that connection with the Obeids was "lead in the saddle bags". He submitted that it did not matter that the appellants were not involved in the corrupt conduct of Messrs Macdonald and Obeid, the information may still be relevant to be taken into account under the rubric of public interest. He submitted it was irrelevant that persons not parties to the corruption may be affected by a decision made in the public interest.
Senior counsel for the Commission submitted that what the test involved was first, ascertaining what was known by the appellants which was regarded by them as a risk to their interests (either not obtaining the mining lease or losing the benefit of the transaction with White Energy) and then, examining the conduct through the prism of ss 8, 9 and 13 of the ICAC Act.
Senior counsel for the appellant emphasised that the submission did not depend on any obligation of disclosure, rather, he submitted what had to be looked at was adverse effect by conduct.
In dealing with the question of disclosure to the IBC, senior counsel for the Commission pointed out that the shareholders were being asked to approve a significant transaction large enough to excite interest in the market. In that context, he submitted the IBC was a place "whence publicity will follow" and that the IBC was critically concerned about the present and past involvement of the Obeids. He submitted it was not contended that the risk presented by the involvement of Obeid related entities was unreal or fanciful. He also submitted there was nothing in the report to justify the conclusion that the risk only related to a change of government or, had the government not changed, that the perception of the risk would have been materially different.
Senior counsel for the Commission submitted that the disclosure of the Obeid involvement in the tenement would have led to a chain of inquiry which would have revealed the corrupt relationship between Messrs Macdonald and Obeid.
Senior counsel for the Commission pointed out that it was clear that money changed hands for the agreed extraction of the Obeids from the venture. He submitted the fact that that transaction took place between entities which were not shown on the document to be successors and assigns of the original parties increased what he described as the "whiff or smell" or, using the Commission's terminology, concealment or disguise in relation to the transaction. He submitted the Commission made a finding that the transaction was designed to conceal the fact that the Obeids were ever involved in the tenement. He submitted that that demonstrated the appellants therefore appreciated a governmental risk from the antecedent involvement of the Obeids. He referred to the evidence of Messrs Duncan, Atkinson and McGuigan to which I have referred above at [74] and submitted that, in light of the concerns they had regarding the disclosure of the Obeid involvement, it could not be said the conclusion of the Commission was devoid of any evidentiary or logical connection. He submitted that, looking at the position in the real world, the steps taken by the appellants to protect their self-interest were explicable for the reasons the Commission used to attribute the nefarious element to it. In that context, he referred to the findings of the Commission I have set out above at [82], noting that only Mr Atkinson challenged the latter finding.
In his submissions in reply, senior counsel for Mr Duncan submitted it was no part of the reasoning of the Commission that the matters within the knowledge of the appellants would justify rejection of the application for a mining lease. Rather, he submitted, the Commission's analysis was predicated on a progress whereby disclosure of the material complained of would have made it more likely that an inquiry would have been conducted that would have led to the corrupt conduct between Messrs Macdonald and Obeid coming to light. He repeated his submission that the Commission had not made any inquiry itself to reach this conclusion and, in those circumstances, the primary judge erred in relying on it to uphold the Commission's finding.
[20]
Disposition
The primary judge set out the basis on which he considered the decision of the Commission could be reviewed: see above at [114]. Generally speaking, none of the parties disputed his conclusion on that issue.
Unlike the requirement in s 13(3A) of the ICAC Act, which depends on the satisfaction of the Commission that the relevant conduct constitutes an offence referred to in s 9 of the ICAC Act, the question of whether the conduct falls within the definition of corrupt conduct involves the making of a finding of objective fact.
If it were established that there was no evidence to support the finding that the conduct found by the Commission could adversely affect the exercise by a public official of official functions, that would constitute an error of law: Australian Broadcasting Tribunal v Bond [1990] HCA 33; 170 CLR 321 (Bond) at 355; Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; 241 CLR 390 at [91]; D'Amore v Independent Commission Against Corruption [2013] NSWCA 187; 303 ALR 242 at [244]. In Bond, Mason CJ stated that, at common law, so long as a particular inference is reasonably open, even if reached as a result of illogical reasons, there is no place for judicial review because no error of law has taken place: at 356. However, it does seem clear that findings or inferences of fact can be challenged if the decision was irrational or illogical and not based on findings or inferences of fact supported by logical grounds. In Peko-Wallsend, Mason J, as his Honour then was, stated that this ground of review would only be made out if the decision was so unreasonable that no reasonable person could have come to it: at 41, citing Associated Picture Houses Ltd v Wednesbury Corporation (1948) 1 KB 23; see also Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21; 197 CLR 611 at [123]-[127]. Indeed, the approach in these authorities reflected what was said by Dixon J in Avon Downs Pty Ltd v Federal Commissioner of Taxation [1949] HCA 26; 78 CLR 353 at 360.
In Re Minister for Multicultural Affairs; Ex parte S20 [2003] HCA 30; 198 ALR 59, McHugh and Gummow JJ accepted that, where the determination of the tribunal was irrational, illogical and not based on findings or inferences of fact supported by logical grounds, a decision was reviewable: at [34]-[37]. See also Minister for Immigration, Multicultural and Indigenous Affairs v SGLB [2004] HCA 32; 207 ALR 12 at [37]-[38].
A similar approach was taken by Crennan and Bell JJ in Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; 240 CLR 611 (SZMDS). Their Honours made the following remarks at [130]-[131]:
"[130] In the context of the Tribunal's decision here, 'illogicality' or 'irrationality' sufficient to give rise to jurisdictional error must mean the decision to which the Tribunal came, in relation to the state of satisfaction required under s 65, is one at which no rational or logical decision maker could arrive on the same evidence. In other words, accepting, for the sake of argument, that an allegation of illogicality or irrationality provides some distinct basis for seeking judicial review of a decision as to a jurisdictional fact, it is nevertheless an allegation of the same order as a complaint that a decision is 'clearly unjust' or 'arbitrary' or 'capricious' or 'unreasonable' in the sense that the state of satisfaction mandated by the statute imports a requirement that the opinion as to the state of satisfaction must be one that could be formed by a reasonable person. The same applies in the case of an opinion that a mandated state of satisfaction has not been reached. Not every lapse in logic will give rise to jurisdictional error. A court should be slow, although not unwilling, to interfere in an appropriate case.
[131] What was involved here was an issue of jurisdictional fact upon which different minds might reach different conclusions. The complaint of illogicality or irrationality was said to lie in the process of reasoning. But, the test for illogicality or irrationality must be to ask whether logical or rational or reasonable minds might adopt different reasoning or might differ in any decision or finding to be made on evidence upon which the decision is based. If probative evidence can give rise to different processes of reasoning and if logical or rational or reasonable minds might differ in respect of the conclusions to be drawn from that evidence, a decision cannot be said by a reviewing court to be illogical or irrational or unreasonable, simply because one conclusion has been preferred to another possible conclusion."
It seems to follow from those cases that, at least in circumstances such as the present, where the finding of corrupt conduct is dependent on the factual finding that the conduct could adversely affect the exercise of official functions by a public official, the decision on the factual question is reviewable on the basis it is one which no rational or logical decision-maker could arrive at on the same evidence.
There remains the question of whether the decision can be reviewed if the finding of the Commission that the conduct fell within the definition of corrupt conduct was based on reasoning that was illogical or irrational, even though the same result could have been reached by a process of reasoning not subject to the same difficulty: see the distinction drawn by Mark Aronson and Matthew Groves, Judicial Review of Administrative Action (5th ed 2013, Thomson Reuters) at [4.730]. The question is of importance in the present case having regard to the submission that the primary judge in effect impermissibly substituted his own reasoning for the reasoning of the Commission in upholding the decision: see above at [258]-[259].
Many of the cases in this area have dealt with circumstances where the exercise of a power or the making of a decision is dependent on the decision-maker reaching a state of satisfaction or forming an opinion on a particular issue. In Connell, Latham CJ made the following remarks at 432:
"It is therefore well settled that if a statute provides that a power may be exercised if a person is of a particular opinion, such a provision does not mean that the person may act upon such an opinion if it is shown that he has misunderstood the nature of the opinion which he is to form. Unless such a rule were applied legislation of this character would mean that the person concerned had an absolutely uncontrolled and unlimited discretion with respect to the extent of his jurisdiction and could make orders which had no relation to the matters with which he was authorized to deal. It should be emphasized that the application of the principle now under discussion does not mean that the court substitutes its opinion for the opinion of the person or authority in question. What the court does do is to inquire whether the opinion required by the relevant legislative provision has really been formed. If the opinion which was in fact formed was reached by taking into account irrelevant considerations or by otherwise misconstruing the terms of the relevant legislation, then it must be held that the opinion required has not been formed. In that event the basis for the exercise of power is absent, just as if it were shown that the opinion was arbitrary, capricious, irrational, or not bona fide."
See also SZMDS at [122].
The issue was considered by the High Court in Minister for Immigration and Citizenship v Li [2013] HCA 18; 249 CLR 332 (Li). French CJ made the following remarks:
[27] In Wednesbury Corporation, Lord Greene MR observed that the word 'unreasonable' in administrative law was used to encompass failure by a decision-maker to obey rules requiring proper application of the law, consideration of mandatory relevant matters and exclusion from consideration of irrelevant matters: 'If he does not obey those rules, he may truly be said, and often is said, to be acting 'unreasonably'.' That kind of unreasonableness may be taken to encompass unreasonableness from which an undisclosed underlying error may be inferred.
[28] Beyond unreasonableness expressive of particular error however, it is possible to say, as Lord Greene MR said, that although a decision-maker has kept within the four corners of the matters it ought to consider 'they have nevertheless come to a conclusion so unreasonable that no reasonable authority could ever have come to it'. In such a case the court may interfere. That limiting case can be derived from the framework of rationality imposed by the statute. As explained by Lord Greene MR, it reflects a limitation imputed to the legislature on the basis of which courts can say that parliament never intended to authorise that kind of decision. After all the requirements of administrative justice have been met in the process and reasoning leading to the point of decision in the exercise of a discretion, there is generally an area of decisional freedom. Within that area reasonable minds may reach different conclusions about the correct or preferable decision. However, the freedom thus left by the statute cannot be construed as attracting a legislative sanction to be arbitrary or capricious or to abandon common sense."
Hayne, Kiefel and Bell JJ dealt with what they described as a legal standard of reasonableness in the following fashion:
"[68] Lord Greene MR's oft-quoted formulation of unreasonableness in Wednesbury has been criticised for 'circularity and vagueness', as have subsequent attempts to clarify it. However, as has been noted, Wednesbury is not the starting point for the standard of reasonableness, nor should it be considered the end point. The legal standard of unreasonableness should not be considered as limited to what is in effect an irrational, if not bizarre, decision − which is to say one that is so unreasonable that no reasonable person could have arrived at it - nor should Lord Greene MR be taken to have limited unreasonableness in this way in his judgment in Wednesbury. This aspect of his Lordship's judgment may more sensibly be taken to recognise that an inference of unreasonableness may in some cases be objectively drawn even where a particular error in reasoning cannot be identified. This is recognised by the principles governing the review of a judicial discretion, which, it may be observed, were settled in Australia by House v The King, before Wednesbury was decided. And the same principles evidently informed what was said by Dixon J about review of an administrative decision in Avon Downs Pty Ltd v Federal Commissioner of Taxation, which was decided less than two years after Wednesbury, at a time when it was the practice of the High Court to follow decisions of the Court of Appeal in England which appeared to have settled the law in a particular area.
[69] In Wednesbury, Lord Greene MR discussed the various grounds upon which an exercise of statutory power may be abused. His Lordship foreshadowed defining those grounds under a single head of unreasonableness, stating that it was 'perhaps a little bit confusing to find a series of grounds set out. Bad faith, dishonesty … unreasonableness, attention given to extraneous circumstances, disregard of public policy' were all relevant to the question of whether a statutory discretion was exercised reasonably.
…
[72] The more specific errors in decision-making, to which the courts often refer, may also be seen as encompassed by unreasonableness. This may be consistent with the observations of Lord Greene MR, that some decisions may be considered unreasonable in more than one sense and that 'all these things run into one another'. Further, in Minister for Aboriginal Affairs v Peko-Wallsend Ltd, Mason J considered that the preferred ground for setting aside an administrative decision which has failed to give adequate weight to a relevant factor of great importance, or has given excessive weight to an irrelevant factor of no importance, is that the decision is 'manifestly unreasonable'. Whether a decision-maker be regarded, by reference to the scope and purpose of the statute, as having committed a particular error in reasoning, given disproportionate weight to some factor or reasoned illogically or irrationally, the final conclusion will in each case be that the decision-maker has been unreasonable in a legal sense."
Gageler J, emphasising that the decision-making authority conferred by statute must be exercised according to law and to reason within limits set by the subject matter, scope and purpose of the statute, dealt with the issue in the following terms:
"[88] Brennan CJ cited Associated Provincial Picture Houses Ltd v Wednesbury Corporation for the proposition that 'when a discretionary power is statutorily conferred on a repository, the power must be exercised reasonably, for the legislature is taken to intend that the discretion be so exercised'. He explained the application of 'Wednesbury unreasonableness' as a court acting on the 'implied intention of the legislature that a [statutory] power be exercised reasonably' to hold invalid 'a purported exercise of the power which is so unreasonable that no reasonable repository of the power could have taken the impugned decision or action'.
[89] That explanation accords with references in earlier High Court decisions to reasonableness as a condition of the exercise of a discretionary power. It has been approved in more recent decisions. It is an explanation that is well-understood by legislatures and courts alike and that has 'stood the test of time'. It explains the nature and scope of Wednesbury unreasonableness in Australia.
[90] Implication of reasonableness as a condition of the exercise of a discretionary power conferred by statute is no different from implication of reasonableness as a condition of an opinion or state of satisfaction required by statute as a prerequisite to an exercise of a statutory power or performance of a statutory duty. Each is a manifestation of the general and deeply rooted common law principle of construction that such decision-making authority as is conferred by statute must be exercised according to law and to reason within limits set by the subject-matter, scope and purposes of the statute."
In my opinion, the decision in Li, particularly with its emphasis on the fact that the power conferred on a decision-making authority must be exercised according to law and to reason and within the limit of the subject matter, scope and purpose of the statute, is consistent with the proposition that a decision on factual matters essential to the making of a finding by a decision-maker (in this case a finding of corrupt conduct), can be reviewed on the basis that the reasoning which led to the decision was irrational or illogical irrespective of whether the same conclusion could be reached by a process of reasoning which did not suffer from the same defect.
That conclusion seems to be consistent with that reached by the Full Court of the Federal Court in two cases decided subsequent to Li. Minister for Immigration and Border Protection v Singh [2014] FCAFC 1; 231 FCR 437 concerned a refusal by the Migration Review Tribunal to grant an adjournment without "objective or intelligible justification". The Court, after referring to Li, made the following remarks:
"[47] This question highlights the distinctions made between reasonableness review which concentrates on the outcome of the exercise of power, and reasonableness review which concentrates on an examination of the reasoning process by which the decision-maker arrived at the exercise of power. Although it is not necessary for the purposes of this appeal to resolve the question whether those should be seen as two different kinds of review and what might flow from that, we are inclined to the opinion that, where there are reasons for the exercise of a power, it is those reasons to which a supervising court should look in order to understand why the power was exercised as it was. The 'intelligible justification' must lie within the reasons the decision-maker gave for the exercise of the power - at least, when a discretionary power is involved. That is because it is the decision-maker in whom Parliament has reposed the choice, and it is the explanation given by the decision-maker for why the choice was made as it was which should inform review by a supervising court. It is not, as in House v The King (1936) 55 CLR 499, on an appeal from an exercise of a judicial discretion, for the Court to re-exercise the discretion. If a supervising court goes outside the reasons given by a decision-maker for another justification for the exercise of power, that court might then be seen to be placing itself in the position of the repository of the power and therefore acting impermissibly. Where there are reasons, either the reasons given by the decision-maker demonstrate a justification or they do not. It would, we think, be a rare case where the reasons demonstrate a justification but the ultimate exercise of the power would be seen to be legally unreasonable.
[48] The standard of legal reasonableness will apply across a range of statutory powers, but the indicia of legal unreasonableness will need to be found in the scope, subject and purpose of the particular statutory provisions in issue in any given case. As we have said, unlike some other grounds for review of the exercise of power, the reasoning process in review for legal unreasonableness will inevitably be fact dependent. That is not to diminish the importance of the supervising court maintaining an approach which does not involve the substitution of its own judgment for that of the decision-maker. Rather, it is to recognise that any analysis which involves concepts such as "intelligible justification" must involve scrutiny of the factual circumstances in which the power comes to be exercised."
In Minister for Immigration and Border Protection v Stretton [2016] FCAFC 11, Allsop CJ, with whom Wigney J agreed, rejected the submission that the plurality judgment in Li propounded two alternative tests, one being that, on the facts, the result is unreasonable or plainly unjust and the second being that the decision lacks an evident and intelligible justification. His Honour made the following remarks:
"[10] This concept of legal unreasonableness is not amenable to minute and rigidly-defined categorisation or a precise textual formulary. For instance, in argument, the submission was put that [76] of Li in the judgment of Hayne, Kiefel and Bell JJ contained two (different) 'tests': (1) if upon the facts the result is unreasonable or plainly unjust and (2) if the decision lacks an evident and intelligible justification. The submission reflected the dangers of overly emphasising the words of judicial decisions concerning the nature of abuse of power, and of unnecessary and inappropriate categorisation. The plurality's discussion of unreasonableness at [63]-[76] in Li should be read as a whole - as a discussion of the sources and lineage of the concept: [64]-[65], of the limits of the concept of reasonableness given the supervisory role of the courts: [66], of the fundamental necessity to look to the scope and purpose of the statute conferring the power to find its limits: [67], of the various ways the concept has been described: [68]-[71], of the relationship between unreasonableness derived from specific error and unreasonableness from illogical or irrational reasoning: [72], of the place of proportionality or disproportion in the evaluation: [73]-[74] (as to which see also French CJ at [30] and see also McCloy v New South Wales [2015] HCA 34; 325 ALR 15 at [3] (French CJ, Kiefel, Bell and Keane JJ)), of the guidance capable of being obtained from recognising the close analogy between judicial review of administrative action and appellate review of judicial discretion: [75]-[76].
…
[12] Crucial to remember, however, is that the task for the Court is not to assess what it thinks is reasonable and thereby conclude (as if in an appeal concerning breach of duty of care) that any other view displays error; rather, the task is to evaluate the quality of the decision, by reference to the statutory source of the power and thus, from its scope, purpose and objects to assess whether it is lawful. The undertaking of that task may see the decision characterised as legally unreasonable whether because of specific identifiable jurisdictional error, or the conclusion or outcome reached, or the reasoning process utilised."
See also at [5], [51]-[58], [61]-[62].
As I indicated, the first reason it was contended that each of the Commission and the primary judge erred in concluding that the conduct of the individual appellants could amount to corrupt conduct within the meaning of the ICAC Act, was that they assumed that the individual appellants knew of all matters relating to the Obeid involvement in the tenement, including the involvement of the Obeids in the creation of the tenement and in the bidding process.
It is not in dispute that the individual appellants did not know of the circumstances leading to the creation of the tenement, the conduct of the bidding process or the involvement of Obeid related entities in those matters. If the Commission had proceeded on that basis, it would have been in error as it would involve factual findings of the individual appellants' knowledge in respect of which there was no evidentiary support.
Whilst it is true that in making the ultimate findings against each of the individual appellants the Commission referred generally to the Obeid family involvement without specifying with precision the knowledge that each of the individual appellants had on this question, these findings must be viewed in the context of the earlier factual findings made against each individual appellant.
As I pointed out above at [26], the Commission stated that its approach was first to make relevant findings of fact, then to determine whether the facts came within s 8(1) or s 8(2) of the ICAC Act. Its factual findings against the individual appellants commenced in Chapter 25 of the report and I have set them out in detail above. The Commission found that each of Messrs McGuigan, Poole and Duncan were aware of the 5 June 2009 agreements (see above at [59]-[65]), which involved the purchase of the properties on which the tenements were situated, upon the grant of a mining lease, at four times the improved value as at 1 June 2009 (see above at [7]) and importantly gave Buffalo, the company associated with Mr Obeid, a 25% interest in the mining venture (see above at [6]).
The Commission made no express finding that Mr Atkinson knew of the 5 June 2009 agreements as at June 2009. However, the Commission made it clear that it concluded that Mr Atkinson knew of that involvement at least at the time the Obeid related entities were bought out of the venture.
In dealing with the extraction of the Obeid interest from the venture (see above at [73]-[82]), the Commission, after reviewing the evidence, made specific findings as to the appellants' knowledge, namely that the transaction with Southeast was a transaction with the Obeid family and that it was carried out with a view to disguising the Obeids' involvement from the government. It was in this context that the Commission made its findings of non-disclosure and misleading conduct in dealing with the IBC.
The Commission's ultimate findings have to be considered in light of that material. The finding of non-disclosure related to non-disclosure to the IBC and, in my view, related to the knowledge of the individual appellants as previously found by the Commission. The remaining finding of corrupt conduct, namely, authorising Mr Poole to arrange (or in the case of Mr Poole arranging) the extraction of the Obeids from the joint venture, did not depend on any particular state of knowledge.
It follows that neither the Commission nor the primary judge erred in attributing to the individual appellants, for the purpose of the finding of corrupt conduct, any greater knowledge than the Commission found they had.
The second way it was said the primary judge erred on this issue was in failing to conclude that the Commission failed to undertake any process of reasoning to justify the conclusion that the matters within the individual appellants' knowledge could have adversely affected a public official in the exercise of the power to grant a mining lease. As I indicated, it was submitted that such a process of reasoning would have demonstrated the inevitability of an investigation of the conduct relating to the creation of the tenement, even without disclosure of information known to the individual appellants and thus led to the conclusion that disclosure of such information would have had no effect on the exercise by a public official of his or her functions. Aligned to this was the criticism that the primary judge had substituted his own reasoning or argument for the reasoning of the Commission in upholding that finding.
It is important once again to have regard to the report of the Commission. The Commission recognised in Chapter 30 that by early 2010, the affairs of Mr Obeid and his family were subject to close public scrutiny. It found that it was that fact that prompted Mr Duncan to seek to have the Obeid interest terminated. In that context, the Commission specifically referred to the AFR article and the question asked by Ms Rhiannon in the Legislative Council.
The Commission expressly rejected the submission to the effect that the motivation for the removal was prompted by reasons other than the risk to the venture as a result of the Obeid involvement: see above at [75].
The Commission then referred to evidence of concerns that the Obeid involvement could jeopardise Cascade's interests in the tenement. That evidence came not only from the individual appellants, who the Commission found arranged the entry into a transaction designed to obscure the Obeid involvement, but also from Mr Cubbin and his solicitor Mr Podzebenko, who expressed their concern that if Obeid related entities were or had been involved in the tenement, the prospect of the grant of a mining lease would be put in jeopardy: see above at [86]-[87]. It is thus clear that at least those involved in the transaction at the time were under no illusion that any disclosure of the Obeid involvement could affect a decision in respect of the mining lease. The Commission took the same view. In finding, for example, that Mr Duncan was misleading Mr Cubbin and the IBC for his own personal financial advantage, it referred to the finding that the continued Obeid involvement presented a risk to the tenement in that there was a risk that the mining lease might not be granted. It does not seem to me that the manner in which the Commission reached this conclusion can be criticised. It was hardly an issue on the evidence that there was such a risk.
Nor was the decision irrational or illogical by reason of what was already in the public domain. It is important in considering this issue to compare what was known of the Obeid involvement by the individual appellants with what was in fact in the public domain. As the Commission found, each of the individual appellants (with the possible exception of Mr Atkinson) knew that, in addition to the agreement to purchase the land the subject of the tenements, Obeid related entities, through a shelf company, had acquired a 25% interest in the mining venture. They also knew that the Obeid related entities were bought out in a transaction involving a total payment of $60 million and that the transaction on its face was designed to conceal the Obeid involvement. By contrast, the AFR article and Ms Rhiannon's question in the Legislative Council raised questions about the particular involvement of Messrs Macdonald and Obeid in the context of the ownership of the land on which the tenement was situated. The disclosure that Obeid related entities also had a significant interest in any mining venture itself could well have prompted further investigation into the creation of the tenement and Mr Obeid's involvement and, as a consequence, influence a public official in the grant of a mining lease.
Nor do I think that, in considering this issue, it is necessary to consider what senior counsel for Mr Duncan described as a counterfactual. Whilst it may be correct that the corrupt dealings between Messrs Macdonald and Obeid would have emerged in any event, the relevant question is whether non-disclosure of the particular information in the possession of the individual appellants could have the capacity to adversely affect the exercise by a public official of his or her function in considering whether to grant a development application which carried with it the grant of a mining lease. Having regard to what was in the public domain at the time, the information within the individual appellants' knowledge would be material to whether a mining lease should be granted either at all or without further investigation. Its non-disclosure could thus adversely affect the exercise of the function of a public official in granting a mining lease without consideration of that issue.
Further, the proposition that the corruption of Messrs Macdonald and Obeid may have emerged in any event in effect made the disclosure irrelevant, does not seem to me to render the Commission's findings irrational or unreasonable in the sense I have described. The scope and purpose of the statute is to prevent corrupt conduct. If, on the facts available at the time the corrupt conduct was alleged to have taken place, the conduct could adversely affect the performance of official functions and the preconditions in ss 9 and 13(3A) of the ICAC Act are otherwise satisfied, then the fact that later material may emerge which would avoid the conduct having any adverse effect does not seem to me to alter the character of the conduct.
For these reasons, the primary judge was correct in concluding that the Commission did not err in finding that the conduct in question could adversely affect the exercise of official functions by a public official by reason of what was already in the public domain.
The third aspect of this issue poses the greatest difficulty. It was not in contest that the individual appellants had no obligation to disclose the information in their possession to the government. What was said to be relevant was a failure to disclose the information to the IBC. The Commission concluded that it was that conduct which could adversely affect the exercise of official functions.
The Commission found that in the case of each individual appellant they did not disclose their knowledge to the IBC for fear that such disclosure would lead to the government becoming aware of the Obeid involvement in the mining venture: see above at [92], [104], [109]. The Commission seemed to have accepted these fears as well-founded and to justify the conclusion that the failure to disclose could indirectly affect the exercise of official functions on the basis that the disclosure would have led to the information being put into the public domain and thus becoming available to a public official in considering whether it was appropriate to grant a mining lease.
At one point in dealing with this issue, senior counsel for the Commission suggested that what was relevant was the effect of non-disclosure to the government rather than the effect of non-disclosure to the IBC. However, the relevant conduct in the present case is in fact the non-disclosure to the IBC or causing the Obeids to be bought out of the joint venture in a manner designed to obscure their involvement. The question is whether that conduct could adversely affect the exercise by the public official of his or her official functions.
There is, I think, considerable force in the submission made by and on behalf of Messrs McGuigan and Poole to which I have referred above at [243]-[244]. It is necessary to identify the precise conduct which could adversely affect the exercise of the functions and to show how that conduct could have done so. In particular, there is force in the submission that the evidence of Mr Cubbin was to the effect that White Energy would terminate the transaction rather than disclose the Obeid involvement.
Notwithstanding these submissions, the task of the Commission was to deal with the hypothetical effect of disclosure to the IBC of the individual appellants' knowledge of the Obeid involvement. It does not seem to me that the conclusion of the Commission was one which no reasonable decision-maker could have reached. The purported transaction with Cascade had been communicated to the market on 30 November 2011 stating it involved the acquisition of two significant coal deposits in NSW and that Cascade was owned by a syndicate of investors including entities associated with the directors of White Energy: see above at [85]. This announcement made no mention of any Obeid involvement. The announcement indicated that the amount payable in respect of the transaction was $486 million and $14 million in assumed liabilities.
Irrespective of any continuous disclosure obligations (see Corporations Act, s 674) it seems to me to be open to the decision-maker to infer that a truthful communication to the market of the reason for terminating the transaction would disclose that it was terminated because of discovery of the Obeid involvement in the mining venture and, as such, the independent directors could not recommend that it proceed. In those circumstances, it was open to the decision-maker to infer that disclosure of that material would lead to further inquiries as to the circumstances in which Obeid related entities came to be involved, particularly in the context of the consideration of the grant of a mining lease.
It must be accepted that the Commission did not reason in this fashion, but rather, accepted that the fears of the directors that such disclosure would occur were justified. However, it seems to me that, having regard to the matters to which I have referred, there was a proper evidentiary basis for the Commission reaching its conclusion. The Commission, in effect, relied on the evidence of the individual appellants themselves concerning the manner in which disclosure would adversely affect the prospect of obtaining a mining lease. This could not be said to be an irrational process of reasoning nor could the result itself, in those circumstances, be said to be unreasonable.
It follows that the grounds of appeal encompassed by what I have described as the fifth issue have not been made out. However, the findings against the individual appellants depend on the answer to the question of whether it was open to the Commission to be satisfied that their conduct involved the contravention of either s 192E of the Crimes Act or s 184 of the Corporations Act. It is to those issues I will now turn.
[21]
The sixth issue: Did the primary judge err in concluding that it was open for the Commission to be satisfied that the conduct of the individual appellants constituted a contravention of s 192E(1)(b) of the Crimes Act?
Section 192E of the Crimes Act is in the following terms:
"192E Fraud
(1) A person who, by any deception, dishonestly:
(a) obtains property belonging to another, or
(b) obtains any financial advantage or causes any financial disadvantage,
is guilty of the offence of fraud.
Maximum penalty: Imprisonment for 10 years.
(2) A person's obtaining of property belonging to another may be dishonest even if the person is willing to pay for the property.
(3) A person may be convicted of the offence of fraud involving all or any part of a general deficiency in money or other property even though the deficiency is made up of any number of particular sums of money or items of other property that were obtained over a period of time.
(4) A conviction for the offence of fraud is an alternative verdict to a charge for the offence of larceny, or any offence that includes larceny, and a conviction for the offence of larceny, or any offence that includes larceny, is an alternative verdict to a charge for the offence of fraud."
The expressions "obtaining a financial advantage" and "causing a financial disadvantage" are defined in s 192D of the Crimes Act:
"192D Obtaining financial advantage or causing financial disadvantage
(1) In this Part, obtain a financial advantage includes:
(a) obtain a financial advantage for oneself or for another person, and
(b) induce a third person to do something that results in oneself or another person obtaining a financial advantage, and
(c) keep a financial advantage that one has,
whether the financial advantage is permanent or temporary.
(2) In this Part, cause a financial disadvantage means:
(a) cause a financial disadvantage to another person, or
(b) induce a third person to do something that results in another person suffering a financial disadvantage,
whether the financial disadvantage is permanent or temporary."
Deception is defined in s 192B of the Crimes Act:
"192B Deception
(1) In this Part, deception means any deception, by words or other conduct, as to fact or as to law, including:
(a) a deception as to the intentions of the person using the deception or any other person, or
(b) conduct by a person that causes a computer, a machine or any electronic device to make a response that the person is not authorised to cause it to make.
(2) A person does not commit an offence under this Part by a deception unless the deception was intentional or reckless."
Dishonest is defined in s 4B of the Crimes Act as dishonest by the standards of ordinary people and known by the defendant to be dishonest according to the standards of ordinary people.
[22]
The submissions
The joint submissions pointed out that for an offence under s 192E to have been committed, there must be an element of deceit. It was submitted that the concept of deception was limited to actual deception.
In the joint submissions, it was stated that the Commission did not find that Mr Cubbin or the IBC were deceived. It was pointed out that there was no finding that Mr Cubbin believed there had been no Obeid involvement or that the payment of $28 million by CMG to Southeast was for a particular reason which was false.
In relation to Mr McGuigan, it was submitted that the only deception was an omission to provide information. It was submitted that a deception by omission would only exist where there was a legal duty to disclose or where the circumstances gave rise to a duty to make a positive factual statement. It was accepted in the joint submissions that there was a finding that Mr Poole lied about his awareness of payments being made to Obeid related entities. However, it was submitted there was no finding that the lies had induced Mr Cubbin or the IBC to believe something was true which was false. It was submitted that at the time the negotiations were terminated, the due diligence process was not complete.
It was also submitted that the finding that Mr Poole had lied was without any evidentiary support. It was submitted that there was no evidence that Mr Poole was aware there had been a payment to Mr Obeid or to Obeid related entities.
It was also submitted in the joint submissions that, in the absence of any knowledge of corrupt or criminal activity by Mr Obeid, it was difficult to see why in a commercial sale it could be said to be dishonest not to disclose the Obeids' prior involvement in the joint venture or that their interests had been bought out.
Senior counsel for Messrs McGuigan and Poole emphasised that deception involved inducing in another a state of mind which the offender knows does not accord with the facts, submitting there was no finding that Mr Cubbin or the IBC were induced into believing anything. He submitted it was only if the IBC due diligence process had been completed and it had been induced to believe that the Obeid family had no interest in the mining venture, that the relevant element of deception could have been satisfied.
Senior counsel for Messrs McGuigan and Poole pointed to the fact that the payment by CMG to Southeast was found to have reached the Obeid family as a result of forensic examination undertaken by the Commission. He said that what Mr Poole said to Mr Podzebenko to the effect that, insofar as he was aware, none of the $28 million was paid to Mr Obeid or his family, was a truthful statement having regard to his knowledge of the identity of the payee.
It was further submitted that there was no financial advantage obtained. In the joint submissions, it was submitted that the value of shares, to the extent it depended on the Mt Penny exploration licence, was never under threat and the reduction of a further risk that the mining lease might not be granted could not be said to be obtaining a financial advantage.
In his written submissions, Mr Duncan challenged the finding that he obtained a financial advantage and the finding of dishonesty made against him. In relation to the former matter, he submitted that the difficulty with the Commission's reasoning was that the creation of the tenement and the grant of the Mt Penny exploration licence was affected by corruption and if, as was common ground, the licence was Cascade's only significant asset, then the true value of his shares in Cascade was nil. In those circumstances, he submitted he could only have obtained a financial advantage if, having concealed the involvement of the Obeids, the shares were disposed of for valuable consideration. He submitted that this had not occurred.
Mr Duncan accepted the point was not taken before the primary judge. However, he argued that the point did not depend on any evidence and leave should be granted to raise it.
Mr Duncan submitted that the Commission's submissions that a financial advantage was obtained proceeded on the assumption that for the purpose of applying s 192E(1) of the Crimes Act, the shares were to be valued by what was publicly known rather than by reference to the true position. He submitted financial advantage for the purpose of the Crimes Act should not proceed upon speculation.
Senior counsel for Mr Duncan referred to the fact that the primary judge accepted the Commission's submission that there was in truth only one financial advantage, namely, avoiding the loss in value of Cascade by the removal or reduction of the contemplated risk. He submitted, however, on the findings of the Commission, the grant of the licence was irrevocably tainted by the corrupt conduct of Messrs Macdonald and Obeid. He noted that the primary judge held there was an irresistible basis for refusing to grant a mining lease: see above at [136].
