JTMJ and Australian Securities and Investments Commission [2010] AATA 350 (11 May 2010)

CATCHWORDS - CORPORATIONS LAW - banning order - whether transaction likely to have had effect of creating artificial price for trading in financial product - whether misleading or deceptive conduct - whether falsification of records - decision varied.

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Corporations Regulations 2001 rr 7.8.19(1), 7.8.19(5)

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DECISION AND REASONS FOR DECISION [2010] AATA 350

And: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

1. set aside the decision of the respondent dated 19 January 2009; and
2. substitute a decision that the applicant be prohibited from providing a financial service for a period of three years from the date of this decision.

Under an order made by another member on 17 March 2009, which is in terms consistent with his earlier orders in the matter:

"Publication of the evidence given before the Tribunal and of matters contained in documents lodged with the Tribunal insofar as the publication identifies the applicant as the applicant in these proceedings continue to be restricted to members and staff of the Tribunal, the parties and their respective and professional advisers except insofar as the respondent or the Commonwealth Department of Public Prosecutions may need to disclose any information material to a court or to a persons [sic] for the purposes of criminal proceedings against ... [named persons]".

In view of that, I have used pseudonyms to identify the applicant and many of those involved in the activities that led to the decision by the Australian Securities and Investments Commission (ASIC) in this matter. A key identifying the persons behind the pseudonyms has been given to the parties and their representatives with these reasons.

2. The applicant, JTMJ, is an authorised representative (AR) of the holder of an Australian Financial Services Licence (AFSL) under the Corporations Act 2001 (Corporations Act). He has applied for review of a decision made by ASIC that an order be made under ss 920A and 920B of the Corporations Act prohibiting him from providing any financial services for ten years. A delegate of ASIC reached that decision on 19 January 2009 after finding that:

1. JTMJ had contravened ss 1041A and 1041H of the Corporations Act by taking part in trading certain shares on the Australian Stock Exchange (ASX) in a manner that had the effect of creating or maintaining an artificial price for the shares; and
2. between 10 March 2006 and 14 August 2006, JTMJ had failed to comply with ss 1041H and 1101F(1A) of the Corporations Act by engaging in conduct that resulted in falsification of order records; and

concluding that, within the meaning of s 920A(1)(f), he or she had reason to believe that JTMJ will not comply with a financial services law in the future.

3. The findings that I have made in reviewing the decision are based on an assumption that the transactions conducted by brokers and others in relation to the shares of the Company concerned were made in the normal course of trading and reflected the normal ebbs and flows of the market. I have no evidence to find otherwise. I have found that JTMJ was in breach of s 1041A on two occasions when he took part in a transaction that led to the creation of an artificial price in the financial market operated by ASX. I have also found that he was in breach of

ss 1041H and 1101F(1A). I have decided that ASIC's decision should be set aside and there be substituted for that decision a decision that a banning order be made against JTMJ for a period of three years commencing on and from the date of my decision. In view of the stay orders made by another member of the Tribunal, notice of the banning order cannot be published in the Gazette and entered in the register of banned persons before the expiration of the appeal period provided in s 44(1) of the Administrative Appeals Tribunal Act 1975 (AAT Act) or, if an appeal is lodged, before the determination of that appeal. As the operation of the banning order itself was not stayed, it comes into operation immediately.

4. In this section of my reasons, I will set out the matters on which there was no dispute between the parties or which are based on material which is found in the affidavits of JTMJ and which was not challenged during cross-examination.

5. The applicant, JTMJ, has worked in the financial services industry for the past 40 years. Although he engages in other professional activities, JTMJ has been employed principally as a technical share analyst in stockbroking houses and has been a client adviser for most of his working life. In addition, he is a registered company auditor, a registered taxation agent, a fellow of the Institute of Chartered Accountants in Australia and a member of the Securities Institute of Australia.

He holds a Bachelor of Commerce degree from the University of Melbourne.

6. In 2002, he and a stockbroking firm, which I will refer to as SB Firm, entered a consultancy agreement. He was to work as a Share Adviser and his remuneration was solely commission based. SB Firm was the holder of an Australian Financial Services Licence (AFSL) under the Corporations Act and was a Participating Organisation in the ASX. As a Share Adviser or Client Adviser at SB Firm, JTMJ was allocated an adviser identity unique to him. I will refer to it as JTMJUN. Among his duties were those requiring him to accept and execute buy and sell trade orders.

7. During the relevant period, JTMJ worked from two offices. One was located within the offices of SB Firm and the other in another State. I will refer to the first as SBF Office located in a State I will describe as State 1. The second will be referred to as the JTMJ Office and is located in a State I will describe as State 2.

8. The person employed by the SB Firm as its Compliance and Audit Adviser (CA Adviser) was responsible for the development, implementation and monitoring of SB Firm's compliance policies and procedures to ensure that they met regulatory requirements at the relevant times. He also handled complaints and liaised with regulators, lawyers and other professional personnel as required.

9. On the basis of his evidence, which was not contradicted, I find that SB Firm required each client to complete a number of forms before trading shares. Among the forms was a form entitled "Account Opening" requiring the potential client to provide a name, address, contact details and those authorised to deal on the account. The form had to be signed and dated by the client. Information on the form is entered on SB Firm's electronic broking system, which I will refer to as the EB System. The system creates an account with a unique client number allocated to that client. That number is never re-allocated even if the client were to close the account or cease trading. Trades conducted through SB Firm by that client are recorded against that account. The EB System also generates an historical ledger or a Client Ledger showing all trades for each client.

10. SB Firm's new clients can complete a CHESS[1] Sponsorship form enabling their shareholding to be registered as being broker sponsored by that firm. This facilitates a clients' trades as well as settlement of those trades. Once a client is registered as being broker sponsored, CHESS allocates that client account a unique Holder Identification Number (HIN). SB Firm records the HIN against the client's account.

11. Many years ago, fully paid shares in a company were first listed on the Australian Stock Exchange (ASX). That company later changed its name to its present name. I refer to that company as the Company.

12. At all relevant times, a director of the Company was a person who will appear in these reasons as DCO. He was the executive chairman of the Company's board of directors from August 2000 until November 2005. In November 2005, another person became the non-executive chairman of the Company's Board.

13. DCO lives with his partner, who I will refer to as Elizabeth. Together, they live in Colorado in the United States of America (USA). JTMJ believes that DCO travels between the USA and Europe and Australia.

JTMJ's advice in relation to the Company and association with DCO and the Company

14. JTMJ first met DCO at a work function in or about 1996 and again in or about 2004 at the funeral of Freda's mother.[2] On the basis of JTMJ's affidavit evidence, I find that these are the only two occasions on which he and DCO actually met physically. As will appear later in these reasons, they had substantial telephone contact.

15. In the years before 2002, DCO was JTMJ's client at another stockbroking firm (ASB Firm). On or about 3 February 2002, DCO opened an account with SB Firm and JTMJ was allocated as the client adviser to the DCO account. Trading on DCO's account in relation to the Company's shares took place between 27 April 2006 and 15 May 2006.

16. On seven different occasions between June 2000 and November 2004 JTMJ issued a general recommendation to investors that they buy the Company's shares. In that period, the shares traded at various levels between 45 and 72 cents.

17. JTMJ recalls at least two visits that DCO made to the offices of SB Firm for the purpose of delivering promotional presentations regarding the Company and the value of its shares. Those visits occurred after August 2000. JTMJ has always found DCO to speak positively, enthusiastically and persuasively about the Company's prospects. During at least one telephone conversation with DCO in or about 2006, DCO had told him that he was expecting a New York research house to produce an independent report ascribing a value of at least $1.00 to the Company's shares. Despite their contact and their professional dealings, JTMJ does not regard DCO as a friend.

18. In July 2003, JTMJ bought a parcel of the Company's shares for himself.

19. A person, whom I will call Freda, is a friend of both JTMJ and of DCO. JTMJ first met her in the early 1990s. Freda lived in London in 2005. In June of that year, she and JTMJ holidayed together in France. Her mother had died the previous year and JTMJ understood her to have received an inheritance from her mother's estate.

20. Freda told JTMJ on several occasions during the holiday that she was interested in investing in shares and in buying a house in France. JTMJ particularly recalled Freda's asking him whether it would be wise to invest in the Company's shares. Some five years earlier and when JTMJ worked for ASB Firm, Freda had asked him to buy the Company's shares. From the nature of her questions of him in June 2005, JTMJ formed the view that she seemed quite familiar with the Company's business. He also formed the view that she had been encouraged to buy the shares by her friend, DCO. He was happy to discuss the shares with her as he had previously analysed them and expected that she would place an order with him to buy more at some time in the future.

21. I find that there is no disagreement between the parties that JTMJ opened an account in Freda's name with SB Firm on 10 March 2006. He was the client adviser for the account. This accords with the evidence of both JTMJ and CA Adviser.[3] The information initially recorded on the EB System did not record details of any person, other than Freda, who was authorised to operate the account. A Third Party Authorisation Form dated 3 May 2006 was signed by both Freda and DCO and showed DCO as a Nominated Agent on the account. It was received by SB Firm on

7 May 2006.[4] There are no telephone records showing that Freda and JTMJ telephoned each other in relation to the trading that occurred on her account.

22. Trading on Freda's account took place from 10 March 2006 to 26 April 2006.

Elizabeth: life partner of DCO and client of JTMJ

23. On the basis of the limited evidence that I have and on the basis that it is uncontradicted, I accept for the purposes of this case that Elizabeth is the life partner of DCO. On the basis of the evidence of JTMJ, I find that Elizabeth has been a client of SB Firm since 14 February 2003 and, perhaps, since an earlier date. JTMJ became her principal adviser on or about that date. Although, he has never met her, JTMJ has spoken with her on the telephone on some ten to 15 occasions.

24. An Account Opening Form was prepared but is undated.[5] Elizabeth and DCO signed a Third Party Authorisation form prepared by SB Firm.[6] It is dated 14 May 2006 and sent to JTMJ on 16 May 2006. It appoints DCO as her nominated agent. JTMJ first entered BIDs on the ASX and on Elizabeth's account on 16 May 2006. The Third Party Authorisation form came to be signed after JTMJ sent it to DCO by facsimile and telling him "Dear ..., Third Party form attached. Regards, ... [JTMJ]. P.S. Please fax back to ... on ... . May be better to postdate it to yesterday."[7]

25. There are no telephone records showing that Freda and JTMJ telephoned each other in relation to the trading that occurred on her account. Trading on Elizabeth's account in respect of the Company's shares took place between

The ASX's Automated Trading Systems: SEATS and ITS

26. On the basis of the statement by Mr Richard James Flynn,[8] I have made the following findings regarding the Automated Trading System that was owned and operated by ASX Operations Pty Limited, which is a wholly owned subsidiary of ASX. Mr Flynn is the Manager of the Surveillance Division of ASX Markets Supervision Pty Limited (ASXMS), which is a subsidiary of the ASX. ASXMS was incorporated in June 2006 and is responsible for the ASX's key operational supervisory functions. The Surveillance Division was previously part of ASX Operations Pty Ltd. Mr Flynn has been employed in that Division from 1997 until 2001 and again from 2003 to date. The Surveillance Division is responsible for carrying out surveillance of trading in equities, warrants and options on the ASX's markets.

27. ASX previously used a computerised operating system known as "SEATS". All trading in quoted equities on the ASX was conducted by means of it until 29 September 2006. SEATS enabled brokers (Trading Participants) throughout Australia to have equal access to the market. Other than off-market transfers between a holder of a security and an acquirer occurring without the aid of a broker, all trading in quoted equities on the ASX was conducted through SEATS.

28. On 2 October 2006, the ASX replaced SEATS with a new computerised system, which it called the Integrated Trading System (ITS). Whereas only equities could be traded through SEATS, ITS enabled financial products such as warrants and derivatives to be traded in addition to equities. Each Trading Participant is licensed by the ASX to access ITS and is allocated an individual broker identification number. I will described SB Firm's broking identification number as xxx. A Trading Participant employs a Designated Trading Representative (DTR) who has been approved by ASX to act as that Trading Participant's operator of an ITS terminal or workstation (previously known as a SEATS Trader Workstation). Each Trading Participant usually maintains at least one ITS terminal in its office.

29. When the ASX transferred from SEATS to ITS, it transferred to ITS any bids that had been entered on SEATS up to 29 September 2006 but had not yet traded. It transferred them at 5.00am on 2 October 2006. For the purposes of this case, there was no difference between SEATS and ITS.

30. The ASX also operates an electronic system known as the Open Interface. It is defined in the ASX's Market Rules as "the electronic protocol and message structure used to provide a mechanism for Trading Participants to access ITS which enables a Trading Participant to submit trading messages". Open Interface transmits the order and trade data to all Trading Participants, whether they used an ITS terminal or the Open Interface. Clients of Trading Participants can gain access to ITS via Automated Order Processing (AOP) and Open Interface. AOP refers to the process by which orders are registered in a Trading Participant's system and submitted as orders into ITS without being entered by a DTR.

31. Currently, a Trading Participant's identification number is automatically recorded in the ITS when its DTR makes an entry in ITS. The ASX records both the number and the entry and they are incorporated in the trading records of ASX. When a Trading Participant is instructed by its client to buy securities, its DTR enters the order, known as a BID, in ITS at a price and for a quantity that accords with the instructions. When instructed to sell securities, its DTR enters the order, known as the ASK, in ITS at a price and for a quantity that accords with the instructions. All BIDs and ASKs are shown on all ITS terminals and are recorded by the ASX. Trading Participants are able to see on the ITS terminals the relevant security's ASX code, the quantity of the relevant security in respect of BIDs and ASKs entered, the price of all BIDs and ASKs and the time, quantity and price of trades that have occurred during the relevant day's trading.

32. ITS is a priority based trading system. Until they are traded or cancelled, all BIDs entered on ITS are given priority and displayed in order first of price and then of the time of entry on ITS. In so far as price is concerned, the BID with the highest price is shown first and the others in descending order to the lowest. Until they are traded or cancelled, ASKs are also shown on ITS in order first of price and then of the time of entry on ITS. Unlike BIDs, the ASK with the lowest price is displayed first and the others in ascending order to the highest.

33. Trading in quoted securities on the ASX during what is known as the "Normal Trading" phase is conducted through ITS between 10.00am and 4.00pm Eastern Standard Time on each trading day. In addition to Normal Trading, BIDs and ASKs can be entered in ITS during the Pre-open phase but trades of securities cannot be executed during that phase. The Pre-open phase refers to the period from approximately 7.00am to 10.00am each trading day. During that period, brokers and online clients via brokers may enter, amend and cancel orders. SEATS does not trade any orders during this period. When the Opening phase commences at 10.00am, stocks commence trading in five staggered groups sorted alphabetically. The first is traded at a time up to 15 seconds before or after 10.00am, the second within the same range of 10.02am and so on at two minute intervals up to 10.09am. The precise time of each is randomly decided upon by SEATS. The Single Price Auction (SPA) occurs for the stocks in each of the respective groups.

34. Normal trading on the ASX ceases at 4.00pm. Stocks are placed in Pre-open. Just as happens in the morning Pre-open, BIDs and ASKs may be entered, amended or cancelled but neither SEATS nor ITS processes any trades. A Closing Single Price Auction (Closing SPA) then takes place. Between 28 November 2005 to 14 July 2006, SEATS randomly decided the precise time at which the Closing SPA took place but it always occurred for 60 seconds at some time between 16.15 to 16.17pm.

35. A trade in a security occurs automatically when the price of a BID and an ASK for that security overlap on ITS. The overlap will occur either when they are identical or the price of a BID is greater than that for an ASK. On the basis of

"A principal underlying the algorithm used the calculate the volume of shares to be traded and at what price in the SPA's is predicated on the fact that a buyer is willing to purchase at a lower price than their existing Bid and a seller is willing to sell at a higher price than their existing Ask. The objective of the algorithm is to match the greatest number of shares possible at one price. If a clear result cannot be achieved when the first decision rule is applied, the model progresses to the second decision rule and so on. The four stages of the algorithm are:

1. Determining the Maximum executable volume and at what price steps if more than one;
2. Establishing the minimum surplus (either Bid or Ask) at the various price steps (the quantity of shares un-traded at the potential auction price ('PAP') should always be the least possible);

1. Ascertaining where the market pressure exists (where multiple potential auction prices exist); and

1. Narrowing the PAP to two. Consulting the reference price (the last traded price). The higher PAP will be used where the reference price is equal to or greater than it, and the lower PAP will be used where the reference price is equal to or less than it. Where the reference price lies between the two PAP's the reference price is used."[9]

36. At the end of each trading day, there is a Closing Single Price Auction (CSPA). At that time, all overlapping buy and sell orders are automatically matched and traded. Up to and including 25 November 2005, that occurred at or around 4.05pm on each trading day. From 28 November 2005, the CSPA took place at approximately 4.15pm each day and, from 17 July 2006, at approximately 4.10pm.

37. In the course of trading, all entries on SEATS were handled electronically. Each day, a file was produced showing all the transactions effected on SEATS during the day. This is the SEATS log file and provided a time stamp of those transactions accurate to one-hundredth of a second. Each SEATS log file was sent electronically to the Surveillance Division after 7.00pm each day. It is retained as part of the SEATS Archive database.

38. The ITS is a little different. Rather than producing a file at the close of each day's trading, each transaction effected on the ITS is passed electronically in real-time to the SMARTS System. The transactions are recorded in log files providing a time stamp of those transactions to one-hundredth of a second. The SMARTS System has a number of application modules that extract and analyse the data it holds.

39. The Surveillance Division itself has computer programs that enable it to analyse all trades effected on SEATS or ITS in a particular security and in a given time period (Course of Sales report), transactions on SEATS (SEATS Transactions) and transactions on ITS as recorded on the SMARTS System (All Transactions).

The latter two reports record all SEATS or ITS entries respectively in a particular security during a given time period in a date and time order and includes details of all trades and of the entry, amendment, cancellation and deletion of all BIDs and ASKs.

40. The Surveillance Division can produce a replay of trading using electronic programs called SEATScan, for SEATS trading, and Market Replay, for ITS trading. Both programs enable the screen to be divided into three. The top band displays a line-by-line description of each transaction which is about to be entered on the relevant system. The middle band displays the depth of the market for both buying and selling or what is known as the BID and ASK schedule, at a point in time. The lower band lists the last ten trades. BIDs and ASKs and subsequent trades can be identified by reference to a particular client.

41. I find that Mr Stuart Dent is an officer of the Australian Public Service and, since 1991, has been engaged by ASIC as a Market Analyst in its Enforcement Directorate. During 1990, he was engaged by ASIC's predecessor as a Compliance Officer in its Investigations Department. His previous professional experience included four years with AC Goode and Co Ltd as an investment adviser, two years in the Eurobond Division of the London office of the merchant bankers, Morgan Stanley International and a period as a post clerk with ASX. He is currently a Senior Associate Member of the Financial Services Institute of Australasia. Mr Dent is familiar with the ASX's Market Rules, the Stock Exchange Automated Trading System (SEATS) and the ASX Integrated Trading System (ITS) as well as with the provisions of the Corporations Act governing the procedures for offering to sell or purchase listed securities on the ASX.

42. Under the Australian Securities and Investments Commission Act 2001 (ASIC Act), Mr Dent has been delegated certain functions and powers under Part 3 of that legislation. Part 3 gives ASIC powers to conduct investigations and gather information. He has been involved in hundreds of investigations including those into alleged market manipulation, insider trading, short selling, false and misleading statements, breaches of the takeover provisions and failure to satisfy continuous disclosure obligations. Mr Dent said that his duties required him to compile and analyse evidence that included market and trading data as well trading data provided by the ASX and other service providers. In a market manipulation investigation, he analyses that material "... for the purpose of providing evidence as to the effect of particular transactions on the price at which a particular security has been traded and the volume of securities traded within the context of the market for these securities."[10] Mr Dent has also considered the materiality of information and statements as to the effect on the price at which a particular security has been traded and the volume of securities traded. In undertaking his duties, he has developed significant experience in the use of two software tools developed by ASIC for the analysis of trading data provided by the ASX: Seatscan and R-Tools.

43. As part of ASIC's investigation into the trading of the Company's securities, I accept that Mr Dent was asked to analyse and prepare trading data in its shares during the period from 10 March 2006 to 1 June 2006 and, in particular, to look at the trading conducted on the accounts of Freda, DCO and Elizabeth conducted through SB Firm.[11] On the basis of his evidence, I find that Mr Dent has given evidence as an expert on approximately six occasions in the Melbourne Magistrates' Court, the Melbourne County and in ASIC's internal enquiries. He is aware that most courts have guidelines for expert witnesses to guide them in the preparation of their evidence and is reasonably familiar with them. As to those prepared by the Federal Court, he said that he had probably read them.

Challenge to Mr Dent's being called as an expert witness

44. Mr Young challenged the basis on which Mr Dent gave his evidence. His statement, which was admitted in evidence, is headed "Expert Statement".[12]

In cross-examination, Mr Dent said that he might have received written instructions to carry out his investigation and prepare his statement. He believed that some of his instructions would have come orally and he might have made a diary note of them but acknowledged that he had not produced them with his report. Neither any written instructions nor any written note of oral instructions was attached to his statement.

45. Mr Young drew his attention to [2.7] of the Guidelines for Expert Witnesses in Proceedings in the Federal Court of Australia (FC's Guidelines) dated

"There should be included in or attached to the report; (i) a statement of the questions or issues that the expert was asked to address; (ii) the factual premises upon which the report proceeds; and (iii) the documents and other materials that the expert has been instructed to consider."

The FC's Guidelines apply only to expert witnesses.

46. Mr Young referred also to the draft Guidelines relating to Opinion Evidence issued by the Tribunal's President in October 2008 (Draft AAT Guidelines). Paragraph [2(b)] states that:

"A written report prepared for the purpose of proceedings in the AAT must include the following information either in the body of the report or as an annexure:

(b) the letter of instruction or details of the questions or issues the person was asked to address in the report as well as a reference to any documents or other materials the person was given to consider".

It appears from [1], which deals with the "Duty to the AAT", that it is directed to a "... person giving evidence based on his or her special knowledge in an area ..." and from [4] of the introductory passages under "Scope of the guidelines" that it applies to "... any evidence before the AAT that has been obtained from a person because he or she has particular knowledge or experience in a subject area." Whether this is limited to the expert witnesses that are the subject of the FC's Guidelines or whether it is of wider application remains to be seen.

B. The law relating to expert evidence and its application to the Tribunal

47. The role of the Tribunal is to review the decision that is the subject of the application made to it. For the purpose of doing that, s 43(1) of the AAT Act provides that it "... may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision ...". When it reviews a decision in this way, the Tribunal is often said to be engaged in 'merits review". That task is an administrative task and differs in significant respects from the task facing a court engaged in judicial review of a decision. The Tribunal's task is not to enquire whether the decision-maker made an error in making the decision. That is the task of courts under the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) or s 39B of the Judiciary Act 1901 if a person affected by the decision wants to question it on the basis that it is affected by errors within the scope of those Acts. The Tribunal's task is not to adjudicate upon whether the decision-maker is able to defend the decision he or she made.[13] Despite the fact that the Tribunal's proceedings often have the appearance of an adjudicative process in a court, its task takes it beyond a consideration simply of the cases put by one party or another and the authorities on which they rely.[14] It is not limited by the Statements of Facts and Contentions lodged by the parties for they do not have the character of pleadings in a court. The task of the Tribunal is to determine the correct process it should itself follow and follow it. That process starts with ascertaining the law that is applicable and the issues that are relevant, considering the probative material that is available to it and make findings of fact that are based on that material and relevant to the issues. Unless varied by another enactment, the Tribunal makes any findings of fact on the basis that it is reasonably satisfied of them.[15] This equates with its doing so on the civil standard of proof and so on the basis of the balance of probabilities.[16] Having done that, the next step is to ascertain the decision or range of decisions that can correctly be made in light of the law and the facts. If more than one decision can be correctly made, it should then choose the decision that is the preferable decision. In doing so, it must ensure that it follows the rules of procedural fairness so that the parties are aware of those and of the issues it is considering and have an opportunity to present their cases accordingly.

48. In assessing the evidence or material that is probative, the Tribunal is not bound by the rules of evidence.[17] When assessing evidence or material before it, the Tribunal often expresses itself in terms of whether the evidence has weight or not or whether it will be given more or less weight. There are occasions, though, on which it will decide that the probative value of evidence or matter is so slight or non-existent that it will not have regard to that evidence or matter. When it decides that the probative value is so slight or non-existent, it will often do so on the basis that the evidence would not be admissible in a court according to the rules of evidence. The rules of evidence generally reflect the views reached by the courts as to the evidence that can be relied on to have probative value.

49. Opinion evidence is evidence of "a belief or judgement which seems likely to be true, but which is not based on proof ...".[18] It has been described in a legal context as "a conclusion, usually judgmental or debatable, reasoned from facts"[19] and as "an inference from observed and communicable data".[20] It is the subject of Part 3.3 of the Evidence Act 1995, which provides that such evidence is not admissible to prove the existence of the fact about the existence of which the opinion was expressed.[21] The general inadmissibility of such evidence is subject to certain exceptions. One of those exceptions is found in s 79(1) which provides:

"If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge."