In that context, he submitted that Mr Duncan's shares were a flawed asset being only as good as the likelihood of obtaining the mining lease. He noted that the case against Mr Duncan was that, by concealing the Obeid involvement, he obtained an advantage by avoiding, if only temporarily, some loss in the value of the asset. He submitted the difficulty with that approach was that the only way a financial advantage can be obtained by concealing a flaw in an asset, is to derive a benefit from the false appearance. He submitted this did not occur in the present case. He submitted that, at most, what occurred in the present case was an attempt to obtain a financial advantage.
Senior counsel for Mr Duncan also submitted there was no basis for saying that the value of the Cascade shares depended on what was known to the market and that the proposition that non-disclosure helped maintain the value of the shares was a matter of speculation. He submitted that to embark on that course it would be necessary to have evidence of value.
It was also submitted by Mr Duncan that his conduct was not dishonest. He relied on the finding by the primary judge that Mr Duncan was not obliged to make any proactive disclosure of the Obeid involvement in the joint venture to the IBC. It was submitted that in circumstances where the Obeids' ownership interest in the land the subject of the tenement was public knowledge, where there was no finding of any knowledge on the part of Mr Duncan that the grant of the Mt Penny exploration licence was tainted by corruption, where there was no obligation requiring disclosure of the fact of the joint venture and where the statements made by Mr Duncan were literally true, there could be no finding of dishonesty. He submitted it was neither uncommon nor dishonest for people engaged in commerce to withhold from public view facts or circumstances they are not required to disclose and which might impact on the value of their assets.
In particular, Mr Duncan submitted that it was not dishonest for the appellant to have told Mr Levi that Mr McGuigan would contact Mr Cubbin directly, thereby relieving Mr Levi from having to answer Mr Cubbin's requests for further information. He submitted because there was no active duty of disclosure, he was not obliged to instruct an advisor of Cascade to disclose the prior Obeid interest in the joint venture. In those circumstances, he submitted a failure to do so could not be classified as dishonest.
Finally, he submitted that what was described as a "literal answer" to the question asked of him by Mr Cubbin, in respect of which there was no obligation of disclosure, was not dishonest.
Mr Atkinson adopted the submissions of the other individual appellants. Senior counsel for Mr Atkinson referred to the fact that Mr Atkinson was not involved in meetings between the IBC and Messrs Duncan and McGuigan. He submitted the IBC knew what it was looking for and from whom it wished to make inquiries. He pointed out that Mr Atkinson was not asked for information by the IBC. He submitted that there was no evidence to suggest the Commission's findings that Mr Atkinson knew the transaction terminating the Obeid interest was carried out with a view to disguising the Obeid involvement from government or investigating agencies.
Senior counsel for Mr Atkinson also submitted that there was no finding that Mr Atkinson knew or authorised any particular method for removing the Obeids from the joint venture as distinct from simply authorising their removal.
The Commission submitted that the primary judge was correct in concluding that the financial advantage identified by the Commission was the prevention of the loss in value of the shareholding in Cascade if the sale to White Energy did not proceed or the government found out about the Obeid involvement and took steps to cancel the Mt Penny exploration licence or announced that it would not grant a mining lease. It was submitted that what the appellants obtained or maintained was a state of affairs where the current value of the shares in Cascade was preserved. It submitted that if the steps to conceal the Obeid involvement were not taken, the state of affairs would have been altered. In particular, it submitted that if the information found its way into the public domain, Cascade would have lost the asset on which the value of the shares depended. It submitted a financial advantage in the ordinary sense was obtained.
Senior counsel for the Commission emphasised that neither the statutory text nor the common law surrounding it required the advantage to be permanent. He gave as an example the deferral of a debt. He submitted that what was required was a measurement between what would be the position but for the criminal conduct and the position if the conduct occurred.
He submitted there was nothing in the proposition that avoidance of diminution could not be an advantage. He referred to the effect of non-disclosure of a particular fact on the market for shares or assets.
The Commission submitted that for conduct to be deceptive it must at least be capable of leading another into error. It referred to Mr Cubbin's evidence that, had he known about the Obeid involvement, he would have informed the "independent assessors". It submitted he did not do so because he was led to believe there were insufficient grounds for establishing the Obeid involvement.
In relation to dishonesty, the Commission referred to the submissions of Messrs McGuigan and Poole that they could not have been dishonest because they did not know of the corrupt activity of Messrs Macdonald and Obeid. It submitted the primary judge was correct in concluding that it would have been open to a jury to find that the individual appellants were dishonest because they had taken steps to divest the Obeid interest, knowing that public knowledge of the Obeid involvement would impact on the value of the shares.
The Commission also submitted that Mr Duncan had taken active steps to conceal the Obeid involvement from the IBC and that Mr Poole was found to have told the IBC that he was not aware of any payments having been made to Mr Obeid and his associates, which was false. It submitted there was no basis for challenging the Commission's conclusion that he lied about the Obeid involvement, pointing particularly to the evidence in the report to which I have referred above at [80].
Senior counsel for the Commission submitted that the question of dishonesty did not depend on any duty of disclosure being owed. He submitted it was sufficient to deliberately not put forward to the decision-maker something which would reduce or eliminate the chance of obtaining the desired outcome. In that context, senior counsel for the Commission referred to the ASX inquiry concerning the capitalised mining costs in respect of which the Commission found $30 million was to be paid to terminate the Obeid interest: see above at [105]-[107]. He submitted that the refusal to disclose the true position indicated an awareness that disclosure would imperil the transaction.
In relation to the submission of Mr Atkinson that there was no evidence to support the finding that the transaction by which the Obeid interest was terminated was, to his knowledge, carried out with a view to disguising the Obeid involvement from the government or other investigative authorities, senior counsel for the Commission submitted that it could be inferred from the evidence that Mr Atkinson was aware of Mr Duncan's concern about the Obeid involvement. He also pointed to the finding that Mr Atkinson and the other directors were at pains to keep the information of that involvement from White Energy. He submitted it was open to infer from those facts that Mr Atkinson shared the other individual appellants' knowledge that the transaction was carried out to disguise the Obeid involvement.
In relation to the distinction between Mr Atkinson and the directors who dealt directly with the IBC, senior counsel submitted that Mr Atkinson, knowing the concerns of the IBC, chose not to reveal the Obeid involvement to the IBC because of self-interest.
[23]
Disposition
It is important to distinguish the separate findings made for the purpose of s 9(1)(a) of the ICAC Act against the individual appellants. They fall into two categories. The first involved the extraction of the Obeids from the joint venture. At the risk of repetition, the finding against Mr Duncan was in the following terms:
"The Commission is satisfied for the purpose of s 9(1)(a) of the ICAC Act that, if the facts it has found, relating to authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture so that the NSW Government would not become aware of their involvement in that tenement, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Duncan committed a criminal offence of obtaining a financial advantage by deception contrary to s 192E(1)(b) of the Crimes Act 1900. The advantage was the removal of the risk to the retention of the exploration licence and the reduction in the risk that a mining licence might not be granted over the Mount Penny tenement."
Similar findings were made against the other individual appellants, although in the case of Mr Poole, the finding was causing the extraction rather than authorising him to arrange it.
The second finding related to dealings with the IBC. Findings of contravention of s 192E in respect of these dealings were made only against Messrs Duncan and Poole. They were in the following terms:
"The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found relating to the deliberate misleading of Mr Cubbin, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Duncan committed a criminal offence of obtaining a financial advantage by deception contrary to s 192E(1)(b) of the Crimes Act 1900. The advantage was to prevent the loss in the value of his holding in Cascade should the sale to White Energy not proceed or if the NSW Government found out about the Obeid involvement and took steps to cancel the exploration licence or announced that it would not grant a mining lease.
…
The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that if the facts it has found, in relation to the deliberate failure to disclose information to the IBC and telling the IBC that he was not aware of any payments having been made to Edward Obeid Sr or any entities associated with him, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Poole committed criminal offences under s 192E(1)(b) of the Crimes Act 1900. The advantage, in each case, was to prevent the loss in value of his holding in Cascade should the sale to White Energy not proceed or if the NSW Government found out about the Obeid involvement and took steps to cancel the exploration licence or announced that it would not grant a mining lease."
I have set out the terms of s 192E and the related definition sections above at [314]-[317]. It is to be noted that the section is one of a number of offences contained in Pt 4AA of the Crimes Act under the heading "Fraud". The stated object of the Part was to modernise and simplify the then existing fraud and forgery offences in the Crimes Act.
It is significant that the offence requires that a financial advantage be obtained by deception. In this regard it may be contrasted, for example, with s 192F which makes it an offence to dishonestly destroy or conceal an accounting record with the intention of obtaining a financial advantage or, more importantly, s 192G which makes it an offence to make or publish a false or misleading statement with the intention of obtaining a financial advantage. The latter two sections, unlike s 192E, do not require that the financial advantage actually be obtained but rather that there be an intention to obtain such an advantage.
Financial advantage is not exhaustively defined in the Crimes Act and it is perhaps easier to identify than define. However, it does include retaining a financial advantage: s 192D(1)(c). In Coelho v Durbin (Supreme Court (NSW), Badgery-Parker J, 29 March 1993, unrep) Badgery-Parker J described as the essence of the concept of financial advantage that the person alleged to have obtained such an advantage has obtained a benefit which can be valued in terms of money.
It is well-established that the financial advantage must be obtained by the deception. In Ho and Szeto v R (1989) 39 A Crim R 145, the Court stated that what must be established is a causal connection between deception and the obtaining of the money, the deception must be the means by which the money was obtained or the effective cause of it being obtained: at 147; see also Clarkson v R [1987] VR 962 at 980; Flack v R [2011] NSWCCA 167 at [37]-[38]; R v Clucas [1949] 2 KB 226 at 229-230.
It is implicit in the need to establish the necessary causal connection that the person or entity deceived be identified: Director of Public Prosecutions v Ray [1974] AC 370 at 384. That is consistent with the well-known description of deception given by Buckley J in Re London and Globe Finance Corporation Limited [1903] 1 Ch 728 at 732:
"To deceive is, I apprehend, to induce a man to believe that a thing is true which is false, and which the person practicing the deceit knows or believes to be false."
It is also necessary that the financial advantage in fact be obtained or at least retained by the deception. That requirement has been interpreted relatively liberally. Thus, in R v Vasic [2005] VSCA 38; 11 VR 380, an appeal from a conviction under s 82 of the Crimes Act 1958 (Vic), which was in relevantly similar terms to s 192E, it was held that it was an offence under that section to defer the payment of a debt by giving a creditor a cheque which the debtor knew to be worthless in pretended payment of the debt, even in circumstances where the debtor may not have the capacity to pay the debt in any event: at [8]-[17]. In Milne v The Queen [2014] HCA 4; 252 CLR 149, it was held that a deliberate failure to declare a capital gain as part of a taxpayer's assessable income would result in the gaining of a financial advantage from the Commonwealth: at [15]. It is important that in each of those cases the financial advantage was only temporary.
In R v Jenkins [2002] VSCA 224; 6 VR 81, Charles JA pointed out that an element of the charge of obtaining financial advantage by deception was that the person obtained financial advantage by such deception which in turn required it to be established that such deception operated on the mind of the person deceived: at [74]. To establish that, it is of course necessary to identify the person or entity deceived.
In Moylan v Western Australia [2007] WASCA 52; 169 A Crim R 302, the appellant dishonestly advised the Chief Executive of the City of South Perth that the Council proposed to substantially reduce his remuneration or ask him to resign on a negotiated superannuation package, failing which the Council would dismiss him. The Chief Executive resigned and the appellant was appointed in his place. He was convicted of fraud in that he gained a benefit (the opportunity to apply for a position) by deceitful or fraudulent means. An appeal was dismissed. Miller AJA, with whom Steytler P and Pullin JA agreed, stated that the opportunity to apply for the position which became vacant by what was arguably a deceitful process on the part of the appellant was quite capable of constituting a benefit: at [64]. He stated the appellant was placed in a superior position by reason of the Chief Executive Officer's resignation and it did not matter that the benefit was qualified because others might apply for the position: at [68]-[69].
There are two matters which should be noted concerning that decision. First, the relevant section referred to the obtaining of a "benefit", a wider concept than financial advantage in s 192E. Second, there could be no doubt that actual deception had taken place, namely, the procurement of the resignation of the Chief Executive by false representations.
A different approach was taken by the Court of Appeal of Queensland in R v Saba [2013] QCA 275; 235 A Crim R 144 (Saba), a case involving the construction of s 408C(1)(d) of the Criminal Code (Qld) which made it an offence to dishonestly gain a benefit or advantage, pecuniary or otherwise, for any person. The appellant in that case had fraudulently submitted forms to ASIC to the effect that he had been appointed sole director of two corporations. It was argued he received a benefit, namely the opportunity presented by the possibility that people might assume, in dealing with each company, that the appellant had been duly appointed and had authority to exercise the powers and perform the duties of a director. The appeal was allowed. Jackson J, with whom the other members of the Court agreed, pointed out that whilst the submission of the forms to ASIC may have been part of a scheme to defraud each company, it did not confer an advantage of itself. Rather, it was a step along the way towards gaining some unidentified advantage: at [50]-[51].
In relation to the contravention found against each of the individual appellants, namely the extraction of the Obeids from the joint venture, the difficulty is that there was no evidence to suggest that the NSW Government or any of its officers were deceived as a result of the transaction. It may be that the transaction was carried out with the intention that the government be deceived, but unless and until such deception actually occurred, the necessary element of the offence was not made out. Such deception did not occur merely by entry into the transaction.
The Commission contended that for conduct to be deceptive it must be capable of leading another into error. That may be accepted and it also may be accepted that the method of extracting the Obeids from the venture was capable of instilling the erroneous belief that the Obeids never had an interest in the tenement, but there is no evidence that the transaction caused that erroneous belief to be held by any government official.
The primary judge did not deal directly with this issue apart from describing the transaction by which the Obeid interest was extracted from the venture as absurdly complex. With the greatest respect to his Honour, he was in error in not considering this issue.
Further, in my opinion, the financial advantage of the nature identified by the Commission was not obtained or retained as a result of the transaction. It was not contended that the transaction, viewed in isolation, conferred a financial advantage. To establish such an advantage there would need to be a comparison between the value of the shares in Cascade where the underlying assets were a 75% interest in the joint venture, with Obeid related entities holding the remaining 25%, and the value of the shares when Cascade held its interest free of the Obeid interest but with the liability under its agreement with CMG to which I have referred above at [13].
By contrast, what was contended to be the financial advantage was that, as a result of the NSW Government remaining unaware of the Obeid involvement, the risk to the retention of the Mt Penny exploration licence was avoided and the risk that the mining lease might not be granted to Cascade was lessened. The primary judge concluded that the Commission was entitled to find that disclosure of information concerning the Obeid involvement and the extraction of the Obeids from the joint venture would have led to the mining lease not being granted (see above at [136]) and to conclude that crystallisation of the risk of disclosure of the Obeid involvement would wipe out the value of Cascade (see above at [143]). Neither of these propositions was disputed on appeal.
The difficulty is that both before and after the transaction, the risk remained. What the transaction did at most was to conceal a significant problem with the underlying asset of Cascade and provide an opportunity at some stage to obtain a financial advantage by obtaining a mining lease without disclosure of the Obeid involvement: see Saba at [50]-[51]. Crystallisation of such an opportunity may well have conferred a financial advantage but unless that occurred, the individual appellants did not receive such an advantage as the asset of Cascade on which the value of their shares depended remained subject to the same defect.
Nor do I think it could be said that a financial loss was avoided even temporarily. This is because, although the transaction may have concealed the defect, no advantage flowed from this. The asset remained subject to the same defect.
For these reasons, the Commission and the primary judge erred in concluding that it would be open to a jury to find that the individual appellants contravened s 192E in arranging for the extraction of the Obeid interest from the joint venture. In particular, it was an error of law to conclude there was a financial advantage in circumstances where there was no evidence to support the proposition that any financial advantage was obtained by deception.
The second basis for finding a contravention of s 192E related to the dealings with the IBC. In relation to Mr Duncan, the deception was said to be the deliberate misleading of Mr Cubbin and the financial advantage was prevention of the loss in value of his holding in Cascade if the sale to White Energy did not proceed "or if the NSW Government found out about the Obeid involvement and took steps to cancel the exploration licence or announced that it would not grant a mining lease."
However, the Commission made no finding that Mr Cubbin had in fact been misled by the statements made by Mr Duncan. The evidence of Mr Cubbin in that regard was equivocal. He told the Commission that Messrs Duncan and McGuigan assured the IBC that the grant was valid and that they were not aware of any illegal or inappropriate behaviour and that none of Messrs Atkinson, Duncan or McGuigan told him there was an Obeid involvement apart from the mere ownership of Cherrydale. He also said he relied "to a large extent" on these persons being honest with him. However, he also indicated he sought further protection for White Energy and ultimately determined there was too much downside risk to the transaction. It does not seem to me open to conclude on that evidence that Mr Cubbin was deceived into believing that there never was an Obeid involvement in the tenement.
However, even if it be assumed that Mr Cubbin was misled, no financial advantage was obtained from that deception. The sale to White Energy did not proceed and the individual appellants were left with the same flawed asset. In those circumstances, there was no evidence to support a finding of a contravention of s 192E against Mr Duncan.
The claim against Mr Poole essentially was that he gave false information to the IBC. Accepting this finding was open and the IBC was misled by the false information, the same problems arise as with the finding against Mr Duncan. As the sale did not proceed, no financial advantage was obtained and Mr Poole (or entities associated with him) was left with the same flawed asset.
There was, therefore, no foundation for the Commission being satisfied for the purpose of s 9(1)(a) of the ICAC Act that the individual appellants contravened s 192E. Attempting to obtain a financial advantage by misstatements may constitute an offence under s 192G of the Crimes Act. It does not constitute an offence under s 192E. Nor in the case of any individual appellant was reliance placed on the attempt provisions in s 7 of the ICAC Act.
In these circumstances it is not necessary to deal with the other element of this offence, dishonesty, although it may be necessary to deal with it in relation to the issues raised under s 184 of the Corporations Act. However, one matter should be noted. Whilst it is not dishonest to not disclose a matter in respect of which there is no obligation to make disclosure (R v Iannelli [2003] NSWCCA 1; 56 NSWLR 247 at [21]; Director of Public Prosecutions (Cth) v Poniatowska [2011] HCA 43; 244 CLR 408 at [29]), it does not necessarily follow that deliberate concealment of information could not be dishonest.
Having regard to the conclusions I have reached, it is unnecessary to deal with Mr Poole's challenge to the finding by the Commission that he lied to the IBC.
[24]
The seventh issue: Did the primary judge err in concluding that it was not open for the Commission to be satisfied that the conduct of those individual appellants who were directors of White Energy constituted a contravention of s 184 of the Corporations Act?
Section 184 of the Corporations Act provides as follows:
"184 Good faith, use of position and use of information - criminal offences
Good faith - directors and other officers
(1) A director or other officer of a corporation commits an offence if they:
(a) are reckless; or
(b) are intentionally dishonest;
and fail to exercise their powers and discharge their duties:
(c) in good faith in the best interests of the corporation; or
(d) for a proper purpose.
Note: Section 187 deals with the situation of directors of wholly‑owned subsidiaries.
Use of position - directors, other officers and employees
(2) A director, other officer or employee of a corporation commits an offence if they use their position dishonestly:
(a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or
(b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.
Use of information - directors, other officers and employees
(3) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation commits an offence if they use the information dishonestly:
(a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or
(b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation."
Of relevance in the present case is s 184(1). That section effectively provides criminal sanctions for a contravention of the statutory obligation imposed on directors and officers of a corporation by s 181 of the Corporations Act to exercise their powers and discharge their duties in good faith and for a proper purpose. The additional requirement for the purpose of criminal liability under s 184(1) is that in failing to do so, the director or officer was either reckless or intentionally dishonest.
The initial issue which arises is the meaning of the fault element "intentionally dishonest" in s 184(1)(b) of the Corporations Act. In Kwok v R [2007] NSWCCA 281; 64 ACSR 307, the Court of Criminal Appeal seemed to conclude that the effect of s 2.2 of the Criminal Code (Cth) (Criminal Code) was to incorporate into the Corporations Act the definition of dishonesty contained in s 130.3 of the Criminal Code, namely dishonest according to the standards of ordinary people and known by the defendant to be dishonest by the standards of ordinary people. However, the difficulty with this approach is that whilst s 2.2 of the Criminal Code and s 1308A of the Corporations Act apply (subject to certain exceptions) the provisions of Ch 2 of the Criminal Code into the criminal offence provisions of the Corporations Act, the definition of dishonesty in the Criminal Code is in Ch 7 rather than in Ch 2. This was pointed out by the Court of Appeal of Victoria in SAJ v R [2012] VSCA 243; 36 VR 435 (SAJ). The Court concluded in that case that the test for dishonesty for the purpose of s 184(2) was that laid down by the High Court in Peters v R [1998] HCA 7; 192 CLR 493 and Macleod v R [2003] HCA 24; 214 CLR 230, namely dishonest by the standards of ordinary decent people. In my respectful opinion, this conclusion was correct.
However, it must be remembered that s 184(1) uses the expression "intentionally dishonest". It seems to me that this expression imports as an element of the offence that the accused had knowledge that what he or she was doing or omitting to do, was dishonest. In Marchesi v Barnes [1970] VR 434, Gowans J stated that the meaning of not acting honestly for the purpose of s 124 of the Companies Act 1961 (Vic) was a consciousness that what was being done was not in the interests of the company and deliberate conduct in disregard of that knowledge.
In those circumstances, in my opinion, for a contravention of s 184(1) to be established, it needs to be shown that the act or omission in question was not done or omitted to be done in good faith or for a proper purpose and was dishonest by ordinary community standards known to be dishonest by the accused and carried out in disregard of that fact.
Unlike dishonesty, the expression "reckless" is defined in Ch 2 of the Criminal Code. The definition contained in s 5.4 is in the following terms:
"5.4 Recklessness
(1) A person is reckless with respect to a circumstance if:
(a) he or she is aware of a substantial risk that the circumstance exists or will exist; and
(b) having regard to the circumstances known to him or her, it is unjustifiable to take the risk.
(2) A person is reckless with respect to a result if:
(a) he or she is aware of a substantial risk that the result will occur; and
(b) having regard to the circumstances known to him or her, it is unjustifiable to take the risk.
(3) The question whether taking a risk is unjustifiable is one of fact.
(4) If recklessness is a fault element for a physical element of an offence, proof of intention, knowledge or recklessness will satisfy that fault element."
The Commission's finding of contravention against Mr Duncan was in the following terms:
"The Commission is also satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found in relation to deliberately misleading Mr Cubbin, deliberately failing to disclose to the IBC the Obeid family involvement in the Mount Penny tenement and relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement in that tenement, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be ground on which such a tribunal would find that Mr Duncan committed criminal offences under s 184(1) of the Corporations Act 2001. This is because, as a director of White Energy, he was intentionally dishonest or, alternatively, reckless and failed to discharge his duties in good faith and in the best interests of that company or for a proper purpose by withholding information about the Obeid family involvement so that the value of his holding in Cascade Coal would not be adversely affected."
The finding against Mr McGuigan was as follows:
"The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found in relation to the deliberate failure to disclose information to the IBC and relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement in the Mount Penny tenement were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that John McGuigan committed criminal offences under s 184(1) of the Corporations Act 2001. This is because, as a director White Energy, he was intentionally dishonest or, alternatively, reckless and failed to discharge his duties in good faith and in the best interests of that company or for a proper purpose by withholding information about the Obeid family involvement so that the value of his holding in Cascade would not be adversely affected."
Whilst the finding against Mr Atkinson was in the following terms:
"The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found in relation to the deliberate failure to disclose information to the IBC were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Atkinson committed a criminal offence under s 184(1) of the Corporations Act 2001. This is because, as a director of White Energy, he was intentionally dishonest or, alternatively, reckless and failed to discharge his duties in good faith and in the best interests of that company or for a proper purpose by withholding information about the Obeid family involvement so that the value of his holding in Cascade Coal would not be adversely affected."
It is to be noted that the findings against each of Messrs Duncan, McGuigan and Atkinson are expressed in terms of s 9(1)(a) of the ICAC Act. It does not appear from those findings that the Commission specifically addressed the jurisdictional fact contained in s 13(3A) of the Act. However, no argument was advanced to the effect that the Commission did not address this question as distinct from criticising the result as unreasonable and involving reasoning that was irrational or illogical or involving an error of law. Presumably, that was because it was relatively clear from the findings made by the Commission, to which I have referred above at [89]-[97], that the Commission was in fact satisfied that a contravention of s 184(1) had occurred.
[25]
The submissions
The Commission submitted that a director's duty under s 184(1) does not cease once the relevant conflict of interest has been disclosed. It submitted that in some circumstances further action would be required.
The Commission submitted that Messrs Duncan and McGuigan were found to have actively misled the IBC. It submitted that in those circumstances, even if the primary judge was correct to conclude that the duties imposed by s 184 did not extend to disclosing information, he erred in concluding the findings against Messrs McGuigan and Duncan could not have been made.
Senior counsel for the Commission stated that when Mr Duncan was asked questions by Mr Cubbin concerning the Obeid involvement, it was an occasion calling for an accurate answer, describing what was said by Mr Duncan as positively misleading.
The Commission submitted, referring to Permanent Building Society (in liq) v McGee (1993) 11 ACSR 260 (McGee), Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187 (Wheeler), Fitzsimmons v R (1997) 23 ACSR 355 (Fitzsimmons) and Australian Securities and Investments Commission v Adler [2002] NSWSC 171; 41 ACSR 72 (Adler), that there were occasions when it was not sufficient merely to disclose a conflict of interest, but positive disclosure of the risk involved in a transaction was necessary to fulfil the director's duty. The Commission also submitted, referring to Fitzsimmons, that it was not material that the information obtained by the individual appellants was obtained in their capacity as directors of Cascade.
The Commission submitted that the fact that the directors offered to grant indemnities and give warranties to protect White Energy did not affect the position. It submitted the efficacy of the warranties would depend upon establishing liability and the capacity of the grantor of the warranties and indemnities to meet any obligation arising under them.
Senior counsel for the Commission submitted that it was not correct that s 184 only imposed proscriptive obligations. He also submitted the obligations imposed by s 184 could not be turned on and off.
Senior counsel for the Commission submitted that there was no difference in substance between the position of Messrs Duncan and McGuigan and that of Mr Atkinson. He submitted that Mr Atkinson chose not to reveal what he knew out of self-interest.
Senior counsel for the Commission referred to the statement by the primary judge that what the Commission fastened on was a breach of fiduciary duty. He referred to the statement by the primary judge to the effect that there may be situations where, to observe the proscriptive obligations imposed on fiduciaries, it may be necessary to do a proactive act. He submitted that in the present case, to avoid a conflict of interest, it was necessary to obtain informed consent. He submitted that there was no fully informed consent given by White Energy to the conflict presented by the directors being personally involved in the sale process.
In those circumstances, he submitted the primary judge was in error in stating that the directors had removed themselves from the position of conflict. He submitted the only way the conflict could be avoided was by the directors resigning or not proceeding with the proposed transaction. He submitted the conflict was not alleviated by the device adopted of having the IBC seek to find answers from those directors who knew of the true position and who continued to hold office.
In the joint submissions, Mr McGuigan pointed out that he disclosed his conflict of interest pursuant to s 192 of the Corporations Act and withdrew from further investigation of the transaction by White Energy. He submitted that that was sufficient to satisfy the obligations imposed on him by s 184(1).
Mr McGuigan pointed to the fact that Mr Levi was not an employee of Cascade. He stated that he, Mr McGuigan, was acting on behalf of the vendor Cascade and was entitled to tell Mr Levi, the employee of another company, not to discuss the affairs of the company of which he was a director. He also submitted the discussions he had with Mr Cubbin and the IBC did not occur in his capacity as a director of White Energy.
Mr McGuigan submitted that the evidence provided no basis for the conclusion he was acting recklessly or was intentionally dishonest in not disclosing information concerning the Obeid involvement to the IBC. He referred to the definition of intent in s 5.2 of the Criminal Code, submitting that, if it was to be found that he engaged in intentional conduct capable of contravening s 184(1), it would have to be found that he deliberately engaged in such conduct in the knowledge that such conduct was not in White Energy's best interest or was for an improper purpose. He also referred to the definition of reckless in s 5.4 of the Criminal Code and submitted that he could only be found to be reckless if he was aware that circumstances existed or would exist that presented a substantial risk to White Energy and, having regard to the circumstances known to him, it was unjustifiable to expose the company to that risk. He submitted non-disclosure of information, the substance of which was publicly known, had already prompted official inquiry in parliament and was the subject of investigation by the IBC, could not be intentionally dishonest or reckless.
Senior counsel for Mr McGuigan, referring to Howard v The Federal Commissioner of Taxation [2014] HCA 21; 253 CLR 83, emphasised that in determining whether there was any breach of a fiduciary obligation, it was necessary to look at the particular circumstances of the case, submitting that Mr McGuigan's interaction with Mr Cubbin and the IBC did not occur in his capacity as a director of White Energy.
Mr Duncan, in his written submissions, submitted that, even assuming a director's duty could extend beyond disclosing the existence of a conflict to disclosing matters which undermined the suggestion that a transaction was in the best interests of the company concerned, the warranties and indemnities offered to White Energy meant that the element of intentional dishonesty in s 184(1) could not be established. He pointed also to the fact that at least 80% of the consideration for the sale would be in the form of shares in White Energy.
In relation to the warranties and indemnities, Mr Duncan referred to the warranties given by Gaffwick Pty Ltd (Gaffwick), the vehicle through which he held Cascade shares, that there were no matters which adversely affected the title to the tenement and that the shareholders of Cascade were unaware of any reason why a mining lease would not be granted and to the indemnities given to support the warranties up to $58 million.
He also pointed to a subsequent warranty offered by the White Energy director-related shareholders in Cascade to the effect that the Mt Penny exploration licence would not be revoked for a period of six months from the date of completion of the sale, which was to be secured by an extension of the period the White Energy shares forming part of the sale consideration for the transaction would be held in escrow.
Mr Duncan also referred to a subsequent agreement of the White Energy director related shareholders of Cascade to pay liquidated damages of 97.132% of the total consideration if, within 12 months of completion, the government initiated a review of the circumstances in which the Mt Penny exploration licence was granted and the licence was cancelled before a mining lease had been granted. Finally, he referred to a proposal to further extend the escrow period.
Mr Duncan submitted that his conduct had to be considered in circumstances where those warranties and indemnities effectively quarantined White Energy from any risk from the Obeid involvement. He submitted that although the Commission referred to the warranties, it failed to consider the fact that they eliminated the risk. He submitted that when they were taken into account, no reasonable decision-maker could have concluded there was a contravention of s 184.
Mr Duncan submitted that there was no finding that he gave a false or incorrect answer to Mr Cubbin's question. He said that his answer to Mr Cubbin's question, "they're not in there", framed in the present tense, was true, the joint venture having been terminated.
Mr Duncan submitted that the Commission did not dispute that if White Energy was sufficiently protected against risk by the indemnities and warranties then there could not be a breach of s 184. He submitted the fact they were contained in draft documents did not matter as what was relevant in considering the question of breach of duty was that they had agreed to execute documents in that form. Further, he pointed out that the warranties and indemnities referred to above at [398] were contained in an executed support deed dated 13 February 2011. He also submitted there was no challenge at the hearing to the capacity of Gaffwick to honour the indemnities, nor was that question investigated, something a reasonable decision-maker would have done.
Senior counsel for Mr Duncan accepted that there may be occasions where it would not be sufficient for a director to discharge his duty by merely disclosing his or her interest in the transaction and, depending on the circumstances and the gravity of the risk, the director might be required to disclose a risk involved in the entry into the transaction. However, he submitted this was not such a case.
In that context, senior counsel for Mr Duncan pointed out that the facts as found by the Commission indicated the IBC was aware of the possibility that the Obeids might have had an historical interest in the tenement. He pointed out it was not a case where White Energy had no inclination of the risk. He submitted in those circumstances, there was no obligation to disclose. He submitted it was up to the IBC to seek further information if they wanted it.
Mr Atkinson referred to the following matters which he said meant it was not open to find that he had contravened s 184. First, there was no finding that he knew of the entry into the joint venture with Buffalo at the time at which it was entered into, although he accepted that he knew subsequent to it being entered into. Second, he disclosed his interest in the transaction to White Energy and withdrew from all deliberations. He pointed out that the IBC chose to deal with Messrs McGuigan, Poole and Duncan who had firsthand knowledge of the Obeid involvement. He submitted the evidence was that he was not asked to attend any meeting. Further he submitted that he joined in the offer to grant guarantees and indemnities.
Mr Atkinson also submitted the formulation of the charges against him was duplicitous as it ran together two charges, namely, failing to exercise powers and duties in good faith in the best interests of the corporation and failing to exercise powers and discharge duties for a proper purpose. He submitted in those circumstances, a proper finding was not made for the purpose of s 9(1)(a) or s 13(3A) of the ICAC Act.
Senior counsel for Mr Atkinson pointed out that ss 9(1)(a) and 13(3A) of the ICAC Act require that the Commission be satisfied that the relevant offence has been committed. He submitted it must be a rational decision based on a proper statement of law and findings of fact properly made.
Senior counsel for Mr Atkinson submitted that his client was in a different position to the other individual appellants. He stated that there was no finding that Mr Atkinson knew of the Obeid interest in the joint venture at the time it was entered into or had any knowledge over and above that of Messrs Poole, McGuigan and Duncan or that he had been involved in any negotiations leading up to that transaction. He pointed out that Mr Atkinson gave evidence that he had not been asked anything by the IBC and this evidence was not rejected by the Commission.
Senior counsel for Mr Atkinson also submitted that there was no evidence in fact that Mr Atkinson knew that the transaction by which the Obeid interest was extracted from the joint venture was carried out with a view to disguising the Obeid involvement from government authorities.
Senior counsel for Mr Atkinson submitted there was no reason in those circumstances for his client to be proactive in the sense of disclosing his knowledge to the IBC.
The Commission also made findings of corrupt conduct against Mr John Kinghorn, being satisfied that he contravened s 184(1) in failing to disclose his knowledge of the Obeid involvement in the joint venture to White Energy. This finding was set aside by the primary judge and the Commission appealed. The appeal was dismissed by consent. Prior to its dismissal, Mr Kinghorn had filed submissions in opposition to the appeal. The individual appellants sought to rely on those submissions so far as they related to s 184(1).
Mr Kinghorn submitted that the reliance by the Commission on what was described as proactive disclosure led the Commission into error. He submitted fiduciary duties are proscriptive. He submitted that, whilst proactive steps may be required to avoid a conflict, adopting the reasoning of the primary judge, that does not mean there is a proactive element in the fiduciary duty.
Mr Kinghorn also submitted that any information he had about the Obeid involvement was obtained from his position as a director of Cascade. He submitted the only course he could adopt was to declare a conflict and abstain from intruding into the activities of the IBC.
Mr Kinghorn sought to distinguish the cases relied upon by the Commission. In relation to McGee, he pointed to the fact that the director, Mr Wheeler, was a director of both the lender and the borrower company and an executive director of each company. He pointed to the fact that no intervening board committee was established to consider the transaction. He submitted that in those circumstances, Mr Wheeler's failure to disclose the inability of the borrower to repay the advance to be made by the plaintiff occurred whilst Mr Wheeler was in a position of conflict and remained in that position. He submitted the situation in Adler was similar.
Mr Kinghorn submitted that Wheeler concerned a breach of a separate, non-fiduciary duty to exercise due skill, care and diligence. He submitted that in Fitzsimmons, there was even a failure to disclose the existence of the conflict.
Mr Kinghorn submitted that Owen J was correct in Fitzsimmons in stating that the circumstance where action is required beyond non-disclosure will vary depending on the subject matter, the state of knowledge of the adverse information, the degree of involvement of the director, whether the director had been promoting the transaction and the gravity of the possible outcome.
[26]
Disposition
Although I have set out the conclusion of the Commission earlier (see above at [95]-[99]) it is important to have regard to the manner in which it reached its conclusion. In dealing with the directors generally, the Commission made the following remarks:
"This is a clear area where there was a direct conflict of interest. As earlier identified, each of Mr Duncan, John McGuigan, Mr Atkinson and Mr Kinghorn, knew of the Obeid involvement, and had arranged for the removal of the Obeids from the joint venture upon the basis that it jeopardised the assets of Cascade. At the same time, each of those men was a director of White Energy and owed a fiduciary duty to White Energy.
Each of those men must have been aware of the interest that Mr Cubbin and the IBC had in the question of any historical involvement of the Obeid family at Mount Penny. Each must have been aware that Mr Cubbin and the IBC were trying to ascertain whether there had been any Obeid involvement in the Mount Penny tenement (and the joint venture relating to it) and to understand why Cascade had paid $28 million to Coal & Minerals Group. Each must have understood that this information was vital to White Energy.
This raises the following question: what did those men do in respect of sharing this information? Put another way: what did those men do to discharge their fiduciary duty owed to White Energy?"
It concluded in relation to Mr Duncan that there was deliberate concealment of information from the IBC. In relation to Mr McGuigan the report contained the following remarks:
"The Commission finds that John McGuigan misled Mr Cubbin and the IBC by taking active steps to conceal from them the Obeid involvement in the Mount Penny tenement. The active steps involved preventing Mr Levi from telling Mr Cubbin about the Obeid involvement. This concealment was carried out for John McGuigan's personal advantage. His personal advantage was, as is the case concerning Mr Duncan, the avoidance of any reduction in the value of his shares in Cascade. That reduction was likely to have resulted had he made full disclosure to Mr Cubbin.
John McGuigan was a director of White Energy and had a fiduciary duty to the company. The Commission is satisfied that, despite this, John McGuigan deliberately concealed the Obeid involvement in the Mount Penny tenement from Mr Cubbin and IBC."
It can thus be seen that the Commission's conclusion in relation to s 184(1) of the Corporations Act was that the directors breached their duty in circumstances where they were in a position of conflict by withholding significant information from the IBC. Essentially, it concluded that disclosure of the conflict was insufficient to discharge the director's statutory (or fiduciary) obligation.
The primary judge accepted that there were occasions when the duty to avoid a conflict could require what he described as the taking of positive steps to avoid it. However, he concluded that this was not the present case as the directors had removed themselves from the conflict. The primary judge ultimately found that the Commission erred in law in concluding that further steps were required.
It is important to bear in mind, in considering this issue, that the relevant question is not whether in fact the appellant against whom the finding was made contravened s 184(1). Rather the question is first, whether it was open to the Commission to be satisfied that such a contravention had occurred. The finding can only be challenged if it involved an error of law (as the primary judge apparently concluded) or was reached by a process of reasoning that was illogical or irrational. The second question was whether it was open to the Commission to conclude, for the purposes of s 9(1)(a) of the ICAC Act, that it would be open to a jury to conclude that such a contravention had occurred.
As I indicated earlier, s 184(1) essentially imposed criminal sanctions for a contravention of s 181 where the contravention is either intentionally dishonest or reckless.
Subject to one possible reservation, the obligations imposed by s 181(1) were, with respect, correctly stated by Gordon J in Digital Cinema Network Pty Ltd v Omnilab Media Pty Limited (No 2) [2011] FCA 509 at [158]:
"[158] To establish a breach of s 181(1) it is necessary to show that the director acted with a consciousness that what was being done was not in the interests of the company: ASIC v Maxwell (2006) 24 ACLC 1308 at [108] and [109]. In Chew v R (1991) 4 WAR 21 at 49, Malcolm CJ summarised the requirements of the duty to act in good faith as including that directors must:
1. exercise their powers in the interests of the company;
2. not misuse or abuse their power;
3. avoid conflict between their personal interest and those of the company;
4. not take advantage of their position to make secret profits; and
5. not appropriate the company's assets for themselves."
This statement was approved by the Full Court on appeal: Omnilab Media Pty Limited v Digital Cinema Network Pty Ltd [2011] FCAFC 166 per Jacobsen J, Rares J agreeing.
The reservation I have is whether, following the introduction of ss 181 and 184 into the Act's predecessor, the Corporations Law, and the consequent separation of civil and criminal liability, it is necessary to establish dishonesty to find a contravention of s 181. The previous section, s 232(2) of the Corporations Law, was in the following terms:
"An officer of a corporation shall at all times act honestly in the exercise of his or her powers and the discharge of the duties of his or her office."
The legislative history leading up to the introduction of ss 181 and 184 is helpfully summarised by Weinberg J and Davies AJA in SAJ at [84]-[94].
Since the amendment, the question of whether dishonesty is required for a contravention of s 181 has been a matter of some debate. In Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; 24 ACLC 1308, Brereton J concluded at [109] that notwithstanding the fact that the words "act honestly" have not been retained in the section, s 181 is only contravened where a director engages deliberately in conduct knowing that it is not in the interests of the company. A similar view was taken by Gzell J in Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287; 71 ACSR 368 at [663] (the issue was not considered on appeal by either the Court of Appeal or the High Court). In Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2008] NSWSC 1224; 69 ACSR 1, Hamilton J reached a contrary conclusion at [34]: see also Robert P Austin and Ian M Ramsay, Ford, Austin and Ramsay's Principles of Corporations Law (16th ed 2015, Lexis Nexis Butterworths) at [8.065]; Austin and Black's Annotations to the Corporations Act at [2D.181]. However, it is unnecessary to determine the issue in the present case.
Nor is it necessary to determine the extent to which a contravention of the duty imposed by s 181 is to be determined having regard to objective standards or whether the director's subjective beliefs and intentions can be taken into account: see Downer EDI Ltd v Gillies [2012] NSWCA 333; 91 ACSR 373 at [76]; R v Byrnes [1995] HCA 1; 183 CLR 501 at 514-515; Doyle v Australian Securities and Investments Commission [2005] HCA 78; 227 CLR 18 at [35]-[37]; cf The Bell Group Ltd v Westpac Banking Corporation (2008) 39 WAR 1 at [4583]-[4618], particularly at [4618].
In the present case, as I have indicated above at [375], a contravention of s 184 requires intentional dishonesty or recklessness. That involves finding that the conduct complained of was dishonest according to ordinary community standards and known by the director to be dishonest, the latter requirement being imposed by the word "intentional".
In the present case, it was not disputed that the directors had fiduciary obligations to avoid placing themselves in a position of conflict when dealing with White Energy. The question arises whether the steps taken by them, namely disclosing their interests and not involving themselves in subsequent deliberations of White Energy concerning the transaction, were sufficient to avoid that conflict and if not, whether their conduct could be said to be intentionally dishonest.
The parties recognised that there were circumstances in which a conflict will not be avoided by simply disclosing their interest in the transaction to the person to whom the duty is owed and withdrawing from participation in the transaction on that person's behalf.
In McGee, the plaintiff company made an advance to a company of which a number of its directors were either shareholders or directors. One of the plaintiff's directors, Mr Wheeler, held the controlling interest in the borrower company. He disclosed his interest in the company but failed to disclose that the borrower would be unable to repay the loan. The trial judge, Anderson J, made the following remarks at 289-290:
"Wheeler - conflict between duty and self interest
In my opinion, it is quite clear that Wheeler did place himself in a position of conflict. It is true that he did not actually participate in the meeting of the plaintiff's board that finally resolved to make the loan. However, this is not a case in which mere disclosure of interest and abstention from voting was sufficient. He must have known that, as things stood, Capital Hall was quite unable to service the loan or to repay it. He was in a better position than Nizzola and McGee to appreciate that fact. Under those circumstances, it was his duty to take positive steps to protect the interests of the plaintiff. At the very least, he was under an obligation to make full and frank disclosure of the extent of Capital Hall's financial incapacity at that time. There is nothing to show that he did that. However, I think his duty went further than that. He was in a position of power and influence in respect of both companies. There was no doubt he could have prevented the transaction proceeding. One word from him would have been enough. He should have done so. He could not escape from his continuing duty to act bona fide in the interests of the society as a whole 'by the simple expedient of leaving the room': Darvall v North Sydney Brick and Tile Co Ltd (1989( 15 ACLR 203, per Kirby P at 250. In my opinion he did, throughout, remain in a position of conflict and it was not overcome by his merely abstaining from participating in the formal resolutions. It was his duty to inform the plaintiff's board that Capital Hall was not in a position to repay an advance of $1.5m should it be made, nor was it in a position to fulfil its obligations as to payment of interest, and that should the advance be made, there was a high risk that none of it would be recovered. As the loan was to be made to a company which was, in effect, his company, he cannot claim honesty of purpose. He came within the rule which absolutely requires a fiduciary to deal with his principal at arm's length upon a consent obtained after full disclosure of all relevant facts."
His conclusion was upheld on appeal in Wheeler.
In Fitzsimmons, the appellant was a director of two companies, Duke Holdings Ltd and Kia Ora Gold Corp NL. A transaction was entered into involving a payment of money from Kia Ora to Duke Holdings and the purchase by Duke of shares in Kia Ora. To the knowledge of the appellant, but not to other members of the board of Kia Ora, Duke was in a precarious financial position. The appellant was said to have breached his duty under s 229(1)(b) of the Companies Code (SA) in failing to act honestly in the affairs of Kia Ora by not disclosing the financial position of Duke Holdings. In the course of his judgment, Owen J made the following remarks at 358-359:
"Each case will depend on its own facts. A director who is confronted with a possible conflict must assess his or her position. The minimum requirement will be disclosure of the interest. This is simply part of, or an extension of, the statutory obligation that a director who is in any way 'interested' in a contract or proposed contract with the company must declare the nature of the interest at a meeting of the directors: Code s 232(1) (now s 231 of the Corporations Law). What action, above and beyond mere disclosure, the director must take will vary from case to case depending on the subject matter, the state of knowledge of the adverse information, the degree to which the director has been involved in the transaction, whether the director has been promoting the cause, the gravity of the possible outcome, the exigencies and commercial reality of the situation and so on. It may not be enough for the director simply to refrain from voting or even to absent himself or herself from the meeting during discussion of the impugned business. The circumstances may require the director to take some positive action to identify clearly the perceived conflict and to suggest a course of action to limit the possible damage.
…
It is not, then, the existence of the conflict that constitutes the mischief with which the law is concerned. It is the pursuit of that interest which renders the conduct objectionable and improper. The case against the applicant was that he pursued the conflict by failing to disclose the true financial position of Duke to the directors of Kia Ora. It is not for me to say what he should have done to avoid a breach of duty. There may have been some disclosure or recommendation that he could have made, short of resignation, that might have complied with his obligations to Kia Ora without infringing the duty of confidentiality that he owed to Duke. On the other hand, once he had realised the gravity of the situation he might have come to the conclusion that the conflict was irreconcilable and that resignation was the only option. It was a matter for him."
In Adler, Santow J, in setting out the principles applicable to s 181 of the Corporations Act, dealt with the issue in the following terms at [735]:
"(1) a director (as a fiduciary) is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances where there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the company: Hospital Products Ltd v United States Surgical Corp [1984] 156 CLR 41; 55 ALR 417 per Mason J at CLR 103. This is both at general law and by statute (s 181 and as applicable ss 182 and 183). Such promotion would not be to act in good faith in the best interests of the corporation, or for proper purposes: s 181. If the director has improperly used his position or information to gain such advantage ss 182 and 183 respectively are breached;
…
(4) in certain circumstances, such as a director in 'a position of power and influence' over the board, mere disclosure of a conflict between interest and duty and abstaining from voting is insufficient to satisfy a director's fiduciary duty. The director may also be under a positive duty to take steps to protect the company's interest such as by using such power and influence as he had to prevent the transaction going ahead: Permanent Building Society (in liq) v McGee (1993) 11 ACSR 260 per Anderson J, at 289. Here neither Mr Adler nor Mr Williams, and failing them Mr Fodera did anything to have the following reach the investment committee or the board; that is, payment of the $10m, the formation of AEUT and its investment in HIH. This allowed the subsequent unlisted investments and loans to be made with no properly approved mandate permitting this and no specific approval or ratification within a reasonable time thereafter;
(5) what action, beyond disclosure, the director must take will depend on matters such as the degree to which the director has been involved in the transaction, and the gravity of possible outcomes for the company: Fitzsimmons v R (1997) 23 ACSR 355 per Owen J (at 358). Here Mr Adler was intimately involved in all aspects of the transactions, while Messrs Williams and Fodera were involved to the lesser degrees earlier identified, with Mr Fodera least involved and the outcomes for HIH and HIHC were clearly adverse, in terms of ultimate loss".
His decision was upheld on appeal: Adler v Australian Securities and Investments Commission [2003] NSWCA 131; 46 ACSR 504; see also Duke Group Ltd (In liq) v Pilmer [1999] SASC 97; 73 SASR 64 at [666]-[670] (overruled in part but not on this point in Pilmer v Duke Group Ltd [2001] HCA 31; 207 CLR 165); Centofanti v Eekimitor Pty Ltd (1995) 65 SASR 31; Rosemary Teele Langford and Ian M Ramsay "Conflicted Directors: What is required to avoid a breach of duty" (2014) 8 Journal of Equity 108.
These cases are consistent with the principle that in the circumstances of a transaction between a person and one to whom he or she owes fiduciary obligations, what is required to avoid a conflict is fully informed consent on the part of the beneficiary of the fiduciary obligation: Maguire v Makaronis [1997] HCA 23; 188 CLR 449 at 466; Australasian Annuities Pty Ltd (in liq) (recs and mgrs apptd) v Rowley Super Fund Pty Ltd [2015] VSCA 9; 104 ACSR 312 at [69].
In the present case, the following facts as found by the Commission are significant:
1. The transaction involved a significant amount of money.
2. The directors considered that the disclosure of the Obeid involvement could have led to the government declining to grant a mining lease thereby rendering the primary asset of Cascade worthless.
3. Although there had been references to the Obeids' ownership interest in the land the subject of the tenement, the publicly available information did not extend to the joint venture arrangement.
4. The directors who were shareholders in Cascade were aware of the IBC interest in relation to both past and present involvement of Obeid interests in the tenement and it could be inferred, had that involvement been made known to the IBC, the transaction between White Energy and the Cascade shareholders would not proceed.
5. The evidence of Mr Cubbin, which was accepted by the Commission, was that the transaction would not have proceeded had he become aware of the past Obeid involvement in the tenement.
None of these matters were taken into account by the primary judge in his consideration of whether it was open to the Commission to be satisfied for the purpose of s 13(3A) of the ICAC Act, that the directors had contravened s 184. They were, in my opinion, relevant to a consideration of this issue.
It also must be remembered that, contrary to what was implied in some of the submissions made by the individual appellants, this was not a case of conflict between the duties owed by the directors to White Energy and duties owed to Cascade. By contrast, in the present case, the conflict was between their duties as directors of White Energy and their interests as sellers of their shares in Cascade to that company. It follows that if they were of the view that disclosure of the Obeid involvement would be detrimental to Cascade, they could have avoided a conflict by simply withdrawing from the transaction.
In those circumstances, it was open to the Commission to be satisfied that it was not sufficient in the particular circumstances of the present case for the directors to disclose their interest in the transaction and not participate in the decision-making process of White Energy. Having regard to the amount involved and the effect of disclosure of the Obeid involvement on the Cascade assets, the transaction proposed was, to say the least, improvident. Put simply, the directors believed that if the Obeid involvement was disclosed, the transaction would not proceed. It seems to me from those circumstances, this was a case where it was open to the Commission to find that the directors did not discharge their obligation to avoid placing themselves in a position of conflict by disclosing their interest in the transaction. The conflict inherent in selling effectively a flawed asset to a company to which they owe fiduciary obligations remained and it was open to find that in seeking to proceed with the transaction without disclosing the true position, the directors contravened their obligation to act in good faith in the interests of White Energy.
Both Messrs Duncan and McGuigan submitted that the information concerning the Obeid involvement that was in the public domain made further disclosure unnecessary. However, the publicly available information did not include details of the joint venture, which on the evidence of all parties was a critical matter.
As I pointed out at [394] and [396], Mr McGuigan's submission stated he was acting on behalf of the vendor Cascade and was not dealing with the IBC in his capacity as a director of White Energy. There are two difficulties with this submission. First, Cascade was not the vendor. To the extent he was acting for anybody, he was acting for interests personally associated with himself. Second, and more importantly, irrespective of whom he thought he was acting for, he remained at all times a director of White Energy. Senior counsel for Mr McGuigan was correct in submitting that it was necessary to look at the particular circumstances of the case, however, the circumstances were in fact that of a director entering into a transaction with the company in circumstances where there was a conflict in respect of which fully informed consent had not been obtained from the company to whom the fiduciary obligation was owed.
However, it is also necessary to deal with the question of intentional dishonesty. It is necessary in this context to deal separately with each of the appellants concerned.
In relation to Mr Duncan, the Commission, after referring to the evidence I have set out above at [90], found that Mr Cubbin was seeking assistance and information from Mr Duncan and that Mr Duncan was seeking to mislead him. In my view, this finding was open to the Commission at least to the extent that it involved a finding of deliberate concealment of information, which was the basis on which the Commission found a contravention of s 184. The carefully chosen answer by Mr Duncan to the question asked of him by Mr Cubbin was designed to conceal the fact that the Obeids had previously had an interest in the mining tenement. Such an answer, in the circumstances in which the question was asked and having regard to its importance, could be held to be dishonest and intentionally so, not only in not disclosing the true position but also in being designed to mislead the corporation to whom the fiduciary duty was owed into believing the Obeids had never been involved in the joint venture.
In these circumstances, it seems to me that it was open to the Commission to be satisfied that Mr Duncan contravened s 184(1). The jurisdictional threshold in s 13(3A) of the ICAC Act was made out. For the purpose of s 9(1)(a) of that Act, it would be open to a jury on the facts found by the Commission to convict Mr Duncan of a contravention of this section.
Mr McGuigan, on the Commission's finding, also took active steps to conceal the true position from White Energy. In circumstances where there was an obligation to make full disclosure, it was open, in my opinion, for the Commission to be satisfied that in taking the steps referred to by the Commission, in circumstances where he was aware the transaction would not proceed if the true position was known, was intentionally dishonest. In those circumstances, the Commission was entitled to be satisfied for the purpose of s 13(3A) of the ICAC Act that Mr McGuigan had contravened s 184(1) of the Corporations Act and for the purpose s 9(1)(a) of the ICAC Act that it would be open for a jury to convict him of that offence.
This conclusion, in my opinion, is not affected by the guarantees and indemnities proffered by the directors. The Commission took these into account. Whilst it may well be the case that these guarantees and indemnities provided significant protection to White Energy, the fact remains that White Energy was entitled to full disclosure and, on the Commission's finding, the true position was deliberately concealed from it. In these circumstances, whilst the guarantees and indemnities would certainly be relevant on the question of intentional dishonesty, it does not seem to me that their existence means the Commission's conclusions on s 13(3A) or s 9(1)(a) of the ICAC Act were unreasonable.
The position of Mr Atkinson is different. Although, in my opinion, the fiduciary and statutory obligation to act in good faith extended in the particular circumstances of the present case to disclosing the Obeid involvement to White Energy, I do not think it was open, on the facts found by the Commission, to find that Mr Atkinson was intentionally dishonest. Although he did not disclose the true position, there was no evidence to suggest that he actively took steps to conceal it from White Energy. Further, he took no part in any discussions with the IBC in relation to the transaction. On these facts, I do not think it was open to the Commission to conclude he was intentionally dishonest and acting in contravention of s 184(1). Nor do I think it would be open to a jury to convict him of this offence on the findings made by the Commission.
In reaching this conclusion, I have taken into account the fact that the Commission found that Mr Atkinson participated in a meeting at which it was resolved not to disclose the rights termination deed. However, that discussion did not extend to reaching an agreement to actively conceal the deed from the IBC or provide misleading information to that body as to the past involvement of the Obeids in the venture. In those circumstances, I do not think an inference of intentional dishonesty can be drawn from the fact that Mr Atkinson participated in this meeting.
In these circumstances, the Commission succeeds on the matters raised in its notice of contention so far as concerns Messrs McGuigan and Duncan, but not so far as concerns Mr Atkinson.
[27]
The eighth issue: Did the primary judge err in failing to conclude that the appellants had been denied procedural fairness?
For the reasons given by Basten JA, in my view, this ground of appeal has not been made out.
[28]
The corporate appellants' appeal
For the reasons given by Basten JA, I am of the opinion that the appeals by Cascade, Mt Penny and Glendon Brook, so far as they relate to the recommendations in respect of the Mt Penny tenement, should be dismissed.
However, I do not think there was a sufficient nexus between the corrupt conduct found by the Commission and the grant of the Glendon Brook exploration licence to warrant the Commission's recommendation in respect of this tenement. This is because, although it was represented by Messrs Moses Obeid and Brooke to Cascade that Cascade had come second to Monaro in the bidding process, the Commission expressly declined to find that Mr Macdonald had told Mr Moses Obeid that this was the case. Thus, the representations to this effect were based on speculation, albeit informed, rather than confidential information. In these circumstances, where Obeid related entities had no interest in the Glendon Brook tenement and the creation of the tenement was not tainted by corruption, there does not seem to be any basis for the Commission's recommendation.
[29]
Conclusion
In the result, Mr Atkinson has been successful in the appeal whilst Mr Duncan has been unsuccessful. The costs of these appeals should follow the event. Mr Duncan should pay the Commission's costs of the appeal, whilst the Commission should pay Mr Atkinson's costs of the appeal and his costs in the court below.
The position in relation to Messrs Poole and McGuigan is somewhat different. They filed a joint appeal which was successful in the case of Mr Poole but unsuccessful in the case of Mr McGuigan. My present view is that, in these circumstances, there should be no order for costs in the appeal but Mr McGuigan should pay the costs of the Commission in the court below, whilst the Commission should pay Mr Poole's costs in the court below. However, I will give the parties an opportunity to make submissions as to the appropriate costs order, both in this Court and the court below.
In relation to the corporate appellants' appeal, a declaration should be made that the Commission had no jurisdiction to make the recommendation that the Glendon Brook exploration licence be expunged. The corporate appellants' appeal should otherwise be dismissed. So far as costs are concerned each party was partly successful. Having regard to the limited time the corporate appellants' case took on the appeal and in the court below, there should be no order for the costs of the appeal or of the proceedings before the primary judge.
In the result I would make the following orders:
In matter 2014/239426 - Travers William Duncan v Independent Commission against Corruption:
(1) Grant the applicant leave to appeal.
(2) Direct that the applicant file the draft notice of appeal in the white book within seven days.
(3) Dismiss the appeal.
(4) Order that the appellant pay the costs of the Commission of the proceedings in this Court.
In matter 2014/249038 - John Vern McGuigan and Richard Jonathan Poole v Independent Commission against Corruption:
(1) Grant the applicants leave to appeal.
(2) Direct that the applicants file the draft notice of appeal in the white book within seven days.
(3) Dismiss the appeal so far as it concerns Mr McGuigan.
(4) Allow the appeal so far as it concerns Mr Poole.
(5) Set aside the orders made by the primary judge in respect of Mr Poole and in lieu thereof order that the finding of corrupt conduct made against him by the Commission be quashed.
(6) Direct the parties within 14 days to file submissions as to the costs orders in respect of the proceedings in this Court and in the court below.
In matter 2014/18985 - Cascade Coal Pty Limited, Mt Penny Coal Pty Limited and Glendon Brook Coal Pty Limited v Independent Commission against Corruption:
(1) Grant the applicants leave to appeal.
(2) Direct that the applicants file the draft notice of appeal in the white book within seven days.
(3) Allow the appeal in part.
(4) Declare that the order made by the Commission recommending that the exploration licence in respect of the Glendon Book tenement was made without jurisdiction.
(5) Appeal otherwise dismissed.
(6) Set aside the order of the primary judge that the appellants pay the costs of the Commission.
In matter 2014/249038 - John Charles Atkinson v Independent Commission against Corruption:
(1) Grant the applicant leave to appeal.
(2) Direct that the applicant file the draft notice of appeal in the white book within seven days.
(3) Allow the appeal.
(4) Set aside the finding of corrupt conduct made against the applicant by the Commission.
(5) Order that the Commission pay the costs of the appellant of the appeal and in the court below.
BEAZLEY P: I have had the advantage of reading in draft the reasons of Bathurst CJ and Basten JA. Each of their Honours have extensively reviewed the facts and the law and explained their conclusions on the matters in issue. After careful consideration, I have reached agreement with the Chief Justice on all matters except: (1) in relation to the position of Mr Atkinson in respect of s 184(1) of the Corporations Act 2001 (Cth); (2) in relation to the positions of Messrs Duncan and Poole in respect of s 192E of the Crimes Act 1900 (NSW); and (3) the Chief Justice's conclusion in respect of the Glendon Brook tenement.
Given the Chief Justice's detailed reasons, I am able to express briefly the reasons for the conclusions I have reached on the first two of these issues. I agree with the reasons of Basten JA in respect of the Glendon Brook tenement.
So far as it is necessary to refer to Messrs Duncan, McGuigan, Atkinson and Poole collectively, I will refer to them as "the individual appellants".
[30]
Judicial review of corrupt conduct findings
It is useful in explaining my reasons to reiterate the principles that govern judicial review proceedings of the kind here in question. The primary judge, at [35], correctly identified that declaratory relief of the type sought by the appellants will only be granted where:
"(1) there is a material error of law on the face of the record (which includes the reasons given for the decision - see s 69(4) of the Supreme Court Act 1970 (NSW));
(2) the reasoning is not objectively reasonable, in the sense that the decision was not one that could have been reached by a reasonable person acquainted with all material facts and having a proper understanding of the statutory function, or was not based on a process of logical reasoning from proven facts or proper inferences therefrom;
(3) there is a finding that is not supported by any evidence whatsoever - that is to say, there is no evidence that could rationally support the impugned finding;
(4) relevant matters have not been taken into account, or irrelevant matters have been taken into account; and
(5) there has been a material denial of natural justice."
With these basic principles in mind, it is then necessary to consider the manner in which the ICAC's powers are engaged under the Independent Commission Against Corruption Act 1988 (NSW) (the Act).
The relevant findings of "corrupt conduct" were made under Pt 3 of the Act, the relevant provisions of which are set out in full in the reasons of the Chief Justice at [18]-[21].
Section 7(1) of the Act provides that, for the purposes of the Act, "corrupt conduct" is any conduct which falls within the description of corrupt conduct in s 8(1) or (2), but which is not excluded by s 9. By virtue of s 8(2), corrupt conduct includes conduct that adversely affects, or that could adversely affect, either directly or indirectly, the exercise of official functions and which could involve, inter alia, "fraud" or "bankruptcy and company violations": s 8(2)(e) and (s). Conduct of that kind will not, however, amount to "corrupt conduct" unless it could constitute or involve, inter alia, a criminal offence: s 9(1)(a). The meaning and proper application of those provisions has been considered in detail by the Chief Justice, at [155]-[165], and by Basten JA at [585]-[598].
The next important observation is that the ICAC's power to make findings that a person has engaged in, or is engaging in corrupt conduct is subject to the requirements in s 13(3A) which provides, relevantly:
"The Commission may make a finding that a person has engaged or is engaging in corrupt conduct of a kind described in paragraph (a) … of section 9 (1) only if satisfied that a person has engaged in or is engaging in conduct that constitutes or involves an offence or thing of the kind described in that paragraph."
The interrelationship of ss 9(1)(a) and 13(3A), as well as ss 74 and 74B needs to be understood. It is clear that the ICAC, as an administrative body, cannot make findings of criminal guilt, nor can it declare criminal liability: s 74B(1). On a bare reading of s 9(1)(a), the view might be taken that all that is required, subject to the requirements of s 8(1) or s 8(2) having been met, is that the relevant conduct could constitute or involve a criminal offence. However, s 9(1)(a) does not stand on its own. Section 13(3A) requires that before a finding of corrupt conduct can be made, the ICAC must be satisfied that the relevant conduct constitutes or involves, as relevant here, a criminal offence.
Effectively, therefore, there are two requirements at play. First, pursuant to s 9(1), conduct will only constitute corrupt conduct if it could constitute or involve conduct of the kinds specified in paras (a) to (d). Second, pursuant to s 13(3A), the power of the ICAC to make a finding of corrupt conduct is conditioned on the ICAC being satisfied that the relevant conduct constitutes or involves an offence or thing of the kinds specified in paras (a) to (d) of s 9(1). Thus, whilst the provisions overlap, there is a distinction between the meaning of corrupt conduct, which engages ss 7, 8 and 9 and the subsequent conditioning of power on the relevant state of satisfaction within the meaning of s 13(3A): see Bathurst CJ at [164]-[165]; Basten JA at [598].
Where there is a challenge by way of judicial review to a finding or determination by the ICAC of corrupt conduct involving a criminal offence, the question, in relation to s 13(3A), is not whether the impugned conduct constitutes a criminal offence, but whether the ICAC had the requisite satisfaction that a person has engaged or is engaging in conduct that constitutes or involves an offence or thing described in s 9(1). The relevant principles of review in this regard were stated by Latham CJ in R v Connell; Ex parte The Hetton Bellbird Collieries Ltd [1944] HCA 42; 69 CLR 407 at 430:
"[W]here the existence of a particular opinion is made a condition of the exercise of power, legislation conferring the power is treated as referring to an opinion which is such that it can be formed by a reasonable [person] who correctly understands the meaning of the law under which [the person] acts. If it is shown that the opinion actually formed is not an opinion of this character, then the necessary opinion does not exist."
Latham CJ continued at 432:
"It should be emphasized that the application of the principle now under discussion does not mean that the court substitutes its opinion for the opinion of the person or authority in question. What the court does do is to inquire whether the opinion required by the relevant legislative provision has really been formed. If the opinion which was in fact formed was reached by taking into account irrelevant considerations or by otherwise misconstruing the terms of the relevant legislation, then it must be held that the opinion required has not been formed. In that event the basis for the exercise of power is absent, just as if it were shown that the opinion was arbitrary, capricious, irrational, or not bona fide."
Where the ground of challenge is unreasonableness or irrationality it is not sufficient that different minds might come to different conclusions on the jurisdictional fact in issue. Rather, it must be found that the decision was illogical or irrational: D'Amore v Independent Commission Against Corruption [2013] NSWCA 187 at [82]. As I stated in D'Amore at [91]:
"… ICAC's state of satisfaction that [a person] had engaged in corrupt conduct had to be reasonable in the sense that it was a state of satisfaction that could be reached by a person with an understanding of the nature of the statutory function being performed: Hetton Bellbird Collieries. That state of satisfaction had to be based upon facts or inferences supported by logical grounds …"
See also Minister for Immigration v Eshetu [1999] HCA 21; 197 CLR 611; Minister for Immigration and Multicultural and Indigenous Affairs v SGLB [2004] HCA 32; 207 ALR 12; Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; 240 CLR 611; Minister for Immigration and Citizenship v Li [2013] HCA 18; 87 ALJR 618.
[31]
The individual appellants: s 184(1) of the Corporations Act
In relation to Messrs Duncan, McGuigan and Atkinson, the ICAC expressed satisfaction that each had engaged in conduct that would be found by a relevant tribunal to constitute an offence under s 184(1) of the Corporations Act. The primary judge reached the view that the ICAC's findings in relation to s 184(1) could not be sustained in respect of any of the individual appellants. I agree with the views adopted by the Chief Justice and Basten JA, contrary to the view taken by the primary judge, that there was no error of law in the ICAC's construction of s 184(1) of the Corporations Act as giving rise to positive duties of disclosure, at least in some circumstances.
As I have indicated, I agree with the Chief Justice that the primary judge erred in relation to the s 184(1) findings in respect of Messrs Duncan and McGuigan. Accordingly, I am only concerned to express my reasons as to why I consider that the primary judge also erred in respect of Mr Atkinson.
[32]
The position of Mr Atkinson
It is convenient at the outset to set out the ICAC's finding of corrupt conduct in respect of Mr Atkinson, namely, that he engaged in corrupt conduct by:
"a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement, and
b) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement."
The ICAC's more detailed findings in relation to Mr Atkinson are set out in the reasons of the Chief Justice at [109].
Mr Atkinson was a director of both Cascade and White Energy. He also owned shares in Cascade. So far as it is necessary to recount the facts, White Energy was proposing to enter into a transaction, under which, "for an enterprise value of $500 million", it would acquire 100 per cent of the shares in Cascade. Mr Atkinson had knowledge of the Obeid involvement in the Mount Penny joint venture and knew that information concerning any such connection would be important to the White Energy Independent Board Committee (IBC). As a director of White Energy, Mr Atkinson was under a duty, pursuant to ss 181 and 184 of the Corporations Act, to act in good faith in the best interests of the corporation and for a proper purpose. A breach of s 184(1) constitutes an offence, and the terms of that offence are set out in the Chief Justice's reasons at [374].
[33]
Issues for consideration in relation to Mr Atkinson
In relation to Mr Atkinson, the question to be determined is whether the primary judge erred in finding that it was not open to the ICAC to be satisfied that Mr Atkinson had engaged in conduct that constitutes an offence against s 184(1) of the Corporations Act. This question raises two sub-issues. First, whether in light of the circumstances and the conduct in which Mr Atkinson was found to have engaged, he breached his positive duty of disclosure, such that his failure to disclose the Cascade transaction to the IBC could constitute a breach of s 184. Secondly, whether, contrary to the primary judge's finding, it was open to the ICAC to be satisfied that the elements of the s 184(1) offence were otherwise made out, including in relation to the requirement of intentional dishonesty or recklessness.
[34]
Consideration: did Mr Atkinson breach his positive duty of disclosure?