50. Opinion evidence that is given by a person who has specialised knowledge based on the person's training, study or experience and that is wholly or substantially based on that specialised knowledge is in a different category. It is admissible in the courts as an exception to the opinion rule[22] and is taken into evidence in the Tribunal. As Gaudron J expressed the principle in HG v The Queen:[23]

"The position at common law is that, if relevant, expert or opinion evidence is admissible with respect to matters about which ordinary persons are unable 'to form a sound judgment ... without the assistance of [those] possessing special knowledge or experience ... which is sufficiently organised or recognised to be accepted as a reliable body of knowledge or experience'."[24]

51. It is clear from the authorities that the "... categories of expert evidence are unlimited ..."[25] and that they are not limited to areas in which a person's special knowledge or skill is derived from scholastic studies. As Thomas JA, with whom McPherson JA and Chesterman J agreed, said in R v Lam:[26]

"There are many fields in which an expert's skill does not derive from scholastic studies. Examples include the practical experience of an Aboriginal tracker ..., a mechanic with much practical experience of engines ... and even the capacity of a heroin addict to identify a substance as heroin ...".[27]

Of some relevance in this case is the fact that the courts have recognised accountancy and auditing as fields of expertise. Speaking of forensic accountants, Austin J said in Australian Securities and Investment Commission v Rich (Rich):[28]

" This broader field of expertise, generally relating to understanding the financial health of a business enterprise, is the realm of forensic accountants. It has been said that 'their role is really to assist the court to understand the financial information, using their skills to organise, display and communicate financial information' ... or to 'help explain complex financial and accounting issues raised in criminal and civil proceedings' .... Thus, in modern litigation forensic accounting evidence is admitted to assist, not only in determining the state of insolvency of the company at the particular time as in Quick v Stoland_,_[[29]] but in a variety of other broadly similar financial tasks, exemplified from Australian cases decided in the recent past ..."[30]

52. Whether or not such a field of knowledge exists is a question that must be answered first:

"In determining whether or not there is, or is not, a field of knowledge which requires expert assistance, the judge is to a large extent involved in an exercise of personal judgment, for which authority provides little help: see per Blackburn J in Millirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 at 160."[31]

The question can be answered by asking two questions that are directed to the reasons why the courts have permitted expert evidence to be admissible when opinion evidence generally is not. Those questions were identified in R v Bonython[32] when King CJ observed that:

"Before admitting the opinion of a witness into evidence as expert testimony, the judge must consider and decide two questions. The first is whether the subject matter of the opinion falls within the class of subjects upon which expert testimony is permissible. This first question may be divided into two parts: (a) whether the subject matter of the opinion is such that a person without instruction or experience in the area of knowledge or human experience would be able to form a sound judgment on the matter without the assistance of witnesses possessing special knowledge or experience in the area, and (b) whether the subject matter of the opinion forms part of a body of knowledge or experience which is sufficiently organised or recognised to be accepted as a reliable body of knowledge or experience, a special acquaintance with which by the witness would render his opinion of assistance to the court. The second question is whether the witness has acquired by study or experience sufficient knowledge of the subject to render his opinion of value in resolving the issues before the court."[33]

53. Parties themselves have been permitted to give expert evidence but only if their evidence meets the standards expected of independent expert witnesses. This has been accepted in the United Kingdom[34] and has also been accepted in various Australian jurisdictions. In FGT Custodians Pty Ltd (formerly Feingold Partners Pty Ltd) v Fagenblat,[35] Ormiston JA, with whom Chernov and Eames

"It is sufficient to say that in large numbers of commercial disputes, one party or the other frequently has particular expertise of a kind where it is frequently, but often only incidentally, necessary to qualify the witness to give expert evidence as to some particular aspect of that trade or business. It would be remarkable if one had to obtain another expert from a competitor or even from outside the country to prove particular aspects of that evidence, whether related to trade usages or technical mechanical processes or whatever. Such evidence can surely be given by a party, or by an officer of a corporate party, and the fact that it comes from such a witness, qualified if required as an expert, should be a matter merely for comment by counsel in argument and a matter of weight for consideration by the judge in reaching his ultimate decision."[36]

54. In Rich, Austin J summarised the law on this point after a comprehensive survey of it:

" In summary, the fact that the expert may have had a family, personal or business relationship with the party retaining him or her, of a kind that might cause a reasonable bystander to apprehend or even expect a lack of impartiality in the expert's opinions, is not of itself a ground for determining that the expert lacks testimonial capacity or competency, or otherwise for holding that the expert's opinion evidence is inadmissible. The possibility remains that matters of this kind might influence the Court to exercise its discretion to exclude the evidence under s 135, but such a matter would not, of itself, to [sic] cause the discretion to be exercised against admitting the evidence. ...

There may, however, be additional factors that would make the evidence inadmissible or, at least, would cause the Court to exclude it in the exercise of its discretion. For example, the Court might exclude an expert's evidence if it appeared that the expert, having formed his or her opinions for another purpose, was not prepared to consider changing his or her mind for the purposes of giving evidence in court. ...

One additional factor especially pertinent in the present case is that expert opinion evidence might be excluded if the expert, in the course of his or her prior relationship with the party who has retained him or her, has obtained information relevant to the formation of his or her expert opinion, which is not part of the identified body of information to which the expert is authorised to have regard in preparing the report. Here the problem is not lack of independence per se, but the fact that, in the course of acting in relationship with a party to the litigation in a non-independent way, the expert may have obtained information which is not appropriate or permissible to be used as a factual basis for expert opinions.

ASIC submitted that it is common, as well as being proper and understandable, that an expert will obtain additional information in dealing with his or her client, which is not included in the factual basis for the expert opinions. For example, it is proper and common for an expert to express views to his or her client about documents within the expert's field of specialised knowledge produced by another party on discovery, or about expert reports from another party, and the expert may sit in court and listen to evidence and provide explanations to the client of the evidence that is given, and even suggestions to counsel as to relevant questions that may be asked.

I accept that there is a range of such things that the expert may do without providing ground for excluding his or her opinion evidence. This because, in engaging in such conduct, the expert does not raise any question as to whether his or her opinions are based wholly or substantially on his or her specialised knowledge. Where, however, the expert has obtained extraneous information in the course of another relationship with the client prior to reaching his or her opinions, and the information is relevant to the opinions, a question would seem to arise as to whether the expert has failed to set out the factual basis that the opinions and has therefore made it impossible for the court to be sure whether the opinions are based wholly or substantially on the expert knowledge."[37]

55. This passage highlights the triple requirements that an expert witness be sufficiently independent, have specialised knowledge and base his or her expert opinion on both that specialised knowledge and a relevant factual basis. The reason for this is found in the judgment of Heydon JA in Makita (Australia) Pty Ltd v Sprowles:[38]

"... If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v The Queen (at 428 [41]), on 'a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant and a process of reasoning which went well beyond the field of expertise."[39]

56. The way in which a court or tribunal satisfies itself that the opinion is based on specialised knowledge:

"... would normally be satisfied by the person who expresses the opinion demonstrating the reasoning process by which the opinion was reached. Thus, a report in which an opinion is recorded should expose the reasoning of its author in a way that would demonstrate that the opinion is based on particular specialised knowledge. Similarly, opinion evidence given orally should be shown, by exposure of the reasoning process, to be based on relevant specialised knowledge."[40]

"... must be presented in such a way that the court can readily assess whether the requisite correlation between opinions and specialised knowledge is present.

Proper categorisation of an intermediate proposition depends on reaching an understanding as to the role of that proposition in the reasoning process, its derivation and its relationship with the assumed or accepted facts. In my opinion, it is sufficient under s 79 [of the Evidence Act 1995] for the report to make it plain, in substance and on a fair reading, that a particular proposition has been deduced by a process of inference from the assumed or accepted facts, and that the process of inference involves the application of the expert's specialised knowledge. If, as a matter of substance rather than form, a proposition is an inference from the assumed or accepted facts, drawn by the expert with the aid of his or her specialised knowledge, it is potentially admissible under s 79 whether it is introduced by some such words as 'in my opinion' or is presented as an assertion of fact. But if, in substance, a proposition cannot fairly be regarded, directly or indirectly, as an inference from the assumed or accepted facts drawn with the aid of the expert's specialised knowledge (because, for example, the expert's reasoning process leading to the proposition has been inadequately disclosed or is non-existent), the proposition is not admissible under s 79 even if it is expressed to be an opinion. ..."[41]

58. The assumed or accepted facts to which Austin J referred are important in that, if the expert's opinion depends upon them, they must be proven or agreed upon between the parties before the expert's opinion can be give weight.[42] The expert witness may observe facts that do not depend upon specialist knowledge and that evidence is admissible even under the Evidence Act as opinion based on evidence of what the person saw, heard or otherwise perceived about the matter.[43]

59. The consequences of failing to identify and articulate the assumed, accepted and observed facts were said by Austin J in Rich in a court and I respectfully suggest that the consequence is no different in this Tribunal:

" Thus, if the expert fails to identify and articulate the assumed, accepted and observed facts upon which he or she proceeded, the court may well be unable to identify those facts, with consequences of several kinds. First, if the court is uncertain about the factual basis used by the expert, it may be unable to comprehend the opinion so as to decide how much weight or probative value to give it. Second, if the factual basis is not articulated, the court may be unable to determine whether the facts assumed or accepted by the expert correspond to the facts proved or admitted at the hearing .... This difficulty goes to the weight or value of the evidence, on any view, and may go to strict admissibility, if the 'basis rule' discussed at 6.7 is correct. Thirdly, in extreme cases the consequence of failure to articulate the factual basis may even be inadmissibility for irrelevancy. In Quick v Stoland_, Branson J remarked that a bare expression of opinion which does not disclose its factual basis will be incapable of affecting the assessment of the probability of the existence of any fact in issue in the proceeding, and will therefore be irrelevant under_

s 56(2)."[44]

60. This is consistent with the earlier case of Arnotts Ltd v Trade Practices Commission,[45] in which the Full Court of the Federal Court specifically approved passages from the work of Sir Richard Eggleston, Evidence, Proof and Probability[46] regarding four functions of expert witnesses: "generalising from experience, acting as librarian, acting as statistician and acting as advocate."[47] The generalisation engaged in by expert witnesses when expressing an opinion in their field of expertise is based on their experience and calls in aid all their training and professional experience. In doing so, Sir Richard said:

"... It is often said that an expert cannot give an opinion as to the ultimate fact that the court has to decide. This is inaccurate, as experts, especially valuers, often give evidence as to the ultimate fact, and in many cases the question whether that fact exists can be answered only by experts ... What the rule really means is that an expert must not express an opinion if to do so would involve unstated assumptions as to either to either disputed facts or propositions of law. ..."[48]

61. He went on to give examples, as did the Full Court when it concluded that:

"... What does matter - the point emphasised by Sir Richard - is that the assumptions upon which the opinion is based are identified and articulated. Of course, if the assumptions made by the witness turned out to be different to those ultimately found by the Court, the opinion might have little relevance. ..."[49]

62. Although the Full Court in Arnotts contemplated an expert's making assumptions about propositions of law, it is clear from the judgment of French J in Woodside Energy Ltd v Commissioner of Taxation[50] and the cases to which he referred that:

"generally, it is not for an expert to give evidence as to the application of a legislative provision, as opposed to furnishing evidence from the view point of an economist with respect to what factors can or should be taken into consideration or ignored."[51]

63. Whether there is sufficient parity between the assumptions and the findings of fact made by the trier of fact is ultimately a question of fact as explained by the High Court in Paric v John Holland (Constructions) Pty Ltd:[52]

" It is trite law that for an expert medical opinion to be of any value the facts upon which it is based must be proved by admissible evidence ... But that does not mean that the facts so proved must correspond with complete precision to the proposition on which the opinion is based. The passages from Wigmore on Evidence cited by Samuels JA in the Court of Appeal ... to the effect that it is a question of fact whether the case supposed is sufficiently like the one under consideration to render the opinion of the expert of any value are in accordance with both principle and common sense.

As Wigmore states ..., 'the failure which justifies rejection must be a failure in some one or more important data, not merely in a trifling respect'. ..."[53]

64. Just how does an expert witness state the assumptions underpinning the expert evidence given to the trier of fact? The Full Court of the Federal Court has specifically rejected an approach that permits an expert witness not to disclose the underlying assumptions in his or her evidence and to review the evidence in this way. They did so on the ground that it would unnecessarily prolong a trial but, more importantly, on the basis of:

"... the difficulty in predicting the 'permutations and combinations necessary to cover all possible findings by the Court'. If an economist were permitted to express opinions upon the effect of the evidence given, without identifying the facts which he or she assumed for the purpose of those opinions, it would be impossible for the Court to know how to apply that evidence. One of the permutations or combinations may have rendered the opinion inapplicable in the expert's eyes but the Court would never know."[54]

65. If evidence given as expert evidence should transgress one or more of these boundaries from time to time, those transgressions do not necessarily render the whole of the evidence inadmissible in a court. That which does not transgress may properly be regarded as admissible.[55]

66. The issue is illustrated by reference to an accountant's evidence where it is:

"... understood to be merely a summary of books and records which have been produced or identified, elaborate reasoning will be unnecessary and there will be no practical issue as to the identification of the assumed facts, because it [sic] books and records will be identified. It is therefore not surprising that the older cases assert, without qualification, that the accountant's summary of the books and records is admissible. That is not to say that accountants' reports are exempt from the general principles as to admissible expert opinion evidence. Rather, the point is that compliance with the general principles will be obvious or can be readily established. As Giles JA said in Adler v ASIC [(2003) [2003] NSWCA 131; 179 FLR 1] at [631], what is required by way of the explanation of which Heydon JA [spoke] in Makita will depend on the circumstances. Thus (at [632]):

A solicitor shown to have specialised knowledge of conveyancing practice can give opinion evidence of general conveyancing practice without spelling out links between his training, study and experience and his opinion. The links are apparent from the nature of the specialised knowledge.

Similarly an accountant can give evidence summarising books and records of a business enterprise without having to spell out the link between his or her opinions and specialised knowledge.

The question of compliance with the general Makita requirements will come to prominence where the accountant's evidence is more than a mere summary and where the subject matter extends beyond a contained set of books and records. ..."[56]

It is to such opinions that the FC's Guidelines and the Draft AAT Guidelines are directed.

67. Applying these principles to Mr Dent's evidence, I accept that he has skills in organising, displaying and communicating information obtained from SEATS and ITS. His role is to assist me to work my way through the data with which I have been presented. To that extent, I think that it has been demonstrated that Mr Dent does have expertise of the sort recognised by the authorities to which I have referred. In presenting his evidence, he has set out the basis of his expertise. His assumptions have been clearly stated and the basis of his opinion stated. It is true that he has not attached separate documents to show those but they are found in his report. A letter of instructions, for example, is not attached but it is clear from [14] of his statement that he was "... tasked to analyse and prepare trading data in the shares of ...[Company] during the period from 10 March 2006 to 1 June 2006 ..." and, in particular trading that occurred through SB Firm in relation to the accounts of DCO, Fred and Elizabeth.

68. The Corporations Act has been amended at various times but the legislative provisions that apply in this case were, for the most part, introduced by the Financial Services Reform Act 2001. Although they came into force on different dates all of the provisions to which I have referred applied in 2006 when the transactions under consideration took place.

Requirement to hold an AFSL if providing a financial service

69. Chapter 7 of the Corporations Act is concerned with the regulation of financial services and markets. A "financial service" is not defined as such. Rather,

s 766A describes six circumstances in which a person "provides a financial service". They occur if the person:

"(a) provide[s] financial product advice (see section 766B); or

(b) deal[s] in a financial product (see section 766C); or

(c) make[s] a market for a financial product (see section 766D); or

(d) operate[s] a registered scheme; or

(e) provide[s] a custodial or depository service (see section 766E); or

(f) engage[s] in conduct of a kind prescribed by regulations made for the purposes of this paragraph."[57]

A person is not taken to provide a financial service if that person's conduct is done in the course of work ordinarily done by clerks.[58] Part 7.1 develops the circumstances in which a person provides a financial service.

70. Subject to s 911A, a person who carries on a "financial services business in this jurisdiction" must hold an Australian Financial Services Licence (AFSL) covering the provision of the financial services.[59] A "financial services business" is a business of providing financial services.[60] There are exemptions to the requirement to be licensed[61] and regulation of the circumstances in which a person may provide a financial service on behalf of another person who carries on a financial services business.[62] The exemption relevant in this case applies if the financial service is provided as a representative of another person who carries on a financial services business and that other person holds an AFSL covering the provision of the service in issue.[63] Those who are licensed to provide financial services must comply with the obligations set out in Division 3 of Part 7.6. The general obligations are set out in s 912A of the Corporations Act.

71. I am concerned with the activities of a person who is a representative of the holder of an AFSL and not with those of the holder itself. The holder is SB Firm. Despite that, it is important to understand the inter-relationship between the holder of the AFSL and its representative and to understand the impact that the activities of the representative can have on the holder.

72. The manner in which a person applies for a licence is set out in s 913A of Division 4 of Part 7.6. Section 913B(1) provides that:

"ASIC must grant an applicant an Australian financial services licence if (and must not grant such a licence unless):

(a) the application was made in accordance with section 913A; and

(b) ASIC has no reason to believe that the applicant will not comply with the obligations that will apply under section 912A if the licence is granted; and

(c) the requirement in whichever of subsection (2) or (3) of this section applies is satisfied; and

(ca) the applicant has provided ASIC with any additional information requested by ASIC in relation to matters that, under this section, can be taken into account in deciding whether to grant the licence; and

(d) the applicant meets any other requirements prescribed by regulations made for the purposes of this paragraph."

ASIC may impose conditions on any AFSL it issues.[64]

What are the obligations of the holder of an AFSL?

73. As I have said, the general obligations of the holder of an AFSL are set out in s 912A of the Corporations Act. Section 912A(1) provides that:

(a) do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly; and

(aa) have in place adequate arrangements for the management of conflicts of interest that may arise wholly, or partially, in relation to activities undertaken by the licensee or a representative of the licensee in the provision of financial services as part of the financial services business of the licensee or the representative; and

(b) comply with the conditions on the licence; and

(ca) take reasonable steps to ensure that its representatives comply with the financial services laws; and

(d) unless the licensee is a body regulated by APRA--have available adequate resources (including financial, technological and human resources) to provide the financial services covered by the licence and to carry out supervisory arrangements; and

(e) maintain the competence to provide those financial services; and

(f) ensure that its representatives are adequately trained, and are competent, to provide those financial services; and

(g) if those financial services are provided to persons as retail clients--have a dispute resolution system complying with subsection (2); and

(h) unless the licensee is a body regulated by APRA--have adequate risk management systems; and

(j) comply with any other obligations that are prescribed by regulations made for the purposes of this paragraph."

74. A "financial services law" refers to a provision of Chapters 5C, 6, 6A, 6B, 6C and 6D as well as of Chapter 7. It also refers to a provision of Chapter 9 as it applies to a provision referred to in one of those seven Chapters, a provision of Division 2 of Part 2 of the Australian Securities and Investments Commission Act 2001 (ASIC Act) and any other Commonwealth, State or Territory legislation covering conduct relating to the provision of financial services.[65]

When can an AFSL be varied, cancelled or suspended?

75. Division 4 of Part 7.6 is also concerned with the suspension and cancellation of AFSLs. Of interest in this case, which concerns the activities of a representative, is s 915C. It provides for some of the circumstances in which ASIC may cancel or suspend an AFSL after giving the licensee an opportunity to appear, or be represented, at a private hearing before ASIC and to make submissions to ASIC on the matter.[66] Those circumstances occur if:

"(a) the licensee has not complied with their obligations under section 912A;

(aa) ASIC has reason to believe that the licensee will not comply with their obligations under section 912A;

(b) ASIC is no longer satisfied of the matter in whichever of subsection 913B(2) or (3) applied at the time the licence was granted (about whether the licensee, or the licensee's representatives, are of good fame or character);

(c) a banning order or disqualification order under Division 8 is made against the licensee;

(d) a banning order or disqualification order under Division 8 is made against a representative of the licensee and ASIC considers that the representative's involvement in the provision of the licensee's financial services will significantly impair the licensee's ability to meet its obligations under this Chapter."[67]

"(a) the application for the licence was false in a material particular or materially misleading; or

(b) there was an omission of a material matter from the application."[68]

The cancellation or suspension takes effect when written notice of it is given to the licensee.[69]

What is, and what are the responsibilities of, an authorised representative?

76. An "'authorised representative' of a financial services licensee means a person authorised in accordance with section 916A or 916B to provide a financial service or financial services on behalf of the licensee."[70] Section 916A(1) provides that a financial services licensee may give a person a written notice authorising the person to provide a specified financial service or financial services on behalf of that licensee. It is an authorisation given for the purposes of Chapter 7 of the Corporations Act.[71] Any authorisation to provide a financial service that is not covered by the AFSL of the licence holder or that is contrary to a banning order or disqualification under Division 8 of Part 7.6 is void.[72] As a general rule, the holder of an AFSL cannot be the AR of another holder of an AFSL.[73]

77. The holder of an AFSL who authorises an individual as an AR must tell ASIC of the authorisation within 15 business days.[74] Division 6 of Part 7.6 provides for the liability of financial services licensees for representatives. That Division applies to the conduct of any representative of a financial services licensee that relates to the provision of a financial service on which a third person could reasonably be expected to rely and on which that person in fact relies in good faith.[75]

78. Section 917B provides that:

"If the representative is the representative of only one financial services licensee, the licensee is responsible, as between the licensee and the client, for the conduct of the representative, whether or not the representative's conduct is within authority."

Section 917C makes particular provision where a person is an AR of more than one financial services licensee. If the licensee is responsible for the conduct of the AR under Division 6, the client has the same remedies against the licensee as the client has against the AR.[76]

What is a banning order and what is its effect?

79. Depending upon its terms, a banning order is a written order prohibiting a person either from providing any financial services or from providing financial services in specified circumstances or capacities.[77] It is not limited to those who hold an AFSL. The order may prohibit the person against whom it is made from providing a financial service:

(b) for a specified period, unless ASIC has reason to believe that the person is not of good fame or character."[78]

A banning order takes effect, or a variation or cancellation of it, takes effect when it is given to the person against whom it is made.[79]

80. The application of a banning order may be modified in certain circumstances. It may allow the banned person to do specified acts or to do specified acts in specified circumstances even though its terms otherwise prohibit that person from doing those acts or doing them in those circumstances. The modification of the application of the banning order may be made subject to specified conditions. That is the effect of s 920B(3).

81. ASIC cannot grant an AFSL to a person against whom a banning order has been made if to do so would be contrary to that banning order.[80] A person contravenes s 920C if the person engages in conduct that breaches a banning order.[81]

82. Should there be a change in any of the circumstances on which ASIC made a banning order, it may vary or cancel it.[82] ASIC may do that on its own initiative or the person against whom the banning order was made may make an application in accordance with any regulations.[83]

83. ASIC may only make a banning order after giving the person an opportunity to appear, or be represented, at a private hearing before ASIC and to make submissions to ASIC on the matter.[84] The circumstances in which ASIC may make a banning order are set out in s 920A(1). In so far as those circumstances are relevant to JTMJ, they occur if:

(bb) the person becomes an insolvent under administration; or

(e) the person has not complied with a financial services law; or

(f) ASIC has reason to believe that the person will not comply with a financial services law."[85]

84. The expression "financial services law" in s 920A(1) has the same meaning as it does in relation to s 912A(1).[86] In this case, ASIC's position is that JTMJ has been in breach of three provisions found in Chapter 7, which is a financial services law; ss 1041A, 1041H and 1101F(1A).

Section 1041A: market manipulation

85. Section 1041A is headed "Market manipulation". It provides:

"A person must not take part in, or carry out (whether directly or indirectly and whether in this jurisdiction or elsewhere):

(a) a transaction that has or is likely to have; or

(b) 2 or more transactions that have or are likely to have;

(c) creating an artificial price for trading in financial products on a financial market operated in this jurisdiction; or

(d) maintaining at a level that is artificial (whether or not it was previously artificial) a price for trading in financial products on a financial market operated in this jurisdiction."

86. Some of the terms used in s 1041A are defined elsewhere in the Corporations Act. The expression "this jurisdiction" is defined in ss 5(1) and (2) and s 9. As each of the States is a referring State, the effect of the definition is that "this jurisdiction" refers to the whole of Australia.

87. A "financial product" has the meaning given by Division 3 of Part 7.1.[87] In general terms, a financial product is a facility through which, or through the acquisition of which, a person makes a financial investment, manages financial risk or makes non-cash payments.[88] Section 764A(1)(a) makes it clear that a security is a financial product for the purposes of Chapter 7. A "security" includes, among other things, "a share in a body".[89]

88. The expression "financial market" is defined in s 761A to have the meaning given by Division 5 of Part 7.1. Section 767A of Division 5 provides:

"(1) For the purposes of this Chapter, a financial market is a facility through which:

(a) offers to acquire or dispose of financial products are regularly made or accepted; or

(b) offers or invitations are regularly made to acquire or dispose of financial products that are intended to result or may reasonably be expected to result, directly or indirectly, in:

(i) the making of offers to acquire or dispose of financial products; or

(2) However, the following conduct does not constitute operating a financial market for the purposes of this Chapter:

(a) a person making or accepting offers or invitations to acquire or dispose of financial products on the person's own behalf, or on behalf of one party to the transaction only, unless the regulations specify circumstances in which such conduct does constitute operating a financial market and the person's conduct occurs in circumstances so specified;

(b) conducting treasury operations between related bodies corporate;

(c) a person, being the holder of a licence under Australian law relating to the licensing of auctioneers, conducting an auction of forfeited shares;

(d) any other conduct prescribed by regulations made for the purposes of this paragraph."

It is accepted that the ASX is a facility of the sort described in s 767(1)A. The term "transaction" is defined in s 9 but not for the purposes of Chapter 7.

89. Note 1 to s 1041A states that failure to comply with s 1041A is an offence and refers to s 1311(1). Section 1311(1) is concerned with offences generally. Unless a provision of the Corporations Act provides that a person is either guilty, or not guilty, of an offence, s 1311(1) provides that:

(a) does an act or thing that the person is forbidden to do by or under a provision of this Act; or

(b) does not do an act or thing that the person is required or directed to do by or under a provision of this Act; or

(c) otherwise contravenes a provision of this Act;

is guilty of an offence by virtue of this subsection ...".

90. A note to the section states that Chapter 2 of the Criminal Code 1995 (Criminal Code) sets out the general principles of criminal responsibility. Those general principles apply to any offence irrespective of how the offence is created.[90] An offence consists of physical elements and fault elements.[91] A physical element of an offence may be conduct, a result of conduct or a circumstance in which conduct, or a result of conduct, occurs.[92] A fault element for a particular physical element of an offence may be intention, knowledge, recklessness or negligence[93] or another fault element specified by law for a particular physical element of the offence.[94] When a law creates an offence, it may provide that there is no fault element[95] or it may provide different fault elements for different physical elements of the offence.[96] Section 1311 makes no specific provision in relation to the fault element in the offence.