As to the first sub-issue, Mr Atkinson emphasised that he did not have any knowledge beyond that of, nor indeed did he have the same knowledge as Messrs McGuigan, Poole and Duncan in relation to the fact that Cascade had entered into a mining venture on 5 June 2009 with an entity associated with the Obeid family. Mr Atkinson pointed out that he only became aware of the Obeid "connection" when told about it by Mr Duncan in March or April of 2010.
Mr Atkinson also relied upon the fact that Messrs McGuigan and Poole had carriage of the day to day affairs of Cascade. Mr Atkinson pointed to the fact that, in relation to the Cascade-White Energy due diligence process, Mr Cubbin and the IBC dealt with Messrs McGuigan, Poole and Duncan, and did not ask him to attend any meeting. Mr Atkinson also emphasised that he did not give any misleading or false information to anyone in relation to the Cascade-White Energy transaction.
The ICAC found that Mr Atkinson:
"… deliberately [failed] to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement"
This finding was based upon the ICAC's understanding of s 184(1) as encompassing a positive duty of disclosure, that being the construction given to the section by the Chief Justice and with which I agree. Mr Atkinson, who was found by the ICAC to be the most reliable witness amongst the individual appellants, "agreed that he knew that the IBC was looking for information on a potential Obeid involvement, and [that] the information was important to it". The transaction under consideration was one in which White Energy proposed to expend very large sums of money, and in respect of which Mr Atkinson possessed important information. It was open to the ICAC, on the material before it, to be satisfied that Mr Atkinson's conduct constituted an offence against s 184(1) of the Corporations Act.
This analysis is consonant with the no conflict rule of fiduciary law. In certain circumstances, the person to whom fiduciary duties are owed may consent to a conflict of interest on the part of the fiduciary. However, what is required in such circumstances in order to avoid breach of fiduciary duty is fully informed consent. In this context, there is much to commend the distinction between existing and future information drawn by Wilcox and Lindgren JJ in Australian Breeders Co-operative Society Ltd v Jones (1997) 150 ALR 488 at 511-512. Their Honours stated, in relation to existing information known to a fiduciary:
"An obligation of good faith and disclosure of relevant information exists at the moment consent is sought [to the fiduciary acting notwithstanding a conflict of interest]; it is sought on the implicit understanding that the fiduciary presently has no reason to believe the transaction (including the granting of the consent) is contrary to the person's interests. A fiduciary who was aware of circumstances that made a particular transaction disadvantageous to a cestui que trust would be bound to disclose that fact in discussing the prospect of the transaction proceeding, even on the basis that the cestui que trust would consent to the fiduciary not disclosing future information. Any other rule would mock the duty." (emphasis added)
The primary judge erred, in my opinion, in finding that it was sufficient in order to comply with his duties as a director for Mr Atkinson to have removed himself from the conflict he was in. It is not to the point that Mr Atkinson had a lesser degree of knowledge and/or involvement than the other individual appellants. Mr Atkinson had knowledge of the Obeid "connection" from March or April 2010.
There was no relevant error in the ICAC's finding notwithstanding that Mr Atkinson was not asked to attend any meetings with the IBC, and that there was no finding he actively gave "misleading or false information in relation to the transaction". The ICAC's state of satisfaction was not so unreasonable or irrational that it could not have been reached by a person with an understanding of the nature of the statutory function being performed and on the basis of facts or inferences supported by logical grounds.
[35]
Consideration: whether Mr Atkinson's breach was reckless or intentionally dishonest
In relation to the second sub-issue, it was submitted on behalf of Mr Atkinson that satisfaction of the requirement of intentional dishonesty or recklessness was not open to the ICAC. It was submitted that the requisite "careful analysis" was lacking.
The primary judge did not deal with this question having regard to his construction of s 184(1) and the nature of the duty he considered was encompassed by it. I agree with Bathurst CJ at [376] that dishonesty in this context means dishonest according to the standards of ordinary people. I also agree with the Chief Justice at [377]-[378] as to the meaning of "intentionally dishonest".
The conduct of Mr Atkinson that the ICAC found to constitute an offence against s 184(1) was an omission, namely, the failure to disclose to the IBC what he knew in relation to the Obeid connection. Mr Atkinson agreed that he knew the IBC was concerned with information about potential Obeid involvement, and that such information was important to the IBC. Mr Atkinson engaged in the following exchange with the Commissioner:
"THE COMMISSIONER: Yes, you remained silent about your knowledge of the Obeid involvement? --- That's, yes, that's correct.
[COUNSEL ASSISTING]: And as you put it, you saw your duty as changing because you now were acting as a seller? --- That's correct.
So you owed the duty to yourself as a seller but not to the mums and dads of White Energy? --- In the context of that transaction, yes.
Yes, exactly. In the context of that transaction your duty was to protect your own interest not the shareholders of White Energy? --- It was to protect the interests of Cascade and presumably, yes, as part of that my own interest, yes."
In my opinion, this evidence provided a basis upon which the ICAC could be satisfied of a necessary element of the s 184 offence, namely that Mr Atkinson's failure to disclose his knowledge of the Obeid involvement was intentional, so that White Energy would not have the benefit of that knowledge, with the intended result that the transaction would proceed. The exchange above, and the alignment of Mr Atkinson's interests as a shareholder with those of Cascade as vendor, provided an evidentiary foundation for the ICAC to be satisfied that the non-disclosure was intentionally dishonest.
Regardless, a finding of reckless was certainly open to the ICAC, having regard to the definition of "reckless" in s 5.4(2) of the Criminal Code (set out above in the reasons of the Chief Justice at [379]).
Accordingly, I consider that the primary judge ought to have determined that there was evidence to support the ICAC's finding that Mr Atkinson, by his conduct, breached his duty under s 184(1), and that the finding was not otherwise vitiated by error of law, nor was it so unreasonable or irrational that the finding could not have been reached by a person with an understanding of the nature of the statutory function being performed.
[36]
The individual appellants: s 192E(1) of the Crimes Act
The ICAC expressed satisfaction that each of Messrs Duncan, McGuigan, Atkinson and Poole had engaged in conduct that would be found by a relevant tribunal to constitute an offence under s 192E(1) of the Crimes Act. In concluding that each of the directors engaged in corrupt conduct, being conduct that constituted or involved an offence under s 192E, the ICAC, relevantly, made findings in respect of two categories of conduct.
The first involved authorising or arranging for the Obeid interests to be extracted from the Mount Penny joint venture. The ICAC's finding in relation to Mr Duncan, for example, was as follows:
"The Commission is satisfied for the purpose of s 9(1)(a) of the ICAC Act that, if the facts it has found, relating to authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture so that the NSW Government would not become aware of their involvement in that tenement, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Duncan committed a criminal offence of obtaining a financial advantage by deception contrary to s 192E(1)(b) of the Crimes Act 1900. The advantage was the removal of the risk to the retention of the exploration licence and the reduction in the risk that a mining licence might not be granted over the Mount Penny tenement."
Findings in much the same terms were made in respect of Messrs McGuigan and Atkinson. The finding in respect of Mr Poole concerned his arranging for the Obeids to be extracted from the Mt Penny joint venture.
The second category of conduct related to the deliberate misleading or failing to disclose information to Mr Cubbin and the IBC in relation to the proposed transaction between Cascade and White Energy. Findings of this kind were made only in respect of Messrs Duncan and Poole. In respect of Mr Duncan, the ICAC stated:
"The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found relating to the deliberate misleading of Mr Cubbin, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be grounds on which such a tribunal would find that Mr Duncan committed a criminal offence of obtaining a financial advantage by deception contrary to s 192E(1)(b) of the Crimes Act 1900. The advantage was to prevent the loss in the value of his holding in Cascade should the sale to White Energy not proceed or if the NSW Government found out about the exploration licence or announced that it would not grant a mining lease.
The finding made in respect of Mr Poole was:
"The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that if the facts it has found, in relation to the deliberate failure to disclose information to the IBC and telling the IBC that he was not aware of any payments having been made to Edward Obeid Sr or any entities associated with him, were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, they would be ground son which such a tribunal would find that Mr Poole committed criminal offences under s 192E(1)(b) of the Crimes Act 1900. The advantage, in each case, was to prevent the loss in the value of his holding in Cascade should the sale to White Energy not proceed or if the NSW Government found out about the Obeid involvement and took steps to cancel the exploration licence or announced that it would not grant a mining lease."
[37]
The challenges
Mr Duncan contended that the primary judge erred in failing to find that the ICAC's conclusions were wrong in law, or irrational or illogical. In particular, Mr Duncan challenged ICAC's findings that his conduct resulted in the prevention of loss in value of his shareholdings in Cascade, that he had obtained a financial advantage within the meaning of s 192E(1), and that his conduct could constitute or involve a criminal offence for the purposes of ss 9(1) and 13(3A) of the Act. Mr Duncan also contended that the primary judge erred in finding that it would be open to a jury, on admissible evidence, to conclude that his conduct was dishonest within the meaning of s 192E(1).
Messrs McGuigan and Poole contended that the primary judge erred in holding that it could be established that there was (a) deception; (b) dishonesty; (c) "obtaining"; or (d) financial advantage. This contention was framed in terms of there having been error of law, no evidence and/or no logical grounds upon which the finding could have been made.
Mr Atkinson broadly contended that the primary judge erred in concluding that s 192E could apply to the circumstances that were open on the material before the ICAC, and contended that the primary judge erred in holding that it could be established there was (a) deception; (b) dishonesty; (c) "obtaining"; or (d) financial advantage. Mr Atkinson relied on the combined submissions of Messrs McGuigan and Poole in relation to this aspect of the appeal.
These submissions thus raise for consideration: first, the meaning of each of the elements of s 192E(1), namely, 'deception, 'dishonesty', 'obtain', and 'financial advantage'; secondly, whether the trial judge erred in finding there was evidence to support the ICAC's findings; and thirdly, whether his Honour should have found that the ICAC's findings were unreasonable, irrational or illogical.
[38]
Deception
The ICAC found that each of the individual appellants had deceived the New South Wales Government, in that they had authorised or arranged for the Obeids to be extracted from the Mount Penny joint venture in such a way that the government would not become aware of their involvement.
I agree with the reasons of the Chief Justice, at [350]-[355], that 'deception' for the purposes of s 192E(1) requires that some person or entity be deceived. I also agree, for the reasons the Chief Justice gives at [359], that there was no evidence that the New South Wales Government or any of its officers was deceived as a result of the transaction. Accordingly, I agree with the Chief Justice that the appeals of Messrs McGuigan and Atkinson's in respect of the s 192E(1) findings should be upheld.
It remains to consider whether the primary judge erred in respect of the deception found by the ICAC to have been practiced on Mr Cubbin, in the case of Mr Duncan, and on the IBC, in the case of Mr Poole.
In this regard, there are two matters that should borne in mind. First, in identifying deception, it is always necessary to identify both the conduct said to be deceptive and the object of the deception said to have been practiced. Where a deception is said to have been practised upon a corporation or government entity, or a corporation or government entity via one of its officers, the conceptualisation of deception in terms of states of mind may be inapt. There is much to be said for the view expressed by Ormiston JA in R v Jenkins (2002) 6 VR 81 at [70] that, where the financial advantage is obtained from a corporation, the fact that the relevant officer was not, or does not consider themselves to have been, actually deceived cannot exculpate the person said to have practiced the deceit.
Secondly, it is imperative to look at the circumstances as a whole. Too narrow a focus on the ultimate knowledge of the person deceived, or their final conclusions at some particular point in time is apt to lead into error. It cannot be the case that, where the other requirements of the offence are met, there is no deception in circumstances where, for example, a person is deceived, but subsequently, and with the benefit of other information, discovers the truth. There has still been a deception operating on the mind of the relevant person. At least in a limited temporal and informational respect, the relevant person has been led into error and induced to believe something which is not true. As Lord McDermott stated in Director of Public Prosecutions v Ray [1974] AC 370 at 382:
"One cannot, so to speak, draw a line through the transaction at the point where the intention changed and search for evidence of deception only in what happened before that or only in what happened after that. In my opinion the transaction must for this purpose be regarded in its entirety, beginning with the respondent entering the restaurant and ordering his meal and ending with his running out without paying. The different stages of the transaction are all linked and it would be quite unrealistic to treat them in isolation."
Accordingly, it remains to consider whether, in relation to the requirement of deception, the ICAC's findings were made without an evidentiary basis, or were unreasonable, irrational or illogical in the relevant sense. In this regard, the two different findings made by the ICAC fall for separate consideration. In my view, a finding of deception was open in respect of both Messrs Duncan and Poole. The ICAC's findings are not so unreasonable as to warrant intervention, nor are the findings without evidential foundation.
In March 2011, Mr Poole met with Mr Cubbin and legal counsel assisting the IBC. According to filenote evidence accepted by the ICAC, three items were discussed: (1) the circumstances surrounding the grant of the Mount Penny exploration licence; (2) whether there had been any Obeid involvement in the exploration licences; and (3) the circumstances behind a payment of $28 million made by Cascade. The evidence recorded Mr Poole telling the meeting that, as far as he was aware, none of the $28 million had been paid to Edward Obeid Snr or interests associated with him. However, the ICAC had before it evidence of a solicitor for the Obeid family, accepted to be reliable, who recounted negotiating directly with Mr Poole in relation to the extraction of the Obeid interests. Further, there was evidence payments in relation to the extraction of the Obeid interests had been made from the bank account of Mr Poole's wife.
It was thus open for the ICAC to conclude that Mr Poole had lied to Mr Cubbin and therefore to the IBC. That Mr Cubbin was deceived is apparent from his evidence, set out below at [513]. Accordingly, the finding of deception made against Mr Poole was not unreasonable or lacking in evidentiary foundation.
Likewise, a finding of deception on the part of Mr Duncan was open to the ICAC, and was not unreasonable or lacking in evidentiary foundation. In his evidence before the ICAC, Mr Duncan indicated that the Obeid involvement was raised with him by Mr Cubbin, and that he "told him that they weren't in there". When asked if he told Mr Cubbin that there had been Obeid involvement in the past, Mr Duncan indicated, "No I don't believe I did". Mr Levi, who worked in Mr Poole's firm and knew of the Obeid involvement, was asked direct questions by the IBC about that involvement. The evidence of Mr Levi was that he was told by Messrs Duncan and McGuigan that Mr McGuigan would contact the IBC directly. Further, as a director of White Energy, on the analysis above in relation to s 184(1) of the Corporations Act, Mr Duncan was under a duty to disclose the Obeid involvement. On this basis, a finding that there was deception in the form of Mr Duncan misleading and failing to make disclosures to Mr Cubbin and the IBC was not unreasonable or lacking in evidentiary foundation.
[39]
Obtaining a financial advantage
Insofar as Messrs Duncan and Poole were found to have deceived Mr Cubbin and the IBC, the financial advantage found by the ICAC was the prevention of the loss in value of the shareholding in Cascade if the sale to White Energy did not proceed. The ICAC did not identify whether its findings were made under the extended meaning of obtaining a financial advantage contained in s 192D(1). In the submissions to this Court, it was suggested that these findings were made in reliance on s 192D(1)(c), which provides that "obtain a financial advantage" includes "keep a financial advantage". In my opinion, it does not matter that the ICAC did not expressly state that its findings were based upon the provisions of s 192D, provided that the finding of "obtaining a financial advantage", including within the meaning of s 192D, was available to it on the evidence.
At the time that White Energy entered into the option with Cascade, it made an announcement to the ASX that it had done so, stating that it had signed an option "to acquire two significant coal deposits in New South Wales". The sale price of $500 million for 100 per cent of the shares in Cascade, if the option were to be exercised, had been negotiated, it appeared to the ICAC, by the individual appellants as directors/investors in Cascade dealing with, excepting Mr Poole, themselves as directors of White Energy. The IBC was appointed after the option agreement had been entered into and the $500 million valuation reached.
The position, therefore, was that the individual appellants owned or were interested in shares to which a value had been ascribed. As is apparent from the previous paragraph, that value may have been, although there was no finding that it in fact was, fixed upon by the appellants themselves. In any event, in Cascade's letter of 26 November 2010 in which the offer of the option was made, the sale price of the Cascade shares was stated to be $500 million. White Energy's response in its letter of 29 November 2010 accepted that price. The primary judge held, at [192], that the individual appellants had "a financial advantage through their ownership (or ownership on their behalf) of valuable shares in Cascade". However, the value of those shares was subject to the risk that information as to the Obeid involvement in the Mount Penny tenement would become public. It was concern as to that risk that was at the heart of the impugned conduct of Messrs Duncan and Poole.
There was no direct evidence that the individual appellants turned their mind to the position if the option was not exercised. However, Mr Cubbin's evidence was that he would have not have recommended that the sale proceed had he become aware of the Obeid involvement. His evidence in this regard was as follows:
"At any time did any of these people Atkinson, John McGuigan, Travers Duncan, Brian Flannery, did any of them tell you that there was an Obeid involvement apart from or in addition to the mere ownership of Cherrydale Park? --- To the best of my recollection, no.
Well, let's put it this way, Mr Cubbin, as head of the Independent Board Committee and given the concerns that you'd had if any of those men had ever told you of an involvement by the Obeid family in the mining venture what would you have done? --- I'd become very worried.
Well, would you ---? --- But, well, I think the best way to answer that is to say that I think that probably would have been the end of the transaction because you know from a practical viewpoint if, if I was informed of that to use your words [as] the head of IBC then I would be required to inform Deloittes who are doing the independent assessment of the deal and it would have to go into the notice of meeting to the shareholders and that would have meant a number of things including I think Deloitte would have said that it wasn't a fair and reasonable deal and I obviously when, when in the notice of meeting the, there would have been a lot of adverse publicity and I think that would have meant the end of the transaction.
Well, just surely as a director of White Energy and in your role as the head of the IBC would you have been recommending that the deal proceed had you known that fact? --- No."
The ICAC stated in its report that it generally accepted Mr Cubbin's evidence.
The Chief Justice has aptly described the Cascade shares as "a flawed asset". This reflects that the substantial asset of Cascade, the exploration licence, was or was always likely to be, adversely affected by the Obeid involvement. Mr Cubbin's evidence is clear support that the asset was indeed flawed. However, the shares had a value, provided the "risk" of the Obeid involvement becoming public knowledge did not come home. This is apparent from the evidence concerning the subsequent termination of the option agreement and the advice given to the ASX. The ICAC recorded that enquiries were made of White Energy by the ASX about certain aspects of the transaction. There was evidence of discussions conducted by Messrs Duncan and Kinghorn which demonstrate that the view was taken that a straightforward answer could not be given to the ASX inquiry without revealing the Obeid involvement. It was at that point the decision was made to terminate the option agreement.
The ICAC considered that a straightforward answer to the ASX's inquiry would have stated that the payment of $30 million in question was made to terminate the rights of the Obeids in the joint venture. The ICAC was unable to determine who made the decision to terminate the option agreement, Cascade or White Energy. However, it concluded:
"… for present purposes, the most relevant aspect - is the fact that the fear of the exposure of the purpose of the payment meant that the better option was to cancel the transaction. The Commission finds that this is because those persons involved in this part of the transaction were so concerned about the need eventually to reveal an Obeid involvement that they were not willing to risk providing answers to ASX."
Although the matter is not without difficulty, I have concluded that there was evidence from which the ICAC was entitled to infer Messrs Duncan and Poole had prevented a loss in value of the shareholdings in Cascade should the option not be exercised. That is, they had obtained a financial advantage in the extended sense of retaining a financial advantage: s 192D(1)(c). However, the mere coincidence of deception with the obtaining of a financial advantage does not suffice. As the Chief Justice has explained at [352]-[354], the statutory language of obtaining a financial advantage by deception requires that there be a causal connection. As relevant here, the requisite causal connection was between the deception practiced by Messrs Duncan and Poole on Mr Cubbin and the IBC, respectively, and the prevention in loss in value of the shareholdings in Cascade.
That it was open to the ICAC to be satisfied of such a connection, can be tested by considering what would have occurred had the individual appellants revealed the Obeid involvement to Mr Cubbin and the IBC during the course of the due diligence process. The answer to that question is apparent from the evidence of Mr Cubbin set out above, at [513]. Further, there was evidence that, in preparing to meet with Mr Cubbin and the IBC, Mr Poole met with Messrs Duncan, McGuigan and Atkinson and resolved that the extraction of the Obeid interests not be disclosed. The reason for so resolving was the view, expressed by Mr Poole, that the truth might reflect adversely on the value of the asset.
In my opinion, it was not illogical to infer from the evidence, both of the failure to disclose information to Mr Cubbin and the inability to adequately answer, followed by the decision not to answer the ASX enquiry without disclosing the Obeid involvement that Messrs Duncan and Poole thereby prevented a loss to their shareholdings should the option not be exercised, as in fact occurred. The fact that the retention of that value, as it turned out, was temporary because of the subsequent investigations, is not to the point. Pursuant to s 192D, any such financial advantage may be temporary.
[40]
Dishonesty
It remains to consider the issue of dishonesty for the purposes of s 192E(1) of the Crimes Act. As noted above, the individual appellants sought to impugn the ICAC's findings in this regard on the basis of error of law, lack of evidentiary foundation, and unreasonableness.
The primary judge, at [195], found no reviewable error in relation to the element of dishonesty for the purposes of s 192E(1):
"It may be correct to say that none of the individual plaintiffs (or at least, none of those for whom Mr Jackson appeared) had direct knowledge of the corrupt arrangements made between members of the Obeid family and Mr Macdonald. However, each of them knew of the Obeid family's involvement in the joint venture, and each of them appreciated that public knowledge of the Obeid family's involvement was likely to imperil his investment … [The ICAC] found that it was this fear that prompted each of them to take the steps that he took or caused to be taken to seek to prevent knowledge of that involvement from becoming public. To my mind, it would be open to a jury, acting on admissible evidence and properly instructed, to find that their conduct in each case, as found by the Commission, was dishonest in the light of the understanding that each of them had at the relevant time."
In the combined submissions of Messrs McGuigan and Poole, it was submitted that the ICAC "did not address this element". It was contended that the assumption on the part of the primary judge appears to have been that knowledge of prior Obeid involvement was tantamount to knowledge of wrongdoing. As the argument went, in the absence of knowledge of corrupt or criminal activity, it is difficult to see why failure to disclose the prior Obeid involvement would have been dishonest. In this regard, the combined submissions stressed that the primary judge had held there was no positive duty of disclosure on the part of the individual appellants who were directors of White Energy. Mr Poole submitted that there was "no evidence" that he was aware that any payments were made to Eddie Obeid Snr or entities associated with him.
It was submitted on behalf of Mr Duncan that the primary judge had concluded he had not been acting in the capacity of a director of White Energy in the course of the negotiations between Cascade and White Energy. According to this submission, Mr Duncan's conduct in failing to disclose the prior Obeid involvement and in relieving Mr Levi from answering the IBC's questions could not be dishonest in circumstances where Mr Duncan was not obliged to volunteer information. There was a further complaint in relation to the imprecision of the phrase "Obeid family involvement", and the potential conflation of knowledge in relation to the joint venture with knowledge of corrupt conduct more generally and in relation to the creation of the Mount Penny tenement. It was submitted that, in light of the reasoning in Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336, the ICAC's findings could have been formulated more precisely "to avoid lending the actions of individuals a more sinister complexion than they actually have".
It was submitted on behalf of the ICAC that the impugned findings of dishonesty did not entail any finding that the individual appellants were concealing information about matters they knew to constitute corrupt conduct or criminal activity. It was contended that a finding of dishonesty was open given that the individual appellants took steps to prevent knowledge of the Obeid involvement becoming public, knowing that such public knowledge would imperil the individual appellant's own interests. The ICAC's submissions stressed that, aside from any positive duty of disclosure, there had been active steps on the part of the individual appellants in order to conceal information from Mr Cubbin and the IBC.
The concept of "dishonesty" for the purposes of s 192E(1) is the subject of statutory definition. Section 4B of the Crimes Act is in the following terms:
"(1) In this Act:
'dishonest' means dishonest according to the standards of ordinary people and known by the defendant to be dishonest according to the standards of ordinary people.
(2) In a prosecution for an offence, dishonesty is a matter for the trier of fact."
Section 4B(1) does not, by its terms, define "dishonesty". Rather, it prescribes the standards by reference to which dishonesty is to be identified for the purposes of the Crimes Act. As Kirby J remarked in Peters v The Queen [1998] HCA 7; 192 CLR 493 at 545, the comprehensive definition of "dishonesty" is "a task which has eluded legislatures, law reform bodies, official committees and judges".
However, as the Chief Justice notes, at [372] above, the Anglo-Australian common law tradition has long held to the view that, absent statutory provision to the contrary, an omission does not give rise to criminal liability in the absence of a relevant legal obligation to act: R v Iannelli [2003] NSWCCA 1; 56 NSWLR 247 at [21]; Director of Public Prosecutions (Cth) v Poniatowska [2011] HCA 43; 244 CLR 408 at [29].
Accordingly, it will not be dishonest to fail to disclose a matter where there is no legal obligation to make the relevant disclosure. There is, I think, no reason to doubt that the converse is not true. Where there is a legal obligation to do some act, or to make some disclosure, the failure to do the relevant act, or make the relevant disclosure, may be dishonest in appropriate circumstances. There was no error of law in the ICAC's understanding of dishonesty.
It may be acknowledged, as noted in the combined submissions of Messrs McGuigan and Poole, that in recording its corrupt conduct findings in Ch 33 of the Report, the ICAC did not expressly and specifically make findings of dishonesty in relation to the individual appellants and their conduct. However, the ICAC set out the requirements of s 192E of the Crimes Act, including the element of dishonesty. Further, the ICAC expressly identified as "deliberate" the conduct of Messrs Duncan and Poole in their interactions with Mr Cubbin and the IBC which had been detailed in earlier Chapters of the Report. In so doing, the ICAC identified the purpose of Messrs Duncan and Poole as preventing loss in value of their share holdings in Cascade, and expressed satisfaction that an appropriate tribunal would find an offence against s 192E(1).
Whether, and to what extent, Messrs Duncan and Poole had knowledge of conduct which they knew or believed to constitute corrupt conduct or criminal activity is not to the point. The relevant inquiry was as to dishonesty as an element of the s 192E offence. That is, the relevant inquiry was as to dishonesty in relation to the conduct said to constitute obtaining a financial advantage by deception. Once it is concluded that the findings of the ICAC as to dishonesty were supported by evidence, it is difficult to see a basis for an argument that the ICAC's finding was unreasonable.
In relation to Mr Poole, the submission that a finding of dishonesty was not open, was lacking in evidentiary foundation, or was otherwise unreasonable, must be rejected. The relevant conduct was identified as Mr Poole failing to disclose to the IBC knowledge of prior Obeid involvement, and Mr Poole telling the IBC that he was not aware of any payments having been made to Eddie Obeid Snr or entities associated with him. There was evidence before the ICAC that disclosure of the Obeid involvement would likely have adversely impacted upon the value of Cascade shares, that payments had been made to Obeid associated entities from accounts of Mr Poole's wife, and that Mr Poole knew of the prior Obeid involvement and sought to disguise that involvement. The evidence included the evidence of the solicitor, Mr Chalabian, who was accepted as a reliable witness. A finding of dishonesty was clearly open to the ICAC.
Likewise, in relation to Mr Duncan, the submission that a finding of dishonesty was not open, was lacking in evidentiary foundation or was otherwise unreasonable, must be rejected. The evidence before the ICAC was that it was Mr Duncan who had initiated the process under which the Obeid's involvement in the Mount Penny tenement was terminated. In giving evidence, Mr Duncan accepted that the extraction of the Obeid interests reflected the risk of public knowledge of Obeid involvement to obtaining a mining lease, and that if a mining lease was not granted, the money already spent would be lost. There was evidence from Mr Duncan that, in relation to Mr Cubbin's concern about Obeid involvement, he "told him that they weren't in there". This was evidence upon which the ICAC could make a finding of dishonesty.
[41]
Conclusion
Having regard to the conclusions I have reached, the effect of my reasons is that I agree with the orders proposed by Basten JA.
BASTEN JA: In October 2009 the State government issued a coal exploration licence over an area in the Bylong Valley known as the Mount Penny tenement. The recipient of the licence was Mt Penny Coal Pty Ltd, a wholly owned subsidiary of Cascade Coal Pty Ltd. Three properties constituting a significant portion of the land within the tenement were owned by interests associated with the Hon Edward Obeid Snr and members of his family. As a result of the grant of the exploration licence, the value of the three properties increased fourfold. Further, using confidential information obtained, particularly by Mr Moses Obeid, a son of Edward Obeid, companies controlled by the Obeids obtained a valuable share in the mining tenement.
Soon after the grant of the exploration licence (together with other licences) was announced, questions were raised in the media as to the circumstances in which the licence was issued to Mt Penny Coal, over land owned or controlled by the Obeids. A connection was noted between the Hon Edward Obeid, and the Minister responsible for the grant of the exploration licence, the Hon Ian Macdonald MLC, then Minister for Primary Industries and for Mineral Resources. In February 2011 the Independent Commission Against Corruption ("the Commission") commenced an investigation into the circumstances in which the Mount Penny tenement came to be issued. In the course of 2012 and 2013 the Commission conducted a public inquiry, which culminated in a Report dated July 2013. [1] The Report contained findings of corrupt conduct against eight individuals, including Mr Macdonald, Edward Obeid and his son Moses Obeid. Those findings were not challenged in these proceedings. The Report also made findings of corrupt conduct against five directors of Cascade Coal, Messrs Travers Duncan, John McGuigan, Richard Poole, John Atkinson and John Kinghorn.
There was a further and separate issue raised before the Commission concerning the fate of the exploration licences granted over three identified tenements, including, of present relevance, Mount Penny and a smaller area near Singleton known as Glendon Brook. (The latter was within the Hunter Coal Area, whereas Mount Penny was located in the Western Coal Area.) In a further Report dated December 2013 (known as "the third Report") [2] , the Commission recommended that the exploration licences in respect of these tenements be expunged by legislation. In January 2014, that recommendation was acted upon by the NSW Parliament.
Also in January 2014, each of the directors commenced proceedings in the Supreme Court by way of judicial review challenging the Commission's findings of corrupt conduct. The companies challenged the recommendations that the exploration licences be expunged. In a judgment handed down on 29 July 2014 McDougall J declared that the finding that Mr Kinghorn had engaged in corrupt conduct within the meaning of the Independent Commission Against Corruption Act 1988 (NSW) ("the ICAC Act") was not made according to law and was a nullity. With respect to the other four individual applicants, McDougall J dismissed each proceeding, although as will be noted shortly, he rejected aspects of the reasoning of the Commission. The proceedings brought by the companies were also dismissed.
Following the refusal of relief sought before McDougall J, Messrs McGuigan, Poole, Duncan and Atkinson, and the three companies, sought leave to appeal to this Court. The delay in hearing these proceedings has resulted from steps, both litigious (taken in related proceedings), and legislative which will be noted below. There being no doubt that the proceedings raised matters of some importance, both for the individuals concerned and in the broader public interest, and there being no objection by the respondent Commission, all applicants should have leave to appeal.
[42]
Factual background
In order to explain the nature of the issues raised on the appeal, it is necessary to identify the findings made by the Commission and, in broad terms, the circumstances giving rise to those findings. A brief chronology of salient events follows.
In June 2006 the Department of Primary Industries obtained a report identifying the extent of coal resources in the Western Coalfield. An area near Bylong was identified as worthy of further exploration. In May 2008 there were meetings between Mr Obeid and the Minister, in the course of which the Minister became aware of Mr Obeid's land holding at Mount Penny, near Bylong.
Prior to 6 June 2008, the Department did not propose that there be any release of coal resources near Mount Penny. However, on that date, it was decided "to create a Mount Penny tenement", being the phraseology adopted by the Commission in its report. [3] (This was not legal terminology, which would usually consider the creation of a tenement as the grant of an exploration licence or a mining lease; rather, the Commission used that language to refer to a departmental decision identifying an area for the purposes of a future release.)
In September 2008 the government announced that it was seeking "expressions of interest" from "junior miners" on a specified list of invitees. [4] The Commission found that this approach was inappropriate in relation to the resources in the Bylong Valley which, although not properly explored, had been estimated by the Department to be in the order of 800 million tonnes of thermal coal. [5] Properly managed, such a resource might have attracted, in a competitive tender, an extremely large "financial contribution" from entities with the resources to exploit such a resource.
The bidding process closed on 24 November 2008. However, at the request of Mr Duncan, the Minister agreed to reopen the process. The Minister's decision to do so appears to have been taken in October 2008, but was publicly announced in January 2009. [6] The Commission made two significant findings in this regard, namely:
1. that Mr Macdonald made a partial decision to benefit Mr Duncan when he reopened the EOI process and disclosed certain confidential information to him; [7] and
2. there was insufficient evidence to establish that Mr Duncan put any pressure, inappropriate or otherwise, on Mr Macdonald to reopen the EOI process. This precluded a finding of corrupt conduct against Mr Duncan in connection with the reopening of the EOI process. [8]
As noted in the first finding set out above, the Commission found that the Minister had released confidential information, both to Mr Duncan, and to the Obeids. Later, the Minister was found to have provided to Moses Obeid critical information concerning the outcome of the tender process, before the results were publicly available.
The second round of the tender process closed on 16 February 2009. One company which put in an expression of interest was Cascade Coal Pty Ltd ("Cascade Coal"). All of the individual appellants in these proceedings were, through family members or (in the case of Mr Poole) his wife, shareholders in Cascade Coal. Mr Poole had been a director of Cascade Coal for some years prior to February 2009; Messrs Duncan, McGuigan and Atkinson became directors in February 2009, Mr McGuigan being managing director. Mr Duncan formally ceased to be a director of Cascade Coal on 31 July 2009, but there was no dispute that he continued to exercise influence over the activities of the company thereafter.
On 19 June 2009, the Director General of the Department accepted recommendations of an evaluation committee, which had considered the various expressions of interest, and advised Cascade Coal that it had been successful with respect to the Mount Penny and Glendon Brook tenements. In order to understand the background to the Commission's findings of corrupt conduct on the part of the appellants, it is necessary to deal in some more detail with events which occurred between the time when Cascade Coal lodged its expressions of interest and the announcement that it had been the successful bidder.
In early July 2008 the Minister obtained a list of companies which were to be invited to lodge expressions of interest. He provided that list to Moses Obeid. By that stage, Mr Obeid had been in contact with Mr Gardner Brook, then working with Lehman Brothers. The Commission made the following findings with respect to the list of companies: [9]
"The Commission finds that Moses Obeid sought the information from Mr Macdonald because he wanted to provide it to Mr Brook to initiate a mining venture. … Finally, the Commission finds that Moses Obeid provided the list of companies to Mr Brook, and the list was used successfully to identify a potential medium for their introduction into coalmining - Monaro Mining."
Mr Brook sought to identify from the list a company with experience in mining but which was "financially weak" and might be amenable to entering into an agreement with a financier and investors. He chose Monaro Mining. The proposed financier was Lehman Brothers.
On 18 July 2008 Moses Obeid gave instructions to the family solicitor, Mr Rumore, with respect to a proposed transaction. Based on the solicitor's notes, Lehman Brothers was to take an option to obtain 60% of Monaro Mining, to be exercisable only if Monaro won the right to mine Mount Penny. Monaro was then to buy "3 Obeid ptys [properties] @ multiple (3 or 4) x valuation". In exercising the option, Lehman Brothers was to direct Monaro Mining to issue 15% of the shares to it and 45% to the Obeids. [10]
On 20 August 2008, Monaro Mining entered into an agreement providing an option to a company known as Voope Pty Ltd, a company controlled by the Obeids, to acquire 80% of any mining interest acquired by Monaro Mining. There were two significant features of this agreement. First, the instructions given by the Obeids to Mr Rumore referred to the proposed invitation to be made to Monaro Mining (amongst others) to express interest in the identified tenements, an invitation which was only made on 9 September 2008, almost two months later. Secondly, it demonstrated that the Obeid family was seeking to enter a joint venture which might allow it to reap the benefits of any mining undertaken in the Mount Penny area.
For the purpose of the bids, Monaro established a separate company, Monaro Coal Pty Ltd. Monaro Mining lodged its expressions of interest without some members of its board being aware of the commitments which it was undertaking, if successful. When they became aware, they sought a mechanism for Monaro to withdraw on the best available terms. [11] The deal proposed by Voope, which would have allowed Monaro to recover some at least of its costs associated with making the bids, was an attractive solution. Voope agreed that it would take over responsibility for the bids submitted by Monaro Mining, but that the name Monaro Coal should be changed to Loyal Coal. On 2 June 2009 Monaro transferred its shares in Loyal Coal to Voope.
By June 2009, expressions of interest pursuant to the reopened process had been lodged by both Monaro and Cascade Coal. Moses Obeid contacted Mr John McGuigan, a director of Cascade Coal, and a series of meetings were held in late May and early June 2009. The meetings resulted in two agreements, one between Cascade Coal and Buffalo Resources Pty Ltd, a company controlled by the Obeid family. The second was between Cascade Coal and a company formed by the landholders affected by the Mount Penny tenement, also representing the Obeid interests. Thus, through corporate vehicles, Cascade Coal and the Obeid family entered into a joint mining venture with respect to the Mount Penny tenement.
The Commission considered the evidence as to the meetings in May and June 2009 in order to identify the knowledge of various persons representing Cascade Coal, including the appellants, as to the involvement of the Obeid family in the arrangements.
Two meetings occurred in late May 2009, the first on 23 May and the second on 31 May. Moses Obeid and Gardner Brook were present at both meetings, in one interest; John McGuigan and his son James McGuigan were present at both meetings representing Cascade Coal. The Commission found that the deliberations of the Department's evaluation committee were completed "[b]y May 2009" and that the outcome of the deliberations, including the successful bidder for the Mount Penny tenement, were known to the Minister and two persons in his office as a result of a meeting on 28 May 2009. [12]
There were three facts which were critical to the arrangements reached by Cascade Coal and Buffalo Resources. These were, (a) that Monaro Mining had been successful in its bid for the Mount Penny tenement; (b) that, since about 22 May 2009, Obeid interests had a right to the benefits of the Monaro Mining bid, and (c) that Cascade Coal was the runner-up in the bidding process. Thus, once it was known that Monaro Mining had been successful, the Obeid interests could withdraw or transfer those benefits to Cascade Coal. The Commission was satisfied that Moses Obeid was aware of the results of the bidding process by the time of the second meeting on 31 May 2009. [13] With respect to the state of knowledge of the appellants, the following findings were important. First, Mr McGuigan was present at the first two meetings and drew the heads of agreement which were later incorporated into the contractual document. Secondly, Mr McGuigan left for Indonesia on 1 June 2009, with Mr Duncan. Thirdly, "Mr Duncan was closely involved in the negotiations and in fixing the terms upon which a deal could be made." [14] Fourthly, although Mr Poole was away at the time of the first two meetings, he assumed control of the negotiations after John McGuigan left for Indonesia. That included a brief third meeting on 1 June with Mr Brook and a fourth meeting on 3 June with Moses Obeid and Gardner Brook. Thus the Commission made findings that Mr McGuigan and Mr Poole "knew full well that the Obeids were the party with whom they were entering a joint venture", [15] and, as noted above, that Mr Duncan had been closely involved in the negotiations.
There was no finding by the Commission as to Mr Atkinson's knowledge at that stage (in June 2009), although he was the managing director of Cascade Coal; there were findings with respect to his state of knowledge some months later, when, on the initiative of Mr Duncan, steps were taken to buy the Obeids out of the joint venture, and to do so in a manner which would conceal their earlier involvement. Thus, after reviewing the evidence of Messrs Duncan, Atkinson and McGuigan as to the need to take such a step, the Commission found: [16]
"Those same people who suggested that these were the reasons behind the removal of the Obeids were at great pains to keep the historical involvement of the Obeids a secret from White Energy."
At least by that stage, the Commission was satisfied that Mr Atkinson too was aware of the Obeid family involvement in the joint venture.
The joint venture was an agreement between Cascade Coal and Buffalo Resources Pty Ltd. Buffalo Resources was registered on 3 June 2009. As the Commission found: [17]
"The original shareholding allocated 88% of the share capital to Equitexx Pty Ltd, a company that acts as trustee for one of the Obeid family trusts. The remaining 12% of the share capital was owned by Warbie Pty Ltd, a company owned and controlled by Mr Brook.
It may well go without saying, but the Commission finds that Buffalo Resources was a company controlled by the Obeid family and, subject to Mr Brook's interest, owned by the Obeid family."
The agreement was signed on 5 June 2009. The agreement assumed that Buffalo Resources and its associates had the power to withdraw "any existing applications in relation to the Mt Penny and Glendon Brook Coal Release Areas". Cascade Coal agreed to transfer its interest in any exploration licence which might be granted to it as a result of the tender process to the joint venture and to grant Buffalo Resources a 25% interest in the joint venture. Buffalo was not required to contribute to the costs of the joint venture until $10 million had been expended on exploration or the necessary permits and approvals had been received to exploit a 100 million tonne resource. The letter setting out the agreement was signed by Mr John McGuigan on behalf of Cascade Coal.
By a separate agreement, Cascade Coal agreed that, subject to it obtaining the necessary permits and approvals to exploit the resource, it would pay four times the land value of the properties which were controlled by the Obeids. [18]
On 9 June 2009 Monaro Mining withdrew its bids for the Mount Penny and Glendon Brook tenements, which were duly awarded to Cascade Coal. [19] In August 2009, exploration licences were granted to Mt Penny Coal Pty Ltd and Glendon Brook Pty, being subsidiaries and the nominees of Cascade Coal to hold the respective tenements. A fourth company, Mt Penny Properties Pty Ltd was incorporated for the purpose of acquiring, in due course, ownership of the properties affected by the Mount Penny tenement. The Commission found that between December 2009 and the time of the public inquiry, Cascade Coal had paid monthly mortgage payments in respect of Cherrydale, Donola and Coggan Creek, in amounts totalling $1.27 million.
[43]
Proposed sale of Cascade Coal shares to White Energy
None of the activities explained above became the subject of findings by the Commission of corrupt conduct on the part of the individual appellants. Rather, those findings all related to steps taken by the appellants to sell their shareholdings in Cascade Coal to a public company, White Energy Co Ltd ("White Energy"). As set out in a letter dated 29 November 2010, the proposal involved the purchase by a subsidiary of White Energy of all the shares in Cascade Coal. These included the shares of each of the individual appellants (held by a trustee company) other than Mr Poole who signed on behalf of his wife in whose name the shares were held. The proposed purchase price was $500 million less $14 million in agreed liabilities, to be paid partly in cash (to a maximum of $41 million) and partly in shares in White Energy (to a maximum of $486 million, less the amount paid in cash).
Of the appellants, who were (indirectly) shareholders and directors of Cascade Coal, only Mr Poole was not a director of White Energy. Because White Energy was seeking to purchase a major asset from its own directors, it notified the Australian Stock Exchange (ASX) of the proposed transaction and appointed an Independent Board Committee (IBC) to assess the proposal on behalf of White Energy and its shareholders. The Commission found that there were four major issues to be addressed by the IBC: [20]
"The first was described as 'the circumstances in which EL7406 was granted to Mount Penny Coal'. The second was whether or not there was any involvement by the Obeid family in the grant of the Mount Penny exploration licence. The third was whether the Obeids were or had been involved in any joint venture to which Cascade was or had been a party. The fourth was to work out why Cascade had paid $28 million to a company called Coal & Minerals Group."
The findings of corrupt conduct (the details of which are set out below) all involved the failures of the individual appellants to reveal information to the IBC as to their involvement in the arrangements with respect to Coal & Minerals Group. It is therefore necessary to identify the findings made by the Commission with respect to these matters.
Speaking at the time of the preparation of the Report (July 2013) the Commission made the following findings: [21]
"There was a close correlation between the management and ownership of White Energy and the circle of investors involved in Cascade. Mr Duncan was the chairman and is a director of White Energy. Mr Atkinson had been the managing director of White Energy and, after he stepped down as managing director, remained on the board. … John McGuigan and Mr Kinghorn are also each members of the board of directors of White Energy. Mr Poole also had a pre-existing connection with White Energy as a financial advisor, and as the controller of a 'substantial' shareholding in White Energy."
Nothing turns for present purposes on the reference to Mr Kinghorn. He was originally the subject of a finding of corrupt conduct by the Commission, but that was set aside by the primary judge on review in the proceedings from which the present appeal is brought. (The Commission lodged, but then withdrew, an appeal from that aspect of the judgment; attempts by the Commission to reinstate its appeal with respect to Mr Kinghorn were unsuccessful. [22] )
The Commission was unable to determine when negotiations commenced with White Energy, beyond the fact that Mr Poole had been examining the prospects of such a transaction "as early as February 2010". [23] Prior to that, commencing in December 2009, there had been "some public discussion about the Obeid family's involvement in the Bylong Valley." [24] The Commission continued:
"In about March or April 2010, Mr Duncan, recognising the problem, issued a direction that meant that the Obeid family involvement in the Mount Penny tenement had to be terminated."
The Commission found that Mr Duncan made his views clear in the course of meetings with Messrs McGuigan, Poole and Atkinson. It was clear from their evidence that he shared their concern. Each expressed the view, in evidence set out by the Commission in its Report, [25] that public knowledge that the Obeids were involved, or had been involved, in the joint venture would constitute a significant risk to Cascade Coal obtaining a mining lease. Mr Poole was given responsibility for removing the Obeid family interests. [26]
The Commission found that "the investors in Cascade agreed to pay the Obeid family $60 million to purchase those rights that it had in respect of the joint venture involving the Mount Penny tenement." [27] The Commission continued: [28]
"The means agreed on to terminate the Obeid interest involved the introduction of two new 'cleanskin' companies - the deal was eventually effected between Coal & Minerals Group and Southeast Investments. Coal & Minerals Group was an inactive company with no capital owned by Mr Poole and his family. Southeast Investments was a shelf company, purchased by Mr Chalabian on behalf of the Obeid family for the sole purpose of doing the deal."
Buffalo Resources was held as to 12% by Mr Brook's company, Warbie Pty Ltd, and as to 88% by the Obeid Family Trust. Mr Brook was paid an amount of $1.75 million by Mrs Poole by a transfer to a Singapore account associated with Mr Brook, while an entry in the accounts of Coal & Minerals Group indicated that Mrs Poole had loaned that company $1.75 million. [29] The payments to the Obeid family were to be made in two tranches, each of $30 million. Two payments were made from an account in the name of Mrs Poole in October 2010, totalling $7.5 million, and a further $22.5 million was paid by Coal & Minerals Group in instalments in March 2011, June 2011 and May 2012. The payments were made through Mr Chalabian's trust account but most, after costs, were said to have found their way into bank accounts associated with the Obeid family. [30] (The Commission made no express findings with respect to the source of those moneys.)
After referring to the relevant evidence, the Commission made the following finding: [31]
"As has been established by earlier findings, each of Mr Duncan, John McGuigan, Mr Atkinson and Mr Poole knew full well that the transaction with Southeast Investments was, in truth, a transaction with the Obeid family. In addition, each of those men knew that the transaction was carried out with a view to disguising the Obeid involvement from the government or other investigatory agencies."
On the appeal, Mr Atkinson challenged the second of these two findings, namely that he knew that the manner of payments was intended to disguise the fact that the Obeid family had been involved, a challenge which will be addressed below.
Returning to the activities of White Energy, the IBC held a number of meetings. It was chaired by a director of White Energy who had no connections with Cascade Coal, Mr Graham Cubbin, although when present, the chair appears to have been a lawyer from Freehills, Mr Philip Podzebenko, appointed to provide legal advice to White Energy.
The Commission considered the evidence of both Mr Cubbin and Mr Podzebenko as to the issues which were of importance to White Energy. The Commission accepted their evidence, including the evidence of Mr Podzebenko that he was never told by any of the investors in Cascade Coal that there was any Obeid involvement in the actual mining venture at Mount Penny or that any part of the $28 million payment was to interests associated with the Obeids. [32]
As it was known that, at the date of the inquiries being made by the IBC, the Obeid family had no involvement in the mining venture, the questioning in the Commission was curiously imprecise when questions were put in the past tense. However, on occasion, this was clarified. Thus, for example, the Report extracted a passage in the questioning of Mr Duncan as to what he told the IBC: [33]
"THE COMMISSIONER: Well did you notice he was asking you questions about the Obeids['] involvement? - I think so.
In the mining aspect? - I think so.
MR WATSON: Did you tell him that you knew they had been involved? - No I don't believe I did, I don't recall.
Why not? Why wouldn't you do that? - Why would I?"
The Commission inferred that Mr Cubbin had been seeking information from Mr Duncan, who had misled Mr Cubbin and the IBC for his own personal financial advantage. The Commission's findings continued: [34]
"The personal advantage that Mr Duncan so obtained was brought about by the concealment of the Obeid involvement in the creation of the Mount Penny tenement in the EOI process and in the joint venture relating to the exploitation of the exploration licence and the tenement generally. The Commission has earlier found that the continued Obeid involvement constituted a risk to the value of the tenement. The risk involved possible government intervention in the exploration licence and a risk that a mining lease might not be granted. Public awareness of that risk would have reduced the value of investors' shares in Cascade. Thus, a personal advantage to Mr Duncan in concealing the Obeid involvement was the avoidance of reduction in the value of his share of Cascade."
With respect to Mr McGuigan, the Commission disbelieved his evidence that he had disclosed his knowledge of the 25% interest held by the Obeids, a disclosure said to have occurred in February 2010, long before the IBC was established. The Commission preferred Mr Cubbin's evidence that "he was unaware of any actual Obeid family involvement in mining interests at Mount Penny; indeed, that is the precise information he was seeking." [35] The Report also set out evidence given by Mr McGuigan that although he was in a fiduciary relationship with the shareholders of White Energy, he did nothing to inform them about issues relevant to their interests. The Commission held: [36]
"His failure to inform the shareholders of White Energy would be a breach of a fiduciary duty to White Energy because the discharge of such a duty required proactive disclosure. In addition, the Commission finds that John McGuigan was engaged in conduct designed to mislead Mr Cubbin and the IBC."
With each of Mr Duncan and Mr McGuigan, the Commission found that public disclosure of the prior involvement of the Obeids in the Mount Penny tenement was likely to have resulted in a diminution in the value of his shareholding in Cascade Coal, because of the increased risk that no mining lease would be granted to Cascade Coal to allow it to exploit the resource.
There was a further element in the findings made with respect to both Mr Duncan and Mr McGuigan. Mr Podzebenko, on behalf of the IBC, asked questions of Mr Levi, a senior officer with Mr Poole's company Arthur Phillip Pty Ltd, as to what he knew of the Obeid involvement in Cascade Coal. He answered, "Well, first of all at that point in time the Obeids were, were not involved in the joint venture." [37] He then sought an opportunity to take instructions and spoke to Mr Duncan and Mr McGuigan as to what he should tell Mr Podzebenko. The Commission found: [38]
"He was told by them that John McGuigan was going to make contact directly with Mr Cubbin on the issue. Mr Levi, therefore, did nothing about the matter after that. Mr Levi understood that what he was told by Mr Duncan and John McGuigan meant that John McGuigan would deal with the matter, and Mr Levi should not reply to Mr Podzebenko. The Commission interprets this episode as an occasion when the IBC came close to getting the truth, but Mr Duncan and John McGuigan stepped in to prevent that truth from emerging."
Mr Cubbin and Mr Podzebenko also arranged a meeting with Mr Poole. Mr Poole, being the director of Cascade Coal who had arranged the mechanism by which the Obeid family involvement was removed from the joint venture, was fully aware of the details of the involvement and of the nature and purpose of the $28 million payment. The Commission found that his statements to the IBC involved "direct lies." [39] The Commission made the following findings:
"On 16 March 2011, Mr Cubbin and Mr Podzebenko met Mr Poole. There were three items on the agenda - the circumstances of the grant of the exploration licences at Mount Penny, whether or not there had been or was any Obeid involvement in the exploration licences, and the circumstances behind the payment of $28 million (part of the $30 million) by Cascade to Coal & Minerals Group.
…
… As regards the second agenda item, Mr Poole said that he personally had no issue disclosing the nature of the services that Coal & Minerals Group had provided to Cascade to which the $28 million payment related. He had been asked by other investors not to do so. He did not believe that there was any political sensitivity in relation to the payment.
As regards the third agenda item, Mr Poole told the meeting that he was not aware of any payments having been made to Edward Obeid Sr or any entities associated with him or to other ALP politicians. In particular, as far as he was aware, none of the $28 million had been paid to Edward Obeid Sr or interests associated with him."
On the basis of this evidence, which the Commission accepted, it concluded: [40]
"Mr Poole did not tell Mr Cubbin and Mr Podzebenko the truth. In substance, as set out above, he deliberately misled them. Mr Poole feared that, if he told Mr Cubbin or Mr Podzebenko the truth, it was likely that the Obeid involvement in the Mount Penny tenement would become public. That would probably have led to a reduction in the value of his Cascade shares."
In the events which followed, neither the IBC nor the ASX obtained the truth as to the issues identified for consideration by the IBC. Rather, the option agreement pursuant to which White Energy were to purchase the shares in Cascade Coal was abandoned.
According to the findings made by the Commission, the abandonment of the agreement flowed from a letter of 16 March 2011 from the ASX to White Energy seeking details of Cascade Coal's "capitalised mining costs" of some $41.7 million. The Commission noted that "[a] straightforward and honest answer to that letter would have revealed the fact that $30 million had been paid to terminate the rights of the Obeids." A response was sent by White Energy which did not deal with the specified concern. On 1 April the ASX wrote again seeking a response. Mr Cubbin and Mr Podzebenko sought information on this subject from Mr Duncan. What then happened was explained by the Commission, referring to statements by Mr Duncan, in the following terms: [41]
"The meeting to which Mr Duncan was referring is the meeting that was captured on a telephone intercept during which Mr Duncan referred to their efforts to answer the ASX request. Mr Duncan spoke of how they had tried all sorts of 'weasel words', but had been unable to come up with a satisfactory explanation for the payment. The concern, as expressed by Mr Duncan and Mr Kinghorn, was that a straightforward answer would enable ASX to 'get behind' the involvement of Mr Poole. It was in light of that concern that a decision was made to terminate the option agreement between Cascade and White Energy."
On 12 April 2011, White Energy made an announcement to the ASX giving a reason for terminating the arrangement with Cascade Coal, which the Commission described as "false." Up to that point, the appellants had thus been successful in preventing disclosure of the Obeid involvement in the granting of the Mount Penny tenement and the operation of the joint venture between Cascade Coal and Buffalo resources. [42]
[44]
Findings relating to appellants
In Ch 33 of its Report, the Commission summarised its findings of fact, characterised those findings by reference to the requirements of s 8(2) of the ICAC Act and reached the following conclusions with respect to corrupt conduct:
Travers Duncan [43]
"The Commission therefore finds that Mr Duncan engaged in corrupt conduct by:
a) deliberately misleading Mr Cubbin as to the Obeid family involvement in the Mount Penny tenement by failing to disclose the involvement to Mr Cubbin when Mr Cubbin raised the issue with him,
b) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement,
c) telling Mr Levi that John McGuigan would directly contact Mr Cubbin and thereby relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement, and
d) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement."
John McGuigan [44]
"The Commission therefore finds that John McGuigan engaged in corrupt conduct by:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement,
b) telling Mr Levi that he (John McGuigan) would directly contact Mr Cubbin and thereby relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement, and
c) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement."
John Atkinson [45]
"The Commission therefore finds that Mr Atkinson engaged in corrupt conduct by:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement, and
b) authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement."
Richard Poole [46]
"The Commission therefore finds that Mr Poole engaged in corrupt conduct by:
a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement,
b) telling the IBC that he was not aware of any payments having been made to Edward Obeid Sr or any entities associated with him, and
c) arranging for the Obeids to be extracted from the Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments,
with the intention, in each case, of deceiving relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement."
[45]
(a) the ICAC Act
In order to address the legal issues raised by the appellants, by way of challenge to the judgment of the primary judge, it is necessary to set out the legal constraints upon the Commission in reaching findings of corrupt conduct. That is because the challenge raised by way of judicial review of the Commission's findings before the primary judge (other than those questions relating to the procedure before the Commission, which can be dealt with separately) depended on the identification of legal error on the part of the Commission.
The first step in that analysis is to note the operation of s 8(2) (so far as relevant) of the ICAC Act.
8 General nature of corrupt conduct
…
(2) Corrupt conduct is also any conduct of any person (whether or not a public official) that adversely affects, or that could adversely affect, either directly or indirectly, the exercise of official functions by any public official, any group or body of public officials or any public authority and which could involve any of the following matters:
…
(e) fraud,
…
(s) bankruptcy and company violations,
….
The primary reason for the delay in the hearing of the present appeals arises from the both litigation and legislation concerning the operation of this provision. Before addressing the terms of the section, it is desirable to set out the chronology of events surrounding its interpretation. The first Report of the Commission was completed in July 2013; the third in December 2013. The judgment of the primary judge on judicial review was delivered on 29 July 2014. In the second half of 2014, proceedings were commenced in the Supreme Court in relation to an entirely separate inquiry undertaken by the Commission, challenging the scope of the Commission's power with respect to corrupt conduct. The first judgment in that matter, Cunneen v Independent Commission Against Corruption [47] was delivered on 10 November 2014. From that judgment an appeal was brought to this Court, judgment being delivered on 5 December 2014. [48]
This Court held (by majority) that the term "adversely affects" in s 8(2) is not so broad as to cover any adverse effect on the exercise of an official function, unless it had the capacity to compromise the integrity of the exercise of the function, in circumstances where the conduct was not that of a public official.
The Commission brought an appeal against that decision to the High Court, which granted special leave but dismissed the appeal: Independent Commission Against Corruption v Cunneen. [49] The point of distinction was summarised in the reasons of the majority (French CJ, Hayne, Kiefel and Nettle JJ):
"[2] 'Adversely affect' is a protean expression. In this context, however, there are only two possibilities. Either it means adversely affect or could adversely affect the probity of the exercise of an official function by a public official, or it means adversely affect or could adversely affect the efficacy of the exercise of an official function by a public official in the sense that the official could exercise the function in a different manner or make a different decision from that which would otherwise be the case.
[3] The former meaning accords with the ordinary understanding of corruption in public administration and consequently with the principal objects of the ICAC Act as set out in s 2A. The latter would result in the inclusion in 'corrupt conduct' of a broad array of criminal offences and other unlawful conduct having nothing to do with the ordinary understanding of corruption in public administration or the principal objects of the ICAC Act. It would also enable the Independent Commission Against Corruption ('ICAC') to exercise its extraordinary coercive powers (with consequent abrogation of fundamental rights and privileges) in areas ranging well beyond the ordinary understanding of corruption in public administration and the principal objects of the ICAC Act. For those reasons, and the reasons which follow, the former meaning is to be preferred."
As will be noted shortly, the potential consequences of the preferred construction of the ICAC Act for the present findings has been removed by legislation. Nevertheless, the High Court provided helpful guidance as to the approach to be taken to the construction of the provision more generally. It is clear that s 8(2) has two limbs: the first requires the characterisation of the person's conduct as at least being capable of affecting adversely the exercise of an official function; the second limb requires that the conduct also involve one of the categories of official misconduct or one of the offences specified in the separate paragraphs of subs (2) subject of course to the broad extensions provided by pars (x) and (y). Quite apart from the question as to whether the adverse effect identified in the first limb related to the probity of the administration of the public function, there is a question as to how broadly that limb can operate. Thus, there is a high level of indeterminacy in characterising in the abstract what sort of conduct might adversely affect, indirectly, the exercise of some official function. In Cunneen the joint reasons dealt with this matter in the following terms: [50]
"The matters specified in s 8(2)(a)-(y) are, therefore, matters of a kind that direct particular attention to whether the conduct in question did or could adversely affect the exercise of official functions by a public official engaging in conduct of a kind described in any of s 8(1)(b)-(d). Hence the competing, and more compelling, construction of s 8(2) is that, if the conduct in question 'could involve' any of the matters in pars (a)-(y) and if the conduct adversely affects or could adversely affect the probity of the exercise of an official function in one of the ways listed in s 8(1)(b)-(d), the conduct is 'corrupt conduct'."
The judgment of the High Court in Cunneen was delivered on 15 April 2015. On 6 May 2015 the legislature amended the ICAC Act to validate anything done or purporting to have been done by the Commission before 15 April 2015 which would have been validly done if the conduct could have adversely affected "the efficacy (but not the probity) of the exercise of official functions." [51] Accordingly, it would be sufficient for present purposes if the Commission had adopted the more expansive reading of s 8(2), without considering whether the conduct in question could affect the probity of the exercise of public functions. That it did not undertake the latter exercise was understandable in the circumstances; the limitation on the operation of s 8(2), upheld by the High Court, had not been ventilated at that time. As a result, the construction adopted in Cunneen is of no present relevance. (It may be noted, however, that these litigious and legislative developments led to a number of interlocutory applications and hence the delay in the determination of this appeal.)
The challenges raised on the appeal (and before the primary judge) did address the first limb, namely whether the conduct the subject of the findings could adversely affect the particular exercises of public functions identified by the Commission in its reasons. However, the grounds of appeal also challenged the findings that the activities said to involve corrupt conduct could be capable of constituting the offences identified by the Commission. Because these questions raise issues as to the precise nature of the conduct sufficient to satisfy the second limb, it is convenient to identify the elements of the offences relied on by the Commission before addressing the less precise elements in the first limb.
For that purpose, it is necessary to have regard to other provisions in the ICAC Act. A further limitation on the operation of s 8 is imposed by s 9 which, so far as presently relevant provides:
9 Limitation on nature of corrupt conduct
(1) Despite section 8, conduct does not amount to corrupt conduct unless it could constitute or involve:
(a) a criminal offence, or
(b) a disciplinary offence, or
(c) reasonable grounds for dismissing, dispensing with the services of or otherwise terminating the services of a public official, or
(d) in the case of conduct of a Minister of the Crown or a member of a House of Parliament - a substantial breach of an applicable code of conduct.
(2) It does not matter that proceedings or action for such an offence can no longer be brought or continued, or that action for such dismissal, dispensing or other termination can no longer be taken.
…
(5) Without otherwise limiting the matters that it can under section 74A (1) include in a report under section 74, the Commission is not authorised to include a finding or opinion that a specified person has, by engaging in conduct of a kind referred to in subsection (4), engaged in corrupt conduct, unless the Commission is satisfied that the conduct constitutes a breach of a law (apart from this Act) and the Commission identifies that law in the report.
There is, as was noted in Cunneen, a substantial overlap between the second limb of s 8(2) and s 9(1), in particular where a criminal offence is relied upon in order to satisfy s 8(2) and s 9(1)(a). On the other hand, s 9(1) may have substantial work to do in respect of other kinds of corrupt conduct, especially under s 8(1), which is not presently relevant. [52]
It is also necessary to refer to the principal functions of the Commission identified in s 13:
13 Principal functions
(1) The principal functions of the Commission are as follows:
(a) to investigate any allegation or complaint that, or any circumstances which in the Commission's opinion imply that:
(i) corrupt conduct, or
(ii) conduct liable to allow, encourage or cause the occurrence of corrupt conduct, or
(iii) conduct connected with corrupt conduct,
may have occurred, may be occurring or may be about to occur,
…
(3A) The Commission may make a finding that a person has engaged or is engaging in corrupt conduct of a kind described in paragraph (a), (b), (c) or (d) of section 9(1) only if satisfied that a person has engaged in or is engaging in conduct that constitutes or involves an offence or thing of the kind described in that paragraph.
(4) The Commission is not to make a finding, form an opinion or formulate a recommendation which section 74B or 74BA prevents the Commission from including in a report, but section 9(5) and this section are the only restrictions imposed by this Act on the Commission's powers under subsection (3).
Section 9(5) and s 13(4) require reference to the reporting function under s 74, and the limitations on that function imposed by s 74A and s 74B.
74 Reports on referred matters etc
(1) The Commission may prepare reports in relation to any matter that has been or is the subject of an investigation.
…
74A Content of reports to Parliament
(1) The Commission is authorised to include in a report under section 74:
(a) statements as to any of its findings, opinions and recommendations, and
(b) statements as to the Commission's reasons for any of its findings, opinions and recommendations.
…
74B Report not to include findings etc of guilt or recommending prosecution
(1) The Commission is not authorised to include in a report under section 74 a statement as to:
(a) a finding or opinion that a specified person is guilty of or has committed, is committing or is about to commit a criminal offence or disciplinary offence (whether or not a specified criminal offence or disciplinary offence), or
(b) a recommendation that a specified person be, or an opinion that a specified person should be, prosecuted for a criminal offence or disciplinary offence (whether or not a specified criminal offence or disciplinary offence).
(2) A finding or opinion that a person has engaged, is engaging or is about to engage:
(a) in corrupt conduct (whether or not specified corrupt conduct), or
(b) in specified conduct (being conduct that constitutes or involves or could constitute or involve corrupt conduct),
is not a finding or opinion that the person is guilty of or has committed, is committing or is about to commit a criminal offence or disciplinary offence.
(3) In this section and section 74A, criminal offence and disciplinary offence have the same meanings as in section 9.
One purpose of these provisions is to limit the tension, or at least the public appearance of tension, between a finding of an administrative tribunal that conduct could constitute a criminal (or disciplinary) offence and a finding that the Commission is satisfied that the person is guilty of the offence. To a lawyer, the distinction may be patent because the Commission is not a court exercising criminal jurisdiction, does not adhere to the rules of evidence and does not impose penal consequences. An analogous situation arose with relation to the powers of a Commonwealth authority responsible for regulating the broadcasting industry, which is empowered to cancel a licence if satisfied that the licensee, in breach of the conditions of its licence, has committed an offence. Considering such a power in Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd, [53] the High Court held at [49]:
"In determining that a licensee has breached the cl 8(1)(g) licence condition, as a preliminary to taking enforcement action, the Authority is not adjudging and punishing criminal guilt. It is not constrained by the criminal standard of proof and it may take into account material that would not be admitted in the trial of a person charged with the relevant offence. It may find that the broadcasting service has been used in the commission of an offence notwithstanding that there has been no finding by a court exercising criminal jurisdiction that the offence has been proven. Where a person is prosecuted for the relevant offence, the Authority is not bound by the outcome of the criminal proceeding and may come to a contrary view based upon the material and submissions before it."
Section 8(2) and s 9(1)(a) of the ICAC Act refer to conduct which "could constitute or involve" a criminal offence; s 13(3A) requires the Commission to be satisfied that a person "has engaged in … conduct that constitutes or involves an offence". It is clear from the legislative scheme identified above that s 13(3A) does not impose an obligation to be satisfied that an offence has in fact been committed. Rather, that as to which the Commission must be satisfied is the capacity of the facts found to constitute an offence, if proved by admissible evidence to the satisfaction of the appropriate court. [54] As senior counsel for the Commission submitted on the appeals, the ground of judicial review in relation to such a finding requires the application of a standard equivalent to that imposed on an accused person seeking to quash an indictment.
[46]
(b) criminal offences
In setting out the terms of s 8(2) [55] the relevant references were pars "(e) fraud" and "(s) … company violations". So far as par (e) was concerned, the offence identified by the Commission was dishonestly obtaining, by deception, a financial advantage, as identified in s 192E(1) of the Crimes Act 1900 (NSW). (The text of the section will be set out in considering the challenge to its availability on the findings of fact.) For the purposes of par (s) the relevant company violation was the offence created by s 184(1) of the Corporations Act 2001 (Cth) making it an offence for a director of a corporation, recklessly or with intentional dishonesty, to fail to exercise the powers and discharge the duties of a director in the best interests of the corporation and for a proper purpose. (Again the precise language will be addressed below.)
The primary judge rejected the Commission's reliance on s 184(1) of the Corporations Act on the basis that, as directors of White Energy, the appellants had no affirmative duties of disclosure in the circumstances in which they had declared their conflict of interest. That conclusion was challenged by the Commission by way of a notice of contention. With respect to Mr Poole, reliance was placed only on the offence of fraud under s 192E, he not being a director of White Energy.
[47]
Issues raised on appeal
In this Court, senior counsel for the Commission was at pains to avoid taking what might be perceived as technical points where there were issues of substance to be addressed. That is an entirely appropriate approach which the Court should also adopt. Nevertheless, it is necessary to exercise caution in dealing with an appeal where the grounds relied upon do not faithfully reflect the pleadings before the primary judge. In the present case, the drafters of the grounds in the summons commencing proceedings in the Common Law Division recognised the limitations on grounds of judicial review, namely the need to identify either jurisdictional error or an error of law on the face of the record on the part of the Commission. The formulation of some grounds of appeal tended to be less faithful to the limited scope of relief. That may in part have been due to the circumstance that, as appeared from the judgment of the primary judge, submissions before him ranged widely across factual findings which were not properly the subject of judicial review.
To the extent that the grounds of appeal identified error on the part of the primary judge, their specific formulation might not be of great significance; however, much of the argument on appeal was directed to challenges to the reasoning of the Commission, with limited regard to the judgment below.
Against that background, it is convenient to address first what may be described as common issues and, secondly, those specific to the circumstances or submissions of particular appellants. In part those will be limited by the findings in respect of the common issues.
The common issues are identified in broadly similar terms in each notice of appeal, although there were variations in emphasis in the written submissions. Taking those matters into account, the common issues were as follows.
1. Breach of duty - company directors:
1. Having disclosed their conflicts of interests, did the directors of White Energy have any further obligation to disclose to the IBC what they knew of the role of the Obeids in the procuring of the exploration licences or their proposed exploitation? Absent such an obligation, could their conduct constitute a contravention of s 184(1) of the Corporations Act?