91. Note 2 to s 1041A states that the section is also a civil penalty provision. Section 1317E specifies those provisions that are civil penalty provisions. Section 1041A is among them.[97] If a Court is satisfied that a person has contravened one of them, it must make a declaration of contravention.[98] Once a declaration has been made, ASIC may seek a pecuniary penalty order under s 1317G. Once a declaration of contravention has been made, it is conclusive evidence of the matters it must specify. Those matters include the fact that the Court made the declaration, that the civil penalty provision was contravened, the person who contravened it and the conduct that constituted the contravention.[99]

Section 1041H: misleading or deceptive conduct

92. Section 1041H is concerned with misleading or deceptive conduct. Section 1041H(1) provides that:

"A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive."

Section 1041H(2) goes on to provide that the reference in s 1041H(2) to "engaging in conduct in relation to a financial product includes (but is not limited to) any of the following ..." activities that it then specifies. The activity that is relevant in this case is specified in s 1041H(2)(a) and is "dealing in a financial product". Section 1041H(2)(b) specifies other activities but expressly does so "without limiting paragraph (a)". None of the activities it specifies relate to those engaged in by JTMJ for the purposes of this case.

93. The expression "dealing in a financial product" must be understood in light of s 766C(1) which provides, in so far as it is relevant:

"For the purposes of this Chapter [7], the following conduct (whether engaged in as principal or agent) constitutes dealing in a financial product:

(a) applying for or acquiring a financial product;

94. Unlike s 1041A, a failure to comply with s 1041H is not an offence.[100] Failure to comply may, however, lead to civil liability under s 1041I.[101] Section 1041I provides that a person who suffers loss or damage by conduct of another person that contravened, among others, s 1041H, may recover the amount of the loss or damage. The person may do so by bringing an action against the person who contravened the provision or by any person involved in the contravention.[102] If an action is brought, the person who contravened the provision may obtain relief from liability by establishing that he or she acted honestly within the meaning of

95. Section 1101F(1A) is concerned with the falsification of records. It provides:

"A person must not engage in conduct that results in the falsification of:

(a) a book required to be kept by a provision of this Chapter; or

(b) a register or any accounting or other record referred to in section 1101C."

Failure to comply with s 1101F(1A) is an offence for the purposes of s 1311(1)[104] but it is a defence "... if it is proved that the person acted honestly and that in all the circumstances the act or omission constituting the offence should be excused."[105]

96. The word "books" includes "(a) a register; and (b) any other record of information; and (c) financial reports or financial records, however compiled, recorded and stored; and (d) a document ...".[106] Section 991D is found in Part 7.8 of Chapter 7. It provides that:

"The regulations may impose requirements for the keeping of records relating to all or any of the following:

(a) instructions received by financial services licensees to deal in financial products through licensed markets or through financial markets (whether inside or outside Australia);

97. Regulation 7.8.19 of the Corporations Regulations 2001 (Corporations Regulations) provides that, for the purposes of s 991D, it:

(a) instructions received by a financial services licensee to deal in financial products, on behalf of a client, through licensed markets or through other financial markets (whether inside or outside Australia); and

(b) instructions received by a financial services licensee to deal in financial products, on the financial service [sic] licensee's own account, through licensed markets or through other financial markets (whether inside or outside Australia)."[107]

98. The matters that must be recorded are set out in r 7.8.19(2):

"The financial services licensee must keep records setting out brief particulars of the following matters:

(a) the instructions;

(b) if the instructions were received on behalf of a client - the client;

(c) the person who gave the instructions to the financial services licensee;

(d) the date and time of receipt of the instructions, and the person who received the instructions;

(e) the date and time of transmission of the instructions, and the person who transmitted the instructions;

(f) the date and time of execution of the instructions."

The financial services licensee must keep these records for at least five years after the particulars are created.[108]

99. Section 93AA of the ASIC Act is concerned with written undertakings. It provides that:

"(1) ASIC may accept a written undertaking given by a person in connection with a matter in relation to which ASIC has a function or power under this Act.

(2) The person may withdraw or vary the undertaking at any time, but only with the consent of ASIC.

(3) If ASIC considers that the person who gave the undertaking has breached any of its terms, ASIC may apply to the Court for an order under subsection (4).

(4) If the Court is satisfied that the person has breached a term of the undertaking, the Court may make all or any of the following orders:

(a) an order directing the person to comply with that term of the undertaking;

(b) an order directing the person to pay to the Commonwealth an amount up to the amount of any financial benefit that the person has obtained directly or indirectly and that is reasonably attributable to the breach;

(c) any order that the Court considers appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach;

(d) any other order that the Court considers appropriate."

100. Mr Young's submissions made on behalf of JTMJ focused on two matters in relation to s 1041A of the Corporations Act. Firstly, they focused on what it meant to create or maintain an "artificial price" for shares. Secondly, they focused on the judgment of Mason J in North v Marra Developments Ltd[109] (North) when his Honour considered when something is "calculated" to create a false or misleading appearance with respect to the market for, or the price of, any securities within the meaning of s 70 of the Securities Industries Act 1970 (NSW) (SI Act). Mr Young referred also to the judgment of Gleeson CJ in Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd.[110] (Fame) in which he referred to the judgment of Mason J. Gleeson CJ approved the approach taken by the trial judge to conclude that both the purpose and effect of the conduct of Fame Decorator Agencies Pty Ltd (FDA) had been to create an artificial market price for shares in Jeffries Industries Ltd (JIL). Deputy President Hack SC also adopted the reasoning of Mason J in Re Bond and Australian Securities and Investments Commission[111] (Bond).

101. On behalf of ASIC, Mr Gilbertson distinguished North on the basis that s 70 of the SI Act does not reflect s 1041A of the Corporations Act and submitted that the Tribunal in Bond should not have applied its interpretation. He also distinguished Fame on the basis that it concerned s 998(1) of the Corporations Law whose wording did not reflect that of s 1041A of the Corporations Act. Mr Gilbertson traced the amendments to the Corporations Law in support of his submission that

s 1041A replaces s 997 of the Corporations Act rather than s 998 or any other provision. He also distinguished Donald v Australian Securities and Investments Commission[112] (Donald) on the basis that it considered s 998(1).

B. Section 1041A

102. When I look at s 1041A, it seems to me that it is directed to behaviour that has four essential elements: the person (1) takes part in or carries out (directly or indirectly and whether inside or outside this jurisdiction); (2) a transaction or two or more transactions; (3) that transaction or those transactions are likely to have the specified effect on the trading in financial products on a financial market operated in this jurisdiction; and (4) the specified effect is either that an artificial price is created for trading in those financial products or that the price for trading in them is maintained at an artificial level. I will start with the fourth and, in particular, with what is meant by an "artificial price" or a price that is "artificial" for it matters not what was done if neither effect specified in ss 1041A(c) and (d) transpires.

103. I have found it useful to have regard to the meanings of some of the individual words and to the meanings attributed to the expression in other contexts before turning to its meaning in the context of s 1041A of the Corporations Act. In taking this approach, I am also mindful that the meaning to be attributed to a word or expression can be affected by its context and that, as Lord Halsbury said in Mersey Docks and Harbour Board v Henderson Bros:[113]

"It certainly is not a satisfactory mode of arriving at the meaning of a compound phrase to sever it into its several parts and to construe it by the separate meaning of each of such parts when severed."[114]

104. The ordinary meanings of the word "artificial" include "... 1 made by human effort; not occurring naturally. ..."[115] and "... 2. made in imitation of or as a substitute; not genuine. 3. feigned; fictitious; assumed. ..."[116] The "price" is "... 1 the amount, usually in money, for which a thing is sold or offered. 2 what must be given up or suffered in gaining something ..."[117] The context in which these words is used is that of regulating people's conduct in an environment in which financial products are traded, or may be traded, on a financial market in this jurisdiction. The focus is upon creating an artificial price for trading in those financial products and upon maintaining the price in that market at a level that is artificial. That context suggests that financial products may and will be traded at that price if there is a seller and purchaser willing to trade. There is nothing feigned, fictitious or assumed about the trade that occurs. Consequently, that is not the meaning in which the word "artificial" has been used in s 1041A(c) and (d).

105. Given the nature of a financial market for financial products, it is a thing made by human effort rather than by nature. Therefore, that meaning of "artificial" cannot be the meaning in which Parliament intended the word to be understood. That leaves the meaning that something is not genuine. In s 1041A(c) and (d), that would mean that the amount for which financial products are sold or offered is not genuine or not naturally occurring. Given the environment in which the price of financial products is of concern, that would mean that the amount for which financial products are sold or offered on a financial market in this jurisdiction is not genuine or naturally occurring within that financial market. Speaking of s 70 of the

SI Act, Mason J, with whom Stephen and Aickin JJ agreed, described what genuinely or naturally occurs within a financial market is that which:

"...reflects the forces of genuine supply and demand. By 'genuine supply and demand' I exclude buyers and sellers whose transactions are undertaken for the sole or primary purpose of setting or maintaining the market price. It is in the interests of the community that the market for securities should be real and genuine, free from manipulation. The section is a legislative measure designed to ensure such a market and it should be interpreted accordingly."[118]

106. The legislative measure to which his Honour referred provided:

"A person shall not create or cause to be created or do anything which is calculated to create, a false or misleading appearance of active trading in any securities on any stock market in the State, or a false or misleading appearance with respect to the market for, or the price of, any securities."[119]

" I agree with Hope and Samuels JJA, in rejecting the suggestion that the section strikes only at fictitious or colourable transactions. Transactions which are real and genuine but only in the sense that they are intended to operate according to their terms, like fictitious or colourable transactions, are capable of creating quite a false or misleading impression as to the market or the price. This is because they would not have been entered into but for the object on the part of the buyer or of the seller of setting and maintaining the price, yet in the absence of revelation of their true character they are seen as transactions reflecting genuine supply and demand and having as such an impact on the market.

When purchases have been made of shares in a company at or about a particular level for the purpose of setting and maintaining a market price for those shares there is a breach of the statutory prohibition. At the very least purchases have then been made which are calculated to create 'a false or misleading appearance with respect to the market for, or the price of' the shares. In reality the purchases are calculated to create a false market or false price. The false or misleading appearance is that the market, in the absence of any disclosure that a market support operation is on foot, appears to be real or genuine, there being no overt sign of market support or manipulation.

In passing I note that it is enough to breach the section that the activities are calculated to create a false or misleading appearance. It is not necessary that they do in fact create that appearance. ..."[120]

108. This passage refers both to the object of the buyer or seller in entering the transaction and what the activities were calculated to achieve. Section 70 of the

SI Act referred to things "calculated to create, a false or misleading appearance of" certain matters or with respect to certain matters. Mason J said:

"... In this setting, 'calculated' means 'designed' or 'intended' rather than 'adapted' or 'suited'. It is not altogether easy to translate the generality of this language into a specific prohibition against injurious activity, whilst at the same time leaving people free to engage in legitimate commercial activity which will have an effect on the market and on the price of securities. Purchases or sales are often made for indirect or collateral motives, in circumstances where the transaction will, to the knowledge of the participants, have an effect on the market for, or the price of, shares. Plainly enough it is not the object of this section to outlaw all such transactions."[121]

109. In the case of Fame, the New South Wales Court of Appeal considered ss 995 and 998 of the Corporations Law. As considered by the Court, those sections provided:

"998(1) A person shall not create, or do anything that is intended or likely to create, ... a false or misleading appearance with respect to the market for, or the price of, any securities."

"995(2) A person shall not, in or in connection with:

engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

(4) Nothing in the following provisions of this Part ... shall be taken as limiting by implication the generality of subsection (2)."

110. The facts of the case appear in the headnote:

" F held both ordinary shares and converting preference shares in J, a listed public company. J failed to pay a dividend on the converting preference shares and this entitled each holder of those shares to accelerate the right to convert into ordinary shares. The number of ordinary shares to be issued on conversion was based on the weighted average sale price of ordinary shares during the 20 trading days immediately prior to the conversion date. Hence the lower the average sale price of ordinary shares during that period, the greater the number of ordinary shares that would need to be allotted to the holders of converting preference shares who elected to accelerate their shares in that manner.

Shortly before the close of trading on the last day of the applicable 20 day period, F sold a number of ordinary shares which had the effect of bringing the market price down substantially. The issue of whether these sales should bind J to issue a larger number of ordinary shares on conversion that it otherwise might have was considered in Fenwick v Jeffries Industries Ltd (1995) 13 ACLC 1334.

Cohen J found that F acted in contravention of CL ss 995 and/or 998. ..."[122]

111. At midday on the day on which Fame sold the ordinary shares, there were eight current offers to buy shares in Jeffries at various prices between 35 cents and 13 cents per share. Those offers had been entered in the SEATS system by date. As it happened, the dates matched the offers in descending order from 31 to 9 March 1995. Fame contacted its stockbroker and instructed him to sell 170,000 shares in Jeffries down to a price of 13 cents and to leave the sales until just before the close of the market. The result was that all outstanding offers to purchase shares were accepted. Mr Cameron, who had placed the second oldest offer at 14 cents said that he had not, in his wildest dreams, thought that anyone would sell Jeffries' shares at

14 cents but sometimes it happens. There was no evidence from James Capel, which had placed the oldest bid at 13 cents.

112. Like s 70 of the SI Act, s 998(1) of the Corporations Law has an element of intention. In the former, it is encompassed within the word "calculated" and in the latter within the word "intended". There is, though, a difference between the two sections and it lies in what it is that is prohibited. In the case of s 70 what is prohibited is that which is "calculated" to create a certain appearance. What is prohibited under s 998(1) is that which is "intended or likely to create" a certain appearance. On its face, s 998(1) is wider than s 70 in that it brings within its prohibition not only that which is intended but that which is likely to have a certain effect. This difference does not appear to be made in the following extract from the judgment of Gleeson CJ, with whom Powell JA agreed, when he said in Fame:

" Section 998 aims to preserve the integrity of the share market. Markets, in reflecting the interaction of forces of supply and demand, may suffer from a variety of imperfections, including mismatches of information, without such imperfections destroying their integrity. However, the conduct of a seller of thinly traded shares, calculated to effect sales at the lowest, rather than the highest, obtainable price, and timed so as to deflect the possibility of some purchasers bidding up the price, had both the purpose and effect of creating, temporarily, an artificial market and price.

There is a difference between the market and the individual buyers who had current bids immediately before the close of trading on 28 April 1995. The effect of Fame's conduct upon the market for shares in Jeffries, and the market price, was not merely incidental. The central object of such conduct was to influence the market price.

As Mason J acknowledged in North, in individual cases there may be difficulty in determining whether the conduct of a buyer or a seller, unless fully disclosed, falsifies the assumptions upon which a market operates, and damages the integrity of the market. In the present case, however, Cohen J was right to conclude that both the purpose and the effect of Fame's conduct was to create an artificial market price for shares in Jeffries and that such conduct contravened s 998."[123]

113. Section 995(2) is a catch all provision and, to some extent, overlaps

s 998. It is a provision that makes no reference to the intention of the person whose activities are under consideration. The prohibition is framed in terms of the nature of the conduct and not upon the intention behind it. The conduct must be "in or in connection with ... any dealing in securities". Of that expression, Gleeson CJ said:

"... The expression 'in, or in connection with' means that the section is not restricted to conduct which amounts to, or is part of, a dealing in securities.

In the present case, Cameron Securities and James Capel were not misled or deceived, and they have no complaints to make about the conduct of Fame. The offers to sell shares to Cameron Securities and James Capel, or, more accurately, the acceptances of their offers to buy, and the resulting contracts of sale and purchase did not, in themselves, considered in isolation, involve misleading or deceptive conduct. They had, and were intended to have, the legal effect which all parties to the dealings wished to achieve.

However, the conduct of Fame in connection with the sales was, for the reasons given above in relation to s 998, likely to mislead or deceive third parties who were interested in the market for shares in Jeffries, who were entitled to assume that market prices reflected the genuine interaction of forces of supply and demand, and who would not have expected that the seller on 28 April 1995 was seeking to sell to the lowest bidders and eliminate the possibility of a higher bidder emerging.

The finding of a contravention of s 995 was also correct."[124]

114. In this passage, Gleeson CJ has referred to intention in the context of

s 995(2) but it seems to me that he has not gone so far as to say that intention to achieve the desired effect must be established in order to establish a breach of s 995(2). He has expressed his conclusion both in terms of intention and of the effect they had but they are findings that stand alone_._ Fame's offers to buy "... had, and were intended to have, the legal effect which all parties to the dealings wished to achieve" when its offers were matched with the offers to sell that were on the market. That was consistent with the facts found regarding Fame's conduct but it seems to me that his Honour has not gone so far as to say that s 995(2) would only be breached if the person intended the particular actions to have, or be likely to have, the prohibited effect.

115. An important point that arises from the judgment of Gleeson CJ in Fame is that the action under scrutiny is not examined in isolation from other activities that were happening in the financial market or even in isolation from other activities in that market that might have been in contemplation. The particular activities under scrutiny in that case were the particular offers to sell shares in JIL.

It can be said that those offers to sell were real in the sense that Fame was not engaged in pretence. It intended to sell at the nominated price. Those offers to sell resulted in sales when Fame's offer to sell was matched with the offers to purchase at various prices. As illustrated by the sales to James Capel and Cameron Securities, the sales of shares in JIL that resulted were real sales. They were not a sham. There was no arrangement behind the scenes that would have restored the parties to the sales to their former positions. The various prices at which Fame sold its shares were real in the sense that the offers to buy at those prices had been placed by those who wished to purchase at those prices. Each sale was genuine but that genuineness was not enough to cloak the original offers to sell with genuineness because of the effect of those individual genuine sales on the financial market. The sales resulting from the offers distorted what would otherwise have been the price at which the shares would have been traded between a purchaser seeking to obtain the shares at the lowest price obtainable on that market and a seller seeking to obtain the highest price obtainable. The offers were made at a time that deflected the possibility of a potential purchaser's making an offer to purchase at a price higher than those already offered.

116. The principles in North were considered by Deputy President Hack in Bond. The context was that of s 1041A of the Corporations Act and he said:

" Whilst concerned with different language, much of what Mason J said is equally true of s 1041A of the present statute. It is not easy to translate the generality of the language into a specific prohibition whilst leaving people free to engage in legitimate transactions that will have an effect on the market and the prices in it. But, as it seems to me, the key to s 1041A of the Act is the existence of genuine buyers and genuine sellers. In common with the section under consideration in Marra [North], s 1041A of the Act seeks to ensure that the market reflects the forces of genuine supply and demand."[125]

117. He then proceeded to analyse the transactions undertaken by Mr Bond:

What effect then did Mr Bond's transactions have on the market? It is the case that the price at which Prime shares were traded in the market went up from $0.89 to $1.01 in a short space of time and then returned to about $0.90. But despite that I do not consider that the effect of the transactions was to create an artificial price because the trades were made at prices, which, at the time, reflected the forces of genuine supply and genuine demand.

Mr Bond, on behalf of Strategic's customers, was a genuine buyer who was prepared to purchase up to 2.5 m shares at prices up to $1.02. The sellers were persons who had offered their shares for sale at prices ranging from $0.89 to $1.01. There is no reason to suppose that the sellers, including Mr Bond, were other than genuine in the sense that they had made a judgment about the prices at which they were willing to sell. There was nothing 'artificial' about the prices paid merely because they happened to exceed the prices paid by other purchasers prior to, and after, the purchases by Mr Bond. At the times when Mr Bond made his purchases the value of Prime shares was that reflected by the prices offered and accepted. The value of Prime shares was the price that Mr Bond, a willing purchaser, was prepared to buy at, and the price at which willing sellers (including Mr Bond) were prepared to sell at. Thus the prices reflected fair market value ....

The Commission relied upon evidence of Mr Russell McCrory, a retired stockbroker with vast experience in share trading but, with respect, it seems to me that much of what the Commission asked him to express an opinion on, misses the point. His evidence was that, ordinarily, to acquire a sizeable parcel of shares in a stock like Prime:

'... one would have to be prepared to be patient and execute the order over quite a few days, keeping a close watch on the trading screen and acquiring any shares that were offered at an acceptable price and also leaving a bid or bids for some shares at lower prices in case a seller offered stock at the best bid price.'

'If for some reason the stock was required to be purchased much more urgently then one would have to bid the price up to a level where the required volume was seen to be available in the dealing screen.'

That, as it seems to me, is precisely what Mr Bond did and accords with the view I have taken on the forces at work in the market as a consequence of Mr Bond's transactions. Mr Bond's judgment, which has not been criticized, was that it was necessary to undertake the purchase more urgently, in part because he had advance notice of a favourable report about the value of Prime shares and in part because, as Mr Bond said and as Mr McCrory accepted, market movements are scrutinized by 'day traders' who might seek to take advantage of a large purchase order acquired in the 'patient' manner suggested by Mr McCrory. Moreover, as Mr McCrory agreed, purchasing shares is not an exact science.

Thus I am not satisfied that Mr Bond's trading had the effect of creating an artificial price in Prime shares and, accordingly, I am unable to conclude that his actions breached s 1041A of the Act. That part of the Commission's case is not made out."[126]

118. Consistent with the principle he has drawn from North, Deputy President Hack has focused on the existence of the genuine buyer, in the form of

Mr Bond, and the genuine sellers on the market. He has accepted that Mr Bond's activities led to a rise in the price of Prime shares from $0.89 to $1.01 in a short space of time and then to a return to $0.90. That price variation is not seen as artificial because it was Mr Bond's judgment that he had to purchase Prime shares more urgently than would be expected of a day trader who would scrutinise the markets daily and patiently for the best price when acquiring a large volume of shares.

119. The case of Bond gives rise to a question regarding the place of a person's reasons and intent in taking part in, or carrying out, the transaction that is considered under s 1041A. The Tribunal in that case clearly had regard to Mr Bond's reasons for placing the orders to purchase shares, which led to genuine purchases, and yet s 1041A makes no reference to a person's reasons or intent. At the same time, a financial market is a place in which people trade for a variety of reasons and so with varying appetites for buying and selling financial products and with varying pressures upon them to do so. They may have any number of reasons for doing so and those reasons may extend well beyond the mere fact of the acquisition and disposition of the financial products themselves. Acquisition and disposition may, for example, be undertaken by a corporation wishing to gain or relinquish control of another or by an individual as part of a financial management plan. People will approach the financial market with varying capacities for patience and with varying external constraints upon that patience. People bring all of those things and more to the financial market and they make up the genuine sellers and buyers whose activities in that market set the price for trading in financial products upon it. As Mason J said in North of s 71 and as Deputy President Hack echoed in Bond, s 1041A cannot be intended to outlaw all such transactions.

120. The question of reasons and intent were considered by Heerey J in the earlier case of Donald when he considered the concept of mens rea in the context of

s 998(1) of the Corporations Law. He noted first that breach of s 998 not only gave rise to a banning order under s 829(d) of the Corporations Law but that it was a criminal offence by virtue of s 1311 and Schedule 3 and then continued:

"... Whether contravention requires mens rea is a question of statutory construction. The leading authority on the principles to be applied is the decision of the High Court in He Kaw Teh v The Queen [1985] HCA 43; (1985) 157 CLR 523. Although mens rea means, literally, a guilty mind, it may take the form of different states of mind or indeed different states of mind in respect of different elements of the same offence (at 568 per Brennan J). Amongst other things the subject matter or character of the legislation must be looked at. As Dawson J said (at 595):

'Conduct prohibited by legislation which is of a regulatory nature is sometimes said not to be criminal in any real sense, the prohibition being imposed in the public interest rather than as a condemnation of individual behaviour. On the other hand, if a prohibition is directed at a grave social evil, the absolute nature of the offence may more readily be seen, particularly if proof of intent would be difficult and would represent a real impediment to the successful prosecution of offenders.'

24 In Nomura [Australian Securities Commission v Nomura International PLC[127]] Sackville J was also concerned with the third limb of s 998(1) as identified above. His Honour found the contravener in fact knew that its conduct was likely to create a false and misleading appearance of active trading and as to the market for the price of securities. However his Honour went on to note his view that s 998(1) does not require proof of knowledge, at the time of the allegedly contravening conduct, that a false and misleading appearance was likely to be created by that conduct. After referring to He Kaw Teh his Honour said (at 571):

'S 998(1) embodies alternatives. The subsection specifically proscribes the conduct intended to create a false or misleading appearance of active trading or with respect to the price of any security. The introduction of the expression 'likely to create' in

s 998(1) of the Corporations Law was clearly designed to cover conduct other than conduct intended to create a misleading appearance. By the words 'likely to create', the drafter sought to prohibit conduct which, objectively assessed, was likely to create a false or misleading appearance and thus be likely to detract from the operation of the ordinary forces of supply and demand. The severity of the consequences attaching to a breach of s 998(1) are sufficiently recognised by construing 'likely' to mean more probable than not.

This does not mean, of course, that the third limb of s 998(1) involves no mental element. Doubtless, it is necessary to show that the alleged contravener intended to carry out the conduct relied on as creating the likelihood of a misleading or deceptive appearance. But I do not think it is necessary to prove that the alleged contravener was aware that the conduct would be likely to have a false or misleading appearance of the kind specified in s 998(1). However, as I have already indicated, it is not necessary to express a final view on this issue.'

I respectfully agree with his Honour's obiter view. It is also supported by an examination of other provisions of Div 2 of Pt 7.11 where the statute specifically provides for carefully differentiated states of minds, and in some cases no state of mind at all. ... "[128]

121. In Australian Securities Commission v Nomura International PLC (Nomura), Sackville J had found that Nomura International PLC (Nomura) knew that its conduct was likely to create a false and misleading appearance of active trading and as to the market for the price of securities contrary to s 998(1). In Donald, Heerey J had a case in which Mr Donald had made his intent clear and so could place it squarely within the activity that "... is intended ... to create ... a false or misleading appearance with respect to the market for, or the price of, any securities." He did not need to bring it within the more narrow confines of prohibited activity being that which "... must not create, or do anything that is ... likely to create ... a false or misleading appearance with respect to the market for, or the price of, any securities." This appears from the following passage of his Honour's judgment:

"21 Applying those principles I have no doubt that it was open to the Tribunal to find that what the applicant did was likely to create a false or misleading appearance with respect to the price of Burswood shares. I accept, as senior counsel for the applicant submitted, that share trading calls for skill and judgment. Timing can be critical. For example, a buyer might have to pay a premium over the market price to acquire a substantial parcel of a thinly traded stock. But the problem with this argument is that it is not what the applicant says happened. In his own carefully considered statement, made in circumstances where he was subject to a Commission enquiry, he said that the price had been 'unsatisfactory' and 'unreasonably low' compared with their 'true value' and that he intended to have the shares 'moved to a more reasonable level'.