2. If they had an affirmative duty of disclosure, was it limited to answering specific questions raised by the IBC with them individually?
1. Breach of duty - fraud:
1. Could the offence of fraud under s 192E of the Crimes Act 1900 be committed merely by remaining silent?
2. Could maintaining the unrealised value of an asset constitute obtaining a financial advantage?
3. Could such an advantage be obtained if the detrimental information became public knowledge by other means?
1. Capacity to adversely affect exercise of public functions:
1. Could the non-disclosure of the detrimental information affect the exercise of any relevant public function, being the grant of a mining lease, if the information was irrelevant and could not properly be taken into account by the officer responsible for the grant of a mining lease?
2. In the alternative to (a), if such an effect were available, was it removed if either -
1. the relevant information was otherwise in the public domain, or
2. that information which was already in the public domain would inevitably lead to disclosure of the relevant detrimental information?
1. Could the findings of corrupt conduct stand in circumstances where -
1. they involved more than one element of knowledge, only one of which could be upheld, or
2. they were based on three separate official functions, but where, as found by the primary judge, only one was available?
1. Procedural unfairness:
1. Should relevant elements of the offences, including the element of dishonesty, have been put to the appellants in the course of their evidence before the Commission?
2. Should the offences relied upon by the Commission have been identified before the appellants gave evidence?
There were circumstances which distinguished the roles of the various appellants, whether in a manner which was inculpatory or exculpatory. Broadly, they can be identified as follows:
1. Mr Duncan was responsible for identifying the risk created by the involvement of the Obeid family in the joint venture and sought their removal.
2. Mr Poole, who was not a director of White Energy, was responsible for negotiating the manner of their removal.
3. Mr Atkinson -
1. was not involved in the day-to-day activities of Cascade Coal, and
2. was not questioned by the IBC.
As will appear, the answers to the common issues make it unnecessary to consider the individual circumstances, except those of Mr Atkinson.
[48]
Severability
Although not perhaps the logical order, it is convenient to deal first with the issue of severability with respect to the findings of the Commission, identified as common issue (4). This issue arose as a consequence of the judicial review judgment, the primary judge having dismissed two of the three respects in which the Commission had found that the exercise of public functions might be affected. To identify the issue, it is necessary to refer in more detail to the findings made by the Commission.
The issues raised can be illustrated by reference to the findings regarding Mr Duncan. The Commission was satisfied that Mr Duncan "knew that, if the NSW Government found out that the Obeids had been involved in the creation of the Mount Penny tenement or in the allocation of the Mount Penny exploration licence or had a beneficial interest in the Mount Penny tenement, the NSW Government might take action to set aside the Mount Penny exploration licence or not grant a mining lease in which case the assets of Cascade, of which Mr Duncan was an investor, would be jeopardised." [56]
This first limb of this finding related to Mr Duncan's state of knowledge, from which it was inferred that he "intended to hide" the Obeid family involvement in these activities. [57] It identified four steps that he took to that end. The Commission then expressed its opinion that "a substantial purpose in taking these steps" was to hide the Obeid family involvement.
The Commission then set out its determination that the four steps which it had identified constituted corrupt conduct for the purposes of s 8(2) of the ICAC Act. It continued: [58]
"This is because his conduct could have adversely affected, either directly or indirectly, the exercise of official functions by any public official or public authority reviewing the creation of the Mount Penny tenement or the grant of exploration licences over the Mount Penny tenement (including the circumstances surrounding the granting of such licences) or the official functions of any public official or public authority considering whether to grant a mining lease over the Mount Penny tenement …."
It will be seen that the last statement expands the areas of adverse effect to include reviewing the creation of the tenement. As noted above, the Commission used language referring to the creation of a tenement as describing the administrative or mapping exercise needed to identify an area which would be the subject of an exploration licence. It was an essential preliminary administrative step to the grant of a licence.
Relevantly, it is the potential adverse effects which are relevant to satisfy the first limb of s 8(2): questions of knowledge or purpose are not specifically adverted to in the first limb, although those findings were undoubtedly relevant to the second limb. Accordingly, it was the three elements of potential adverse effects which were material and, as to the first two, were the subject of challenge before the primary judge.
The primary judge noted that there was no express statutory power to review the creation of the tenement or the issue of the exploration licence. In those circumstances, he was not satisfied that the Commission had identified with sufficient particularity a function which might be adversely affected. However, unsurprisingly, he accepted that the third proposed function, the grant of a mining lease, was a relevant governmental function, a proposition he understood not to be challenged by the appellants. [59]
There was no challenge to the finding that the Commission had failed to identify a relevant function with respect to the first two matters it had relied upon; accordingly, in this Court the Commission was only able to rely upon the capacity of the conduct identified to affect adversely the grant of a mining lease. However, the appellants sought to reagitate an argument presented to the primary judge, but rejected by him, namely that the various official functions had not been identified distributively, so that the failure of one (or two) brought down the collective finding. The judge rejected the contention on the basis that the Commission had stated its findings in disjunctive form and no reason had been demonstrated why they should not each be treated as supporting a separate official function and a separate finding of a function capable of adverse affectation. [60]
The submissions in this Court sought to run together separate activities of the appellants in failing to disclose a common factor, namely "the Obeid family involvement", with the potential adverse effect on three separate official functions. The elements of the appellants' conduct will be addressed separately; that analysis does not address the question as to whether the Commission dealt with the official functions separately. There may be some truth in the proposition that the first two functions (the creation of a tenement and the grant of an exploration licence) were not readily severable. Part of the reason for that may be that the focus was on express statutory powers and there was no express statutory power to create a tenement in the manner identified above. The argument is, however, beside the point because the first two functions were rejected. Apart from the practical likelihood (though by no means a legal necessity) that the first two functions would precede the third, there is no connection between them. The value of the tenement lay in the potential to exploit the coal resource; that is what the directors sought to sell to White Energy; there was a rational connection between their non-disclosures and the function of granting or refusing a mining lease.
The challenge to the severability of findings that each of the appellants engaged in the activities which constituted corrupt conduct will depend on whether some but not all of the findings are to be set aside. The submissions appeared to raise a separate issue as to the causal connection between any finding upheld and the official function of granting a mining lease. This issue will not arise unless particular elements of the corrupt conduct findings are set aside.
[49]
Company violations - Corporations Act, s 184
There was no dispute that a contravention of s 184(1) of the Corporations Act would constitute a "company violation" for the purposes of s 8(2)(s) of the ICAC Act. The question raised was whether the findings as to the activities of the appellants (being those who were directors of White Energy) fell within the scope of s 184. The section reads:
184 Good faith, use of position and use of information - criminal offences
Good faith - directors and other officers
(1) A director or other officer of a corporation commits an offence if they:
(a) are reckless; or
(b) are intentionally dishonest;
and fail to exercise their powers and discharge their duties:
(c) in good faith in the best interests of the corporation; or
(d) for a proper purpose.
Note: Section 187 deals with the situation of directors of wholly‑owned subsidiaries.
Use of position - directors, other officers and employees
(2) A director, other officer or employee of a corporation commits an offence if they use their position dishonestly:
(a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or
(b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.
Use of information - directors, other officers and employees
(3) A person who obtains information because they are, or have been, a director or other officer or employee of a corporation commits an offence if they use the information dishonestly:
(a) with the intention of directly or indirectly gaining an advantage for themselves, or someone else, or causing detriment to the corporation; or
(b) recklessly as to whether the use may result in themselves or someone else directly or indirectly gaining an advantage, or in causing detriment to the corporation.
In considering the operation of s 184(1) the Commission stated: [61]
"The concept of 'good faith' in this area of company law has been defined to include at least four aspects: an exercise of powers or duties in the interests of the company, in the sense of not misusing or abusing those powers, avoidance of conflicts between personal interests and those of the company, a prohibition on taking advantage of the position to make secret profits, and a prohibition on the appropriation of the company's assets for their own benefit.
The concept of 'a proper purpose' in this part of company law has been understood to mean much the same thing as 'good faith'."
The appellants did not take issue with those statements; rather, they contended that they had declared a conflict of interest, following which they had not sought to exercise their powers or duties as directors of White Energy, nor had they sought to make a secret profit, nor appropriate the company's assets. They had, it was submitted, no affirmative (or "proactive") obligation to disclose information which had come to them otherwise than in the course of their positions as directors of White Energy.
The primary judge accepted this submission. His conclusion was expressed in the following passage:
"[205] No doubt, there may be situations where, to observe the proscriptive obligations imposed on fiduciaries, it may be necessary for a fiduciary to perform some positive act. But that does not mean that there is a prescriptive element to the fiduciary duty. It means that, to avoid a conflict of interest (or to avoid profiting at the expense of the beneficiary), it is necessary for the fiduciary to take some positive step.
[206] This is not such a case. The directors were in a position of conflict. They stood to profit if White Energy exercised the option to acquire their shares in Cascade Coal. But they had removed themselves from the conflict, and left to others the question of whether the option should be exercised. And as I have pointed out, they were not acting in any way as directors of White Energy in relation to the transaction.
[207] In those circumstances, it seems to me, the elements of s 184(1) of the Corporations Act have not been satisfied. Even accepting, for the moment, that the directors were 'intentionally dishonest' in their dealings with Mr Cubbin and the IBC, that did not occur in the exercise of any of their powers as directors, nor in the discharge of any of those duties."
The Commission challenged these findings on two bases. First, it submitted that a director's duties were not necessarily discharged simply by disclosing a conflict of interest and ceasing to be involved in the company's deliberation on the issue. Secondly, the Commission disputed the underlying assumption that the various appellants (other than Mr Atkinson) had been passive in their relationship with the IBC established by White Energy.
It is convenient to address the first limb of the contention first. Pursuant to s 181 of the Corporations Act, a director must exercise the powers of that office and discharge its duties "(a) in good faith in the best interests of the corporation; and (b) for a proper purpose." Section 184(1) makes a contravention of that obligation, if done recklessly or with intentional dishonesty, a criminal offence. The Corporations Act also recognises that a director may have a conflict between a material personal interest and his or her duties as a director of a company: s 191. In such a case, the director must, subject to exceptions, give the other directors notice of the interest. The notice must include details of "the nature and extent of the interest" and "the relation of the interest to the affairs of the company": s 191(3)(a). These provisions have effect in addition to and not in derogation from any general law rule about conflicts of interest: s 193(a).
To address the issues raised by characterising the obligation sought to be imposed on the appellants as "proscriptive" rather than "prescriptive" is unlikely to be determinative and, if treated as conclusive, may lead to error. [62] It is clear that the Corporations Act (in terms reflective of general law principle) imposes affirmative obligations on company directors.
Whilst acknowledging that directors owe fiduciary duties to the company, the law has been pragmatic in its approach to potential conflicts of duty and interest. So much is recognised in the list of the circumstances of which or in which a director does not need to give notice, as set out in s 191(2) of the Corporations Act. However, the fact that directors are subject to affirmative obligations is reflected in the cases holding that a director's duties may not be satisfied merely by disclosing a material personal interest and abstaining from voting at a board meeting. Thus, in Centofanti v Eekimitor Pty Ltd [63] King CJ noted:
"[T]he circumstances may be such that [the interested director] can deal at arm's length with the company, consulting his own interests and leaving to the other apparently competent and fully informed, directors the assessment of any risks and the merits of the proposal from the standpoint of the company. Where, however, the director conducts the day-to-day operations of the company or is otherwise possessed of knowledge relevant to the decision, which his co-directors do not possess, he may not be free to act in that way but may be obligated to act in a way that protects the interests of the company."
Permanent Building Society (in liq) v Wheeler [64] involved the purchase by the Society of industrial land for development purposes; a number of the directors would benefit from the purchase. One, being the managing director of the Society (Hamilton), disclosed his interest and abstained from voting. At trial, the claim against him by the Society was dismissed. That judgment was reversed by the Full Court (Malcolm CJ, Seaman and Ipp JJ). Ipp J, writing for the Court, noted that the Society had no expertise in land development and stated there was "a heavy duty on the respondents generally and Hamilton in particular to scrutinise the proposed transaction with caution and thoroughness." [65] Ipp J continued:
"In my opinion that duty was not affected by the fact that Hamilton believed that he had a conflict of interest and accordingly did not vote when the resolutions in question were taken. It was manifest that the transaction was capable of causing [the Society] serious harm. In those circumstances, in my opinion, Hamilton could not avoid his duties as chief executive and managing director by asserting his perceived conflict of interest. It may be that, because of the conflict, he should not have spoken or voted in favour of the resolution. But as chief executive and managing director there was a responsibility on him to ensure that the other directors appreciated the potential harm inherent in the transaction, and to point out steps that could be taken to reduce the possibility of that harm. Hamilton could not avoid that duty by, metaphorically speaking, burying his head in the sand while his co-directors discussed whether [the Society] should enter into such a potentially detrimental transaction."
In another case involving some of the same parties, Permanent Building Society (in liq) v McGee, [66] the Society lent a large sum of money to a second company which, to the knowledge of a director of the Society (Wheeler) was not in a position to repay the principal or the instalments as they fell due. Anderson J stated: [67]
"In my opinion, it is quite clear that Wheeler did place himself in a position of conflict. It is true that he did not actually participate in the meeting of the plaintiff's board that finally resolved to make the loan. However, this is not a case in which mere disclosure of interest and abstention from voting was sufficient. He must have known that, as things stood, [the borrower] was quite unable to service the loan or to repay it. He was in a better position than [other directors] to appreciate that fact. Under those circumstances, it was his duty to take positive steps to protect the interests of the plaintiff. At the very least, he was under an obligation to make full and frank disclosure of the extent of [the borrower's] financial incapacity at that time."
The cases recognise that there may well be a concomitant obligation of confidentiality owed by a director to the second company in circumstances where the knowledge which ought to have been disclosed to the first company had been obtained as a director of the second company. Thus, Fitzsimmons v R [68] concerned a transaction between Kia Ora Gold Corp NL and Duke Holdings Ltd. Duke Holdings was in financial difficulty and organised a reverse takeover by Kia Ora, which involved Kia Ora providing funds to Duke so that Duke was able to acquire a parcel of shares in Kia Ora. [69] The applicant was a director of certain Duke companies and a director of Kia Ora. Parker J summarised the substance of the defence in the following terms: [70]
"The applicant's duties to Duke included a duty of confidentiality which, it was contended, bound him in respect of his knowledge as to the financial position of Duke which he had acquired as a director or an employee or both. It was advanced that the applicant was under a positive duty to Duke, a duty enforceable both at equity and by criminal sanctions, not to disclose what he knew of Duke's financial position.
…
Faced with such a conflict, it was contended for the applicant that necessarily it was the intendment and true operation of s 229(1) [the predecessor to s 181] that there could be no failure to act honestly by him merely remaining silent and not disclosing to Kia Ora information which the applicant was precluded from disclosing by virtue of his duties to Duke. In this sense it was put that the duty to act honestly in the affairs of Kia Ora necessarily 'rolled-back' to allow compliance with the duty to Duke."
Parker J dismissed these submissions. First, he noted that they were in conflict with the reasoning and decision in Walker v Wimborne, [71] the principle from which had been previously identified and applied, in the following terms, namely that "when acting as a director of Kia Ora the applicant's duties were to be determined by reference to the interests of Kia Ora and separately from his duties to Duke". Parker J continued: [72]
"Further, were the view contended by the applicant to be accepted, there would be a most significant inroad into the working of s 229 and a marked weakening of the effectiveness of the provision, which has a significant part to play in ensuring the honesty of directors. I cannot see any policy basis on which such a reading of s 229(1) would have been in the contemplation of the legislature.
It seems to me to be the intendment in effect of s 229(1) that at all times, and regardless of conflicting duties, a director of a company is to act honestly in the exercise of his powers and the discharge of his duties as director of that company. Further, in circumstances such as the present, the duty to act honestly can require disclosure of information known to the director which is material to issues being decided."
Owen J, in agreeing with the reasoning of Parker J, added the following more guarded comment. Owen J stated: [73]
"Each case will depend on its own facts. A director who is confronted with a possible conflict must assess his or her position. The minimum requirement will be disclosure of the interest. This is simply part of, or an extension of, the statutory obligation that a director who is in anyway 'interested' in a contract or proposed contact with a company must declare the nature of the interest at a meeting of the directors …. What action, above and beyond mere disclosure, the director must take will vary from case to case depending on the subject-matter, the state of knowledge of the adverse information, the degree to which the director has been involved in the transaction, whether the director has been promoting the cause, the gravity of the possible outcome, the exigencies and commercial reality of the situation and so on. It may not be enough for the director simply to refrain from voting or even to absent himself or herself from the meeting during discussion of the impugned business. The circumstances may require the director to take some positive action to identify clearly the perceived conflict and to suggest a course of action to limit the possible damage."
Owen J then expressed agreement with the reasoning of Ipp J in Wheeler set out above.
The issue was to arise again in another of the series of cases involving the Duke Group. One part of the litigation, Pilmer v Duke Group Ltd (In Liq), [74] dealing with the liability of a firm of accountants retained by Kia Ora, was considered by the High Court. The same proceedings involved a separate claim against a director, Somes, which was resolved by the Full Court of the Supreme Court of South Australia in Duke Group Ltd (in liq) v Pilmer [75] and not part of the appeal to the High Court. Kio Ora had made a successful takeover bid for another company, Western United, but at a price which was excessive. Somes had shares in both Kia Ora and Western United and made a substantial profit from selling his shares in Western United. The Full Court dealt with the challenge to the findings against Mr Somes in the following passages:
"[663] Before reaching these conclusions, the trial judge reviewed a number of authorities relating to the duties of directors. He referred to the duty of directors to exercise their powers bona fide for the benefit of the company as a whole; the duty of care which is owed to the company by the directors (Daniels v AWA Ltd; [76] ) and the statutory duties under the Companies Code …. The authorities refer to the directors being fiduciary agents and stress their responsibility to take reasonable steps to place themselves in a position to guide the management.
[664] Whilst conceding the nature and extent of these duties, Ms Powell QC, for Somes, argued that special considerations applied in a case where there were conflicting fiduciary duties. It was argued that Somes owed fiduciary duties to both Kia Ora and Western United by reason of the fact that he was a director of both companies. According to the argument, Somes' duty required him to make disclosure of the conflict and refrain from taking part in discussions on the decision to proceed with the takeover. He was required to proceed in this manner, so it was said, because he could not prefer the interests of one beneficiary (Kia Ora) over another (Western United)."
The Full Court then reviewed the authorities referred to above and reached the following conclusions:
"[670] According to the argument advanced on behalf of Somes, he faced two situations of conflict, the first arising by reason of the fact that he had a personal interest as a shareholder in Western United and the second which followed from what was alleged to be a conflict between his fiduciary duty to Kia Ora on the one hand and to Western United on the other. If there had been no suggestion of Kia Ora entering into an improvident transaction, we agree that the proper course for Somes and Lee-Steere [another director] would have been to declare their interest and take no further part in the implementation of the takeover. However we are of the view that different considerations apply by reason of the fact that the transaction was contrary to Kia Ora's interests as Somes and Lee-Steere well knew. We are of the view that in these circumstances Somes and Lee-Steere could not avoid their duty to Kia Ora and remain silent simply because Western United's shareholders might stand to profit by reason of Kia Ora's unwise offer.
[671] However that may be, it is unnecessary for us to decide what would have been the requirements of Stomes' and Lee-Steere's duties as directors of Kia Ora if they had decided to take no part at all in the takeover. Although Ms Powell argued that Somes' duty in the present case was restricted to declaring his interest and refraining from taking part in the decision-making process, that is not the course which he followed. On the uncontested findings of the trial judge, both Somes and Lee-Steere knew that the directors and, later the shareholders, were supplied with a misleading opinion which overvalued Western United to a considerable degree. They both realised that the takeover was not in the interests of Kia Ora and should have been rejected. Despite this, they participated in decisions which progressed the plans for the takeover. At a later stage Somes participated in the decisions to make the offer unconditional and extend the cut off date for acceptance of the offer, steps aimed at bringing about the ultimate success of the takeover."
While the facts relating to Mr Somes are not identical to those which arise from the findings made by the Commission in this case, it is clear that there is a consistency in approach revealed by the principles set out above. The topic is dealt with in Austin and Ramsay, Ford's Principles of Corporations Law by reference to the same cases and without identifying conflicting authority or suggesting that they erred in principle. [77] As remarked by RI Barrett in 1997, writing after the cases referred to above, but before his appointment to this Court: [78]
"Legal principle of long standing countenances membership of several boards, even where the companies concerned are competitors…. More recent developments emphasising that it is not safe for a director always to deal with conflict by the simple combination of silence and abstention may mean that the freedom to hold several directorships will be more sparingly exercised."
In these circumstances, if the findings of fact are not open to challenge, the challenge that the findings could not support an offence under s 184(1) should have been rejected. Accordingly, subject to consideration of the individual findings in respect of the particular appellants, the notice of contention should be upheld.
Before leaving this topic, it should be noted that the trial judge identified an issue which he did not need to determine, namely a challenge by the appellants to the findings of intentional dishonesty. [79] That ground of challenge was actively pursued in this Court only on behalf of Mr McGuigan, [80] and more succinctly by Mr Atkinson. [81]
The language in s 184(1) (being "intentionally dishonest" in failing to exercise a power or discharge a duty) emphasises the subjective element of the breach. The apparently tautological expression was presumably adopted to resolve a difference of opinion as to the meaning of the duty to "act honestly" in s 124 of the Companies Act 1961 (Vic), identified as a subjective test in Marchesi v Barnes, [82] but as requiring an objective approach in Australian Growth Resources Corporation Pty Ltd v Van Reesema [83] and debated in other authorities referred to in Forge v Australian Securities & Investments Commission. [84] However, the tautology is apparent rather than real once it is accepted that the term "dishonest", which appears not only in s 184(1), but also in the adverbial form ("dishonestly") in s 184(2) and 184(3) was to be given its objective meaning, namely referring to conduct which would be considered dishonest by ordinary, decent people, whether or not the putative offender realised that his or her conduct was so considered. It was in relation to the latter provisions that the Court of Appeal in Victoria in SAJ v The Queen (Weinberg JA and Davies AJA, Nettle JA agreeing) concluded that the word required such a construction. [85] The insertion of the qualifier "intentionally" dishonest, introduced an additional subjective element. The result is a standard reflected in R v Ghosh. [86] That test was summarised by Weinberg JA and Davies AJA in SAJ in the following terms: [87]
"Therefore, Ghosh held that the prosecution had to satisfy two components to establish dishonesty. First, it had to show that the accused had acted dishonestly according to the standards of reasonable and honest people. Second, the accused must have realised that his conduct was dishonest according to those standards. In other words, there was both an objective and subjective component to the test."
The result is consistent with the language adopted by Gowans J in Marchesi, namely that a breach of the duty to "act honestly" in the interests of the company involves "a consciousness that what is being done is not in the interests of the company, and deliberate conduct in disregard of that knowledge." [88]
The factual findings with respect to Mr McGuigan (and Mr Duncan) have been set out at [575]-[578] above. The specific findings with respect to the various parties, including Mr McGuigan, are set out at [584]. In identifying the specific breach of s 184(1), the Commission explained its findings in the following terms: [89]
"The Commission is satisfied for the purposes of s 9(1)(a) of the ICAC Act that, if the facts it has found in relation to the deliberate failure to disclose information to the IBC and relieving Mr Levi from having to answer Mr Cubbin's request for information about the Obeid family involvement in the Mount Penny Tenement were to be proved on admissible evidence to the criminal standard of beyond reasonable doubt and accepted by an appropriate tribunal, there would be grounds on which such a tribunal would find that John McGuigan committed criminal offences under s 184(1) of the Corporations Act 2001. This is because, as a director of White Energy, he was intentionally dishonest, or, alternatively, reckless and failed to discharge his duties in good faith and in the best interests of that company or for a proper purpose by withholding information about the Obeid family involvement so that the value of his holding in Cascade would not be adversely affected."
These are findings of fact made in the application of the correct legal test.
There is no doubt that it was open to the Commission to conclude that those who deliberately misled the IBC were intentionally dishonest. Mr Atkinson, however, did not meet the IBC. His breach of his duties as a director lay in his failure to disclose what he knew, in the understanding that it was material to the decision of the IBC. He said that he preferred the interests of Cascade Coal and, as a consequence, his own interests. It was open to the Commission to conclude that to seek to obtain a price for one's own property (in this case shares in Cascade Coal) without disclosing to the purchaser a matter which he knew the purchaser would perceive as diminishing the value of the asset, in circumstances where there was a duty of disclosure, would, in ordinary parlance, constitute dishonesty. Such conduct being deliberate and with full knowledge of the relevant facts could be seen to be intentionally dishonest. It was therefore open to the Commission to conclude that such factors, if proved beyond reasonable doubt, would constitute an offence under s 184(1); that is, that there was an intentionally dishonest failure to make a disclosure required of a director acting in good faith and in the best interest of the corporation.
That Mr Atkinson was not involved in active concealment may have been a good defence if the duty were limited to a duty not to mislead or conceal; it would not answer a breach of the pro-active duty to reveal what he knew. The section refers to a "failure" to act; it is not restricted to an active exercise of a power.
[50]
Fraud - Crimes Act, s 192E
The second basis on which the Commission found that conduct of the appellants satisfied both the second limb of s 8(2) and the requirement of s 9(1)(a), was by reference to s 192E(1) of the Crimes Act, which provides:
192E Fraud
(1) A person who, by any deception, dishonestly:
(a) obtains property belonging to another, or
(b) obtains any financial advantage or causes any financial disadvantage,
is guilty of the offence of fraud.
Maximum penalty: Imprisonment for 10 years.
Subject to an exception noted in the individual issues, the Commission made separate findings with respect to each of the appellants with respect to the second limb of s 8(2) and with respect to the qualification in s 9(1)(a). For example, with respect to Mr Poole, both provisions were held to be satisfied by reference to an offence under s 192E(1)(b) of the Crimes Act. There was no reliance upon s 8(2)(s) and an offence under the Corporations Act, Mr Poole not being a director or officer with White Energy. With respect to Mr Duncan, both provisions were relied upon and reference was made to both fraud and company violations falling within s 8(2)(e) and s 8(2)(s) of the ICAC Act. Similarly, reliance was placed on both provisions for the purposes of s 9(1)(a).
The primary submissions with respect to the operation of s 192E were put on behalf of Messrs McGuigan and Poole. Apart from a challenge by Mr McGuigan with respect to a specific finding (addressed below) the submissions addressed three specific elements of the offence, namely (a) deception, (b) dishonesty and (c) obtaining a financial advantage.
[51]
(a) deception
The Crimes Act, Pt 4AA - Fraud, has a definition of "deception" in s 192B, which reads:
192B Deception
(1) In this Part, deception means any deception, by words or other conduct, as to fact or as to law, including:
(a) a deception as to the intentions of the person using the deception or any other person, or
(b) conduct by a person that causes a computer, a machine or any electronic device to make a response that the person is not authorised to cause it to make.
(2) A person does not commit an offence under this Part by a deception unless the deception was intentional or reckless.
The appellants' primary argument with respect to this element was that the Commission made no finding that the failures to disclose material facts to the IBC and Mr Cubbin, led to Mr Cubbin, or other persons involved with the IBC, being misled or deceived.
However, the definition of "deception" in s 192B (except in respect of an electronic response) does not require that the deception have the effect of inducing a false belief in the recipient of information. The relevant effect is prescribed by the third element of the offence, namely obtaining (relevantly) any financial advantage.
[52]
(b) dishonesty
There is a definition of "dishonest" in s 4B of the Crimes Act, which reads:
4B Dishonesty
(1) In this Act:
dishonest means dishonest according to the standards of ordinary people and known by the defendant to be dishonest according to the standards of ordinary people.
(2) In a prosecution for an offence, dishonesty is a matter for the trier of fact.
Section 4B(2) is significant: if the question of dishonesty is a matter for the trier of fact, in judicial review proceedings the challenger will usually need to establish that there was no material upon which the decision-maker could have relied in finding the impugned conduct had been dishonest. The appellants' submissions did not attack the Commission's finding directly, but rather asserted that a finding of knowledge of prior involvement of the Obeid family must have been treated as tantamount to knowledge of wrongdoing on their part. There was, it was submitted, no evidence "of any knowledge of corrupt or criminal activity that had been engaged in by 'the Obeids'." [90]
While it is true that there was no finding in the terms of the proposed assumption, there did not need to be. On one view, the submission blurs the distinction between dishonesty in the form of a lie, and the motivation to lie. The Commission found that Mr Duncan had expressed an opinion, shared by other directors of Cascade Coal, that the involvement of the Obeid family was a threat to the grant of a mining lease. The Commission held that they were correct in that regard. To prevent the facts becoming publicly known, the Commission found they were dishonest in their dealings with the IBC. There was no legal error in that finding and there was material providing rational support for the inference. (The specific situation of Mr Atkinson, who had no direct contact with the IBC, will be addressed below.)
The appellant further submitted that, absent an actual statement to the IBC which was deceptive or dishonest, a failure to provide information could only constitute dishonesty if there were an obligation to provide a truthful statement. The discussion with respect to the duties of directors in a position of conflict with personal interests set out above concluded that there could be an affirmative duty of disclosure. Accordingly, the submission failed at the level of principle.
However, the Commission submitted that it failed at a factual level, there being findings that Mr Poole lied to the IBC, and that the answers given by Messrs Duncan and McGuigan were misleading. Further, each was involved in authorising Mr Poole to arrange for the Obeids to be extracted from the Mount Penny joint venture. That conduct involved a device intended to conceal the fact that the Obeids had had an involvement in the joint venture. Information as to the constituent elements of Cascade Coal's capital expenditure, which the ASX and the IBC sought, would have revealed the connection, but it was not provided.
[53]
(c) obtaining a financial advantage
The third element in the offence is also the subject of a definition, in this respect expressly inclusive, in s 192D of the Crimes Act, which reads:
192D Obtaining financial advantage or causing financial disadvantage
(1) In this Part, obtain a financial advantage includes:
(a) obtain a financial advantage for oneself or for another person, and
(b) induce a third person to do something that results in oneself or another person obtaining a financial advantage, and
(c) keep a financial advantage that one has,
whether the financial advantage is permanent or temporary.
The Commission made a finding that Mr Duncan misled the IBC for his own personal financial advantage. It identified the advantage in these terms: [91]
"The personal advantage that Mr Duncan so obtained was brought about by the concealment of the Obeid involvement in the creation of the Mount Penny tenement in the EOI process and in the joint venture relating to the exploitation of the exploration licence and the tenement generally. The Commission has earlier found that the continued Obeid involvement constituted a risk to the value of the tenement. The risk involved possible government intervention in the exploration licence and a risk that a mining lease might not be granted. Public awareness of that risk would have reduced the value of investors' shares in Cascade. Thus, a personal advantage to Mr Duncan in concealing the Obeid involvement was the avoidance of reduction in the value of his share of Cascade." [92]
The primary judge understood that there were two challenges to the findings in this regard. The first was that the advantage obtained by concealment was both limited and temporary. It was limited in the sense that the sale to White Energy did not proceed; it was temporary in the sense that the risk ultimately materialised in any event. The second challenge was that similar findings were not made with respect to other appellants.
In this Court the focus of submissions was somewhat different. First, it was said that the finding with respect to the value of the shares must have relied upon subs (1)(c) of the definition of "obtain" as including "keep a financial advantage that one has". The submission continued: [93]
"In the present case, the 'risk' which it was alleged was obviated or deferred from crystalizing, was not anything which could be said to be an advantage that had been initially obtained and subsequently retained. 'When one speaks of obtaining a financial advantage by deception, there is imported … the notion of improving a financial situation by means of that deception.' [94] The language of obtaining or retaining is entirely inapposite to a risk of a future diminution of value. One does not speak of obtaining or retaining a risk."
A person obtains a financial advantage by proffering a valueless cheque in payment of an outstanding debt: R v Vasic. [95] The advantage may be the retention of funds for a longer period, deferral of any steps which might be taken by the creditor to enforce the debt or an opportunity to seek finance. If the debtor has funds, which are retained for a further period, there is the retention of an asset, not merely deferral of an obligation. A similar analysis may be applied where the advantage is the retention of an asset the value of which would be diminished absent the deception. Thus, on the factual premise accepted by the Commission, the value of the mining tenement which was the principal asset of Cascade Coal would be maintained if the involvement of the Obeid family in the acquisition of the tenement were concealed. That involved a direct financial advantage to the shareholders of Cascade Coal. Maintaining that advantage was understood by them to be the purpose of the deception.
It is true that one might describe obviating or deferring a risk as a form of advantage; however, in the present context, it is the consequence of obviating or deferring the risk which constitutes the advantage, namely maintaining the value of the shares. To maintain the value of a share falls comfortably within the concept of keeping a financial advantage that one has. As s 192D(1) declares, it is sufficient that keeping such an advantage occurs only temporarily.
The appellants further submitted that there was an absence of authority for the proposition that "the offence of fraud" can be made out if A misleads B with the result that C acts differently even though the representation was not made to C. However, whether or not that proposition is correct is beside the point: the question is whether the statutory offence was capable of being satisfied on the findings of fact made by the Commission. For the reasons already articulated, the challenge to the Commission's conclusion has not been made good.
[54]
(d) conclusions
Subject to limited individual considerations, the primary judge was correct to conclude that there was no reviewable error in the approach of the Commission to the operation of s 192E.
[55]
Section 8(2) - the first limb, "adversely affects"
Once the relevant area of official functions was limited to the future grant of a mining lease, the appellants' submissions focused on the proposition that, whatever might be encompassed by the phrase "the Obeid family involvement", it was not within the scope of considerations which could permissibly be taken in to account by the body responsible for determining an application for a mining lease. To make good that proposition, the appellants sought to identify a limited set of considerations by reference to the legislative scheme, the grant of a mining lease being an entirely statutory function.
[56]
(a) permissible considerations - public interests
It was common ground that the primary exercise in decision-making took place under Pt 3A (since repealed) of the Environmental Planning and Assessment Act 1979 (NSW) ("the EP&A Act"). The steps by which this result was achieved were threefold.
First, s 75B of the EP&A Act stated that Pt 3A applied to the carrying out of development declared to be a project to which the Part applied by a State environmental planning policy. [96] The second step was the declaration in the State Environmental Planning Policy (Major Development) 2005 (NSW) that development that, in the opinion of the Minister, was of a kind described in Sch 1, was development to which Pt 3A of the EP&A Act applies. [97] Schedule 1 identified development for the purpose of mining that was coalmining or had a capital investment value of more than $30 million. [98] The third step was to be found in s 75V which provided that the grant of a mining lease could not be refused if it were necessary for carrying out a project approved under Pt 3A. [99]
The operative provisions of Pt 3A commenced with a prohibition on carrying out development that was a project to which the Part applied, unless the Minister had granted approval. [100] Section 75E provided for an application for approval by the Minister; ss 75F-75I dealt with what were described as "environmental assessment" requirements and procedures. Those functions were to be carried out by the Director-General, who was to provide a report on the project to the Minister for the purposes of the Minister's consideration of the application. [101] Section 75J provided the statutory basis for the Minister's decision.