22 This was plainly an artificial or managed manipulation of the price. In his own words, the applicant wanted to give the Burswood shares 'a bit of a nudge upwards' so that the price appeared higher than it would if the market had operated in accordance with the normal expectations of participants, with buyers buying for the lowest price obtainable and sellers selling for the highest."[129]

122. Both parties have drawn my attention to papers that have considered whether mens rea must be established before a breach of s 1041A or of s 998(1) (in so far as it does not refer to "anything that is intended") can be established. I will look first to the article by Hui Huang entitled "Redefining market manipulation in Australia: The role of an implied intent element".[130] It is a lengthy and comprehensive analysis of s 1041A and the repealed ss 997 and 998. I think that its Conclusion is a fair, though brief, distillation of the essential arguments the author advances:

"As a result of the Financial Services Reform Act 2001 (Cth), the Australian market manipulation law has undergone significant changes, one of which is the removal of the explicit requirement of 'intent' from the wording of relevant provisions. Due to the difficulties in defining market manipulation and the lack of case law in this area, it remains unclear, however, whether the manipulation law is now devoid completely of any mental element. This has caused serious concerns, given the stiff liability attached to market manipulation.

This article argues that although the word 'intent' has been removed from the current legislation, it is still to be implied into its provisions. For criminal liability, the Criminal Code supplies the fault elements, albeit with some technical problems with its application. This is termed the statutorily implied intent approach. In civil penalty cases where the Criminal Code has no operation, intent should be implied through the concept of 'artificiality'. This is dubbed the self-implied intent approach as 'intent' is inherently embedded in the concepts of 'an artificial price' and 'a false and misleading market'.

The argument for implying intent in civil proceedings is advanced on several grounds. First, while the requirement of intent is the distinction between a civil penalty and a criminal offence in regard to some provisions in the Corporations Act, this is not so in the case of market manipulation due to the special nature of market manipulation. Secondly, the idea of formulating a purely objective test of manipulation is not feasible as it has serious conceptual and practical defects. The intent element plays a pivotal role in distinguishing between manipulative and non-manipulative conduct. Further, the general intent to be judicially developed through the self-implied intent approach may represent an improvement on the specific intent requirement found in the former provisions. Finally, the relevance of intent has been confirmed by a comparative study of other common jurisdictions including the United States, the United Kingdom and New Zealand."[131]

123. My attention was also drawn to another article written in two parts. In "Australian Green Shoes, price stabilisation and IPOs - Part 2",[132] Anton Trichardt analyses s 1041A. He noted that the four fault elements specified in s 5.1(1) and defined in ss 5.2. 5.3. 5.4 and 5.5 of the Criminal Code would apply to any offence by an individual but that the application of s 769B(3) of the Corporations Act meant that slightly different fault elements had to be established if the offence were committed by a corporation under s 1311.[133] With regard to the civil penalty provision that is

s 1317E and the Court's powers to make pecuniary penalty orders under s 1317G and compensation orders under ss 1317H and 1317HA when a person has contravened a civil penalty provision, Anton Trichardt wrote:

" These provisions significantly enhance the powers of ASIC because they enable the corporate regulator to bring a civil penalty application even if it is not possible to prove the fault elements necessary for a criminal prosecution. ... Despite the fact that s 1041A of the Corporations Act 2001 (Cth) is a civil penalty provision with a quasi criminal nature, the temptation to subjectify the interpretation of the provision by reading into it a requirement of calculation or intention as contemplated in North v Marra Developments Ltd ... and Fame Decorator Agencies v Jefferies Industries Ltd [sic] ... should be resisted because Parliament has chosen to remove the words of purpose or intent from the present market manipulation provision. By reading into s 1041A of the Corporations Act 2001 (Cth) a requirement of intent or purpose, an important distinction between the section as a civil penalty provision and as an offence will be negated. The requirements of artificiality and effects will arguably ensure that s 1041A of the Corporations Act 2001 (Cth) does not result in limitless liability in respect of legitimate commercial activity which has an effect on the market or the price of securities.

This is because in the case of a civil penalty application, the market misconduct provisions such as s 1041A of the Corporations Act 2001 (Cth) are not read with the Criminal Code. ... Liability under the financial services penalty regime is objectively determined. Civil penalties therefore provide a flexible alternative to enforce the market misconduct provisions of the Corporations Act 2001 (Cth) to ensure the integrity of the financial market. ...Although the defendants in civil penalty proceedings are not subject to imprisonment, they face significant pecuniary penalties. ... Potentially, the application of civil penalties will act as a deterrent to market misconduct."[134]

124. As helpful as these papers are, I think that I have to go back to the words of s 1041A and its place in the Corporations Act. That I must do so is clear from the judgment of Hayne and Heydon JJ said in Shi v Migration Agents Registration Authority:[135]

" As this Court has so often emphasised ... in recent years, questions presented by the application of legislation can be answered only by first giving close attention to the relevant provisions. Reference to decided cases or other secondary material must not be permitted to distract attention from the language of the applicable statute or statutes. Expressions used in decided cases to explain the operation of commonly encountered statutory provisions and their application to the facts and circumstances of a particular case may serve only to mask the nature of the task that is presented when those provisions must be applied in another case. That masking effect occurs because attention is focused upon the expression used in the decided cases, not upon the relevant statutory provisions."[136]

125. My reason for doing so is illustrated by the following extract from the judgment of Brennan J in He Kaw Teh v The Queen.[137] It is in the context of whether mens rea had to be established in order to establish that a criminal offence had been committed but its approach is equally applicable to an analysis of s 1041A:

"... The penalties of criminal law cannot provide a deterrent against prohibited conduct to a person who is unable to choose whether to engage in that conduct or not, or who does not know the nature of the conduct which he may choose to engage in or who cannot foresee the results which may follow from that conduct (where those results are at least part of the mischief at which the statute is aimed). It requires clear language before it can be said that a statute provides for a person to do or to abstain from doing something at his peril and to make him criminally liable if his conduct turns out to be prohibited because of circumstances that that person did not know or because of results that he could not foresee. However grave the mischief at which a statute is aimed may be, the presumption is that the statute does not impose criminal liability without mens rea unless the purpose of the statute is not merely to deter a person from engaging in prohibited conduct but to compel him to take preventive measures to avoid the possibility that, without deliberate conduct on his part, the external elements of the offence might occur. A statute is not so construed unless effective precautions can be taken to avoid the possibility of the occurrence of the external elements of the offence. In Lim Chin Aik ... [Lim Chin Aik v The Queen [1963] A.C., at p. 174], Lord Evershed speaking for the Judicial Committee said:

'But it is not enough in their Lordships' opinion merely to label the statute as one dealing with a grave social evil and from that to infer that strict liability was intended. It is pertinent also to inquire whether putting the defendant under strict liability will assist in the enforcement of the regulations. That means that there must be something he can do, directly or indirectly, by supervision or inspection, by improvement of his business methods or by exhorting those whom he may be expected to influence or control, which will promote the observance of the regulations. Unless this is so, there is no reason in penalizing him, and it cannot be inferred that the legislature imposed strict liability merely in order to find a luckless victim.'

The requirement of mens rea is at once a reflection of the purpose of the statute and a humane protection for persons who unwittingly engage in prohibited conduct.[138]

126. The same approach is true of s 1041A. Quite apart from its omitting to make any mention of mens rea whether by that name or by reference to, for example, purpose, intent or calculation, what is the purpose of s 1041A? Its purpose is to prohibit the conduct it describes where that conduct has the effect it describes. Although the section is headed "Market manipulation" and the literature often refers to it as regulating market manipulation, I think that it is misleading to do so for it draws attention from the words of s 1041A, which are binding, to those of its heading, which are not part of the section at all[139] and so cannot be taken into account. It is misleading because the very meaning of "manipulate" carries with it the suggestion that the market has been controlled or influenced to the advantage of the person exerting that control or influence. That follows from the ordinary meaning of "manipulate" i.e. "...2. to control or influence someone or something cleverly and unscrupulously, especially to one's own advantage. 3. to give false appearance to something, change its character, etc ...".[140] As I said, though, the heading is not taken to be part of the Corporations Act[141] and I will not allow it to distract me further from the words of the section.

127. It seems to me that the reasoning of Heerey J in Donald in relation to

s 998(1), in so far as it referred to a person's not creating or doing anything likely to have the described effect is equally applicable to s 1041A of the later Corporations Act. Section 998(1) does refer to actions that are intended to have that described effect but I am not concerned with that aspect at the moment. In its wider sense,

s 998(1) does not refer to mens rea by that name or by reference to purpose, intent or calculation and nor does s 1041A. Neither refers to a reason. Both exist in legislation in which reference is made to a mental element of some sort in other provisions. Section 1041A is directed to an effect as is s 998(1) although s 998(1) is wider in that it also draws in an intended effect. Both provisions are directed to the regulation of activity in circumstances in which proof of intent is likely to be difficult and the requirement that those engaged in that activity had to have a particular intent would represent a real impediment to the effectiveness of the regulatory scheme. These matters lead me to the view that a breach of s 1041A will be established if each of its criterion is met and without any reference to a mental element on the part of the person whose actions are under consideration.

128. It seems to me that the part that s 1041A plays in the Corporations Act as a whole reinforces this view. It is a section that sets one of the standards, as it were, for proper and appropriate trading in financial products. A person may be in breach of it but, whether or not consequences follow from that breach, depends upon matters external to s 1041A itself.

129. Whether or not the consequence of being prosecuted for a criminal offence follows a breach depends upon whether the person had one or other of the mental elements prescribed in the Criminal Code and whether or not the Director of Public Prosecutions (DPP) thinks it an appropriate case to prosecute. Whether or not the consequence of a breach is a declaration by a Court under s 1317E that the person has contravened a civil penalty provision depends upon whether ASIC applies under

s 1317J for such a declaration. Whether or not the declaration leads in turn to a pecuniary penalty order under s 1317G or a compensation order under s 1317H depends upon whether ASIC[142] or, in the case of compensation order, the corporation, responsible entity or registered scheme[143] applies for it. Whether or not a banning order is made against the person depends upon whether ASIC makes it under s 920A.

130. Whether or not all or any of these consequences follows from a breach of s 1041A will depend upon whether or not ASIC decides that it is appropriate to refer it, in the case of a criminal prosecution, to the DPP or, in other instances, to the Court. In the case of a criminal prosecution, the person's state of mind will be relevant for it is essential that the person's actions are accompanied by the requisite mental element. It is to be expected that the person's state of mind will also be relevant to ASIC in deciding whether or not it should take other steps to obtain a declaration of a breach of a civil penalty provision or to make a banning order. It is to be expected that, in making its decision, ASIC will have in mind the person's mental state as just one of the factors it will take into account in considering whether to take action in respect of the breach. If for no other reason, the person's mental state will be relevant in considering whether to apply for a declaration of contravention of a civil penalty provision. Section 1317S(2) provides that, if proceedings for a contravention of a civil penalty provision are brought against a person, a court may give relief if, among other matters, the person has acted honestly.[144] The word "honestly" has been considered in the context of s 1317S(2) in a number of cases including Australian Securities and Investments Commission v Macdonald (No 12)[145] when Gzell J said:

"22 In my view a person acts honestly for the purposes of Section 1317S(2) and Section 1318(1), in the ordinary meaning of that term, if that person's conduct is without moral turpitude in the sense that it is without deceit or conscious impropriety, without intent to gain improper benefit or advantage and without carelessness or imprudence at a level that negates the performance of the duty in question. That conclusion may be drawn from evidence of the person's subjective intent. But a lack of such subjective intent will not lead the Court to conclude that a person has acted honestly if a reasonable person in that position would regard the conduct as exhibiting moral turpitude."[146]

131. ASIC has recognised that not all breaches of the Corporations Act necessarily warrant its taking action. It has issued Regulatory Guide RG 108 - "No-action letters" - which outlines some of the issues that it will take into account when formally deciding that it will issue a no-action letter. Such a letter will state that ASIC does not intend to take regulatory action over a particular state of affairs or over particular conduct. It will only give a no-action letter where it would serve a clear regulatory purpose (such as business facilitation) to do so or it would not advance the policy of the Corporations Act to take other regulatory action in relation to the conduct in question.[147] In so far as they are relevant in this case, ASIC will consider whether or not to give a no-action letter in light of its regulatory goals of:

"(a) promoting consumer confidence in using financial services ... (including informed decision making);

(b) promoting the provision of efficient, honest and fair financial services ... by all licensees and their representatives; and

(c) supporting confident use of financial markets ... by consumers and market participants.'[148]

132. Since the hearing of this matter and since writing the above, I found that Goldberg J had considered both ss 1041A and 1041B in Australian Securities and Investments Commission v Soust[149] (Soust). The parties have since drawn it to my attention. Section 1041B prohibits a person from doing, or omitting to do, an act that has, or is likely to have the effect of creating, or causing the creation of, a false or misleading appearance of certain things. Those things include the price for trading in financial products on a financial market.[150] Goldberg J considered North, Fame and Donald. He did so after finding that a term of an executive service agreement between Select Vaccines Limited (Select Vaccines), its Managing Director and Chief Executive, Dr Soust, and the trustee company of the Soust Trust related to the payment of a short-term bonus to Dr Soust. A crucial determining factor in whether a bonus was paid at all was Select Vaccines' share price at the close of trading on

133. Twenty five minutes before the close of trading on the ASX on

31 December 2007, Dr Soust telephoned his sharebroker and asked him to purchase $2,550 worth of Select Vaccines' shares on account of his mother. The bid for the shares was entered in the market approximately 14 minutes before the close of trading and immediately three trades were transacted to fill the bid at 2.4 and 2.5 cents per share. Given the volume at each price, the average purchase price for each was 2.45 cents and, with brokerage and GST, Dr Soust paid $2,660 for the shares. These were the only shares traded on that day. Goldberg J found that Dr Soust's trades meant that the price of Select Vaccines' shares increased from 2 cents immediately before the trades to 2.5 cents per share immediately after the trade representing an increase of 25%. Over the calendar year, it had increased from 2.1 cents on the last day of trading in 2006 to 2.5 cents on 31 December 2007. As a result of the increased price and the wording of the Executive Services Contract, a short-term bonus was payable to Dr Soust. But for Dr Soust's trades, none of these things would have transpired.

"89. The fundamental issue to address is what is meant by an 'artificial price'. The expression 'artificial price' is defined in the Shorter Oxford English Dictionary as 'constructed, contrived', 'not natural though real' and 'not real'. The expression 'natural' is defined as 'in the usual or ordinary course of things' or 'in the usual course of nature'.

90. Having regard to the context in which the expressions 'artificial price' and 'false or misleading appearance' appear, I consider that the expression 'artificial price' in s 1041A connotes a price created not for the purpose of implementing or consummating a transaction between genuine parties wishing to buy and sell securities, but rather for a purpose unrelated to achieving the outcome of the interplay of genuine market forces of supply and demand.

I consider that the reasoning of Mason J in North v Marra Developments Ltd (supra) (par [83] above) in relation to the creation of a false or misleading appearance of active trading and the creation of a false or misleading appearance with respect to the market for, or the price of, securities is equally applicable to the creation of an artificial price for trading in securities. That is to say, the reasoning applies to ss 1041A and 1041B(1)(b).

91. It is fundamental to the working of the free market forces of securities exchanges such as the ASX that buyers are concerned to buy securities at the lowest possible price and sellers are concerned to achieve the highest possible price. Any different approach to the price for which securities are traded is a distortion of the interplay of the open market forces of supply and demand.

92. A consideration of the scope of s 1041A is complicated by the fact that the section has a heading "Market Manipulation". Section 13(3) of the Acts Interpretation Act 1901 (Cth) provides that headings to sections do not form part of the Act. It is therefore necessary to be careful in equating the act of creating an artificial price for shares or securities with manipulation of the market.

93. A guide as to the legislative intention enshrined in the expression 'artificial price' is found in the Explanatory Memorandum for the Futures Industry Bill 1986 (par [75] above). It is apparent from par 288 of that Memorandum (par [75] above) that the draftsman and the Parliament had in mind the observations of Mason J in North v Marra Developments Ltd (supra) at 58-59 (par [83] above). Although Mason J was analysing s 70 of the Securities Industry Act 1970 (NSW) which proscribed the creation of 'a false or misleading appearance of' trading in shares, I consider that his observations are equally applicable to the interpretation of 'artificial price' in s 1041A. Mason J focussed on the intention or purpose of the conduct of a relevant buyer or seller in market. His Honour was concerned to ensure that market prices reflected the operation of the genuine forces of supply and demand.

94. The defendant's submissions proceed on the basic assumption that so long as there was a seller in the market with a posted or 'ask' price who was independent of, and not connected or associated in any way with, a person such as the defendant who was wanting to buy at that price to achieve his purpose of increasing the price of Select Vaccines shares on the market there was no creation of an 'artificial' price for those shares, nor was there the creation of a false or misleading appearance with respect to the price for trading in them.

95. This assumption is misplaced. It places emphasis only on the existence of a genuine seller and fails to take into account that there also needs to be, as Mason J observed in North v Marra Developments Ltd (supra), a genuine buyer whose purpose in buying the shares is to achieve a genuine purchase at the lowest possible price and thereby reflect the forces of genuine supply and demand. The defendant was not such a genuine buyer. His purpose in buying the shares was rather to set the market price. Mason J excluded such a buyer from the equation of the interplay of the forces of genuine supply and demand.

96. The defendant did not wish to acquire or own shares in Select Vaccines on 31 December 2007. Further, there was no evidence that his mother wished to do so. Indeed, the defendant knew, because of Select Vaccines' Share Trading Policy, he was prohibited because of his role as a director in Select Vaccines from acquiring shares in Select Vaccines on 31 December 2007. What he wanted to do was to have the share price in Select Vaccines increase at the close of the trading for the 2007 year. He was not intending or proposing to buy shares in Select Vaccines at the lowest price which he could on the market. He could only achieve his object, that is to qualify for the bonus, by ensuring that the price for trading in Select Vaccines shares increased.

97. Because of the defendant's familiarity with 'market depth' information about Select Vaccines shares, he knew that by placing the order to purchase the Select Vaccines shares at market price he would thereby be able to move the share price up to 2.4 cents per share and then 2.5 cents per share by placing an order to purchase $2,550 worth of shares, having regard to the number of shares offered for sale at those prices.

98. I am therefore satisfied that at the time the defendant spoke to Bell Potter at 1.45 pm on 31 December 2007 and gave instructions to purchase the Select Vaccines shares on market he took part in, and carried out, a transaction that had the effect of creating an artificial price for trading in Select Vaccines shares on the ASX. This resulted in a contravention of s 1041A(c) of the Act.

99. I am further satisfied that by giving this instruction to Bell Potter the defendant committed an act which had the effect of creating a false and misleading appearance with respect to the market for and the price for trading in Select Vaccines shares on the ASX. This resulted in a contravention of s 1041B(1)(b) of the Act."[151]

135. The final two paragraphs of this passage are cast in terms that make no reference to Dr Soust's intentions and yet it is clear from the two paragraphs immediately preceding them, [96] and [97], that Goldberg J had reference to Dr Soust's knowledge of the market, the effect of his purchase offer on that market and the way in which he intended to effect the share purchase and so affect the price at which the shares traded on that market. Despite his Honours' reference to purpose and intention, I do not think that Soust can be read as limiting the operation of

s 1041A to circumstances in which a person's intentions and purpose dictate whether the transaction has had the effect of, for example, creating an artificial price. Purpose and intention were part of the factual matrix in that case and led Goldberg J to conclude that Dr Soust was not a genuine buyer of the sort contemplated by Mason J in North as being a factor in the equation of the interplay of the forces of genuine supply and demand. The findings made by Goldberg J at [21] and [22] of his judgment made no reference to Dr Soust's intention or purpose in making the trades. They referred only to the consequences of his doing so as do his findings in [98] and [99].

136. Having regard to the whole of the judgment in Soust and to those in North in relation to s 70 of the SI Act and Fame and Donald in relation to s 998(1) of the Corporations Act, it seems to me that words importing mens rea cannot be read into s 1041A as a criterion that must be satisfied before a person can be said to have breached that section. Intention and purpose of the person may be relevant in analysing the transaction in which the person is engaging but s 1041A is breached only if the effect is, or is likely (among other things) to create an artificial price. If a transaction were a sham and resulted in a fictitious sale of financial products, its identification as such would be a relevant step but s 1041A would only be breached if the effect of that transaction were to create, or to be likely to create, an artificial price. The transaction has to be looked at in its entirety and against the backdrop of the market in which it is accepted that the price for trading in financial products is the price which reflects "... basic forces of supply and demand working in an open, efficient and well-informed market".[152] That price is to be contrasted with a price resulting from conduct that impedes, or is likely to impede, the openness and efficiency with which the market generally works or keeps from those engaged in that market information that they require to make considered decisions regarding their trading or otherwise in those financial products.

137. Other factors that are relevant in looking at the effect of a transaction are factors such as the timing of any offers to sell or purchase, the volume of financial products the person offers to sell or purchase, the depth of trading in financial products of that type on that financial market, the pattern of trading in those financial products preceding the actions under consideration and any changes in the pattern that are consequential upon those actions or that would not have occurred but for those actions and which do not reflect the forces of supply and demand. Given the nature of human transactions, these can be but examples.

138. The records of SB Firm show that an account was opened in Freda's name and with Freda's details and allocated a unique account number. SB Firm has been unable to locate the Account Opening form.[153] Freda and DCO both signed a form authorising DCO to give instructions to trade on her account with SB Firm.

It was dated 3 May 2006 and was received by SB Firm on 7 May 2006 by facsimile transmission.[154]

139. I accept that, in summary, JTMJ created, or instructed others, to create 15 orders on Freda's account. Seven of those orders were created or amended after 3.40pm and so in the last 20 minutes before the close of normal trading at 4.00pm or after 4.00pm during the Closing SPA. Of those seven, five were after 4.00pm.[155]

140. Based on the analyses undertaken by Mr Dent and Mr Flynn and the reports to which they referred, the evidence of CA Adviser relating to SB Firm's records of the orders, I have made the following findings as to the course of trading on Freda's account with SB Firm in respect of the Company's securities in the period from 10 March 2006 to 7 April 2006. It is intended as a snapshot of orders, telephone calls, BIDs and ASKs and trades in that period in that it is illustrative of those events over the entire course of the conduct of Freda's account up to 27 April 2006. It is also illustrative of the conduct of the accounts of DCO and of Elizabeth and of ASIC's analyses of those events on the market in the Company's shares.

141. The orders recorded in SB Firm's books in relation to Freda's account are shown in italics, orders made on SEATS on Freda's account in bold and the subsequent trades in bolded italics. The BID/ASK spreads before and after are taken from the annotated table exhibited to Mr Dent's statement as are the effect of the last trade on the BID/ASK spread as identified by him in that table. The telephone calls and orders are based on the statement of Mr Flynn[156] with reference to the four statements of Ms Meagan Foster, who is an employee of Telstra Corporation Limited[157] and of CA Adviser.[158] I have also included entries that are to be found in JTMJ's day book and that relate to the trades.

[No time specified] Client: P. Bond NEW Discussion: 30/- @ 35.5 Company Additional Notes: [material from Account Opening Form]

[No time specified] Client: Freda Discussion: 30/- @ 35.5

4pm Client: Freda Discussion: Company shares B 15/- 37.5

3.50pm Client: Freda Discussion: Company shares 20/- @ 36

2.30pm Client: Freda Discussion: B 20/- @ 36 Company B 20/- 35.5 4.04

[No time specified] Client: Freda Discussion: B 20/- @ 36.0 Company

36.0 (Note: Freda's existing bid for 7,260 shares at 35.5)

BID 36.0 ASK 36.5 + 1.0 (BID) +0.5 (ASK) 0.0 (TRADE)

[No time specified] Client: Freda Discussion: 25/- @ 35.5 Company 15/- 35.5 Company

C.2 ASIC's analysis of effect of Freda's bid on 14 March 2006 on market

142. On the basis of the analysis by Mr Dent[160] I find that, had JTMJ not entered the BID for 15,000 Company shares on 14 March 2006 at 16:00:44, the active trades resulting from the Closing SPA would have been:

143. According to the rules of the Closing Spa match out and assuming no other BIDS, ASKs or TRADEs had been entered, the market would have remained unchanged at the conclusion of the match out. There would have been no matches and so no resulting trades. The closing BID/ASK spread would have been, on Mr Dent's evidence, BID (37.0) and ASK (38.0). Mr Dent explained in his statement that the BID/ASK spread is a reference to the best BID price following the function under consideration (in this case the Closing SPA) and the best ASK price at that time.[161]

It is clear from the table that it does not represent the spread of asking and bidding prices remaining on the market. That spread is clear from the tables I have reproduced above and below. When referring to the BID/ASK spread, I will be using Mr Dent's understanding of it but will leave the tables to show the spread of bidding and asking on the market at the particular time.

144. Once Freda's BID for 15,000 shares at 37.5 cents had been entered, there would have been matches and so trades in the Closing SPA match out. The result was a matching of BIDs and ASKs that are reproduced in bold italics in the table:

The effect of Freda's bid was that it gained priority under the rules of the Closing SPA. The closing BID/ASK spread was: BID (37.5) and ASK (38.0).

C.3 ASIC's analysis of effect of Freda's bid on 17 March 2006 on market

145. On the basis of the analysis by Mr Dent I find that, had JTMJ not entered the BID for 10,000 Company shares on 17 March 2006 at 16:09:14, there would have been no active trades resulting from the Closing SPA. The last traded price had been 37.0 cents:

On Mr Dent's analysis, this meant that the BID/ASK spread was BID (36.5) and ASK (37.0).

146. Once Freda's BID for 10,000 shares at 37.0 cents had been entered, there would have been matches and so trades in the Closing SPA match out. The result was a matching of BIDs and ASKs that are reproduced in bold italics in the

The effect of Freda's bid was that it gained priority under the rules of the Closing SPA and closing BID/ASK spread was: BID (37.0); ASK (38.0).

C.4 ASIC's analysis of effect of Freda's bid on 23 March 2006 on market

147. On the basis of the analysis by Mr Dent I find that, at the time that JTMJ entered the BID for 20,000 Company shares on 23 March 2006 at 16:10:26 at 35.5 cents, the matching trades that would have resulted from the Closing SPA are shown in bolded italics in the following table. The last traded price on that day had been 35.5 cents:

After the 2,270 shares had traded at a price of 35.0 cents, on Mr Dent's analysis, the resulting BID/ASK spread would have been: BID (35.0); ASK (36.0) with 26,130 shares BID at 35 cents and 30,000 shares offered at 36.0 cents.

148. After Freda's BID was entered for 20,000 shares at 35.5 cents, the matching trades appear in bolded italics in the following table:

149. Freda's bid gained priority over the other bids during the Closing SPA. Mr Dent said in his statement that Freda's acquisition of the shares had increased the closing price from 35.0 cents to 35.5.[162] That statement must be understood in terms of the price at which the shares would have closed during the Closing SPA but for Freda's BID and not in terms of the last price at which the shares had traded before her BID was entered. Mr Dent said in his statement at [73] that the last traded price before her BID had been entered, and so at some time earlier in the day, was 35.5 cents. On the basis of his statement, it appears that another unrelated BID was entered in the Closing phase and that resulted in a closing price of 36.0 cents and resulted in a BID/ASK spread of BID (35.5) and ASK (36.0). That was the spread that Mr Dent said was also achieved by Freda's BID.

C.5 ASIC's analysis of effect of Freda's bid on 7 April 2006 on market

150. JTMJ entered an amended BID for 23,840 Company shares on 7 April 2006 at 16:08:29 at 35.5 cents. That amended an earlier BID which had failed at the time to attract 8,840 of the shares it had bid for. It had been a BID at 35.5 cents. For all practical purposes, the amended bid increased the volume sought but did not affect the price at which they were sought. Had the amended bid not been entered, the matching trades would have been those shown in bolded italics. The last traded price on that day had been 35.5 cents:

The match out occurring in the Closing SPA would have led to the Company's shares trading at 35.0 cents and the resulting BID/ASK spread would have been BID (35.0) and ASK (36.0).

151. Following JTMJ's amended BID on behalf of Freda, the trades shown in bolded italics were effected:

The resulting BID/ASK spread would, Mr Dent said, be BID (35.5) and ASK (36.0). In the result, Freda paid 35.5 cents for 8,840 shares when, had the order not been amended, she could have acquired them for 35.0 cents. Due to the way in which the Closing SPA works, had she BID for 19,999 she would have acquired them for 35.0 cents per share. As she bid for more than that number, the price at which they were traded was the price she had bid for them.

C.6 Two transactions that led to an increase in the last traded price

152. In the submissions made on behalf of ASIC, there appears a table setting out details of two transactions resulting from JTMJ's 15 orders. It is submitted that the two transactions had the effect of increasing the last traded price and so set a higher closing price. Omitting material identifying JTMJ, the trades shown in the

153. Transactions at these are shown in the larger table I have compiled above. The first line accords with the details I have shown but the second does not. A trade occurred at 14:44:11 but it was in relation to 12,000 shares which traded passively and so as a result of a seller's matching the Bid price.[163] There was a trade that had occurred earlier in the day at 12:58:11.23 when 2,128 shares had been transferred in an Active trade in partial satisfaction of a BID for 30,000 shares at 35.5 cents. The price at which shares had previously been traded was 34.5 cents and so the trade represented a one cent increase on that price. There then followed four Passive trades as Sellers matched the BID price for shares remaining from the 30,000 bid for.

C.7 One transaction that led to an increase in the last traded price

154. On 12 April 2006, an order was placed at 15:43:44.84 for 30,000 shares at 35.5 cents. On behalf of ASIC, Mr Gilbertson submitted that this resulted in a late price increase in the 20 minutes before the close of normal trading at 4.00pm or during the Closing SPA.

155. When I look to the spreadsheet annexed to Mr Dent's statement, I find that two trades followed from the Bid. Between them, they took up the whole of the 30,000 sought and each was a Passive trade. That meant that there were one or two sellers offering to sell at the price at which the Bid was entered i.e. 35.5 cents.

156. Reference to the SEATS Transactions for the Company's shares on that day[164] show that the two Trades resulted from an ENTASK entered by Broker B at 15:47:13.10 for 24,000 at 35.5 cents and an AMDASK by Broker J for 50,000 also at 35.5 cents entered at 15:50:13.08. This trade was followed by an AMDBID by Broker C for 3,905 shares at 35.5 cents and the TRADE followed.

157. I have also looked at the course of trading earlier in the day on the SEATS Transactions printout. Although it is tedious, I think it is instructive to reproduce the information, without identifying material, to show the course of trade on one of the days about which ASIC has expressed concern.

158. The trade that took place on 12 April 2006 at 10:59:50.01 for 30,000 shares at 35.5 cents occurred as a result of an amended BID for that number of shares and that price entered at 16:47:07.87 pm 10 April 2006. The AMDBID had been made by or on behalf of JTMJ acting with respect to Freda's account. At the time the trade took place, JTMJ had made no other bids on the two intervening trading days. In the absence of any evidence to suggest that the BIDs and ASKs that were made on that day were made for a purpose related to the market's reflecting something other than a genuine price arrived at as a result of normal trading, I find that the amended BID was at a price that was within the pattern of trading on that day. I do not find that it could be described as a transaction that either created, or was likely to create, an artificial price.

159. For the most part, the entries in JTMJ's Day Book are unexceptional in relation to Freda's account. That dated 23/03/2006 does, however, cause me some concern for the reference to "4.04" following "B 20/- 35.5 ..." does look on its face as if it is a reference to making a bid at the price for that number of shares at 16.04 hours. The spreadsheet annexed to Mr Dent's statement shows that JTMJ did enter a bid for that number at that price at 16:10:26.16.

160. On the basis of CA Adviser's statement, I find that one trade that had occurred on 26 and three that had occurred on 27 April 2006 and had been booked to Freda's account were cancelled from her account and re-booked to DCO's account.[165]

161. SB Firm held an account for DCO for the period from 1 January 2005 to 16 March 2007. The only trading on that account occurred between 27 April 2006 and 15 May 2006 and this is the period in which DCO bought the Company's shares.[166]

D.1 Transactions occurring in Opening and Closing SPAs

162. In his statement, Mr Dent has analysed the transactions that occurred in the Opening and Closing SPAs as he did in relation to the transactions on Freda's account. I do not propose to set his analyses in their wider context as I have done with the transactions on Freda's account and in the market generally for the Company's shares. The context in which I have placed Freda's transactions is repeated when regard is had to the transactions on DCO's account.

163. I will take trading on a couple of days as examples. Beginning with

28 April 2006, Mr Dent has said that, before JTMJ entered a BID for 20,000 shares at 35.0 cents on behalf of DCO, there would have been no matching trades in the Closing SPA. The market would have looked like this:

164. Following the BID made by JTMJ at 16:14:45, the match out in the Closing SPA is shown in bolded italics in this table:

165. On Mr Dent's analysis, JTMJ's BID increased the closing price of the Company's shares from 34.5 cents to 35.0 cents. This is supported by the SEATS Transaction records. It was a day on which there were 66 transactions and seeming little movement in the stock. The lowest BIDS were made at 30 cents and the highest ASKs were 70 cents. Until JTMJ's BIDs resulting in trades, the only TRADES had occurred at 34.5 cents earlier in the day. Broker A had bought four lots at that price (10,000, 5,000, 3,576 and 5,924) and JTMJ had bought 4,076. Broker A entered and then cancelled a BID at 34.5 for 12,500 shares before JTMJ entered an amended BID for 25,924 for 34.5 cents and then entered BID for 20,000 at 35.0 cents. The TRADE effected by JTMJ's BID at 35.0 cents "picked up" a further 25,924 of the 70,630 shares offered by Broker K at 14:09:58.49 on the previous day i.e. 27 April 2008. JTMJ had acquired a total of 19,900 of them at 35.0 cents in two TRADES on that day. There was nothing else on offer at 34.5 cents or below but they did remain on offer at the relevant time.

166. On 15 May 2006, the SEATS Transactions records show 81 transactions in the Company's shares. I will not set them out as I have done in relation to trading on Freda's account. I note that TRADEs took place for a total of 19, 500 shares in three transactions for 33.5 cents. Broker A was the buying broker and Brokers J and O were the selling brokers. Those TRADEs occurred at 10:04:20.90.

167. A further TRADE took place at 10:06:06.72 for 34.5 cents for each of 5,000 shares. Brokers A and K were involved. The price slipped back to 33.5 cents at 10:53:36.24 when 1,428 shares were traded. Brokers H and A were involved. Broker A was again involved as the selling broker when a total of 10,000 shares in two parcels were traded at 11:30:06.22. Brokers C and O represented those selling the shares. Further trades at 33.5 cents occurred at 11:37:36.78, 11:48:33.14, 11:58:04.94, 12:07:38.91, 12:15:26.38, 12:17:53.80 and 12:28:07.08 (2). JTMJ played no part in these trades. During the course of the afternoon, a further 26 trades occurred at 33.5 cents. The last of those occurred at 15:37:34.73. There then followed five TRADEs at 33.0 cents between 15:55:56.93 and 15:56:18.46. None of the transactions had involved JTMJ to this point.

168. At 16:13:25.07, JTMJ entered a BID for 120,000 shares in the Company at 35.0 cents per share. The entry from JTMJ's Day Book for 15 May 2006 shows the time as 9.45am, the client as Elizabeth and "B 120/- ... [Company] @ 35". There then followed a telephone call from DCO to JTMJ at 15:49:00. It lasted for 15 seconds.

169. The order records held by SB Firm record two orders by JTMJ following the telephone call:

There is no record in the SEATS Transactions or in the spreadsheet annexed to

Mr Dent's statement showing that the order for 30,000 shares was executed on 15 May 2006 or on any subsequent day. The only BID for 30,000 shares on DCO's account had been entered by JTMJ on 8 May at 16:12:26.26 for 35.0 cents. There is no record of an order that I have been able to find that records the volume as 150,000 shares. That was the total of the two orders but the BIDs in fact placed by JTMJ totalled 270,000. I can find no orders that cover them and no entries in his day book that relate to that volume.

170. Had JTMJ not entered the BID for 120,000 shares at 35.0 cents and had there been no further BIDs, the Closing SPA would have not led to any TRADES and the market would have remained unchanged at a closing price of 33.0 cents. That would have been consistent with the course of sales during the day and the BIDs and ASKs would have looked like this:

171. If there had been no further BIDs other than that by JTMJ for 120,000 shares at 35.0 cents, the effect of that BID would have led to the following TRADEs (shown in bold italicised type) to occur in the Closing SPA:

172. JTMJ's BID was not the last BID as Broker A entered an ASK for 37,000 Company shares @ 33.0 cents, the matching trades would have been those shown in the following table in italicised bold type:

The result would be that DCO would have acquired 120,000 shares at 34.5 cents instead of 35.0 cents.

173. This was not to be for JTMJ then amended the BID for 120,000 Company shares by increasing the volume to 150,000 shares and the matching trades in the Closing SPA became:

174. The outcome was that JTMJ acquired 150,000 of the Company's shares for 35.0 cents. He did so in an environment in which there had been 37 TRADES at 33.5 cents before 15:37:34.73 and a further five TRADEs at 33.0 cents between 15:55:56.93 and 15:56:18.46. At no time in the course of those transactions did JTMJ make a BID on behalf of any of his clients. That was despite his having written the order in his day book earlier in the day at 9.30am. It is understandable that he did not execute that order at any earlier time when it was clear that the shares could be obtained at the lower price of 33.5, rather than 35.0 cents. What is not understandable is why JTMJ continued to execute the order when he entered different orders in the SB Firm's records at 16:24:05 and 16:31:13 and so at a time when the market was maintaining TRADEs at a low of 33.5 cents. The smaller of the orders was for the sum of 35.0 cents and the larger, for 120,000, was for "Mkt", which

I understand to mean that he was to bid for them at the prevailing market price.

I have even less understanding of JTMJ's actions in entering the BID for 120,000 shares when the previous five TRADEs had been concluded at the even lower price of 33.0 cents. Unlike the BIDs that I have referred to already in these reasons, this was not a BID that could be said to be in line with the previous course of trading in the Company's shares during the day. It was a BID that was quite out of step with the market and, I find, took the price of the Company's shares beyond the level to which it would have been taken by the ordinary market forces of supply and demand prevailing on that day. Those were so far outside that they distorted, rather than were simply part of the pattern of trading on that day or a logical or understandable extension of it. They were also inconsistent with the pattern in that the volume of shares for which he entered a BID was well outside the volumes that had been the subject of individual TRADES earlier that day. The BID took it to a level where I am satisfied that it was an artificial price.

175. I am also satisfied that the BID for 120,000 shares and the amended BID for 150,000 shares for 35.0 cents were each, and were together, a transaction that had the effect of creating, or being likely to create, an artificial price on the ASX market within the meaning of s 1041A. Whether he entered the BID or authorised another to enter it, I find that JTMJ either carried out, or took part in, a transaction that had that effect or was likely to have that effect.

176. SB Firm held an account ledger in Elizabeth's name for the period from 1 January 2005 to 16 March 2007.[168] It has an Account Opening form. In so far as trading in the Company's shares are concerned, trades were conducted on Elizabeth's account with SB Firm from 16 May 2006 to 1 June 2006.

177. The trades which occurred on 15 May 2006 in relation to DCO's account were rebooked against Elizabeth's account. JTMJ arranged that after close of trading on that day.

178. On four trading days between 16 and 31 May 2006, JTMJ created seven orders to be placed on SEATS against Elizabeth's account. Three of the orders were placed in the last 20 minutes before the close of trading. These findings accord with the submissions made by ASIC but, taken on their own without context, I draw no conclusions from them. For the reasons I have given in relation to Freda's account, the context in which a BID is made may show that it is a BID that is just part of the normal pattern of trading. That pattern has highs and lows as BIDs and ASKs are entered and amended and TRADEs are made. It is to be expected that those following the market, be they brokers or not, will be adjusting their BIDs and ASKs both up and down for the purpose of either meeting or anticipating the market. The transactions carried out by JTMJ or in which he took part on 15 May 2006 were well outside the highs and lows of the pattern. Whether the seven orders placed on Elizabeth's account were outside that pattern depends upon more than the fact that they were placed.

179. The SEATS Transaction records for 16 May 2006 show TRADEs for relatively low volumes of shares occurring at 34.5 cents earlier in the day, then at 33.5, 33.0 and 32.5 by midday. Two TRADEs at 33.0 occur early in the afternoon before a final TRADE before 16:00 at 33.5 cents. That occurred at 14:28:47.48. The ASK prices had started at 60 cents but, at the time the market closed at 16:00:00, there were ASK prices of 34.5 cents that had not yet been matched by BIDs. They totalled 111,185 Company shares. At 16:14:37.13, JTMJ entered a BID for 20,000 shares at 34.5 cents. I find that this would have resulted in TRADEs in the Closing SPA at 34.5 cents and that would have represented the closing price for the day rather than 33.5 cents. It would have resulted in a closing price that was, on its face, outside the pattern of trading on that day.

180. That was not to happen for, at 16:14:45.51, Broker K entered a BID for 28,500 shares at 34.5 cents. The result of the Closing SPA would not have changed. At 16:15:14.93, JTMJ cancelled the earlier BID for 20,000. That too had no impact upon the closing price which remained 34.5 cents because Broker K's BID remained current during the Closing SPA.

181. The BID entered by Broker K was a transaction that had an effect on the closing price. I find that it created a price that did not reflect and was not consistent with the pattern of trading on that day or a logical extension of that pattern. It created an artificial price in the meaning of s 1041A of the Corporations Act. The part that JTMJ played in that is more subtle. Perhaps his BID in the closing stages of the market could be read by those in the market as the start of an upward trend in the price or as the start of an attempt to take all of the 111,185 shares in the Closing SPA. Perhaps Broker K had that concern and decided he should enter the market and gain some priority. I do not know for I do not have evidence on which I can make a finding. Despite that, I do consider that I have sufficient evidence in the form of the timing of the BIDs of JTMJ and of Broker K to find that the BID by JTMJ at that time and in that market and given the way in which the Closing SPA works was likely either of itself to create an artificial price in the Closing SPA or to lead to another broker's entering a BID that did so.

182. On my understanding of the law, I do not need to go beyond this but, for the purposes of other matters to which I must have regard later in these reasons,

I will look further at the course of events on that day. On its face, the entering of the BID could be seen as simply as the implementation of a wish to acquire shares and a concern that, despite the low volumes and low prices of that day, the price could be less advantageous on the morrow. That view becomes more difficult to hold when regard is had to the orders that were made and the telephone conversations that took place on that day.

183. Starting with the previous day, JTMJ had received one telephone call from DCO and placed two orders as I have set out above.[169] The telephone call preceded the two orders and there is no record of another telephone call between it and the placement of two orders on 16 May on Elizabeth's account. These orders were:

184. There is no explanation how the orders came to be. The telephone conversation of the previous day was of 15 seconds duration and, given its timing and length, would seem to have related only to the orders placed on that day. There is no explanation why the earlier of the two orders on Elizabeth's account was not entered as a BID shortly after 15:38:45 or at all. JTMJ's day book does not take me any further and leaves me to question why the instruction it suggests was given to JTMJ at 15:00: 00 to bid for 40,000 shares at 34.5 cents was not translated to an order. It

185. The timing of the first of these notes shows that it was made just after or, using approximations as would be expected in notes, at or just before JTMJ entered a BID for 60,000 shares in the Company at 33.5 cents. That resulted in a TRADE of 53,300 shares at that price and JTMJ entered a TIKBID to take the price he BID for the remaining 6,7000 shares to 34.0 cents. The BID did not match the order although the TIKBID did. As a result of the TIKBID, 6,700 shares were traded in two lots at 10:04:31.54 on the following day: 17 May 2006.

186. The note timed at 3pm would seem to have been written as an afterthought and not at the time the discussion it describes took place. Given that, on 16 May 2006, there is no record of an order that matches it and a BID was never placed that matches it, there is doubt whether the discussion occurred at all. To be fair, it is possible that the note in the day book of the 3pm discussion is not misplaced but is, instead, a reference to a discussion on 17 May 2006. That entry immediately follows the 3pm entry and describes the client as Elizabeth and the discussion as "B 50/- ... [Company] @ 34.5". An order was created for 40,000 shares at 34.5 in

SB Firm's records in Elizabeth's name at 14:58:56 and a BID entered for them on the market at 15:00:04.63. There is, however, no record of a telephone discussion between JTMJ and DCO or Elizabeth before 15:00:00 or on the previous day.

187. The order to which I referred in the previous paragraph resulted in three TRADEs at 15:00:04.63 at 34.5 cents. Those transactions were followed by a BID entered by Broker A at 15:54:31.36 for 12,800 shares at 33.5 cents. Broker A also entered an ASK at 34 cents at 15:58:30.11. Had matters ended there, the result of the Closing SPA would have been to match 35,000 shares in TRADEs at 34.0 cents.

188. Matters did not end there as I find that the first telephone call between DCO and JTMJ then occurred. It was a telephone call from DCO to JTMJ at 16:04:00 on 17 May 2009 and lasted 1:59 minutes. An entry in JTMJ's day book records a discussion at 4 pm to buy 50,000 Company shares at 34.5 cents. An order was created in SB Firm's records to that effect and on Elizabeth's account at 4:08:04. The BID was entered on SEATS at 16:08:37.36. That resulted in TRADEs in two lots making up 50,000 shares at 34.5 cents.

189. In choosing to enter a BID in this way, JTMJ had foregone the opportunity to obtain 35,000 shares at 34.0 cents. That was a price at which the shares had traded earlier in the day but they had also traded at 34.5 cents. Given the pattern of trading on the day, I do not find that JTMJ was engaged in a transaction that had, or was likely to have, the effect of creating an artificial price for trading in the shares. Certainly, he could have obtained them more cheaply but I do not think that

s 1041A goes so far as to catch those who do not trade their shares at the best price possible. The varying degrees of acuity possessed by brokers and others engaged in the market is also a feature of the market place. So too is the fact that they may simply make mistakes in noting orders or in entering them. It is certainly conceivable that attempts to create an artificial price might come dressed as, for example, a mistaken reading of the market but, on the balance of probabilities, I do not find that this is one of them.

F. Conclusion regarding s 1041A

190. In summary, I have found that that JTMJ has been in breach of

s 1041A in relation to two transactions: that on 15 May 2006 and that on 16 May 2006.

Section 1041H: Misleading or deceptive conduct (civil liability only)

191. The parties did not deal separately with s 1041H but focused on

s 1041A. As Mr Young submitted, if I am to find that JTMJ contravened either

ss 1041A or 1041H, I must first identify, and be satisfied, that he took part in trading the Company's shares on the ASX and that had the effect of creating or maintaining an artificial price for those shares.[170]

B. Section 1041H

192. The positions adopted by Mr Young and Mr Gilbertson were reasonable given that the conclusions I have reached regarding s 1041A in relation to mens rea are equally applicable to s 1041H(1) and for similar reasons. I say "similar" for, unlike s 1041A, s 1041H(1) is not a civil penalty provision under s 1317E and failure to comply with it is not an offence. They are the same in that neither specifies intent as a criterion whether by that name or by another such as purpose, reason or calculation. They are the same in that both fit within a regulatory structure that does specify intent elsewhere and a person may defend an action for civil liability following breach of them by relying on the provisions of s 1317S. Those provisions require the person to establish, among other things that he or she has acted honestly. In light of the judgment of Gzell J in Australian Securities and Investments Commission v Macdonald (No 12), that requires the person to establish rather more than that he or she did not intend the outcome of his or her actions but intention is a relevant factor. Finally, ss 1041A and 1041H(1) are the same in that breach of them can lead to the imposition of a banning order but, whether ASIC chooses to make such an order, will depend upon its view of the conduct, including the intention behind it. It is my view that, in deciding whether or not a person has breached

s 1041H, it is unnecessary to establish that the person has any particular state of mind be it one of the mental elements specified under the Criminal Code or any other.

193. I note that this conclusion is consistent with that reached by Sackville J in Australian Securities Commission v Nomura International PLC in relation to whether, under the former s 998(1), a person had done anything "likely to create, a false or misleading appearance of active trading in any securities on a stock market or a false or misleading appearance with respect to ... the price of, any securities." Although obiter dicta, it was adopted by Heerey J in Donald again in the context of

194. I have found the judgment of Gordon J in Australian Competition and Consumer Commission v Dukemaster Pty Ltd[171] instructive in the manner in which

I should approach s 1041H(1) even though she was considering s 52(1) of the Trade Practices Act 1974 (TP Act). That section provides that "A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." Unlike the Corporations Act, the TP Act defines the word "likely". It is said by s 44ZZRB of the TP Act to include "a possibility that is not remote" in relation to the supply or acquisition of goods or services or the production of goods. That difference must be borne in mind in reading the following passage of her Honour's judgment and I will return to it below.[172] In her view, when considering s 52(1):

"9. ... It is necessary to identify the conduct complained of and then identify the proper approach to the conduct which is sought to be impugned: Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] FCA 180; (1984) 2 FCR 82 at 87-90.

1. The following principles are worth restating.
   1. _A contravention of s 52(1) of the TPA is established by 'conduct' which is misleading or deceptive or likely to mislead or deceive: Global Sportsman Pty Ltd [1984] FCA 180; 2 FCR 82, 87. The 'conduct', in the circumstances, must lead, or be capable of leading, a person into error (_Hannaford (trading as Torrens Valley Orchards) v Australian Farmlink Pty Ltd [2008] FCA 1591 at [252] citing Taco Company of Australia Inc v Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177 at 200; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 198) and the error or misconception must result from 'conduct' of the corporation and not from other circumstances for which the corporation is not responsible: Global Sportsman Pty Ltd [Global Sportsman Pty Ltd v Mirror Newspapers Ltd] [1984] FCA 180; 2 FCR 82, 91. 'Conduct' is likely to mislead or deceive if there is a 'real or not remote chance or possibility regardless of whether it is less or more than fifty per cent': Global Sportsman Pty Ltd

195. Applying this approach to s 1041H(1) of the Corporations Act, I must first identify the conduct that is said to contravene the provision. The word "conduct" is not defined. Section 769B is concerned with the conduct engaged in on behalf of a body corporate or of individuals. In that provision, "a reference to conduct is a reference to an act, an omission to perform an act, or a state of affairs".[174] The Corporations Act does not otherwise include a definition of the word "conduct". The ordinary meaning of the word "conduct" when used as a noun is "1 behaviour 2 the managing or organizing of something. ...".[175] Both meanings appear relevant. In so far as the first is concerned, a person's behaviour, and so conduct, may manifest itself through that person's physical actions, words or even lack of words. As is apparent from the extract from Australian Competition and Consumer Commission v Dukemaster Pty Ltd, words may be used in a variety of ways e.g to express opinions, give promises or make statements. Physical actions too may take many forms.

196. Whatever form the conduct takes, it must be "in relation to" a financial product and the person alleged to have breached s 1041H(1) must have been "engaged" in that conduct. This is an example of the use of the word as an intransitive verb when its ordinary meanings include: "13. to occupy oneself; become involved: to engage in business, politics. ...".[176] When taken together, the ordinary meanings of each of the words in the expression to "engage in conduct" lead me to conclude that Parliament intended to encompass a wide range of behaviour. At one end is behaviour that is itself, and without reference to any one else's behaviour, misleading or deceptive, or likely to be so. At the other end is behaviour that does not necessarily stand alone but that is part of a set of activities that, taken together, are misleading or deceptive, or likely to be so. That interpretation is consistent with

s 1041H(2), which expands upon the circumstances in which a person is engaging in conduct in relation to a financial product. In particular, a person is engaged in such conduct if "carrying on negotiations, or making arrangements, or doing any other act, preparatory to, or in any way related to, an activity covered by any of subparagraphs (i) to (ix)" of s 1041H(2)(b). The interpretation is also consistent with the purpose of a provision such as s 1041H(1) which is to ensure the integrity of the financial market and to ensure that those who engage in it may do so appropriately informed and according to the interplay of genuine market forces of supply and demand.

197. Of the expression "in relation to", Mason J said in Fountain v Alexander[177] that it is "... an expression of wide and general import, [and] it should not be read down in the absence of some compelling reason for so doing."[178] It is an expression that has been considered by the Full Court of the Federal Court in the context of s 1041H(1) in Australian Securities and Investments Commission v Narain[179] (Narain). Citrofresh International Ltd (CIL) had sent two letters to the ASX. Allegedly, those letters misrepresented the capabilities of CIL's disinfectant products. ASIC alleged that the announcements in the letters were likely to, and did in fact, affect the trading and price of CIL's shares.