75J Giving of approval by Minister to carry out project
(1) If:
(a) the proponent makes an application for the approval of the Minister under this Part to carry out a project, and
(b) the Director-General has given his or her report on the project to the Minister,
the Minister may approve or disapprove of the carrying out of the project.
(2) The Minister, when deciding whether or not to approve the carrying out of a project, is to consider:
(a) the Director-General's report on the project and the reports, advice and recommendations (and the statement relating to compliance with environmental assessment requirements) contained in the report, and
(b) if the proponent is a public authority - any advice provided by the Minister having portfolio responsibility for the proponent, and
(c) any findings or recommendations of the Planning Assessment Commission following a review in respect of the project.
(3) In deciding whether or not to approve the carrying out of a project, the Minister may (but is not required to) take into account the provisions of any environmental planning instrument that would not (because of section 75R) apply to the project if approved. …
(4) A project may be approved under this Part with such modifications of the project or on such conditions as the Minister may determine.
The next step in the appellants' argument referred to provision for the contents of the Director-General's report identified in cl 8B of the Environmental Planning and Assessment Regulation 2000 (NSW) ("EP&A Regulation"), which read at the relevant time:
8B Matters for environmental assessment and Ministerial consideration
The Director-General's report under section 75I of the Act in relation to a project is to include the following matters (to the extent that those matters are not otherwise included in that report in accordance with the requirements of that section):
(a) an assessment of the environmental impact of the project,
(b) any aspect of the public interest that the Director-General considers relevant to the project,
(c) the suitability of the site for the project,
(d) copies of submissions received by the Director-General in connection with public consultation under section 75H or a summary of the issues raised in those submissions.
Note. Section 75J (2) of the Act requires the Minister to consider the Director-General's report (and the reports, advice and recommendations contained in it) when deciding whether or not to approve the carrying out of a project.
The primary judge identified the "essential controversy" between the parties as being whether "the public interest" referred to in cl 8B of the Regulation extended beyond environmental concerns to such general issues as a corrupt process by which a tenement had been created or an exploration licence granted. [102] A similar argument was raised in this Court, challenging the conclusion that, in granting a mining lease, such matters were available to be considered for the purpose of an approval under Pt 3A of the EP&A Act. The judge reasoned, in a passage challenged by the appellants, that any public interest arising out of environmental concerns would have been addressed in the course of the environmental assessment process so that, on its proper construction, the reference to the public interest in the regulation extended to any aspect of the public interest that the Director-General considered relevant to the project. [103]
The appellants were also critical of reliance by the primary judge on matters arising under the Mining Act 1992 (NSW). Particular reference was made to s 63, the relevant parts of which read (in 2010-2011) as follows:
63 Power of decision-maker in relation to applications
(1) After considering an application for a mining lease, the decision-maker:
(a) may grant to the applicant a mining lease over all or part of the land over which a lease was sought, or
(b) may refuse the application.
(2) Without limiting the generality of subsection (1) or any other provision of this Act, an application may be refused on any one or more of the following grounds:
(a) that the applicant (or, in the case of an applicant that is a corporation, a director of the corporation) has contravened this Act or the regulations (whether or not the person has been prosecuted or convicted of any offence arising from the contravention) or has been convicted of any other offence relating to mining or minerals,
(b) that the decision-maker reasonably considers that the applicant provided false or misleading information in or in connection with the application or any report provided under this Act for or with respect to the lease.
The primary judge made the following observations with respect to this provision: [104]
"The subsection does not limit the matters that the decision-maker may take into account in deciding whether to grant or refuse an application for a mining lease. But it does draw particular attention to what might be called circumstances of dishonesty attending, preceding or surrounding the application. Again, many citizens of this State would find it strange that the specific kinds of dishonesty referred to in subs (2) could be taken into account, but clear evidence of another form of dishonesty - corruption in relation to the creation of the tenement or the grant of an antecedent exploration licence - must be ignored."
The reasoning continued:
"[118] One of the effects of the grant of a mining lease is to give the lessee the right to extract and deal with, on its own account, mineral wealth that, otherwise, would have been the property of, and exploitable by, the State. There is a clear public interest in ensuring, so far as possible, that rights to exploit what otherwise was public property are given in accordance with the law, and by open and transparent processes; and that they are not given as a result of or consequential upon, corrupt dealings.
[119] In my view, had it come to the attention of the Director-General, in connection with an application for a mining lease, that the corrupt dealings that the Commission found to have occurred in this case had been associated with the creation of the tenement and the grant of the exploration licence, it would have been open to the Director-General to take those matters into account, as an aspect of the public interest. In the language of cl 8B(b), it would have been open to the Director-General to consider those matters as aspects of the public interest that were relevant to the project."
The appellants challenged the relevance of the provisions of the Mining Act on the basis that the effect of s 75V of the EP&A Act was to remove the discretion conferred on the Minister administering the Mining Act and thus remove from consideration factors which might otherwise have been relevant, including those relating to the applicant under s 63(2) of the Mining Act. If that reasoning were not to be accepted, the appellants nevertheless challenged the relevance of the matters identified in s 63(2) on the basis that there was no evidence that Cascade Coal and its directors had contravened the Mining Act or were likely to provide false or misleading information in connection with the application for a mining lease.
With respect to the reference to "the public interest" in the EP&A Regulation, the appellants submitted that it must be understood having regard to its statutory context. It should not be read as incorporating unconstrained notions of the public interest, but rather should be limited to those aspects of the public interest relevant to the subject-matter of the regulation, namely environmental and planning matters. Reference was made to the following statement of principle in The Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal: [105]
"It is well established that, when used in a statute, the expression 'public interest' imports a discretionary value judgment to be made by reference to undefined factual matters. As Dixon J pointed out in Water Conservation and Irrigation Commission (NSW) v Browning [106] , when a discretionary power of this kind is given, the power is 'neither arbitrary nor completely unlimited' but is 'unconfined except in so far as the subject-matter and the scope and purpose of the statutory enactments may enable the Court to pronounce given reasons to be definitely extraneous to any objects the legislature could have had in view'."
Taking that passage in isolation, it is by no means self-evident that factors which may indicate corruption in the process by which a mining tenement was mapped and an exploration licence with respect to it granted would be "definitely extraneous to" a discretionary judgment with respect to the issue of a mining lease over the same tenement.
However that passage should not be read in isolation. The joint reasons in Pilbara Infrastructure continued with a further proposition relevant to the present case. That statement of principle should also not be read divorced from its context. The factual context concerned two railway lines and associated infrastructure owned and operated by BHP Billiton Ltd and Rio Tinto Ltd in the Pilbara. Pursuant to provisions of Pt IIIA of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)), a third party could obtain access to infrastructure owned by others by applying for a particular service to be "declared". [107] An application would be considered by the National Competition Council (the NCC) which would make a recommendation to the Minister who had power to declare the service. Following the passage set out above, the joint reasons continued: [108]
"It follows that the range of matters to which the NCC and, more particularly, the Minister may have regard when considering whether to be satisfied that access … would not be contrary to the public interest is very wide indeed. And conferring the power to decide on the Minister (as distinct from giving to the NCC a power to recommend) is consistent with legislative recognition of the great breadth of matters that can be encompassed by an inquiry into what is or is not in the public interest and with legislative recognition that the inquiries are best suited to resolution by the holder of a political office."
Part 3A of the EP&A Act was not directed to matters of national economic significance, but it was directed to "major infrastructure or other development that, in the opinion of the Minister, is of State or regional environmental planning significance". [109] In this context, the structure of s 75J is important. First, it confers on the Minister a largely unfettered discretion to approve or disapprove the project. Furthermore, the only express fetter is the imposition of an affirmative obligation on the Minister to consider the Director-General's report, the advice from a Minister having responsibility for a public authority if the public authority is the proponent of the project and findings and recommendations of the Planning Assessment Commission. Thus, the factors which the Minister may (and perhaps must) take into account cannot be more limited than those which may be addressed by those bodies. Relevantly, s 75J has no express exclusion of factors which would be impermissible considerations.
A further inference is available from the requirement that the Minister consider any advice by another Minister having portfolio responsibility for the proponent of a project proposed by a public authority and from the fact that the Minister is empowered (but not required) to take into account the provisions of any environmental planning instrument that would otherwise have applied to the project, if approved. By analogy, it must be permissible for the Minister to have taken into account factors which would have been relevant under specific legislation relevant to an authority otherwise required (subject to discretionary powers) for the carrying out of the development. In other words, the primary judge was correct to accept that factors relevant to the issue of a mining lease, as prescribed by the Mining Act and Regulation, were permissible factors for the Minister to take into account in considering an application for a mining lease under Pt 3A of the EP&A Act.
This analysis places more weight on the ministerial discretion conferred by s 75J of the EP&A Act; reference to the public interest in the EP&A Regulation, cl 8B, is less significant. As the appellants noted, the reference in that context is to consideration by the Director-General, not the Minister. Accordingly, its content must be identified by reference to the functions of the Director-General in preparing a report for the purposes of s 75I. On the other hand, it is not correct, as the appellants submitted, to treat that function as limited to questions of environmental assessment in any narrow sense. The Director-General's report is to include "any advice provided by public authorities on the project" and "a copy of any report of the Planning Assessment Commission in respect of the project". [110] The term "public authority" is broadly defined to include any government department. [111] With respect to a project involving the grant of a mining lease, it must be permissible, if not mandatory, for the Director-General to seek advice from the Department of Primary Industries and Mineral Resources (as it then was). There is no reason to suppose that that Department would not be entitled to give advice of any maladministration in the issue of the tenement or the exploration licence then held by the applicant for a mining lease.
Further, although the submissions did not address the matter, it is not insignificant that the Director-General's report is to include any report of the Planning Assessment Commission. That body, established pursuant to s 23B of the EP&A Act comprises eight members with broad ranging expertise, not limited to planning and the environment, but including "land economics", "tourism or government and public administration." [112]
The appellants also sought to obtain assistance from the judgment of this Court in Warkworth Mining Ltd v Bulga Milbrodale Progress Association Inc. [113] However, that case tended to support a broader view of the scope of public interest considerations relevant to the power conferred by s 74J of the EP&A Act. Warkworth's primary challenge to the decision below had been based on the supposed failure of the trial judge (who stood in the shoes of the Minister for the purpose of the decision) to consider and evaluate its economic evidence as to the value of the proposed mine locally, regionally, and having regard to the national interest. One element of the evidence was the likely value of royalties to the New South Wales government and the value of company taxes likely to be paid to the Commonwealth, if the project went ahead. The Court found that a broad range of issues was relevant to the public interest engaged in that case. [114]
"Some of the matters involved a focus on local issues. Noise and dust impacts is an example. Other matters, such as biological impacts and economic issues, involved wider regional, state and national issues."
The Court accepted that no narrow approach should be taken in identifying the scope of the relevant public interest. It held that "the public interest embraced Ecologically Sustainable Development" and "community responses to the project". [115] None of that analysis supported the proposition that the Minister was required to disregard conduct engaged in in the creation of the mining tenement or the grant of the exploration licence.
[57]
(b) adverse effect - causal connection
To return to the first two elements, there was a degree of incongruity in Mr Duncan putting a submission that there was nothing qualitatively different between the information in the public domain and that which was sought to be concealed or, if there were some difference, it was not explained by the Commission in its report.
Three steps in the chronology set out above may be referred to in this context. First, Mr Duncan was aware of the arrangements by which an Obeid controlled company, Buffalo Resources, obtained a 25% interest in a joint venture with Cascade Coal for the exploitation of the coal mining potential of the Mount Penny tenement. Secondly, there was the matter of timing: the first publication of details concerning the Obeids' property interests raised a clear implication that there was something untoward in the timing of the property acquisitions and the creation of the mining tenement. That occurred in December 2009, with the publication of the article in the Australian Financial Review. It was about the time that a question was asked in the Legislative Council that Mr Duncan told Moses Obeid in no uncertain terms that he wanted him out, followed by unequivocal instructions to Mr Poole to effect the removal of the Obeid interests from the joint venture. That step, combined with the mechanism which resulted in a part payment to the Obeid family of $30 million in a manner which concealed the true recipients, led the Commission to find that each of the appellants "knew that the transaction was carried out with a view to disguising the Obeid involvement from the government or other investigatory agencies." [116] Finally, when it became necessary in the course of the attempted sale of Cascade Coal shares to White Energy to give a public explanation to the ASX as to the constituent elements of the payments made by Cascade Coal, the decision was taken to abort the sale rather than disclose the truth.
In short, it was the conduct of the appellants which constituted strong evidence that the information sought to be concealed was qualitatively different from that already in the public domain. Further, it was evidence of the appellants which demonstrated their subjective perception that revealing the involvement of the Obeid family in the joint venture not only could, but probably would, result in refusal of the mining lease. There was no evidence to suggest that they believed the disclosures were inevitable at that time. Further, the adverse effect postulated by s 8(2) need not require demonstration of any differential outcome, although such a demonstration might satisfy the statutory test. It would be sufficient to show that the manner of exercise of the function might be adversely affected. That required an objective assessment of the capacity of particular conduct to affect the exercise of an administrative function, which in essence was a factual question for the Commission. The final step in the factual chain was that the true reason for ending the deal between Cascade Coal and White Energy was not revealed in the statement made by White Energy to the ASX.
The findings with respect to the connection between the appellants' conduct and the conclusion that the conduct could have adversely affected the exercise of an official function did not require much by way of elaboration in the light of the factual findings noted above. However, the Commission went a step further in relation to the causal link, noting that "a substantial purpose in taking these steps [including misleading Mr Cubbin and failing to disclose the Obeid family involvement] was to prevent public officials and public authorities from learning of the Obeid family involvement" so that, as the Commission further found "Mr Duncan thereby intended to deceive relevant public officials". [117]
While the ultimate conclusion involved an objective test of capacity to affect, the subjective intentions and purposes of the parties to the conduct were by no means irrelevant. The reasoning of the Commission in this regard was not impeached. It follows that the submissions with respect to the first limb of s 8(2), in so far as they are common to the appellants, must be rejected.
[58]
Procedural unfairness
In Greiner v Independent Commission Against Corruption [118] Gleeson CJ made the following observation about the definition of corrupt conduct in the ICAC Act as it then stood:
"One of the most striking aspects of the legislative scheme is that a conclusion that a person has engaged in corrupt conduct, which is unconditional in form, is necessarily based upon a premise which is conditional in substance. Part of the definition of corrupt conduct is that it must be conduct which 'could' constitute or involve a criminal offence …. Thus, for example, where an alleged criminal offence is involved a determination that a person has engaged in corrupt conduct is necessarily based upon a finding that the conduct of the person could constitute a criminal offence. In the public perception, the conditional nature of the premise upon which it is based could easily be obscured by the unconditional form of such a conclusion."
The primary function of the Commission is to make findings of fact in respect of alleged conduct which may constitute corrupt conduct. That, in many cases, the Commission will be required to consider whether the conduct demonstrated on the material before it could constitute a criminal offence is an exercise in characterisation. Furthermore, the exercise is undertaken at a high level of abstraction: the Commission has no jurisdiction to consider a criminal charge, nor has any charge been formulated. The Commission is not bound to follow the rules of evidence and will often consider material which would be inadmissible in a criminal prosecution. In order to characterise the conduct as capable of constituting or involving a criminal offence, it is not required to analyse the evidence before it and disregard that which would be inadmissible for the purposes of a prosecution.
In an earlier form of the legislation, the Commission was empowered to include a statement in its report as to whether there was evidence warranting consideration of the prosecution of a specified person for a specified offence; [119] that power has long since been removed from the Act. [120] The powers of the Commission to make recommendations have been reformulated in the manner summarised above; [121] nevertheless, the Commission is not authorised to include in a report a finding that a person is guilty of or has committed a criminal offence and, as the Act expressly states, a finding that a person has engaged in corrupt conduct "is not a finding or opinion that the person is guilty of or has committed … a criminal offence". [122]
In considering the scope of the undoubted obligation of the Commission to afford procedural fairness to persons who may be adversely affected by its findings, [123] it is necessary to bear in the mind the separate fact finding and characterisation functions of the Commission. It is also necessary to have regard to the statutory powers of the Commission including, where exercised, the powers with respect to the conduct of a public inquiry.
The Commission may permit a person who is interested in the subject-matter of the public inquiry to "appear at the public inquiry", [124] and may authorise such a person, and a person giving evidence, to be represented by a legal practitioner. [125] That person may, with leave of the Commission, examine or cross-examine any witness. [126] Each of the appellants was legally represented at the public inquiry conducted by the Commission.
The relevant principal function of the Commission engaged in the present case was the investigation of allegations or complaints, or circumstances which in the Commission's opinion implied that there had been corrupt conduct. [127] The Commission is empowered to hold a public inquiry, if satisfied that it is in the public interest to do so, "[f]or the purposes of an investigation". [128] Accordingly, the statutory function being exercised by the Commission in the course of the public inquiry was, in a fundamental sense investigative. It bore no relation to a civil or criminal trial before a court with jurisdiction to resolve factual and legal issues in a dispute between contending parties. Using the term "adversarial" in the limited sense of such a judicial proceeding, an inquiry conducted by the Commission is not adversarial.
In support of its submissions that they had been dealt with unfairly, the appellants called in aid a passage in the judgment of the President in D'Amore v Independent Commission Against Corruption, [129] to the effect that a public inquiry is conducted "in a way that is essentially adversarial in nature". However, that passage does not in any sense derogate from the analysis set out above. Reliance upon it reflected the usual error of taking a word or phrase out of context. The passage in D'Amore was to be found within a long section dealing with the need for, and proper scope of, the reasons to be given by the Commission for its findings. (The implicit requirement to provide reasons for findings is expressed in s 74A(1)(b) of the ICAC Act.) Nor were the President's remarks directed specifically to the functions of the Commission, but more broadly to a tribunal conducting a public hearing in the course of an administrative process. The point being made was not that the functions of the Commission were adversarial, in a judicial sense, but that where there was a dispute as to some matter presented to the tribunal, which was operating with counsel assisting and with affected persons who were legally represented, in making findings, the tribunal should adequately expose the reasons for its conclusions.
At the heart of the appellants' complaints of procedural unfairness were two propositions: the first was that it was not until final submissions by counsel assisting the Commission that the attention of the affected parties was directed to any particular offences which might have been committed by the conduct revealed in the evidence. Secondly, and no doubt by way of an inevitable consequence of the first complaint, the appellants were not questioned, nor able to give evidence, as to the elements of the offences.
The primary judge, quite appropriately, and in a manner to which no objection was taken, dealt with the two limbs of the appellants' complaints as inter-related. He took as a relevant statement of general principle the approach adopted by Wood J in Glynn v Independent Commission Against Corruption. [130] Wood J commenced with the proposition that the Commission was bound to observe the rules of procedural fairness, the content of which is variable and depends on the requirements of each case. [131] Referring to Dainford Ltd v Independent Commission Against Corruption [132] Wood J accepted that the inquiry was not to be "shackled by formal rules of pleading and particulars and confining parties to particulars as would happen in adversary proceedings in a court of law." Wood J then continued, in a passage relied upon by the primary judge: [133]
"Inevitably such an inquiry will expand and move into new or different areas, within its terms of reference, as it progresses. What is necessary is that by the end of the hearing, a party potentially affected by an adverse finding have the opportunity to meet it by submission, and if necessary, by evidence. The argument of the plaintiff in this regard seems to proceed on a misconception that after the evidence is received, the nature of the inquiry changes and it ceases to be investigative. I can see no basis for such a view.
If in the course of submissions, it becomes apparent that there is an area not previously raised for consideration, which does call for investigation, then it may be necessary for the Commission to stop and permit its further investigation by evidence and addresses. To take any other view would be to fail the purpose for which the Commission was created, but the cost may be an interruption and delay to ensure that natural justice is done."
The principle objection taken to that passage in this Court and, as it appears, before the primary judge, was that it was not a matter for the parties represented before the Commission to take steps to "cure" the breach of procedural fairness. The primary judge rejected that proposition.
"[215] In the present case, the public hearing took evidence over many days. Counsel assisting the Commission then prepared written closing submissions which were distributed to all interested parties. In those submissions, Counsel assisting identified in detail the corrupt conduct findings that, in their submission, the Commission should make. As a necessary part of that process, they identified the criminality said to have been involved.
[216] At that point, those against whom findings were sought knew what the case against them was. They were in a position to answer it, by submissions on the evidence. If they believed that they had been denied the opportunity to lead (or to test) evidence on a particular topic or topics, because their significance had not been apparent at the time, they could have made application to reopen the public hearing. As Wood J said, they were entitled to the opportunity to meet the case put against them 'by submission, and if necessary, by evidence'.
[217] There were complaints made to the Commission of denial of natural justice. However, none of the plaintiffs now complaining of a denial of natural justice made any application to the Commission to reopen the public hearing so that they could adduce further evidence. None of them identified, in submissions before me, the further evidence that might have been available.
…
[219] It is correct to say that it was not put to any of the individual plaintiffs, in terms, that he had committed the offences that, in the Commission's view, could be made out. Nor was any of them cross-examined in detail on the elements of those offences. Nonetheless, each of them was cross-examined at length, in particular on all the relevant facts that underlaid the Commission's findings. Each of them had the opportunity, both through his own counsel and in cross-examination, to deal with the facts."
The supposed error in this analysis was not clearly articulated in the course of the appeal. Indeed, there was no challenge on the part of Mr Duncan to this reasoning. Mr Atkinson included a ground in similar terms to that relied upon before the primary judge, but without identifying the error in the reasoning. He made no separate submissions with respect to those grounds, beyond adopting the submissions of Messrs McGuigan and Poole.
The written submissions of McGuigan and Poole were terse: they were not relevantly expanded upon in oral argument. They did not suggest that any relevant complaint was made before the Commission, but rather submitted that it was a matter for counsel assisting to identify the particular elements of each relevant offence and the evidence which might support them. That submission appeared to be a complaint as to the content of counsel's submissions, but this Court was not taken to either the written or oral submissions in order to demonstrate that the primary judge had misunderstood the submissions to him or had misconceived the submissions made to the Commission. The proposition that they could have applied to reopen the hearing was met with the submission that "[t]he reality was that by reason of the directions made on 15 October 2012 that was not an option." [134] However, the document referred to was merely a statement provided by the Commission as to the scope of the proposed public inquiry. Its relevance to the likely response of the Commission to an application to reopen was obscure.
The submissions contained no express complaint that an opportunity to provide adequate answers by way of written submissions was denied; nor did the submissions before this Court, any more than those before the primary judge, identify any evidence which might have been available and which was not presented to the Commission. In short, the appellants did not condescend to address the detail of their complaints, so as to demonstrate that there was an element of practical unfairness.
In circumstances where a procedural complaint is raised for the first time on judicial review, the Court is placed in a difficult position. It will have no assistance from the primary tribunal as to how it would have dealt with an argument which was never presented to it. Given the broad discretionary powers of the Commission, an applicant for judicial review faces a heavy burden of persuading a court of error in these circumstances. That burden was not met in the present case. The grounds relating to procedural unfairness in each appeal must be rejected.
[59]
(a) Mr Atkinson and the IBC
As the statement of findings by the Commission set out at [584] above demonstrates, there were variations in the identification of corrupt conduct, as between the appellants. However, one finding was common to each of the appellants, namely:
"a) deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that the IBC was concerned with any such involvement."
For the reasons discussed above, the Commission found, on the basis of relevant material, that each of the appellants knew that the Obeid family had been involved with the proposed mining venture and knew that the IBC was not aware at least of the extent of the involvement and wished to discover the extent of the Obeid involvement. The variations in their positions arose from different communications with the IBC. Whether different findings should have been made may be tested by considering the submissions of Mr Atkinson, who had no direct communication with the IBC or any of its members.
Mr Atkinson submitted that he was not asked by the IBC to attend, nor was he asked to furnish it with information; he had no duty to volunteer information to the IBC, and he made no false statement to it, nor did he authorise any person to make a false statement on his behalf.
In oral submissions, senior counsel for Mr Atkinson relied on the proposition that his conduct could not constitute "deception" for the purposes of s 192E. Although there was no concession that silence in the face of a duty to speak might constitute deception, the submission was put on the premise that there was no such duty. [135] The question of silence in circumstances where there was a duty to speak was addressed in reply to the Commission's submissions with respect to s 184 of the Corporations Act. Mr Atkinson's response in that regard was succinct: he reiterated the principle accepted by the primary judge that the fiduciary duty owed by a director, "[g]enerally speaking" did not require one to be "proactive", meaning that participation in the decision-making process was not required. [136] He sought to distinguish Fitzsimmons on the basis that the director who had a duty to disclose his knowledge of the financial difficulties of the Duke Group was the only person who had that knowledge. [137]
While it was true that the applicant in Fitzsimmons had knowledge from his position with the Duke Group which was not known to non-Duke members of the Kia Ora board, [138] the reasoning of the Court depended upon his duty as a member of the board of directors of Kia Ora and not upon his position as the sole member of the Kia Ora board who was also a director of certain Duke companies and an employee of Duke. In principle, it is difficult to see that the distinction relied upon by Mr Atkinson could be material; the fact that two directors had the relevant knowledge could not abrogate the duty of either to speak out.
Once is it is accepted that Mr Atkinson had a duty as a director of White Energy to reveal the information he had concerning the involvement of the Obeid family, it is apparent that his attempt to distinguish himself from the position of the other appellants must fail.
[60]
(b) reliance on fraud offence
There was a curiosity with respect to the formulation of the findings in respect of Messrs McGuigan and Atkinson with respect to the offences. In both cases, the Commission made findings for the purposes of s 9(1)(a) in relation to both fraud and company violations. However, in dealing with s 8(2), the finding referred purely to company violations within s 8(2)(s), omitting reference to fraud and s 8(2)(e).
To the extent that the Commission is successful in its contention that findings with respect to s 184(1) of the Corporations Act should stand, the point is of little significance. However, Mr McGuigan and Atkinson relied on the fact that there was no express statement that the second limb of s 8(2) was satisfied by reference to fraud under par (e).
The Commission submitted that the failure to refer to s 8(2)(e) with respect to two directors was an oversight. It had no material consequence because the specific findings made for the purposes of s 9(1)(a) were in all relevant respects identical with those required by the second limb of s 8(2). The relevant state of satisfaction was expressed; the only error was to fail to apply a specific statutory label.
Although the outcome of the appeals will not turn on this point because the notice of contention is upheld with respect to the Corporations Act violations, the Commission's submission should be accepted. There was no relevant legal error in failing to note one of two statutory provisions, the relevant state of satisfaction having been recorded. It was not submitted by the appellants that a different test applied to the satisfaction of s 8(2)(e) and s 9(1)(a).
[61]
Corporate appellants
The corporate appellants were Cascade Coal Pty Ltd and two of its subsidiary companies through which it had an interest in the Mount Penny and Glendon Brook tenements, in circumstances outlined above. Each of those companies, namely Mt Penny Coal Pty Ltd and Glendon Brook Coal Pty Ltd, had held the exploration licences in October 2009, until their cancellation by legislation in January 2014.
The proceedings brought by the corporate applicants in the Court below sought review of the findings made by the Commission in a further report published in December 2013 (referred to as the third report). That report made no findings as to corrupt conduct; rather, based on the findings made in its earlier report, it responded to a request from the New South Wales Government for recommendations, which request had been made in January 2013. The relevant recommendations made by the Commission were as follows: [139]
"The Commission is of the view that the granting of the authorities for Doyles Creek, Mount Penny and Glendon Brook was so tainted by corruption that those authorities should be expunged or cancelled and any pending applications regarding them should be refused.
The Commission recommends that the NSW Government considers enacting legislation to expunge the authorities for Doyles Creek, Mount Penny and Glendon Brook. That could be accompanied by a power to compensate any innocent person affected by the expunging … to the extent that that was considered appropriate.
…
In the absence of special legislation, another reasonable option in relation to each of Doyles Creek, Mount Penny and Glendon Brook is to consider cancelling the relevant authorities and refusing pending applications for assessment leases under s 380A of the Mining Act, if the minister formed the view that it is in the public interest to do so.
…
A possible further alternative approach is to allow the current authorities to continue until they expire and then refuse to renew them or refuse to grant a mining lease. The Commission does not favour this approach."
On 15 January 2014 the companies filed a summons seeking judicial review of the recommendations and a declaration that they were made in excess of jurisdiction and are a nullity. The gravamen of the challenge appeared to be that there were no findings of corrupt conduct on the part of any of the companies and, in particular, there was no finding that Cascade Coal had obtained the benefit of the Mount Penny and Glendon Brook tenements in circumstances which constituted corrupt conduct on its part. (Doyles Creek is not relevant to the proceedings.)
The primary judge dismissed the claims for declaratory relief for what he described as three reasons. The first reason was that there was no decision or finding that was amenable to review, but only "recommendations". [140] The second reason derived from the submissions before him which depended, at least in part, on the findings made in the Commission's first report being set aside. The third reason was that the relief sought lacked utility because the grant of the declarations would not undo the legislative response and that any "reputational damage" that the companies had suffered followed "not from the recommendations in the third report, but rather from the relevant findings contained in the first report." [141]
The grounds contained in the draft notice of appeal challenged these. Ground 3 reiterated the entitlement of the appellants to declarations that the recommendations were made without jurisdiction and were nullities. Some further particularisation, in administrative law terms, was provided by an amended draft notice of appeal.
The first reason given by the trial judge is not supportable in principle. As explained by Aronson and Groves: [142]
"Many official reports, findings and recommendations contain no orders within them, or effect no immediate alteration of legal rights or obligations. The reports of coroners, royal commissioners, or other formal advisory bodies are good examples. Nevertheless, the common law has long subjected them to judicial review if they are made to a formal legal structure, where they substantially impact on the economic or reputational interests of particular individuals. In this respect, the common law was simply recognising both the de facto importance of some reports, and the common practice of splitting the administrative process into at least two compartments, investigative and decisional."
The authors further note that judicial review is available even where the report or recommendation does not constitute a legal precondition to the action of others, referring to Annetts v McCann [143] (dealing with the findings of a coroner investigating the death of a farm hand on a station in Western Australia) and Ainsworth v Criminal Justice Commission [144] (permitting review of a report of the CJC which contained adverse recommendations about the applicants, who were involved in the poker machine industry).
The second reason failed to address the possibility that, even if the findings in the first report were upheld, a causal nexus was required between those findings and the recommendations. Thus, in the course of argument on the appeal, senior counsel for the companies took the point that, absent the appropriate nexus, the Commission had taken itself outside the function conferred by s 13(3)(b) of the ICAC Act. [145] The submissions did not expand upon the nature of the constraint imposed by s 13(3)(b). However, it is convenient to address the terms of that subsection, taken in context.
13 Principal functions
…
(3) The principal functions of the Commission also include:
(a) the power to make findings and form opinions, on the basis of the results of its investigations, in respect of any conduct, circumstances or events with which its investigations are concerned, whether or not the findings or opinions relate to corrupt conduct, and
(b) the power to formulate recommendations for the taking of action that the Commission considers should be taken in relation to its findings or opinions or the results of its investigations.
…
(4) The Commission is not to make a finding, form an opinion or formulate a recommendation which section 74B or 74BA prevents the Commission from including in a report, but section 9 (5) and this section are the only restrictions imposed by this Act on the Commission's powers under subsection (3).
(5) The following are examples of the findings and opinions permissible under subsection (3) but do not limit the Commission's power to make findings and form opinions:
(a) findings that particular persons have engaged, are engaged or are about to engage in corrupt conduct,
(b) opinions as to:
(i) whether the advice of the Director of Public Prosecutions should be sought in relation to the commencement of proceedings against particular persons for criminal offences against laws of the State, or
(ii) whether consideration should or should not be given to the taking of other action against particular persons,
(c) findings of fact.
The Commission itself considered the question of its jurisdiction, in particular with respect to the inquiry into the Doyles Creek tenement, and dealt in its third report with the submission that the powers conferred under s 13(3) were grounded in the results of the investigations, namely whether there had been corrupt conduct. [146] The Commission rejected these submissions noting that no such restrictive approach had been adopted by this Court in Duncan v Ipp. [147] By reference to the statutory language, the Commission expressly noted that the power to make findings and form opinions extended beyond questions of corrupt conduct, [148] and that the power to formulate recommendations for action was coupled with its findings or opinions and therefore decoupled from the need for a relationship with corrupt conduct.
The Commission further noted the deliberate exclusion of restrictions on the Commission's powers under subs (3) [149] and the expansive formulation used in s 13(5).
While it may be correct to say, as the Commission concluded, that "it is crystal clear that s 13 confers power on the Commission to make recommendations concerning matters that do not involve corrupt conduct", that is not to say there are no limitations on the Commission's powers. One limitation is to be found in the need to accord procedural fairness before affecting adversely the interests of an individual. (The companies do not complain of a breach of procedural fairness.)
At the heart of their submissions, the companies seek to challenge the nexus upon which the Commission relied. However, the submissions in effect sought to impose a further condition on the making of the recommendations, namely that the directors of the companies now holding the tenements should, when the interests were acquired, have had knowledge of the corrupt conduct of the former Minister and Edward and Moses Obeid. It should be added that, in discussing the question of knowledge, the submissions understated the findings made by the Commission.
The submissions by the companies in this Court sought to distinguish between the creation of the Mount Penny tenement and the grant of the exploration licence with regard to it and the equivalent steps in relation to the Glendon Brook tenement. Accordingly, it is convenient to deal with the two areas separately.
So far as the Mount Penny tenement was concerned, there was no challenge to any of the findings of corrupt conduct involving former Minister Macdonald, Edward Obeid Snr and Moses Obeid. The closest the submissions got to that issue was a suggestion that, because the exploration licence was issued by the Director-General under delegation from the Minister and there was no suggestion of corruption on his part, therefore the licence was not "tainted" by the Minister's corrupt conduct. The factual premise concerning the non-involvement of the Director-General is correct; it does not follow that the grant of the exploration licence was not tainted, in a relevant sense, by the corrupt conduct, without which the tenement would not have been mapped, nor would the processes which followed have eventuated.
There were ample reasons, revealed in the history of the investigation and the findings set out above, to support a recommendation that the exploration licence be cancelled or expunged. (Nothing turns, for present purposes, on the mechanism by which that was to occur.) Certainly it could not be said that such a recommendation was arbitrary or irrational or that no reasonable Commissioner could adopt it.
Once that issue is resolved, there may be a further question as to whether the holder of the tenement is, in effect, a bona fide purchaser for value without notice of its tainted origins. On one view, that question did not arise: the recommendation expressly stated that it was for the government to consider the possibility of compensation for any "innocent person" affected by the expungement of the tenement. The recommendation did not refer specifically to the status of the corporate appellants in that regard. Nevertheless, the submissions in this Court disregarded a number of factors which told against the characterisation of the appellants as innocent persons.