198. At first instance,[180] Goldberg J had noted that the expression "in relation to" has been the subject of judicial consideration in a variety of contexts and that each is limited in its precedential value by those contexts. Despite that:

"... A consistent theme running through the cases is that the expression 'in relation to' gathers its meaning from the context in which it appears and the purpose for which it appears .... The words 'in relation to' have a very wide meaning, but like the expression 'in respect of', they do not extend to 'any relationship however tenuous' ..."[181]

199. Goldberg J had gone on to consider the way in which the expression had been interpreted in Tooheys Ltd v Commissioner of Stamp Duties (NSW),[182] Australian Competition and Consumer Commission v Maritime Union of Australia[183] and Joye v Beach Petroleum NL.[184] He concluded that those cases provided useful guidance as to the scope and proper interpretation of the expression "in relation to" in s 1041H(1). Goldberg J:

" The Commission submitted that the conduct in issue was 'in relation to' a financial product because it was conduct that was likely to have, and did in fact have, an impact on trading in CIL's shares. But that submission does not identify a relationship between the contents of the letters and the price or market value of the shares in CIL. No such relationship appears on the face, or in the contents, of the letters.

The context in which s 1041H appears suggests that subs (1) is to have a wide operation. So much can be gleaned from subs (2) and the varied types of conduct specified which do not limit the scope of s 1041H(1). Nevertheless there must be some ostensible connection or relationship on the face of the conduct, that is, a connection or relationship on the face of the letters with the shares in CIL. To adopt and adapt the words of Dixon CJ in Tooheys Ltd v Commissioner of Stamp Duties (NSW) [1961] HCA 35; 105 CLR 602, the letters do not deal with shares in CIL. I also adopt and adapt the words of Taylor J in the same case: the relationship between the contents of the letters relied upon by the Commission and shares in CIL does not appear upon an examination of the letters themselves. As Taylor J said, and I accept, it is the character of the letters which is the material consideration. The contents of the letters on which the Commission relies do not relate to shares in CIL.

The consequence is that the Commission's allegations in relation to the 27 September letter and the 29 September letter and their contents do not demonstrate a contravention of s 1041H. The letters and the statements in them relied on by the Commission are not notices, statements or representations 'in relation to' shares and securities in CIL, that is to say, in relation to financial products or financial services. Rather they are notices, statements or representations 'in relation to' CIL itself or to a product manufactured, distributed and sold by CIL. The allegations might otherwise raise for consideration whether other provisions of the Act, such as s 1041E, might have been contravened, but the Commission has only alleged a contravention of s 1041H."[185]

200. In Citrofresh, ASIC had submitted that Mr Narain, CIL's chief executive, had personally engaged in conduct contravening s 1041H(1) by sending to the ASX two letters containing misleading and deceptive statements. ASIC did not rely on accessorial liability or indirect liability. Goldberg J found that Mr Narain did not personally send either letter. In relation to the second letter, he found that it included Mr Narain's name as a contact but that he had not engaged in any conduct relating to its preparation or its transmission to the ASX. With regard to the first letter, he found that Mr Narain had participated in its preparation and drafting, had approved of its contents and had authorised its being sent to the ASX. His Honour found that he had not personally sent the letter. Instead, CIL sent the letter to the ASX through the medium of its company secretary and so did not personally engage in conduct that was misleading or deceptive or likely to mislead or deceive within the meaning of s 1041H(1).

201. ASIC appealed against Goldberg J's dismissal of ASIC's application seeking orders against Mr Narain. The Full Court of the Federal Court allowed the appeal in Australian Securities and Investments Commission v Narain[186] and did so on two bases. First, it looked at whether the conduct was "in relation to" the shares of CIL or, as described in the appeal, CTF. Finkelstein J said:

" As regards the first issue in the appeal (whether the representations were 'in relation to' CTF shares), it is of course true, as the judge said, that the words 'in relation to' require a relationship or connection between two subject matters. In the context of Pt 7.10 generally, and s 1041H in particular, the expression ought to receive broad construction. One important object of the Part is to ensure that the participants in the market for financial products and financial services act with integrity and honesty and that consumers are adequately protected. To further this object I do not think the connection between misleading statements on the one hand and shares in a company on the other must necessarily be immediate or direct. I particularly do not accept as a necessary condition for conduct to be 'in relation to a financial product' that the conduct must 'on its face' refer to or, as the judge would have it, 'deal with' the financial product. With great respect to those who hold the opposite view, that approach gives s 1041H an unnecessarily narrow construction; a construction that will not promote its objects.

There can be no doubt that once it became public; the information in the Release (provided it was believed to be true) would have a material effect on the price of CTF shares. Indeed that was the reason it was given to the ASX. That is to say, CTF provided the Release to the ASX in purported discharge of its statutory duty and listing rule obligation of continuous disclosure.

Now, the real question that must be answered is this. Is the publication on the ASX of a statement that, as in this case, a reasonable person would expect to have, or would be likely to have, a material effect on the price or value of CTF shares, conduct that 'relates to' those shares? I am in no doubt that it does. Indeed, in my view, the statements in the Release 'relate to' CTF shares whether one takes a narrow or broad view of those words. There is sufficient connection between the statements and CTF shares by reason of (1) the content of the statements, concerning, as they do, the business of CTF; and (2) the place of their publication, namely on the exchange where the shares are traded."[187]

202. On appeal, the Full Court found that Goldberg J had erred in finding that Mr Narain had not "engaged' in conduct of the prohibited sort. Contrary to the approach taken by Goldberg J, it found that Mr Narain had engaged in that conduct by authorising another to send the letter and by earlier participating in its preparation and drafting and approving its contents.[188]

203. The conduct engaged in must be "misleading or deceptive". That expression has been considered in the context of s 1041H(1) and s 12DA(1) of the ASIC Act[189] by Brereton J in Australian Securities and Investments Commission v Maxwell and ors.[190] His Honour said:

" _Conduct is misleading and deceptive if it leads the victim into error [_Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd _[1982] HCA 44; (1982) 149 CLR 191, 198 (Gibbs CJ)]. The section is contravened even if the perpetrator acted honestly and reasonably and without intent to mislead or deceive and without negligence [Parkdale v Puxu, 197 (Gibbs CJ)]. While the issue of whether conduct is misleading or deceptive, is to be determined objectively, and while evidence that some person has in fact formed an erroneous conclusion is admissible and may be persuasive, it is neither essential to nor conclusive of whether the conduct was misleading or deceptive or likely to mislead or deceive [_Taco Company of Australia Inc v Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177; (1982) ATPR 40-303, 43,752 (Deane and Fitzgerald JJ)]. But although the test is objective, the attributes of the target audience are relevant, and once the relevant section (or sections) of the public, by reference to whom the question of whether conduct is (or is likely to be) misleading or deceptive falls to be tested is identified, then 'the matter is to be considered by reference to all who come within it, including the astute and the gullible, the intelligent and the not so intelligent, the well educated as well as the poorly educated, men and women of various ages pursuing a variety of vocations' [Taco Bell, 43,751 (Deane and Fitzgerald JJ)]."[191]

204. The conduct need not necessarily be misleading or deceptive for it is enough that it is "likely to mislead or deceive". The meaning of the word "likely" can be shortly dealt with for I think that the conclusion by Sackville J in Australian Securities Commission v Nomura International PLC in relation to a similar use of the word in s 998(1) is equally applicable to s 1041H(1). He concluded that "likely" was to be construed as "more probable than not". That is a meaning that accords with its ordinary meaning[192] but it is not a meaning that is always attributed to it for it is a word very much affected by its context. Its various meanings have been canvassed in cases such as Trade Practices Commission v TNT Management Pty Ltd,[193] Poignand v NZI Securities Australia Ltd[194] and Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union[195] with various outcomes. In its particular context of the Corporations Act, his Honour saw the meaning that he adopted as recognising the severity of the consequences attaching to a breach of s 998(1).

C. ASIC's submissions regarding JTMJ's alleged breach of s 1041H

205. It seems to me that the submissions made on behalf of ASIC in relation to whether or not JTMJ is in breach of s 1041H have relied solely on the analysis of his conduct in relation to s 1041A. The conduct to which it referred in conducting that analysis went beyond that to which I have referred in my analysis of JTMJ's conduct under s 1041A. That conduct included the way in which he had placed and amended orders with SB Firm and recorded discussions in his day book and whether or not he had conversations with DCO, Elizabeth or Freda in relation to orders he placed and BIDs that were entered. For all that, I do not think that it is appropriate to blend the findings in this way in order to conclude, as ASIC's delegate did in making the decision under review and as I feel the submissions invite me to do:

"... between 10 March 2006 and 14 August 2006, ... [JTMJ] contravened s 1041A and s 1041H of the Act by taking part in trading of ... [Company] shares on the ASX that had the effect of creating or maintaining an artificial price for the shares."

I have to look at conduct that is misleading or deceptive or that is likely to be misleading or deceptive.

206. When I do that, I begin by focusing on the order records, the day book and the telephone calls JTMJ received from, or made to, DCO. I do that because each time JTMJ entered a BID or authorised its entry, he implicitly held out to the market that he had instructions to enter it. When he entered details of the instructions he had received for an order in SB Firm's records, he held out to SB Firm that he had received proper authority to do so and that he was acting within the terms of that authority. He held out that he was completing the records accurately on the basis of the knowledge that he had or should have sought given his role as a broker.

207. The normal way in which he shows that he held the instructions was to follow the process followed by CA Adviser. On the basis of his statement, I find that all of SB Firm's client advisers are required to record all instructions on its EB System or on paper based order record tickets whether they are received orally or electronically.

208. The SB Firm's EB System Adviser manual was available to all of its advisers including JTMJ. It provides a comprehensive guide as to the way in which it is navigated and used. In relation to the box marked "Order Source" that had to be completed in order to place an order, the manual stated:

"Order source: The name of the natural person you actually received the order from. If order is for a company or joint account, the actual name of the order source must be recorded."[196]

On the basis of CA Adviser's statement,[197] I find that JTMJ had attended an in-house compliance briefing session regarding the way in which orders were to be taken and recorded. He did so on 20 March 2003.

209. In view of the manual and of his attendance at the course as well as the clear differentiation on the order forms between the "client" and the "order source",

I do not accept JTMJ's evidence that he thought they were one and the same. By writing Freda's or Elizabeth's names as the order source, rather than that of DCO from which the instructions clearly came, JTMJ was engaging in conduct that was misleading. It disguised the fact that he had no contact with either Freda or Elizabeth and gave the impression that they were the instigators of the trades. That was not a fact disguised by another client adviser with SB Firm for he marked the order source as DCO in relation to two orders recorded on 4 April 2006 in relation to Freda's account.

210. I make the same finding in relation to Elizabeth's account. The calls that JTMJ made or received were to or from DCO and I find there is no record of his having any communication with Elizabeth regarding the trades on her account. I also find that he did not hold an authority permitting DCO to operate her account at all relevant times. It was not cured by arranging for a back-date authority to be sent to him. His taking instructions and placing BIDs in Elizabeth's name while not holding the authority is to hold himself out to SB Firm and to the market, for it was SB Firm's practice to enter the client's account number in SEATS, that he had the authority. It is conduct that is misleading or deceptive and it is conduct that is in relation to the trading of shares and so in relation to a financial product.

211. The order records made or authorised by JTMJ in relation to Elizabeth's account for 15 May 2006 do not reflect the BIDs that were actually entered, or authorised to be entered, on SEATS by JTMJ. As I have found at [185] above, I cannot trace the authority for the entry of BIDs totalling 270,000 shares in either the order records or in JTMJ's day book. There was one telephone conversation with DCO on that day. The orders that were made in SB Firm's records following that 15 second call totalled 150,000 and not 270,000 shares. Whether this is deceptive or misleading conduct, I make no finding. It is certainly indicative of a lack of care in leaving a paper trail that others, including SB Firm and ASIC, can follow to confirm that instructions have been received, orders placed, ASX Rules followed and statutory obligations met.

212. The meaning that I have given to the expression "engage in conduct" in relation to s 1041H(1) seems equally applicable to an interpretation of s 1101F(1A). The word "falsification" is from the word "falsify", which means "... to alter something dishonestly or make something up, in order to deceive or mislead ..."[198] or "... 1. to make false or incorrect, especially so as to deceive. 2. to alter fraudulently. 3. to represent falsely; misrepresent. ...".[199] There is clearly an element of intent to deceive or mislead inherent in the word but is it necessary to establish a mental element such as an intention to deceive or mislead in order to establish a breach of s 1101F(1A)?

213. Parliament has chosen to use the word "falsification" or its root "falsify" and the related word "false" in other enactments. In the Defence Force Discipline Act 1982, for example, s 55(1) provides that certain persons are guilty of an offence if, "... with intent to make a gain for the person or another person or with intent to deceive, or to cause loss, damage or injury to, another person ...", they make or sign certain documents or make certain entries that are "false". Clearly, intention is an element of the offence.

214. It seems to me that, by omitting reference to intent or a mental state of any sort in s 1101F(1), Parliament has deliberately chosen to attribute to the word "falsification" a meaning devoid of intention. That is to say, falsification will occur if the record is false, and so is "not true or correct; erroneous"[200] regardless of the intention of the person engaging in the conduct that leads to its occurring whether that intention is to mislead or deceive or otherwise. This would seem to be the correct interpretation for, in s 1101F(1)(e), Parliament has chosen to refer specifically to intent when it provides that, in certain circumstances and when matter is recorded on certain devices, a person must not "fail to record or store matter by means of that device, with intent to falsify any entry made or intended to be compiled, wholly or in part, from that matter." It has also referred to the person's mental state in s 1101F(2), which provides a defence to the offence similar to that provided in s 1317S(2). If a breach could only be established if the person intended to falsify the books, it is difficult to imagine situations in which a person could defend the breach on the basis that he or she has acted "honestly". Parliament's omission to refer to a person's mental state in s 1101F(1A) would seem consistent with its intention to regulate financial markets. The integrity of records maintained in relation to conduct which is, in turn, in relation to those financial markets, is an essential element in maintaining the integrity of the markets themselves.

215. In view of the findings that I have made, I find that JTMJ has breached r 7.8.19(2), and so s 1101F(1A), in relation to the records of the instructions that he is required to keep. I have referred to those relating to 15 May 2006 and to the misstatement of the order source on each order in relation to the accounts of Freda and Elizabeth. By omitting DCO as the source of the instructions, he has failed to comply with r 7.8.19(2)(i). The entries in his day book on 16 and 17 May 2006 do not reflect BIDs he entered, or gave instructions to enter, on SEATS.

Section 920A(1)(f): reason to believe a person will not comply with a financial services law

216. The expression "reason to believe" has been considered by the High Court in Boucaut Bay Co Ltd v The Commonwealth.[201] Starke J decided that the Court could not determine for itself whether facts existed which could reasonably lead to the Minister's having reason to believe that the appellant had not carried out an agreement between it and the Commonwealth and so determining that agreement. He concluded that:

"... In my opinion, the belief of the Minister is 'the sole condition of his authority'; 'he is the sole judge of the sufficiency of the materials on which he forms it' (Lloyd v Wallach [(1915) [1915] HCA 60; 20 CLR 299 at 304]). If a man is to form a belief and his belief is to govern, he must form it himself on such reasons and grounds as seem good to him (Allcroft v Lord Bishop of London [(1891] AC 666 at 678). He must not act dishonestly, capriciously or arbitrarily: that would be contrary to the implication of the agreement and so establish a want of belief stipulated for as a condition of the exercise of the power of determination. So long, however, as the Minister acts upon circumstances appearing to him to bear upon the case and giving him a rational ground for the belief entertained, then, in my opinion, the Courts of law cannot and ought not to interfere with his discretion. ..."[202]

217. A little more recently, the expression "reason to believe" was considered by Lockhart J in WA Pines Pty Ltd v Bannerman.[203] The context was that of s 155 of the Trade Practices Act 1974, which gave certain persons the power to require another to provide information if those persons had "reason to believe that a person is capable of furnishing information". His Honour reviewed the authorities since Boucaut Bay Co Ltd v The Commonwealth and said:

"The phrase 'has reasonable cause to believe' was considered by the House of Lords in Liversidge v. Sir John Anderson [1941] UKHL 1; 1942 A.C. 206. That case related to a claim for damages for false imprisonment which was brought about by an order made by the Home Secretary under the Defence (General) Regulations 1939 (Reg. 18B) of the United Kingdom. It involved a question as to the meaning of the words 'if the Secretary of State has reasonable cause to believe any person to be of hostile origin or associations'. The majority of the House held that those words in their context meant simply that the Secretary of State had honestly to suppose that he had reasonable cause to believe the requisite matter. Provided he acted in good faith he was the only judge of the conditions of his own jurisdiction.

In Nakkuda Ali v. M.F. De S. Jayaratne 1951 A.C. 66 Lord Radcliffe, who wrote the opinion of the Board, said that Liversidge v. Anderson should be regarded as an authority for the meaning of that phrase in that particular regulation alone. His Lordship said at p. 77: -

_'_Their Lordships therefore treat the words in regulation 62 '(i.e. of the Defence (Control of Textiles) Regulations 1945) '"where the Controller has reasonable grounds to believe that any dealer is unfit to be allowed to continue as a dealer" as imposing a condition that there must in fact exist such reasonable grounds, known to the Controller, before he can validly exercise the power of cancellation.'

In Inland Revenue Commissioners v. Rossminster Limited [1979] UKHL 5; [1980] 1 All E.R. 80 Lord Diplock considered the power of an officer of the Board of Inland Revenue to seize and remove the things that he found on premises which the warrant authorised him to enter and search; but where the source of the power limited the power of seizure and removal to things 'which he has reasonable cause to believe may be required as evidence for the purpose of proceedings' for an offence involving a tax fraud. His Lordship said at p. 92: -

'These words appearing in a Statute do not make conclusive the officer's own honest opinion that he has reasonable cause for the prescribed belief. The grounds on which the officer acted must be sufficient to induce in a reasonable person the required belief before he can validly seize and remove anything under the sub-section.'

'For my part I think the time has come to acknowledge openly that the majority of this House is Liversidge v. Anderson were expediently and, at that time, perhaps, excusably, wrong and the dissenting speech of Lord Atkin was right'.

_In my opinion, the words '_has reason to believe' in sub-s.155 (1) imply actual belief: see Boucaut Bay Co. Limited (In Liquidation) v. The Commonwealth (supra) per Isaacs A.C.J. at p. 106; but do not make conclusive the Commission's (also the Chairman's or Deputy Chairman's) own opinion that it has reason for the requisite belief. Words such as these are found frequently in legislation or regulations conferring powers on Ministers of the Crown or public servants. They must be read as limiting otherwise arbitrary powers. If they are to be read as empowering the person in whom the power is vested, to determine conclusively whether the limitation has been satisfied, the value of the intended limitation is nugatory.

Plainly, the power must not be exercised dishonestly or in bad faith (see Boucaut Bay Co. Limited (In Liquidation) v. The Commonwealth (supra) per Starke J. at p. 101); but if that were the sole restraint upon the exercise of the power it would apply only in a very small number of cases, leaving the power arbitrary and unfettered in the great majority of cases.

In my opinion the words in s. 155 'has reason to believe . . .' mean that the Commission must believe that a person is capable of furnishing information, producing documents or giving evidence; and there must be reasonable grounds or cause for that belief, before the powers conferred by sub-s.155 (1) may be exercised."[204]

218. In Power v Hamond,[205] Chernov JA, with whom Maxwell P and Ormiston JA agreed on this aspect, cited Lockhart J's judgment and then continued:

"... It is now settled law that the question whether there is 'reason to believe' a specific matter in a context such as the present is to be determined by the person concerned on an objective basis and that the correctness of the conclusion may be tested in court. Thus, for example, it was said in George v. Rockett that '[w]hen a statute prescribes that there must be "reasonable grounds" for a state of mind - including suspicion and belief - it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person.' Consequently, in order to have launched the impugned investigation lawfully the Ombudsman had to conclude, on an objective basis, that Power's failure to obtain insurance might amount to misconduct or unsatisfactory conduct. The question, therefore, is whether, in all the circumstances, a reasonable Ombudsman would have so concluded.

106 It is not necessary in order to satisfy the requirement that there be 'reason to believe' that a prima facie case be made out against the person the subject of the investigation. ... Moreover, in assessing whether the above requirement has been made out, the investigative nature of the powers must be borne in mind. Nevertheless, the belief must rest on objective facts that would induce the relevant state of mind in a reasonable person. I consider that, given the observations of Cummins, J. to which I have referred earlier,... and having regard to the material before the Court, no reasonable person in the Ombudsman's position would have concluded that there was reason to believe that by continuing to practise without an operative practising certificate due to a bona fide failure to obtain indemnity insurance, Power might be found guilty by the Tribunal of misconduct or unsatisfactory conduct. Put another way, it was not open to the Ombudsman to form that view."[206]

219. Although perhaps trite to say so, what amounts to reasonable grounds will depend on the context. In this case, the immediate context is that of s 920A(1)(f) but the broader context is that of founding a power on which to make a banning order. As I will conclude later in these reasons, that is a power that is exercised on the basis of the protection of the public and not for the punishment of the person banned or to penalise that person. There is no doubt, though, that a consequence of a banning order is to prevent the person banned from undertaking work that person has chosen to do in the past. That may well be work that has provided the person's income and means of supporting him or her self and a family. That is a serious consequence for the person just as protecting the public is a weighty endeavour. These sorts of matters will be borne in mind in deciding whether there exist facts sufficient to induce in the mind of a reasonable person a reason to believe that the particular state of affairs exists.

220. In the case of s 920A(1)(f) that state of affairs is that the person "will not comply with a financial services law". The state of affairs is not that the person "may not comply with a financial services law". To my mind, the distinction between what a person will do and what that person may do is very important. A state of mind in which a person has a reason to believe that another person may do something may well be reached before and on less convincing material than is required for a state of mind that the person will do something. This is the conclusion to which Dr Hughes, Member, and I came to in in Re Howarth and Australian Securities and Investments Commission[207] (Howarth) and I continue to hold it.

221. I am aware that, in Re De Souza and Australian Securities and Investments Commission[208] (De Souza) Senior Member Frost, as he now is, did not agree with our conclusion in Howarty. Of our analysis of s 920A(1)(f), Senior Member Frost said:

" With respect, I have not found it helpful to consider the distinction in that way. The safer course, in my view, is to concentrate on the language of

s 920A(1) itself, and to be guided simply by the requirement that is expressed there. The requirement placed on me is to determine whether I have reason to believe that Mr De Souza will not comply with a financial services law. It is not a question, in my view, of the material being 'more convincing' or 'less convincing'; the material will either give me reason to believe, or it will not. It may be, as Callinan J said in Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49; (2002) 213 CLR 543 at [130], that the expression 'reason to believe' poses a 'relatively low threshold', but the threshold still needs to be met."[209]

222. I agree with Senior Member Frost that "the material will either give me reason to believe, or it will not" and that "the expression 'reason to believe' poses a 'relatively low threshold', but the threshold still needs to be met." I also agree with him that "The safer course ... is to concentrate on the language of s 920A(1) itself, and to be guided simply by the requirement that is expressed there." When I re-read what Dr Hughes, Member, and I wrote in Howarth, which is the same as [252] below, perhaps Dr Hughes and I should have emphasised the words "will" and "may" in Howarth. Section 920A(1)(f) uses the word "will", which is a word with a variety of meanings. In the context in which it is used in that provision, its meanings are:

"... 8 what is bound to be the case ... 9 what applies in certain circumstances ... 10 an assumption or probability ...".[210]

Applying these meanings to s 920A(1)(f), ASIC may make a banning order if it has reason to believe that a person "is bound" not to comply with a financial services law or it is "an assumption or probability" that the person will not comply. Parliament could have provided that ASIC may, in the sense of permitted, make a banning order if it has reason to believe that the person "may not" rather than, as it did, "will not" comply with a financial services law. Had it done that, the word "may"would have signified "a possibility"[211] of non-compliance. When analysing the evidence, a person may conclude that there is reason to believe that there is a "possibility" of non-compliance on certain evidence but would not conclude that there is reason to believe there "is bound" to be, or "an assumption or probability" of, non-compliance on that same evidence. The latter requires a conclusion that there is reason to believe something that is more than a possibility and it is to be expected that more is required to give reason to conclude that something will happen than that it may happen. Therefore, with the greatest of respect to Senior Member Frost, I am not persuaded by his view in De Souza and maintain the view that Dr Hughes and I expressed in Howarth.

B. Do I have reason to believe JTMJ will not comply?

223. I find that I do have reason to believe that JTMJ will not comply with a financial services law. I make that finding on several bases. First, his lack of understanding of the requirement that he show the Order Source as the person giving him instructions indicates either a fundamental flaw in his ability to understand an instruction or a reckless or wilful disregard of the requirement. It is a simple requirement and to suggest that it referred to the Client when that person's name was the subject of a separate entry on the form is not an explanation that is worthy of an authorised representative.

224. I have also had regard to the fact that JTMJ permitted DCO to operate Elizabeth's account when he knew he did not hold an Authority for him to do so. He thought that it could be remedied by obtaining a back-dated document. In another case in which that was the only error, it may be that little would be made of it. When it is taken with the matter in the previous paragraph, it indicates a lack of concern for the rules by which an authorised representative is required to act. It gives me reason to believe that he will not comply with a requirement of the financial services law in the future.

225. On the evidence that I have, I have not placed the emphasis upon the late trades that ASIC has placed upon them in its submissions. I have given my reasons for not doing so but there is one aspect in respect of which they do become relevant. Between 10 March and 27 April 2006, DCO was located in Australia. During that time, JTMJ entered at three BIDs after 4.00pm on Freda's account that are of concern to me. When taken with the times at which telephone conversations occurred between DCO and JTMJ and the orders placed, a pattern emerges. The three late BIDs occurred on 14 March 2006 (16:00:44), 23 March 2006 (16:10:26) and

7 April 2006 (16:08:29). These are included in the table at [142] above.

226. Taking 14 March 2006, I am unable to find a telephone call that from DCO that matches with the times shown in JTMJ's day book for that day. The three entries made in the day book match the BIDs entered on SEATS after 4.00pm but they do not match any order in the SB Firm's records. On 23 March 2006, there had been three telephone conversations between DCO and JTMJ in the middle of the day and an order recorded and a BID entered shortly after the third conversation. That was at about 2.30pm and that accords with the first half of the entry in the day book. The second half of the entry refers to bidding for a further 20,000 shares at 35.5 with the figures "4.04" following. There was no further telephone conversation but a late BID for 20,000 was entered at 16:10:26.16 for 35.5 cents. It does not accord with JTMJ's evidence that he entered late BIDs because DCO was overseas and called him at or about 4.00pm. The figures of "4.04" suggest a conscious decision to enter a BID at or about that time.

227. On 7 April 2010, the record of the conversation between DCO and JTMJ is timed at 14:40:00. The day book entry relates to the purchase of two lots totalling 40,000 at 35.5 cents. The entry of a BID for 25,000 led to two trades totalling 16,160 shares. That left the BID unfulfilled to the extent of 8,840 shares. At 16:08:29.23, JTMJ entered an amended BID increasing the number bid for from the remaining 8,840 shares to 23,840 shares. That was in accordance with the earlier instructions to the extent of volume but it does not accord with JTMJ's evidence that he entered late BIDs because that was the time at which DCO telephoned him.

228. Having regard to the pattern of the telephone conversations between JTMJ and DCO generally, I do not accept that DCO had a habit of calling at or about the time of the close of the ASX market. JTMJ's evidence in that regard is not supported by the telephone records. There are occasions on which he did but there are many occasions on which he did not and JTMJ's entry of late BIDs cannot be explained by reference to the timing of DCO's calls in a significant number of instances. Therefore, although I have not, on the evidence, shared ASIC's degree of concern about some of the late BIDs per se, I am concerned with the reason JTMJ has given to explain their timing. It leads me to conclude that JTMJ is not a person for whom accuracy is important. That further persuades me that he is a person whom

I have reason to believe will not comply with a financial services law.

Section 93 of the ASIC Act: an enforceable undertaking

A. The power to accept an enforceable undertaking

"(1) ASIC may accept a written undertaking given by a person in connection with a matter in relation to which ASIC has a function or power under this Act.

(2) The person may withdraw or vary the undertaking at any time, but only with ASIC's consent.

(3) If ASIC considers that the person who gave the undertaking has breached any of its terms, ASIC may apply to the Court for an order under subsection (4).

(4) If the Court is satisfied that the person has breached a term of the undertaking, the Court may make all or any of the following orders:

(a) an order directing the person to comply with that term of the undertaking;

(b) an order directing the person to pay to the Commonwealth an amount up to the amount of any financial benefit that the person has obtained directly or indirectly and that is reasonably attributable to the breach;

(c) any order that the Court considers appropriate directing the person to compensate any other person who has suffered loss or damage as a result of the breach;

any other order that the Court considers appropriate."

231. Mr Young submitted that, should I come to a decision adverse to JTMJ, all that I should require of him is that he enter an enforceable undertaking. If

I decide to take that course, the appropriate course for me to take would be first to decide upon the terms of that undertaking. I would then remit the matter to ASIC with a direction that it enter into the undertaking accordingly.[212]

232. Mr Gilbertson submitted that I should have regard to ASIC's policy regarding enforceable undertakings. That policy is found in Regulatory Guide 100 (RG 100) entitled "Enforceable undertakings". He referred to ASIC's general position as set out in [2.14] of RG 100:

"2.14 We will generally not accept an enforceable undertaking after a matter has been referred to an ASIC delegate for possible disqualification or suspension.

At this stage, ASIC will have considered the matter in some detail and, should a delegate decide to make an administrative order, ASIC views this as a more effective regulatory outcome than an enforceable undertaking, as:

(a) such a decision would clearly reflect our view of the nature and extent of the misconduct by making findings of fact;

(b) breach of a disqualification order under Part 2D.6 or s 920C is a criminal offence (this is not the case with a breach of an enforceable undertaking); and

Note: This approach is consistent with Sage v Australian Securities and Investments Commission [2005] FCA 1043 where an undertaking offered to the court as an alternative to banning action was not considered to be an adequate alternative.

(c) any persons disqualified by a delegate will be listed on one of the public registers of banned or disqualified persons."

C. The Tribunal's power regarding an enforceable undertaking

233. Mr Gilbertson simply drew my attention to this passage of RG 100 and, quite properly, did not suggest that I was bound by it. That is consistent with the principles stated very early in the Tribunal's history by its then President, Brennan J, in Re Drake and Minister for Immigration and Ethnic Affairs (No 2):[213]

" When the Tribunal is reviewing the exercise of a discretionary power reposed in a Minister, and the Minister has adopted a general policy to guide him in the exercise of the power, the Tribunal will ordinarily apply that policy in reviewing the decision, unless the policy is unlawful or unless its application tends to produce an unjust decision in the circumstances of the particular case. Where the policy would ordinarily be applied, an argument against the policy itself or against its application in the particular case will be considered, but cogent reasons will have to be shown against its application, especially if the policy is shown to have been exposed to parliamentary scrutiny."[214]

234. The reason for adopting such a position in relation to policy that is framed in terms consistent with the legislation conferring the decision-making power is found in an earlier passage in his Honour's judgment. The particular policy he had before him had been developed by a Minister. Although there are particular considerations that apply to Ministerial policy, the principles he outlines resonate in relation to all policy even though the degree of resonance may vary according to the level at which the policy has been developed:

" But in general, it would be manifestly imprudent for the Tribunal to override a Ministerial policy and to adopt a general administrative policy of its own. Although the practice of giving reasons for decisions inevitably spins out threads of policy from the facts of the cases, the policy developed in this way originates in the need to ensure that justice is done in individual cases, and it is a different development from a Ministerial declaration of broad policy relating to the generality of cases. The Tribunal is no doubt able to refine a broad policy, but the laying down of a broad policy on deportation is essentially a political function, to be performed by the Minister who is responsible to the Parliament for the policy he adopts. The very independence of the Tribunal demands that it be apolitical; and the creation of its deportation jurisdiction is intended to improve the adjudicative rather than the policy aspects of deportation decisions. The Tribunal is not linked into the chain of responsibility from Minister to Government to Parliament, its membership is not appropriate for the formulation of broad policy and it is unsupported by a bureaucracy fitted to advise upon broad policy. It should therefore be reluctant to lay down broad policy, although decisions in particular cases will impinge on or refine broad policy emanating from a Minister. Different considerations might apply if a reviewable discretionary power were not subject to Ministerial supervision (see, in connection with Ministerial supervision, Ansett Transport Industries (Operations) Pty Ltd v Commonwealth of Australia [1977] HCA 71; (1978) 52 ALJR 254).

If consistency in decision-making is sought, as it ought to be, the standards and values which a Minister expresses in a statement of lawful policy can be a constant reference point for each of the Presidential Members of the Tribunal in exercising the discretion in particular cases. Ministerial policy can be an aid to consistency among Tribunal decisions, and to consistency between the decisions of the Tribunal and those of the Minister. Decisions made under a statutory power and reviewed by the Tribunal are but a proportion of the decisions made under that power, and it would be a regrettable anomaly if the decisions which were not reviewed revealed different standards and values from those made on review.

These considerations warrant the Tribunal's adoption of a practice of applying lawful Ministerial policy, unless there are cogent reasons to the contrary. If it were shown that the application of Ministerial policy would work an injustice in a particular case, a cogent reason would be I shown, for consistency is not preferable to justice. ..."[215]

235. Policies are developed at different levels and for different purposes. The policy to which Brennan J was referring had been developed at the political level but some are developed at the departmental level. In an earlier case of Re Becker and Minister for Immigration and Ethnic Affairs,[216] Brennan J had distinguished the two:

" The difference between the factors to be taken into account in the two kinds of policy provides one ground of distinction between them; the difference in Parliamentary opportunity to review the two kinds of policy provides another. Some policies are basic, and are intended to provide the guideline for the general exercise of the power, other policies or procedural practices are intended to implement a basic policy. Different considerations may apply to the review of each kind of policy, and more substantial reasons may have to be shown why basic policies - which might frequently be forged at the political level - should be reviewed. There may, of course, be particular cases where the indefinable yet cogent demands of justice require a review of basic or even political policies, but those should be exceptional cases and this is not one of them."[217]

236. ASIC is neither a Minister nor a department. It is a body created by statute but one which is not entirely independent of Ministerial direction.[218] It must report to Parliament under s 9 of the Commonwealth Authorities and Companies Act 1997 but must also report more particularly on its goals and priorities in performing its functions and its effectiveness in achieving them.[219] Its activities are among those scrutinised and reported on by the Parliamentary Joint Committee on Corporations and Financial Services to the Parliament.[220] ASIC is, therefore, a body whose actions are closely scrutinised. Although one step removed from scrutiny on the floor of the House as a Minister would be scrutinised, scrutiny is undertaken in a structured environment by a committee of the Parliament. It does not place ASIC in the same positions as a Minister but there are analogies to be drawn between the two. There are perhaps more analogies to be drawn than between a Minister and the position of the Department with regard to the Minister but I do not need to explore it further for the purposes of this case.

237. The matters to which I have referred, however, together with the comprehensive nature of RG 100, lead me to conclude that, provided it accords with ASIC's decision-making powers, it should be given considerable weight. In order to decide whether it does accord with those powers, I have looked beyond [2.14] of RG 100 to see the basis on which that policy is supported by ASIC.

238. RG 100 sets out ASIC's general approach to the circumstances in which it will choose to accept an enforceable undertaking rather than seeking an order for damages or compensation or an injunction from a court or taking administrative action. It will do so if it considers that an enforceable undertaking provides a more effective regulatory outcome than non-negotiated administrative or civil actions. ASIC sees a negotiated settlement as having a number of potential advantages including:

"(a) produce a swift result that compensates persons who have suffered loss or damage as a result of the contravention or alleged contravention of the law;

(b) compel the individual, company or responsible entity to implement improved compliance arrangements, monitored by an independent expert reporting to ASIC;

Note: Examples of improved compliance arrangements include improvements to corporate governance arrangements, disclosure practices, staff training, implementing a whistleblower regime and regular reports to ASIC on progress in implementing a new compliance program.

(c) restrict the activities that may be undertaken by an individual, company or responsible entity; and

(d) be a cost-effective alternative to litigation."[221]

239. ASIC has set out the circumstances in which it will generally accept an enforceable undertaking. As a rule, these are the only circumstances:

"(a) we have considered starting civil or administrative enforcement action for a contravention or an alleged contravention of the relevant legislation;

(b) we have weighed up the nature of the alleged breach and the effectiveness of the regulatory outcome offered by the enforceable undertaking compared to outcomes offered by other available enforcement remedies; and

(c) we believe an enforceable undertaking is the most effective and appropriate regulatory outcome given the significance of the issues to the market and the community, the nature and seriousness of the alleged breach and the compliance history of the party (see paragraphs 2.8-2.12 of this guide)."[222]

240. The circumstances in which ASIC will not accept an enforceable undertaking are those described at [2.5] of RG 100. It will not accept an enforceable undertaking:

"(a) instead of commencing criminal proceedings against a party; or

(b) to secure payment of a pecuniary civil penalty (see paragraph 2.6 of this guide); or

(c) after a matter has been referred to a specialist body (see paragraph 2.13 of this guide); or

(d) in respect of deliberate misconduct or fraud; or

(f) as an alternative form of relief if conditional relief has not been complied with."

241. In assessing whether an enforceable undertaking is a more effective regulatory outcome than other possible courses of action, ASIC will take into account four critical considerations:

"(a) the position of consumers and investors whose interests have been or may be harmed by the suspected conduct;

(b) the effect on the regulated person's future conduct;

(c) the effect on the regulated population as a whole; and

(d) the community benefit in regulatory outcomes being achieved as quickly and cost-effectively as possible."[223]

242. ASIC will consider an enforceable undertaking to be an effective regulatory outcome if it:

(a) promotes the integrity of, and public confidence in, our financial markets and corporate governance;

(b) specifically deters the person from future instances of the conduct which gave rise to the undertaking;

(c) promotes general deterrence in making the business community aware of the conduct and the consequences arising from engaging in that conduct; or

(d) provides an ongoing benefit by way of improved compliance programs."[224]

243. When deciding whether an enforceable undertaking is appropriate in the circumstances of the case, ASIC will consider the following factors among those that may be relevant:

"(a) Is the person prepared to publicly acknowledge ASIC's concerns about the conduct and the necessity for protective or corrective action?

(b) Was the misconduct that ASIC considers to be a breach inadvertent?

(c) Was the conduct that ASIC considers to be a breach a result of the conduct of one or more individual officers or employees of the company?

(d) What was the seniority and level of experience of the individual(s) involved in the breach?

(e) Has the person co-operated with ASIC, including providing us with complete information about the underlying breaches and any remedial efforts?

(f) Will it achieve an effective outcome for those who have been adversely affected by the conduct or compliance failure?

(g) Is the person likely to comply with the enforceable undertaking?

(h) Has the person been the subject of complaints or previous ASIC enforcement action?

(i) What are the prospects for a speedy resolution of the matter?"[225]

244. When regard is had to the earlier principles set out in RG 100, ASIC's statement in [2.14] makes more sense. It is clear that, by the time a matter has been referred to an ASIC delegate for possible disqualification or suspension, ASIC has considered the regulatory outcomes of various courses of action and the extent to which those outcomes would protect or compensate consumers and investors harmed by the conduct and the public generally and the effect they would have in regulating the activities of the person concerned and of those engaged in the market generally.

It has considered whether an enforceable undertaking is appropriate in the circumstances as known to it and according to the policy it has set out. This seems to me to be an approach that is consistent with the powers given to ASIC under the Corporations Law in relation to the regulatory powers that it has and under the ASIC Act in relation to enforceable undertakings.

245. It does not follow automatically that I think that the Tribunal should follow precisely the same path. To accept that I should not consider, or that I should be slow to consider, whether JTMJ should be required to enter an enforceable undertaking simply because the matter has been referred to an ASIC delegate for possible disqualification or suspension would be to limit my powers and discretions in reviewing the decision. Under s 43 of the AAT Act, I may, for the purposes of reviewing ASIC's decision, exercise all the powers and discretions conferred on it by any relevant enactment i.e. the Corporations Act and the ASIC Act.[226] In the circumstances of this case, Parliament has not chosen to modify the Tribunal's powers in this regard. It has not, for example, provided that the Tribunal may not consider an enforceable undertaking. Therefore, to adopt [2.14] of RG 100 and to decide as a result that an enforceable undertaking should not be considered because ASIC has considered and imposed a disqualification in the form of a banning order would be to decline to consider the full range of powers and discretions available to me. It would be to fetter the powers and discretions that I have under the Corporations Act and the ASIC Act in a manner that I do not think is permitted by that legislation.

246. It would be to adopt a doctrine of deference. That is a doctrine which has not found favour in Australian courts when reviewing decisions of administrative bodies. In so far as the law is concerned, that is clear from the judgment of the majority of the High Court in Corporation of the City of Enfield v Development Assessment Commission.[227] The majority of the High Court drew a clear distinction between whether an administrative body acts within its jurisdiction and the merits of administrative action in so far as they do not raise questions of legality. If called upon, the former is a matter for a court to determine. In determining the latter, the court may have regard to the opinion of the administrative body if it thinks it appropriate by reason of, for example, the field in which it operates, the criteria for appointment of its members, the materials on which it acts in exercising its functions and the extent to which its decisions are supported by disclosed processes of reasoning. That does not mean it defers in any way to the decision of the administrative decision-maker and this is clear from the judgment of Kirby J in the later case of NAIS v Minister for Immigration and Multicultural and Indigenous Affairs.[228] Citing Corporation of the City of Enfield, he said:

"... The separation of each of the three branches of government in the United States has produced a doctrine of deference to administrative decision-making that has never been accepted in Australia or other Commonwealth countries. ...

In Australia, at least in respect of officers of the Commonwealth, we embarked in a constitutional direction different from that of deference to administrators. It is one that affords to the courts the jurisdiction and power to ensure compliance with the law by federal office-holders, including, relevantly, members of the tribunal. This is a distinctive feature of our constitutional arrangements. It is reflected in the provisions of the Judiciary Act. This court should not in any way diminish it."[229]

247. Although the Tribunal is clearly not a court, it seems to me that the same principles underlie its approach in reviewing the merits of an administrative decision as underlie those of a court reviewing the legality of an administrative decision. The Tribunal must follow and apply the law in reviewing the merits of an administrative decision. Unless it provides that it is to be so, the law cannot be modified by the facts or by what has gone before. Therefore, the fact that the decision-maker has chosen to make one decision or another or to reach that decision by one route rather than another cannot modify the law. That means that, in this case, the fact that ASIC has chosen to consider and then impose a banning order cannot limit the powers that I have to consider whether another form of regulatory outcome would be more appropriate than a banning order or than taking no regulatory action at all. Therefore, I do not consider that I should have regard to ASIC's policy not to accept an enforceable undertaking once the matter had been referred to a delegate for possible disqualification of JTMJ.

248. I do not consider that I should direct ASIC to accept an enforceable undertaking from JTMJ but give my reasons below when considering the imposition of a banning order.

A. What are the limits of that discretionary power?

249. The more broadly based constraints of discretionary power were considered by Windeyer J in Finance Facilities Pty Ltd v Federal Commissioner of Taxation.[230] He did so in the context of s 46(3) of the Income Tax Assessment Act 1936:

"... If the scope of the permission be not circumscribed by context or circumstances it enables the doing, or abstaining from doing, at discretion, of the thing so authorized. But the discretion must be exercised bona fide, having regard to the policy and purpose of the statute conferring the authority and the duties of the officer to whom it was given: it may not be exercised for the promotion of some end foreign to that policy and purpose or those duties. ..."[231]

250. The particular legislative context in which a discretionary power is conferred will reveal the more narrowly based constraints applicable to the exercise of that particular power. Constraints of this type were described by Gleeson CJ, Gaudron and Hayne JJ in Coal and Allied Operations Pty Limited v Australian Industrial Relations Commission and Others:[232]

"'Discretion' is a notion that 'signifies a number of different legal concepts' .... In general terms, it refers to a decision-making process in which 'no one [consideration] and no combination of [considerations] is necessarily determinative of the result' .... Rather, the decision-maker is allowed some latitude as to the choice of the decision to be made .... The latitude may be considerable as, for example, where the relevant considerations are confined only by the subject matter and object of the legislation which confers the discretion .... On the other hand, it may be quite narrow where, for example, the decision-maker is required to make a particular decision if he or she forms a particular opinion or value judgment."[233]

251. In this case, the particular legislative framework is the licensing framework established by Part 7.6 of the Corporations Act. It establishes two steps that have to be taken if a banning order is to be imposed. The first step takes the form of considering whether to exercise the discretion relevant to s 920A as to whether a banning order should be issued at all. If the decision is not to take that step at all, that is an end of that matter although it may then lead to a consideration of whether the person should be permitted to offer, and ASIC should be required to accept, an enforceable undertaking and, if so, the terms of that enforceable undertaking. If the decision is to take the step and issue a banning order, the second step is relevant to

s 920B. It is to determine the length of that banning order.

252. The matters to which we must have regard in considering whether or not to make a banning order have been the subject of some judicial consideration.

Dr Hughes, a Member of the Tribunal, and I considered these in Re Howarth and Australian Securities and Investments Commission.[234] Although a lengthy passage,

I include it to explain why I continue to hold the view that the authorities establish that a banning order should only be imposed for protective, and not punitive, purposes:

"152. If we were to have regard to the licensing framework established by Part 7.6 of the Corporations Act without reference to judicial authorities, it would seem to us that the purpose of a banning order is to ensure that members of the public are protected from those who do not meet the standards of behaviour or otherwise expected of a person engaged in the provision of financial services. There is nothing on the face of Part 7.6 generally or of

ss 920A and 920B in particular that suggests that the purpose of imposing a banning order is intended to be punitive. There are separate provisions in the Corporations Act creating criminal offences and yet others providing for civil consequences, such as pecuniary penalties, for the breach of certain provisions of the financial services law.[235] There seems to be a clear separation in the Corporations Act of the regulatory provisions relating to suspension or cancellation of AFSLs, those relating to the imposition of banning orders and those relating to the creation of offences and the criminal and civil consequences of breaching them.

153. It might be thought that this proposition would be contrary to the High Court's conclusion in Rich v Australian Securities and Investments Commission_[236]_ when it overruled the judgment of the Full Court of the Federal Court in Australian Securities Commission v Kippe_.[237] The issue that faced the Full Court and its conclusion were summarised by Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ in_ Rich_:_

'... In Kippe, the question was whether statements made in an examination under s 19 of the Australian Securities Commission Act 1989 (Cth) were admissible in evidence in proceedings before the Administrative Appeals Tribunal in which banning orders were sought under ss 829 and 830 of the Corporations Law. Section 68(3) of the Australian Securities Commission Act provided that the statements were not admissible in "a proceeding for the imposition of a penalty". The Full Court of the Federal Court held ... that a proceeding which might result in a banning order was to be characterised as "protective" in purpose and not as one for the imposition of a penalty. ..."[238]

154. The case of Rich itself involved an application by ASIC to the Supreme Court of New South Wales for orders of discovery against Mr Rich and another. Mr Rich claimed that he should not be required to give discovery because the proceedings exposed him to a penalty in the form of declarations of contravention, compensation orders and disqualification orders so that the privilege against penalties and forfeiture applied. Referring to a disqualification order, the majority, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ, with whom McHugh J agreed on these aspects, said:

' If a disqualification order is made, the person against whom the order is made ceases to be a director, or a secretary of a company, ... unless given permission under ss 206F or 206G of the 2001 Act to manage the corporation concerned. The order for disqualification thus causes the person against whom it is made to forfeit any office then held in a corporation and forbids that person from holding office in a corporation for the duration of the disqualification order. Those consequences, whether taken separately or in combination, when inflicted on account of a defendant's wrongdoing, are penalties. That the penalty is not exacted in the form of a money payment does not deny that conclusion. As the authorities referred to earlier in these reasons reveal, equity's concern with penalties was never confined to pecuniary penalties. If exposure to loss of office or exposure to dismissal from a police force ...is exposure to penalty, exposure to a disqualification order is exposure to a penalty.'[239]

155. The majority did not go on to consider the basis on which the discretion to make a disqualification order should be made. They referred to authorities in which it had been said that its purpose was to protect the public rather than to punish but immediately distinguished that line of authorities from the issue that they had to decide. The issue they had to decide was:

'... how should the general principles of the privileges against exposure to penalties and forfeiture find application in the particular circumstances of these proceedings. That inquiry is not assisted by examining why the orders sought in the proceedings might be made or what purposes might be achieved by their making. Rather, attention must be focused upon the nature of the orders that are sought.'[240]

156. On our understanding, the majority gave no consideration at all to the factors that are to be taken into account when making disqualification orders. It appears from their judgment that they had no need to do so. Kirby J, who was in dissent, did not need to do so and expressly said so:

'... Those decisions are not themselves under review in this appeal. Accordingly, their correctness (and in particular the correctness of the 'fifteen point guide' to disqualification orders considered in one of them) ... [Re HIH Insurance Ltd (in prov liq) [2002] NSWSC 483; (2002) 42 ACSR 80 at 97-9 [56] per Santow J] was not argued or considered in this appeal. Principle and fair procedures require that this court reserve its position upon them.'[241]

157. McHugh J, however, did go on to consider them even though he agreed with the majority on the issues they had addressed. He said:

'... I think that the factors that the courts take into account when ordering disqualification under the corporations legislation make it impossible to hold that the "civil penalty" provisions and, in particular, the disqualification provisions, are purely protective in nature. Despite frequent statements by the judges who administer the legislation that the purpose of the disqualification provisions is protective, what the judges actually do in practice is little different from what judges do in determining what orders or penalties should be made for offences against the criminal law. Elements of retribution, deterrence, reformation and mitigation as well as the objective of the protection of the public inhere in the orders and periods of disqualification made under the legislation.'[242]

158. Later in his reasons, McHugh J went on to analyse 15 propositions that Santow J derived from previous authorities regarding a court's powers under ss 260C and 260E to disqualify a person from managing corporations. Santow J had done that in Re HIH Insurance Ltd (in prov liq)[243] and McHugh J described his judgment as the leading authority on the reasons for a court's exercising its powers under ss 206C and 206E of the Corporations Act to order the disqualification of a person from managing corporations. His Honour categorised some of Santow J's propositions as relating to the protection of the public, others as relating to deterrence and yet others as relating to mitigating factors.

159. McHugh J also analysed principles stated in other cases concerned with disqualification orders in the same way. In particular, he referred with approval to the judgment of the Victorian Court of Appeal in Elliott v Australian Securities and Investments Commission_[244]_ when it said:

' Many of the propositions and factors listed by Santow J bear a similarity to sentencing principles. Matters going to aggravation and mitigation in relation to contraventions of s 588G [of the Corporations Law] need to be considered and accorded proper weight. But above all else protection of the public and deterrence, specific and general, must also be given appropriate consideration.'[245]

' Both Santow J's list of propositions and the comments of the Victorian Court of Appeal indicate that the factors taken into account in the criminal jurisdiction - retribution, deterrence, reformation, contrition and protection of the public - are also central to determining whether an order of disqualification should be made under the Corporations Act and, if so, the appropriate period of disqualification. Those factors also support the conclusion that the jurisdiction exercised under this part of the Corporations Act cannot properly be characterised as purely protective.'[246]

161. Having analysed the judgments of both the majority and of McHugh J, we find, regrettably, that our understanding of the majority judgment in Rich does not accord with the analysis of it by Senior Member Penglis in Re Dollas-Ford and Australian Securities and Investments Commission_[247]_ when he said:

' The proper basis for the exercise of a discretion to impose a banning order was considered by the High Court of Australia in Rich v Australian Securities and Investments Commission .... The High Court rejected the proposition stated in Australian Securities and Investments [sic] Commission v Kippe ... the purpose of banning orders is solely to protect the public rather than to punish.'[248]

162. We note that Finkelstein J reached the same conclusion as Senior Member Penglis in Australian Securities and Investments Commission v Vizard_[249]_ when he considered the pecuniary penalty that should be imposed as well as whether a disqualification order should be made. His Honour said:

' It could hardly be denied that, as a rule, directors of publicly listed companies are sensitive to risk. The few that may be tempted to gain prestige, wealth and security by illegal means can be dissuaded from that course if the risk of detection and serious punishment is too great. Although the civil penalties are not substantial when compared with the possible gains from corporate crime, other penalties may act as a better deterrent.