In short, the following points may be noted. First, the Commission found that Mr Duncan had obtained confidential information from Mr Macdonald prior to the reopening of the bidding process, which resulted in Cascade Coal preparing to make bids for exploration licences at Mount Penny and Glendon Brook, which it ultimately secured. The Commission was satisfied that Mr Macdonald's conduct was corrupt, although it made no such finding with respect to Mr Duncan's receipt of the documents.
The second point involved the inability of the Commission to find that Macdonald provided Moses Obeid with the information that Cascade Coal had come second to Monaro Mining in the bidding process. However, there was no doubt that Mr Obeid and Mr Brook had confidential information and used it to their advantage.
Thirdly, there was a dispute as to what Cascade Coal knew at the time that it entered into the agreement with Buffalo Resources. Although the submissions stated that Cascade Coal did not know that this information was correct, in fact the Commission accepted evidence given by Mr Jones, a director of Cascade Coal, that the information had been provided by Moses Obeid (and Mr Brook) and that the information was "decisive". The Commission found that "those persons negotiating on behalf of Cascade Coal believed that, if Loyal Coal withdrew its bid, Cascade was guaranteed of success." [150] That statement appears under the heading "Cascade had inside information". In its written submissions in this Court, the Commission asserted:
"It is a clear implication from these findings that the Commission was of the view that Cascade knew that the Obeid family was given, and improperly used, confidential information; namely, the rankings of Loyal and Cascade in the EOI process." [151]
In reply, the corporate appellants submitted that this statement should be rejected as "an impermissible attempt, long after its publication, to construct findings not expressed by ICAC in the Report." [152]
The Commission's submissions should be rejected in part. There were three elements, namely: (a) Cascade Coal had inside information, (b) that information came from the Obeid representatives and, (c) the representatives of Cascade Coal knew that it had been improperly obtained.
The Commission did not make the last finding and it would be inappropriate to allow it to defend the judicial review proceedings on that basis. However, that conclusion does not provide a basis for setting aside the Commission's recommendation. The recommendation was based on the objective circumstances, namely the use of confidential information, which had been improperly obtained by the Obeid family, as a result of which it was able to broker the deal which resulted in Cascade Coal obtaining the two mining tenements. That being the basis upon which the recommendation was made, it could not be said that the recommendation was without rational support or was in any other way a manifestly illogical or unreasonable exercise by the Commission of its functions. The precise state of knowledge of the directors of Cascade Coal might be relevant to any claim for compensation, but that was not the issue the Commission was addressing. As already noted, it left that question for the government to determine.
Fourthly, there were the findings, noted above, as to the joint venture entered into by Cascade Coal with Buffalo Resources, a company known by Cascade Coal to involve the Obeids. Further, there was the evidence that Cascade Coal, before arranging a sale of its interest in Mount Penny to White Energy determined to remove the Obeids from the joint venture and agreed to pay them $60 million, of which $30 million was paid upfront and in a manner which sought to disguise their involvement.
The short propositions, which may be derived from the history more fully recounted above, are: first, the creation of the Mount Penny tenement was a flawed and corrupt process from its initiation. Secondly, if Cascade Coal, the successful bidder for the exploration licence, was, as may be assumed, unaware of the details of the creation of the tenement, the means by which it was successful depended upon the use of confidential information provided to it by Moses Obeid. The valuable nature of that information was reflected in the willingness of Cascade Coal to offer the Obeid interests a 25% share of a potentially extremely valuable coal mining tenement in order to be able to make use of the information provided. Thirdly, whether the directors of Cascade Coal knew of the means by which Moses Obeid had obtained the confidential information was not a critical issue in this analysis. The Commission expressly found that, prior to the announcement of the successful bidder, the directors of Cascade Coal were aware that they were dealing with the Obeid family. The information was confidential in the sense that, prior to release, it should only have been available within the Department; Moses Obeid had access to it and provided it to Cascade Coal, which relied upon it, and thus the process by which Cascade Coal obtained its interests in the two licences was tainted.
In these circumstances, it cannot be said that there was any want of statutory power for the Commission to make the recommendation in relation to the Mount Penny tenement.
It may be accepted that the underlying circumstances relating to Glendon Brook were, in some respects, different. First, the Obeids had no landholding interest in the area the subject of the tenement. Secondly, there was no finding that the creation of the tenement was tainted by corruption. These matters should be accepted. However, the submissions with respect to Glendon Brook went one step further: there was, it was said, no finding that Cascade Coal had received any confidential information about the exploration licence to be issued with respect to Glendon Brook. [153]
The last proposition should not be accepted. The information that Cascade Coal came second to Monaro Mining in the bidding related not only to the Mount Penny tenement, but also to Glendon Brook. The arrangement with Monaro and its nominee Loyal Coal, was that bids for both would be withdrawn with the result that Cascade Coal would be successful in relation to both areas. As the Commission expressly found, following a meeting on 29 November 2008, Cascade Coal commenced making plans to bid for both Mount Penny and Glendon Brook.
It is true that Cascade Coal did not enter into an agreement with the Obeid family interests to purchase any land the subject of the Glendon Brook tenement, because the Obeids did not own such land. It is also true that there was no joint venture with respect to the exploitation of the Glendon Brook tenement. Nevertheless, the history of dealings over the Mount Penny tenement demonstrated that Cascade Coal became the successful bidder for the Glendon Brook tenement in the same way that it obtained the Mount Penny tenement, namely by Loyal Coal withdrawing its bid.
Returning to the terms of s 13(3)(b), the recommendation of the Commission with respect to Glendon Brook could not be said to be unrelated to the results of its investigations: clearly it was based squarely on those results. The recommendation related to the revocation of the mining tenement, a matter which was not extraneous to those results. Nor was the recommendation in some sense an "irrational" response. The primary judge was, therefore, correct to refuse to intervene in the exercise of the limited supervisory jurisdiction of the Court. There was no want of statutory power for the recommendation in relation to the Glendon Brook tenement..
[62]
Conclusions
In the result, the individual appellants have been unsuccessful in seeking judicial review of the findings of corrupt conduct made by the Commission with respect to them individually. The corporate appellants have also been unsuccessful, in their case in challenging the recommendation for expungement of the two exploration licences.
The Commission has been successful in its notice of contention with respect to the availability of offences under s 184(1) of the Corporations Act, a point upon which the primary judge found against it. As the success of the applicants on this point in the Court below did not result in favourable relief, there is no need to interfere with the orders made by the primary judge.
In the result, each appeal must be dismissed; the appellants must pay the respondent's costs in this Court. The Court should make the following orders:
In matter 2014/239426 - Travers William Duncan v Independent Commission Against Corruption:
(1) Grant the applicant leave to appeal.
(2) Direct that the applicant file the draft notice of appeal in the white book within seven days.
(3) Dismiss the appeal.
(4) Order the appellant to pay the costs of the Commission of the proceedings in this Court.
In matter 2014/249038 - John Vern McGuigan and Richard Jonathon Poole v Independent Commission Against Corruption:
(1) Grant the applicants leave to appeal.
(2) Direct that the applicants file the draft notice of appeal in the white book within seven days.
(3) Dismiss the appeal.
(4) Order the appellants to pay the costs of the Commission of the proceedings in this Court.
In matter 2014/318985 - Cascade Coal Pty Ltd, Mt Penny Coal Pty Ltd and Glendon Brook Coal Pty Ltd v Independent Commission Against Corruption:
(1) Grant the applicants leave to appeal.
(2) Direct that the applicants file the draft notice of appeal in the white book within seven days.
(3) Dismiss the appeal.
(4) Order the appellants to pay the costs of the Commission of the proceedings in this Court.
In matter 2014/319803 - John Charles Atkinson v Independent Commission Against Corruption:
(1) Grant the applicant leave to appeal.
(2) Direct that the applicant file the draft notice of appeal in the white book within seven days.
(3) Dismiss the appeal.
(4) Order the appellant to pay the costs of the Commission of the proceedings in this Court.
[63]
Endnotes
Independent Commission Against Corruption Report - Investigation into the conduct of Ian Macdonald, Edward Obeid Snr, Moses Obeid and Others (July 2013) ("the ICAC Report"). It was the first of three reports relating to this investigation.
Independent Commission Against Corruption, Operations Jasper and Acacia - Addressing Outstanding Questions (December 2013).
ICAC Report, pp 65-66.
ICAC Report, pp 73-74.
ICAC Report, p 63.
ICAC Report, pp 100 and 103.
ICAC Report, p 105.
ICAC Report, p 102.
ICAC Report, p 88.
ICAC Report, p 91.
ICAC Report, p 107.
ICAC Report, p 112.
ICAC Report, p 112.
ICAC Report, p 112.
ICAC Report, pp 109 and 119.
ICAC Report, p 125.
ICAC Report, p 110.
ICAC Report, p 111.
ICAC Report, p 114.
ICAC Report, pp 131-132.
ICAC Report, p 121.
Independent Commission Against Corruption v Kinghorn [2015] NSWCA 342
ICAC Report, p 122.
ICAC Report, p 124, referring to an article in the Australian Financial Review published on 19 December 2009.
ICAC Report, p 125.
ICAC Report, p 126.
ICAC Report, p 126.
ICAC Report, p 126.
ICAC Report, pp 127-128.
ICAC Report, p 128.
ICAC Report, p 128.
ICAC Report, p 132.
ICAC Report, p 133, emphasis added.
ICAC Report, p 133.
ICAC Report, p 134.
ICCA Report, p 134.
ICAC Report, p 134.
ICAC Report, p 134.
ICAC Report, pp 136-137.
ICAC Report, p 137.
ICAC Report, p 137.
ICAC Report, p 138.
ICAC Report, p 150
ICAC Report, p 151.
ICAC Report, p 152.
ICAC Report, p 153.
[2014] NSWSC 1571 (Hoeben CJ at CL).
Cunneen v Independent Commission Against Corruption [2014] NSWCA 421 (Bathurst CJ, Basten and Ward JJA).
[2015] HCA 14; 89 ALJR 475.
Cunneen at [50].
Independent Commission Against Corruption Amendment (Validation) Act 2015 (NSW), Sch 1, adding a new Pt 13 to the ICAC Act.
For terms of s 8(1), see [18] above.
[2015] HCA 7; 89 ALJR 382.
Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125 at 129: see at [146] below.
Above at [586].
ICAC Report, pp 148-149.
ICAC Report, p 149.
Ibid.
Primary judgment at [77] and [85].
Primary judgment at [154].
ICAC Report, p 149.
J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane's Equity - Doctrines and Remedies (5th ed, 2015) at [5-380]-[5-385].
(15th ed, LexisNexis, 2013) at [9.100]; see also Austin, Ford and Ramsey Company Directors - Principles of Law and Corporate Governance (LexisNexis, 2005) at [8.25] and [8.26]-[8.27].
RI Barrett, "Resolution of directors' conflicts" (1997) 71 ALJ 677 at 679.
Primary judgment at [208].
Combined Written Submissions in Reply, 18 March 2015, pars 64-69; Jackson QC for McGuigan, CA Tcpt, 18/02/16, p 151(5); cf Hutley SC for Duncan, p 138(35).
Written Submissions in Reply, 18 March 2015, par 8.
[1970] VR 434 at 438 (Gowans J).
(1988) 13 ACLR 261 (King CJ).
[2004] NSWCA 448; 213 ALR 474 at [244]-[246] (McColl JA, Handley and Santow JJA agreeing).
SAJ v The Queen [2012] VSCA 243; 225 A Crim R 528.
[1982] QB 1053 at 1057 (Lord Lane CJ).
SAJ at [42].
Marchesi at 438.
ICAC Report, p 151.
Written submissions for McGuigan and Poole, filed 18 March 2015, par 161.
ICAC Report, p 133.
The finding was repeated at ICAC Report, p 149.
Submissions for McGuigan and Poole, par 174.
Fisher v Bennett (1987) 85 FLR 469 at 472 (Miles CJ).
SEPP (Major Development), Sch 1, item 5(1)(a) and (c).
EP&A Act, s 75V(1)(c).
EP&A Act, s 75D(1).
EP&A Act, s 75I(1).
Primary judgment, at [90].
Primary judgment, at [107]-[109].
Primary judgment, at [117].
(2012) 246 CLR 379; [2012] HCA 36 at [42] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ); see also O'Sullivan v Farrer (1989) 168 CLR 210 at 216 (Mason CJ, Brennan, Dawson and Gaudron JJ).
(1947) 74 CLR 492 at 505.
Pilbara Infrastructure at [5].
Pilbara Infrastructure at [42].
EP&A Act, s 75B(2).
Section 75I(2)(b) and (c).
EP&A Act, s 4(1), public authority.
EP&A Act, Sch 3, cl 2(3).
(2014) 86 NSWLR 527; [2014] NSWCA 105 (Bathurst CJ, Beazley P and Tobias AJA).
Warkworth at [301].
Warkworth at [296].
ICAC Report, p 128.
ICAC Report, p 149.
(1992) 28 NSWLR 125 at 129.
ICAC Act, s 74(5), referred to Balog v Independent Commission Against Corruption (1990) 169 CLR 625.
Independent Commission Against Corruption (Amendment) Act 1990 (NSW), Sch 1(9).
See [595]-[596] and s 13(3)-(5), 74-74A.
ICAC Act, s 74B. See also s 14: other functions of the Commission include assembling evidence that may be admissible in a prosecution.
See Independent Commission Against Corruption v Chaffey (1992) 30 NSWLR 21 at 27E (Gleeson CJ).
ICAC Act, s 32.
ICAC Act, s 33(1).
ICAC Act, s 34(1).
ICAC Act, s 13(1)(a)(i).
ICAC Act, s 31(1).
[2013] NSWCA 187 at [105].
(1990) 20 ALD 214.
Glynn at 215.
(1990) 19 ALD 207 (Young J).
Glynn at 218-219.
Combined submissions, at par 191.
CA Tcpt, 17/02/16, p 77(46)-(50) and p 78(17)-(37).
Tcpt, 18/02/16, p 130(25)-(50).
Tcpt, p 131(15)-(24).
Fitzsimmons at 362.
ICAC Report (December 2013), p 6.
Primary judgment at [237]-[239].
Primary judgment at [241].
M Aronson and M Groves, Judicial Review of Administrative Action (Law Book Co, 5th ed, 2013) at [2.460].
(1990) 170 CLR 596.
(1992) 175 CLR 564.
Tcpt, 16/02/16, p 46(35).
Third Report, p 9.
[2013] NSWCA 189 at [38] (Bathurst CJ, Barrett and Ward JJ agreeing).
ICAC Act, s 13(3)(a).
ICAC Act, s 13(4).
ICAC Report, p 112.
ICAC Submissions, filed 18 February 2015, par 61.
Appellants' combined submissions in reply, 18 March 2015, par 82.
Tcpt, 16/02/16, p 48(18).
[64]
Amendments
23 June 2016 - [628] Correcting typographical error in quote
29 June 2016 - [226] Amendment to quote.
[289] Amendment to FCAFC citation and typographical error in quote.
[351] Inserting "J" after "Badgery-Parker".
[354] Changing "the creditor may.." to "the debtor may.."
[379] Deleting "indifference" after "reckless".
[417] Inserting 'Owen J' in place of "Ipp J".
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 29 June 2016
Parties
Applicant/Plaintiff:
Duncan
Respondent/Defendant:
Independent Commission Against Corruption
Legislation Cited (16)
repealed); Environmental Planning and Assessment Regulation 2000(NSW)
Companies Act 1961(Vic)
Environmental Planning and Assessment Regulation 2000(NSW)
Independent Commission Against Corruption Amendment (Validation) Act 2015(NSW)
Independent Commission Against Corruption (Amendment) Act 1990(NSW)
Trade Practices Act 1974(Cth)
repealed); Environmental Planning and Assessment Act 1979(NSW)
WORDS AND PHRASES - "intentionally dishonest", Corporations Act 2001 (Cth) s184(1)
Legislation Cited: Companies Act 1961 (Vic), s 124
Companies Code (SA), s 229
Corporations Act 2001 (Cth), ss 181, 184, 191, 193, 674, 1308A
Corporations Law, s 232
Crimes Act 1900 (NSW), ss 4B, 192B, 192D, 192E, 192F, 192G; Pt 4AA
Crimes Act 1958 (Vic), s 82
Criminal Code (Cth), ss 2.2, 5.2, 5.4, 130.3; Ch 2, Ch 7
Criminal Code (Qld), s 408C
Environmental Planning and Assessment Act 1979 (NSW), ss 4, 5, 23B, 75B, 75D, 75E, 75F, 75H, 75I, 75J, 75V, 75Z; Pt 3A; Sch 3, cl 2; Sch 6A, cl 2A
Environmental Planning and Assessment Regulation 2000 (NSW), cl 8B
Independent Commission Against Corruption Act 1988 (NSW), ss 7, 8, 9, 13, 14, 31, 32, 33, 34, 74, 74A, 74B
Independent Commission Against Corruption Amendment (Validation) Act 2015 (NSW), Sch 1
Mining Act 1992 (NSW), ss 13, 51, 63, 65, 72, 121, 380A; Pt 5, Div 4
Independent Commission Against Corruption (Amendment) Act 1990 (NSW), Sch 1(9)
State Environmental Planning Policy (Major Development) 2005 (NSW), cl 6; Sch 1
Trade Practices Act 1974 (Cth), Pt IIIA
Cases Cited: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
Adler v Australian Securities and Investments Commission [2003] NSWCA 131; 46 ACSR 504
Allina Pty Ltd v Commissioner of Taxation (1991) 28 FCR 203
Annetts v McCann (1990) 170 CLR 596
Associated Picture Houses Ltd v Wednesbury Corporation (1948) 1 KB 23
Australasian Annuities Pty Ltd (in liq) (recs and mgrs apptd) v Rowley Super Fund Pty Ltd [2015] VSCA 9; 104 ACSR 312
Australian Breeders Co-operative Society Ltd v Jones (1997) 150 ALR 488
Australian Broadcasting Tribunal v Bond [1990] HCA 33; 170 CLR 321
Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd [2015] HCA 7; 89 ALJR 382
Australian Growth Resources Corporation Pty Ltd v Van Reesema (1988) 13 ACLR 261
Australian Securities and Investments Commission v Adler [2002] NSWSC 171; 41 ACSR 72
Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287; 71 ACSR 368
Australian Securities and Investments Commission v Maxwell [2006] NSWSC 1052; 24 ACLC 1308
Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd [2008] NSWSC 1224; 69 ACSR 1
Avon Downs Pty Ltd v Federal Commissioner of Taxation [1949] HCA 26; 78 CLR 353
Balog v Independent Commission Against Corruption (1990) 169 CLR 625
Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336
Centofanti v Eekimitor Pty Ltd (1995) 65 SASR 31; 15 ACSR 629
Clarkson v R [1987] VR 962
Coelho v Durbin (Supreme Court (NSW), Badgery-Parker, 29 March 1993, unrep)
Cunneen v Independent Commission Against Corruption [2014] NSWCA 421
Cunneen v Independent Commission Against Corruption [2014] NSWSC 1571
Dainford Ltd v Independent Commission Against Corruption (1990) 19 ALD 207
D'Amore v Independent Commission Against Corruption [2013] NSWCA 187; 303 ALR 342
Digital Cinema Network Pty Ltd v Omnilab Media Pty Limited (No 2) [2011] FCA 509
Director of Public Prosecutions (Cth) v Poniatowska [2011] HCA 43; 244 CLR 408
Director of Public Prosecutions v Ray [1974] AC 370
Downer EDI Ltd v Gillies [2012] NSWCA 333; 91 ACSR 373
Doyle v Australian Securities and Investments Commission [2005] HCA 78; 227 CLR 18
Duke Group Ltd (in liq) v Pilmer (1999) 73 SASR 64; [1999] SASC 97
Duncan v Independent Commissioner Against Corruption (NSW) [2015] HCA 32; 89 ALJR 835
Duncan v Ipp [2013] NSWCA 189
Eaton & Sons v Warringah Shire Council [1972] HCA 33; 129 CLR 270
Flack v R [2011] NSWCCA 167
Fitzsimmons v R (1997) 23 ACSR 355
Forge v Australian Securities & Investments Commission [2004] NSWCA 448; 213 ALR 474
Glynn v Independent Commission Against Corruption (1990) 20 ALD 214
Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125
Ho and Szeto v R (1989) 39 A Crim R 145
House of Peace Pty Ltd v Bankstown City Council [2000] NSWCA 44; 48 NSWLR 498
Howard v The Federal Commissioner of Taxation [2014] HCA 21; 253 CLR 83
Independent Commission Against Corruption v Cunneen [2015] HCA 14; 89 ALJR 475
Independent Commission Against Corruption v Chaffey (1992) 30 NSWLR 21
Independent Commission Against Corruption v Kinghorn [2015] NSWCA 342
Jonah Pty Ltd v Pittwater Council [2006] NSWLEC 99; 144 LGERA 408
Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; 241 CLR 390
Kouflidis and Jenquin Pty Ltd v Corporation of the City of Salisbury (1982) 29 SASR 321
Kwok v R [2007] NSWCCA 281; 64 ACSR 307
Macleod v R [2003] HCA 24; 214 CLR 230
Maguire v Makaronis [1997] HCA 23; 188 CLR 449
Marchesi v Barnes [1970] VR 434
Milne v The Queen [2014] HCA 4; 252 CLR 149
Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; 162 CLR 24
Minister for Immigration and Border Protection v Singh [2014] FCAFC 1; 231 FCR 437
Minister for Immigration and Border Protection v Stretton [2016] FAFC 11
Minister for Immigration and Citizenship v Li [2013] HCA 18; 249 CLR 332
Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; 240 CLR 611
Minister for Immigration, Multicultural and Indigenous Affairs v SGLB [2004] HCA 32; 207 ALR 12
Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; 185 CLR 259
Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21; 197 CLR 611
Minister for Planning v Walker [2008] NSWCA 224; (2008) 161 LGERA
Moylan v Western Australia [2007] WASCA 52; 169 A Crim R 302
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; 67 ALJR 170
Omnilab Media Pty Limited v Digital Cinema Network Pty Ltd [2011] FCAFC 166
O'Sullivan v Farrer (1968) 168 CLR 210
Permanent Building Society (in liq) v McGee (1993) 11 ACSR 260
Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187; 14 ACSR 109
Peters v R [1998] HCA 7; 192 CLR 493
Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal (2012) 246 CLR 379; [2012] HCA 36
Pilmer v Duke Group Ltd (In Liq) (2001) 207 CLR 165; [2001] HCA 31
R v Byrnes [1995] HCA 1; 183 CLR 501
R v Clucas [1949] 2 KB 226
R v Connell; Ex parte The Hetton Bellbird Collieries Ltd [1944] HCA 42; 69 CLR 407
R v Ghosh [1982] QB 1053
R v Iannelli [2003] NSWCCA 1; 56 NSWLR 247
R v Jenkins [2002] VSCA 224; 6 VR 81
R v Saba [2013] QCA 275; 235 A Crim R 144
R v Vasic (2005) 11 VR 380; [2005] VSCA 38
Re London and Globe Finance Corporation Limited [1903] 1 Ch 728
Re Minister for Multicultural Affairs; Ex parte S20 [2003] HCA 30; 198 ALR 59
SAJ v R [2012] VSCA 243; 36 VR 435
The Bell Group Ltd v Westpac Banking Corporation (2008) 39 WAR 1
Walker v Wimborne (1975-76) 137 CLR 1
Warkworth Mining Ltd v Bulga Milbrodale Progress Association Inc (2014) 86 NSWLR 527; [2014] NSWCA 105
Water Conservation and Irrigation Commission (NSW) v Browning [1947] HCA 21; 74 CLR 492
Texts Cited: M Aronson and M Groves, Judicial Review of Administrative Action (Law Book Co, 5th ed, 2013) at [2.460], [4.730]
Solicitors:
Yeldham Price O'Brien Lusk (Duncan)
TressCox Lawyers (McGuigan, Poole, Cascade, Mt Penny and Glendon Brook)
Hall & Wilcox (Atkinson)
Crown Solicitor for NSW (ICAC)
File Number(s): 2014/239426; 2014/249038; 2014/318985; 2014/319803
Decision under appeal Court or tribunal: Supreme Court
Jurisdiction: Common Law Division
Citation: [2014] NSWSC 1018
Date of Decision: 29 July 2014
Before: McDougall J
File Number(s): 2013/249678; 2013/325031; 2014/13155; 2013/325031
HEADNOTE
[This headnote is not to be read as part of the judgment]
In February 2011 the Independent Commission Against Corruption ("ICAC") commenced an investigation into the circumstances in which the NSW State government had come to issue a coal exploration licence to Cascade Coal ("Cascade") over an area in the Bylong Valley, known as the Mount Penny tenement, in October 2009. A significant proportion of the land within the tenement was owned by interests associated with the Hon Edward Obeid MLC and members of the family, the market value of which increased fourfold as a result of the grant of the exploration licence. A connection was noted between Edward Obeid and the Hon Ian Macdonald MLC, then Minister for Primary Industries and for Mineral Resources, responsible for granting the exploration licence. The Commission conducted a public inquiry during 2012-2013 culminating in a report (Investigation into the conduct of Ian Macdonald, Edward Obeid Snr, Moses Obeid and Others, July 2013), in which it made findings of corrupt conduct against various individuals under the Independent Commission Against Corruption Act 1988 (NSW) ("ICAC Act"). The Commission relevantly found that Cascade had entered into a joint venture agreement with an Obeid-controlled company with respect to the award of the Mount Penny exploration licence. In a related inquiry culminating in a third report (Operations Jasper and Acacia - Addressing Outstanding Questions, December 2013), the Commission considered the fate of exploration licences granted over three identified tenements (Mount Penny, Glendon Brook and Doyle's Creek), recommending that the licences be expunged by legislation.
The Commission made findings of corrupt conduct on the part of the appellants with respect to the steps they had taken towards a proposed sale of their shares in Cascade to a public company, White Energy Co Ltd ("White Energy"). The Commission found that prior to the proposed sale the appellants had taken steps to remove the Obeid family involvement from the joint venture which was seen to pose a potential risk to the value of the Mount Penny tenement: the risk being that the exploration licence might be cancelled by the government, and that a mining lease might never be granted should the Obeids' involvement become known. The appellants were all shareholders (indirectly) and directors of Cascade; and all (apart from Mr Poole) were directors of White Energy. As the proposal involved White Energy purchasing a major asset from its own directors, the Australian Stock Exchange was notified and an Independent Board Committee ("IBC") set up to assess the proposal on behalf of White Energy and its shareholders.
The Commission made findings of corrupt conduct on the part of the appellants, based on their failure to reveal information to the IBC, and their involvement in actions which the Commission found were intended to deceive relevant public officials or public authorities of the NSW Government as to the involvement of the Obeids in the Mount Penny tenement. The Commission found that this amounted to:
deliberately misleading the IBC chair as to the Obeid family involvement in the Mount Penny tenement by failing to disclose the involvement when the issue was raised [Duncan];
deliberately failing to disclose to the IBC the fact of the Obeid family involvement despite knowing that it was concerned with any such involvement [Duncan; McGuigan, Atkinson, Poole];
telling the IBC that he was not aware of any payments having been made to Edward Obeid Snr or any entities involved with him [Poole];
relieving the Director of Corporate Finance at Mr Poole's company, from having to answer the IBC chair's request for information about the Obeid family involvement [Duncan, McGuigan];
authorising Mr Poole to arrange for the Obeids to be extracted from Mount Penny joint venture through arrangements involving Coal & Minerals Group and Southeast Investments [Duncan, McGuigan, Atkinson, Poole].
In January 2014, Messrs Travers Duncan, John McGuigan, Richard Poole, John Atkinson and John Kinghorn, commenced proceedings in the Supreme Court challenging the Commission's findings of corrupt conduct against them by way of judicial review. The companies challenged the recommendation that the exploration licences be expunged. In a judgment handed down on 29 July 2014 McDougall J: (i) dismissed the finding of corrupt conduct under the ICAC Act against Mr Kinghorn as not made according to law; (ii) upheld the findings of the Commission against the other four individual applicants, whilst rejecting aspects of the Commission's reasoning; and (iii) dismissed the proceedings brought by the companies (Cascade Coal Ltd and subsidiaries). Messrs Duncan, McGuigan, Poole and Atkinson and the companies sought and were granted leave to appeal to this Court. The Commission submitted a notice of contention concerning the primary judge's rejection of the Commission's findings by the applicants as directors of White Energy, under s 184(1) Corporations Act 2001 (Cth).
The issues to be determined on appeal were:
(i) whether the conduct, the subject of the Commission's findings, could adversely affect the particular exercises of public functions, and so constitute "corrupt conduct" under s 8(2) ICAC Act;
(ii) whether the conduct, the subject of the Commission's findings, was capable of constituting criminal offences for the purposes of s 9(1)(a) ICAC Act; specifically,
(a) whether the appellants (other than Mr Poole) could be found to have violated their duties as company directors, in contravention of s 184(1) of the Corporations Act, in satisfaction of s 8(2)(s) ICAC Act; and
(b) whether the findings of fact made by the Commission supported the offence of dishonestly obtaining a financial advantage by deception, as identified in s 192E(1) Crimes Act 1900 (NSW), in satisfaction of s 8(2)(e) ICAC Act;
(iii) whether the appellants were afforded procedural fairness, in circumstances in which the offences and their particular elements relied on by the Commission were not averted to until closing submissions by counsel assisting the Commission, consequently denying the appellants the opportunity to be questioned or to give evidence as to the elements of those offences;
(iv) whether the Commission had the jurisdiction to recommend that the company exploration licences be expunged and whether such recommendations were amenable to judicial review.
The Court held, Bathurst CJ (dissenting as to Messrs Atkinson, Poole, and Glendon Brook), Beazley P and Basten JA:.
In relation to (i)
"Corrupt conduct" is any conduct which falls within ss 8(1) or (2), and which is not excluded by s 9, ICAC Act: [155]-[165]; [466]-[467]; [585]-[598].
The relevant interpretation of "corrupt conduct" pursuant to s 8(2) ICAC Act for these proceedings was not limited by the construction accepted in Independent Commission Against Corruption v Cunneen [2015] HCA 14; 89 ALJR 475, because of the Independent Commission Against Corruption Amendment (Validation) Act 2015 (NSW): [22]-[23]; [460]; [590].
The Commission was required to identify a relevant government function in determining whether the appellants' subject conduct "could adversely affect" the exercise of its function, pursuant to s 8(2) ICAC Act, which was accordingly limited to the body responsible for determining the future granting of a mining lease: [194]; [460]; [613]-[614].
Ministerial discretion in approving a mining lease is only limited by the scope and purpose of the relevant statutory context. Relevant considerations included the public interest. The relevant public interest should not be narrowly construed, and is not limited to environmental considerations, thereby including the conduct subject of the Commission's findings, Mining Act 1992 (NSW), s 63(2) (now repealed); Environmental Planning and Assessment Act 1979 (NSW), Part 3A (now repealed); Environmental Planning and Assessment Regulation 2000 (NSW), cl 8B(b): [230]-[233]; [460]; [662]-[679].
Minister for Planning v Walker [2008] NSWCA 224; 161 LGERA 423; The Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal (2012) 246 CLR 379 considered.
Whether relevant information is already in the public domain, or whether the information in the public domain would inevitably lead to further disclosure of the subject information, does not preclude a finding that the information sought to be concealed satisfies the test of adverse effect postulated by s 8(2) ICAC Act: [303]-[305]; [460]; [682].
In relation to (ii)
Sections 8(2), 9(1)(a) and 13(3A) ICAC Act do not require the Commission to be satisfied that a criminal offence has in fact been committed in order to justify a finding of corrupt conduct. Rather, the Commission must be satisfied that the facts found have the capacity to constitute an offence if proved before a court: [164]-[165]; [469]; [598].
In relation to (ii)(a)
Director's duties pursuant to s 184(1) may not be fully satisfied by directors removing themselves from positions of potential conflict. The Corporations Act also imposes positive duties of disclosure on company directors: [473]; [623]-[641].
Centofanti v Eekimitor Pty Ltd (1995) 65 SASR 31, Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187, Permanent Building Society (in liq) v McGee (1993) 11 ACSR 260, Fitzsimmons v R (1997) 23 ACSR 355, Duke Group Ltd (in liq) v Pilmer (1999) 73 SASR 64, discussed.
A contravention of s 184(1) requires intentional dishonesty or recklessness, which involves a finding that the conduct complained of was dishonest according to ordinary community standards, and known by the director to be so: [376]-[378], [430]; [487]; [636].
SAJ v The Queen [2012] VSCA 243, Marchesi v Barnes [1970] VR 434 discussed.
A deliberate failure to disclose relevant information in circumstances where there is a duty of disclosure and with full knowledge of the relevant facts could be seen to be "intentionally dishonest": [487]-[489]; [640].
In relation to (ii)(b)
(per Beazley P)
It is necessary to look at the circumstances as a whole. Too narrow a focus on the ultimate knowledge of the person deceived is apt to lead into error: [505].
(per Bathurst CJ and Beazley P)
The offence (s 192E Crimes Act 1900 (NSW)) requires that a financial advantage be obtained by deception, and that the person or entity so deceived be identified. Unless and until such deception actually occurs, the necessary element of the offence has not been made out. A causal connection is required between the deception and financial advantage acquired: [350]-[355], [359]; [502], [517].
(per Bathurst CJ, in dissent)
No financial advantage arose from the conduct said to be deceptive. This was because any benefit from concealing the Obeid involvement in the tenement from either the government or the IBC had not crystalised: [364]-[366].
(per Beazley P)
Pursuant to s 192D Crimes Act, the retention of financial value may be temporary: [519].
(per Basten JA)
Maintaining the unrealised value of an asset constitutes obtaining a financial advantage for the purposes of ss 192E and 192D Crimes Act 1900 (NSW), in satisfaction of s 8(2) ICAC Act: [657]-[658].
In relation to (iii)
(per Basten JA, Bathurst CJ and Beazley P agreeing)
To ascertain the scope of the Commission's obligation to afford procedural fairness, it is necessary to bear in mind the fact-finding and characterisation functions of the Commission, and to have regard to its statutory powers with respect to the conduct of a public inquiry: [453]; [460]; [688].
Where a procedural complaint is raised for the first time on judicial review, an appellant faces the heavy burden of attempting to persuade a court of error in circumstances where little assistance is afforded the court as to how the Commission, with its broad discretionary powers, would have dealt with an argument not presented to it: [698].
In relation to (iv)
(per Basten JA, Beazley P agreeing)
Having regard to its functions and jurisdiction the Commission has the power to make findings and form opinions extending beyond the question of "corrupt conduct". The power to formulate recommendations coupled with such findings and opinions, means that such recommendations are, consequently, not dependent on findings of corrupt conduct. These recommendations are amenable to judicial review: [460]; [714], [717].