This is where the possibility of disqualification from office can play an important function. It may be accepted that the principal object to be achieved by a disqualification order is protective: protection of the company and its shareholders against the likelihood of repetition of the offending conduct. The mistake is to treat this as the sole purpose of a disqualification order. That error has now been exposed. In Rich v Australian Securities and Investments Commission (2004) 209 ALR 271; 50 ACSR 242 ; [2004] HCA 42 the High Court made it clear that a disqualification order can be imposed not only to protect the company's shareholders against further abuse, but also by way of punishment and, importantly, for general deterrence. I am confident the fear of losing both their position from business life, as well as their good reputation, will be an effective deterrent in the case of many a director who is contemplating a dishonest course for gain. Few corporate crimes are spontaneous. There is always time to consider the consequences. The risk of a long period of disqualification, for example so long that it will keep the director forever out of public corporate life, may well tip the scales.'[250]

163. Any disagreement we might have with a judgment of the Federal Court is, when all is said and done, irrelevant if what is said in that judgment is not obiter dicta and if there is no relevant conflicting authority from a superior court. McHugh J's judgment accorded with the statements made in these two cases but not so the majority's. The majority were at pains to distinguish between an enquiry that was relevant to the resolution of the issue it had to decide - the nature of the orders sought - and an issue it did not have to decide - why an order might be made and the purposes it might achieve.

164. The judgment of Finkelstein J places us in a very difficult position as we are bound by judgments of superior courts. In trying to resolve our dilemma, we note that what McHugh J said in Rich and Australian Securities and Investments Commission is obiter dicta_. What Finkelstein J said in_ Australian Securities and Investments Commission v Vizard is not necessarily so but it is not consistent with conclusions reached on the same or analogous issues in other superior courts. We will begin by referring to passages from judgments to which McHugh J referred in Rich and Australian Securities and Investments Commission.

165. After analysing passages from the judgment of Bryson J in Re One.Tel Ltd (in liq); Australian Securities and Investment Commission v Rich_[251]_ when ordering that persons were disqualified from holding office as company officers, McHugh J concluded:

' It is difficult to read these passages without concluding that there is little difference in the approach of his Honour and the approach of judges making orders or imposing sentences in the criminal jurisdiction. It is hard to escape the conclusion that, in determining the period of disqualification, the courts consider that the larger the loss the longer the period of disqualification that is justified. If that is so, and I think that it is, it indicates that retribution is as much a factor as protection of the public. There is no a priori reason why the protection of the public requires a person who is responsible for the loss of $100m to be disqualified for a longer period than a person who is responsible for the loss of $100,000. The person responsible for the smaller loss may be a far greater danger to the public than the person responsible for the larger loss. Yet, given the approach of the courts, if other things are equal, the person responsible for the major loss will almost certainly receive a far longer period of disqualification.

Another matter which suggests that retribution is a factor behind the making of a disqualification order, including the appropriate length of disqualification, is the relevance of the defendant's having obtained some personal benefit from the conduct that gives rise to the application for disqualification. Thus, in Australian Securities Commission v Donovan, Cooper J said... that in determining whether a disqualification order is appropriate and, if so, the length of such disqualification, the extent to which the person benefited from the conduct personally or tried to conceal it are relevant matters.

Further, the fact that courts take into account mitigating factors suggests that the jurisdiction is not purely protective. For example, both the Victorian Supreme Court and the Court of Appeal in Australian Securities and Investments Commission v Plymin (No 2)...[(2003) [2003] VSC 230; 21 ACLC 1237] and Elliott_...[(2004) [2004] VSCA 54; 205 ALR 594 ; 48 ACSR 621] and Gzell J in the New South Wales Supreme Court i_n Australian Securities and Investments Commission v Whitlam (No 2)__...[(2002) [2002] NSWSC 718; 42 ACSR 515] took into account mitigating factors when determining whether to order disqualification and when assessing the appropriate period of disqualification of the defendant company directors. In Plymin and Elliott such factors included the defendants' previous unblemished corporate record, remorse and their cooperation with relevant authorities, including the Australian Securities and Investments Commission and external administrators... In Whitlam (No 2), Gzell J also took into account the loss to the community of the defendant's services if he were disqualified and the irreparable effect of the proceedings upon the defendant's reputation, income, career and family.'[252]

166. The case of Australian Securities Commission v Donovan_,[253] to which McHugh referred in this passage required Cooper J to consider s 1317EA(3)(a) of the_ Corporations Law giving the Court power to make an order prohibiting persons whom it has declared to have contravened certain provisions in certain ways, from managing a corporation. Cooper J described s 1317EA(3)(a) as "... a protective provision designed to protect the public and to prevent a corporate structure being used by individuals in a manner which is contrary to proper commercial standards."[254] He cited Re Tasmanian Spastics Association; ASC v Nandan_,[255] which had considered the same section as well as_ Nicholas v Corporate Affairs Commission_,[256] which had considered s 562A(3) of the_ Companies (Victoria) Code_. Cooper J concluded:_

'Because the power under s 1317EA(3)(a) is predominantly protective, it is relevant to have regard to the officer's prior corporate conduct, to the present activities of the officer, to the likelihood that the officer will repeat or engage in conduct of the type which constituted the contravention of s232(4) which gives rise to the application, including whether or not the officer shows contrition or accepts responsibility for his or her conduct, and the extent to which the officer benefited from the conduct personally or tried to conceal it.'[257]

167. Contrary to the earlier passage to which we have referred, Cooper J described the power in this passage as 'predominantly protective_' (emphasis added). That modification followed his reference to the cases of_ Re Civica Investments Ltd_[258]_ and Cullen v Corporate Affairs Commission.[259] In each, consideration was given to whether the relevant power to disqualify should be exercised for the maximum period or for something less. In Re Civica Investments Ltd_, Nourse J considered a power to disqualify that was limited to a five year period. He said that the court should:_

'... what the court has to do is to impose such a period of disqualification, if any, as it thinks appropriate, bearing in mind the upper limit of the power and disregarding its further power to give leave to act in the future notwithstanding the disqualification. Speaking for myself, I certainly would not think it right to impose the maximum period of disqualification irrespective of the degree of blame and then leave it to the person concerned to come back and seek leave to act in the future.

Secondly, the fact that the five year period is a maximum must, on general principles, mean that the longer periods of disqualification are to be reserved for cases where the defaults and conduct of the person in question have been of a serious nature, for example, where defaults have been made for some dishonest purpose, or wilfully and deliberately, or where they have been many in number and have not been substantially alleviated by remedial action and convincing assurances that they will not recur in the future.'[260]

168. Cooper J also referred to this passage from the judgment of Young J in Cullen v Corporate Affairs Commission (NSW). Young J was considering an appeal from a notice that the Corporation Affairs Commission (NSW)(CAC) had given Mr Cullen prohibiting him from being in any way concerned in or taking part in the management of a corporation. The CAC had issued the notice under s 562A(3) of the Companies (NSW) Code which, at the relevant time, permitted it to impose a prohibition for a period not exceeding five years. It was in that context that Young J said:

' The next question is for what period should that disqualification be. There is not much authority on this point. In Re Civica Investments Ltd (1983) BCLC 456, Nourse J held that the maximum period of disqualification should be reserved for defaults of a serious nature such as dishonesty or a large number of defaults not substantially alleviated by appropriate remedial action and/or convincing assurances that they would not recur. As far as I know that case has never been departed from although I must confess I do not know of any other cases in the reports that deal with this point.

The present case was not the worst case. The delegate did not find, nor did the liquidator find, any fraud or dishonesty. The case was one of, there [sic], inefficiency, or as the learned delegate put it, bungling. The director did not take appropriate action quickly enough to minimise loss. That he intermingled the affairs of different corporate entities, that he did not fully understand the obligations of a director and, most importantly, did not pay over group tax.

The learned delegate said that unless there were strongly persuasive circumstances which would warrant a reduction of five years he should not reduce it. He said this notwithstanding the submission of counsel for the Corporate Affairs Commission that on the facts before him it was not the worst case. Learned counsel says that he does not adhere to that submission before me because further facts have come out which make the case more serious than the evidence before the delegate suggested.

It seems to me, with respect, the learned delegate overlooked the words of Nourse J and took the view that five years' disqualification was the norm. I am of the view that I should follow the view of Nourse J. This is not the worst case, but on the other hand it is not a trivial case and I think in all the circumstances, especially as this is one of the first cases where this sort of conduct has come under consideration for disqualification, that disqualification for two years from today would be appropriate. I have taken into account the fact in fixing this period that de facto the director has not been involved in being a director of a company since last May.'[261]

169. It is important to note that both Re Civica Investments Ltd and Cullen v Corporate Affairs Commission (NSW) concerned provisions that permitted the disqualification periods to be no more than five years. That was a feature recognised by Cooper J in Australian Securities Commission v Donovan when he surmised that a maximum of that length must mean that the longer periods of default must, on general principles, be reserved for the cases where the person's defaults and conduct has been more serious. That can be read as introducing an element of punishment but, when read in the context of a maximum period, need not necessarily be read in that way at all.

170. Any notion that punishment is relevant in the imposition of a period of disqualification was dispelled by the Full Court of the Federal Court in Kamha v Australian Prudential Regulation Authority,[262] which was decided after Rich_. It said:_

'73 While punishment of a criminal offence is the exercise of judicial power, the imposition of disciplinary penalties does not necessarily entail the exercise of judicial power: Police Service Board v Morris & Martin [1985] HCA 9; (1985) 156 CLR 397 at 403 and 407. Disciplinary jurisdiction is significantly protective and does not involve a punitive element in the nature of the punishment of a criminal offence. Jurisdiction in disciplinary matters is exercised to protect the public, not to punish the person disciplined. The object of protection of the public also includes deterring others who might be tempted to fall short of the relevant standards of conduct.'[263]

171. More recently, in 2007, in Australian Securities and Investments Commission v Forge_,[264] White J of the Supreme Court of New South Wales considered whether to make a disqualification order against Mr Forge for a greater or lesser period or to accept an enforceable undertaking. Earlier in his reasons, his Honour had quoted the passage from McHugh J's judgment that the factors of retribution, deterrence, reformation, contrition and protection of the public are also central to determining whether an order for disqualification should be made under the Corporations Act and, if so, the appropriate period of disqualification.[265] White J also referred to the fact that McHugh J had cited with approval the observations of Bryson J in_ Re One.Tel Limited (in liq); Australian Securities and Investments Commission v Rich that only limited guidance can be obtained from other decisions with respect to disqualification orders and the period for disqualification. That is so because each decision is related to its own facts and the circumstances of each defendant are special and vary greatly.[266]

172. Somewhat in contrast to these passages, when White J came to consider whether an enforceable undertaking should be accepted in lieu of a disqualification order, White J said:

' The proffered undertaking is in narrower terms than a banning order. A banning order would prohibit Mr Forge from managing a corporation. That expression is defined by s 91A of the Corporations Law. It extends to the person being in any way (whether directly or indirectly) concerned in or taking part in the management of a corporation. However, I understood that the proffered undertakings were intended to extend to managing a corporation in this sense, as well as being a director of a corporation. It was submitted for Mr Forge that the proffered undertaking would fully protect the public. Indeed, unless a disqualification order were made for life, it was said that the public would have greater protection by the acceptance of such an undertaking than it would if a disqualification order were made. That is because the undertaking is proffered as a perpetual undertaking.

I do not accept this submission. A disqualification order is protective of the public for the period of disqualification against misconduct by the person disqualified. However, that is not its only purpose. The object of general deterrence is also of great importance. That object is served by the public disapproval of the impugned conduct being marked not only by a declaration that the conduct has contravened the Act, but by an order for disqualification of the contravener from managing a corporation either for a fixed period or for life. The shame or embarrassment which accompanies such an order is not designed as punishment, although it might have that effect, but serves as a general deterrent to others who might be tempted to breach their duties as directors or officers of a company. In my view, the objective of general deterrence would not be sufficiently served by the acceptance of the proffered undertaking.'[267]

173. This passage clearly excludes punishment as a factor in the imposition of a banning order even though it notes that punishment may be an effect of its imposition. White J had referred to McHugh J' judgment but appears not to have read it in the way that led him to reach the conclusion reached by Finkelstein J in Australian Securities and Investments Commission v Vizard.

174. The conclusion reached by White J is also consistent with earlier authorities. We refer, for example, to Story v National Companies and Securities Commission_,[268] in which Young J (in Eq) considered s 60 of the_ Securities Industry (New South Wales) Code_. That section provided that the then National Corporations and Securities Commission (NCSC) could revoke the licence held by a dealer in certain circumstances. One of those circumstances arose where the NCSC had reason to believe that the dealer had not performed the duties of the holder of such a licence. One of the grounds on which the NCSC could revoke a licence was that the person was not performing his or her duties efficiently, honestly and fairly._

175. Among other matters, Young J considered whether the dealer's licence should have been revoked. In doing so, he said that a finding that a dealer had been inefficient was not necessarily sufficient to justify a conclusion that his or her licence should be revoked. He considered what matters should be taken into account when he said:

'On the matter as to whether revocation should follow an opinion of inefficiency, various matters have to be weighed. One of these is the public interest that people should be permitted to follow a trade or profession which they are qualified to follow. Another is that the public expect those who fall short of minimum standards to be removed from the profession, at least until such time as the regulatory body can be assured that they are able to perform their functions efficiently. A third consideration is that the step of revocation is purely for the public benefit and is not punitive.'[269]

176. Although not part of the ratio decidendi of the case, the Full Court of the Federal Court maintained that theme in Australian Securities Commission v Kippe and Another_.[270] They said in relation to a banning order made under s 829 of the_ Corporations Law as in force at the time against a dealer's representative:

'The immediate and direct legal effect intended by a banning order is not to impose a penalty or punishment on the person concerned, but to be preventive in that it removes a perceived threat to the public interest and to public confidence in the securities and futures industry by removing that person from participation therein.'[271]

A similar theme is found in the judgment of Emmett, Allsop and Graham JJ in Kamha v Australian Prudential Regulation Authority[272] when they said:

'73 While punishment of a criminal offence is the exercise of judicial power, the imposition of disciplinary penalties does not necessarily entail the exercise of judicial power (Police Service Board v Morris & Martin [1985] HCA 9; (1985) 156 CLR 397 at 403 and 407). Disciplinary jurisdiction is significantly protective and does not involve a punitive element in the nature of the punishment of a criminal offence. Jurisdiction in disciplinary matters is exercised to protect the public, not to punish the person disciplined. The object of protection of the public also includes deterring others who might be tempted to fall short of the relevant standards of conduct."[273]

177. This approach is consistent with the approach taken by superior courts in relation to statutory powers to regulate other professional, business and other activities that affect members of the public. The judgement of the New South Wales Court of Appeal in New South Wales Bar Association v Hamman_[274]_ provides an example. The court considered disciplinary proceedings against a legal practitioner and said:

"... Disciplinary proceedings against a legal practitioner are concerned with the protection of the public (Wentworth v New South Wales Bar Association [1992] HCA 24; (1992) 176 CLR 239 at 250-251). The object is not to punish the practitioner but to protect the public and to maintain proper standards in the legal profession. ..."[275]

178. Authorities such as New South Wales Bar Association v Evatt_[276]_ and Hardcastle v Commissioner of Police_[277]_ acknowledge that, in achieving the objects of public protection and the maintenance of proper professional standards, an order made in disciplinary proceedings may involve great deprivation for the person who is the subject of that order. Despite that, the object of the order is not to punish or to extract retribution.

179. Intentionally committing a wrong-doing is not the only reason to cancel or suspend a person's right to engage in his or her chosen profession. As Kirby P said in Pillai v Messiter [No.2]:[278]

"... The public needs to be protected from delinquents and wrong-doers within professions. It also needs to be protected from seriously incompetent professional people who are ignorant of basic rules or indifferent as to rudimentary professional requirements. Such people should be removed from the register or from the relevant roll of practitioners, at least until they can demonstrate that their disqualifying imperfections have been removed. ...".[279]

180. The weight of authority in the Federal and Supreme Courts to whose judgments we have referred seems to be to the effect that a disqualification order, and so a banning order, is made on the basis of what will protect the public. It is not made on the basis of what will punish the person concerned even though punishment or the imposition of a penalty may be the practical outcome of the making of an order. Deterrence is also a relevant concern. Deterrence may relate both to the person concerned and to others engaged or potentially engaged in the finance. If imposed, it is relevant in the case of the individual in that it protects the public from that person's being involved in the industry. Whether imposed or not, the possibility that an order might be made is itself a deterrent both to an individual and to all of those engaged in that industry. As was said in Re Donald and Australian Securities and Investments Commission_,[280] the Tribunal said:_

"116. The imposition of a banning order against a dealers representative certainly achieves, in respect of at least one member of that profession, the second aspect of public protection for the period in respect of which it is imposed. That is, it ensures that the public can be certain that a particular person, who has been found to have breached a statutory standard applicable to him or her, is no longer entrusted with dealing in shares. At the same time, it informs both other dealers representatives and members of the general public that the behaviour is neither acceptable nor tolerated.

117. Whether it achieves the first aspect of public protection is more debateable. A period of prohibition may, rather like a retreat or a period of contemplation, lead a person to reflect upon his or her behaviour and to come to an understanding of why that behaviour has been regarded as inappropriate by others and, if it is necessary to do so, to take steps to improve his or her knowledge of what is an appropriate manner of behaviour. On the other hand, a period of prohibition may not result in such reflection or lead to a person's coming to any greater understanding than he or she had when it was imposed."[281]

Should a banning order be made or an enforceable undertaking given?

253. This matter has caused me some concern. At one level, it can be said that I have found only two breaches of s 1041A and breaches of ss 1041H and 1101F(1A) in relation to events arising out of trading involving a single share and a limited number of people. It can be said that these breaches have occurred over a relatively confined space of time in a career which is otherwise without blemish. They have been committed by a person about whom others[282] speak highly and without reservation of his professional expertise, dedication and hard work.

254. At another level, it can be said that those who have spoken so highly of him make no reference in their statements to the allegations made by ASIC against him. It can also be said that the breaches have been made by a person who has considerable experience in the financial services industry and who should know otherwise. The ease with which he states that he lodged the BIDs after 4.00pm because DCO was overseas overlooks the fact that DCO was not overseas for a significant part of the relevant time and that a number of the calls between JTMJ and DCO were made before 4.00pm. Although JTMJ and the DTR at SB Firm do not agree on the terms of their conversation, or even if they had more than one conversation, they do agree that they had one conversation regarding JTMJ's lodging BIDs after 4.00pm.

255. I accept that evidence and JTMJ's evidence that he raised the matter with DCO, who stopped trading on his account with SB Firm after their conversation on 15 May 2006.[283] It could be thought that JTMJ has carried out his duty by raising the matter with DCO. To my mind, he did not for he had a wider duty beyond that to his client. That wider duty is a duty owed to the financial services market, to those trading in it and to the public generally. The obligations imposed by the Corporations Act both reflect and fashion that wider duty. JTMJ's wider duty required him to have an eye to his obligations as well as to his instructions. He had an obligation not to carry out or take part in a transaction that did, or was likely to, create an artificial price. That could not be met by his saying that he acted in accordance with DCO's instructions at all times and that he neither had nor exercised any independent discretion in placing the bids. His duty under the Corporations Act was greater than his duty to follow his client's instructions. Indeed, it may be that his duty to his client encompassed a duty to warn that client against trading in circumstances that placed him in breach of the Corporations Act. I do not come to a conclusion on whether his duty to his client does extend to that. What I do come to a conclusion about is that an adviser who acts purely on a client's instructions places him or herself, however innocently and unwittingly, in a position where he or she may be used by an unscrupulous client as a tool to achieve ends quite unrelated to legitimate trading on a financial market according to everyday market forces.

256. My concern deepens when I look to the way in which JTMJ maintained the records he was obliged to keep. I accept, as he has stated, that he honestly believed that he was satisfying all requirements by recording the name of the client as the order source. That he could do so after attending a training session and to acknowledge that this led to the client's name being recorded twice for no seemingly sensible reason, smacks of lack of care about why records are kept. It is the same lack of care that I sense when I read in his statement that DCO's instructions:

"... always comprised a 'limit order', that is instructions concerning the number of ... [Company] shares he wished to buy and the maximum price he was willing to bid per share. In each instance, when I received ... [DCO's] instructions, I would place an order on ... [DCO's] behalf for the specified number of ... [Company] shares and specify the limit price."[284]

Apart from one which specified market price,[285] a comparison of JTMJ's day book and the orders which were placed, shows that the orders were always placed at the price stated in the book. The BIDs that were entered were for the same prices and, having regard to the course of instructions, orders and BIDs, I can see no basis for JTMJ's statement that DCO specified the maximum price at which he was willing to bid for shares. I find on the material that I have that DCO specified the price at which he wanted shares.

257. Having listened to JTMJ give evidence and having analysed the events in this matter, I do not think that giving him the opportunity to give an enforceable undertaking is the right thing to do. He is a person with a great deal of experience in the financial services industry and with activities associated with that industry and yet, on the best view of the evidence, he has permitted himself to be used. He has permitted that to happen by his lack of attention to recording what he should have been recording and observing the outcome of what he had been asked to do. He is not a young person who has recently come to the industry, made a mistake and acknowledged it. Instead, he is a person who has denied any mistake other than, possibly, failing to identify the order source. On the assumption that JTMJ has continued to work in the financial services industry on the understanding that he is permitted to do so under a stay order, I have also assumed that there have been no complaints about his performance. That, however, does not affect the view I have reached one way or other for he has been working in an environment in which he knows that his actions are likely to be scrutinised. I have already decided that I find him a person who will not, as opposed to merely may not, comply with a financial services law in the future. Although failure to comply with an enforceable undertaking has serious consequences under the ASIC Act, I have decided that the protection of the public requires that JTMJ not be permitted to provide financial services for a period of three years.

258. In setting this period, I realise that it is a period significantly shorter than the period of ten years decided upon by ASIC. Given JTMJ's age, that was a period that effectively took away any opportunity to work in the financial services industry again. It has the air of being punitive and not simply protective of the Australian public. JTMJ's age could lead to the conclusion that a three year banning order has the same effect. Given increased longevity and the encouragement for older Australians to work longer, that is not necessarily so. There may be time to resume work in the industry. At the same time, a two year period at this stage of JTMJ's career is a significant period. It not only gives him time to reflect upon his actions and to reconsider his duties, it also gives those engaged in the industry a warning that their duties are to be taken seriously and so protects the public.

The date of effect of the substituted decision

259. Under s 43(6) of the AAT Act, a decision varied by the Tribunal or made in substitution for the decision under review is deemed to be a decision of the person who made the decision under review. In this case, my decision will be deemed to be ASIC's decision. Unless I make an order to the contrary, my decision will be deemed to have come into effect on and from the day on which ASIC's decision came into effect i.e. on or about 19 January 2009 assuming that it was given to him on or about that date.

260. The reference to my being able to make an order to the contrary and so affect the date on which the decision comes into effect, draws my attention back to

ss 43(5A) and (5B) of the AAT Act. In most cases, the Tribunal's decision comes into operation immediately it is given. That is the effect of s 43(5A). When read with s 43(6), that means that, if the Tribunal has varied the decision or substituted another, the decision is deemed to have taken effect from the date of the original decision reviewed by the Tribunal. The Tribunal may, however, specify in its decision that its own decision is not to come into operation until a later date that it specifies. If it chooses to do that, the status quo is maintained until the specified date occurs. Once the specified date occurs, the effect of s 43(6) will be that the decision is deemed to have had effect from the date of the original decision reviewed by the Tribunal.

261. The general rule does not apply if the Tribunal has made a stay order under s 41(2) of the AAT Act. This comes about by virtue of s 43(5C) which provides:

(a) the Tribunal has made an order under subsection 41(2) staying the operation or implementation of the decision under review; and

(b) the order was in force immediately before the decision given by the Tribunal on the review;

then, unless the Tribunal, the Federal Court of Australia or the Federal Magistrates' Court otherwise orders, the operation or implementation of the Tribunal's decision is stayed until:

(c) subject to paragraph (d), the end of the period within which a party to the proceeding before the Tribunal may appeal from the decision to the Federal Court of Australia under subsection 44(1) (including any further time for bringing the appeal that is allowed by the Federal Court before the end of that period); or

(d) if such an appeal is brought - the appeal is determined."

262. The reference to the Tribunal's otherwise ordering in s 43(5C) could be thought to be a reference to s 41(2) but, when I go to that provision and those that qualify it, I do not think that view would be correct. The general position is that an application to the Tribunal for review of a decision does not affect the operation of that decision or prevent action to implement it.[286] Section 41(2) provides:

"The Tribunal may, on request being made, as prescribed, by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and the determination of the application for review."

263. Section 41(3) gives the Tribunal power to vary or revoke the order made under s 41(2). Sections 41 (4) and (5) relate to the processes that the Tribunal must follow before it may make an order. Section 41(6)(a) provides that any order is subject to any conditions imposed by the Tribunal. Section 41(6) provides:

"An order in force under subsection (2) (including an order that has previously been varied on one or more occasions under subsection (3)):

(a) ...

(b) has effect until:

• (i) where a period for the operation of the order is specified in the order - the expiration of that period or, if the application for review is decided by the Tribunal before the expiration of that period, the decision of the Tribunal on the application for review comes into operation; or

(ii) if no period is so specified - the decision of the Tribunal on the application for review comes into operation."

264. It is clear from s 41(6)(b) that any order made by the Tribunal under

s 41(2) or as varied under s 41(3) can have effect only until the Tribunal's decision comes into operation. A stay order made under s 41(2) cannot have effect beyond that time. If confirmation is needed beyond the clear words of s 41(6)(b), it is found in

s 41(2) itself. The order that the Tribunal may make is that which it "considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review." The Tribunal's task is to review decisions. Once it has made its decision, its task is completed. Any hearing it has held has come to an end and the application for review has been determined. The purpose for which the power is given to the Tribunal under s 41(2) has come to an end. So too must the power have come to an end.[287]

265. Given that the Tribunal has no power under s 41(2) after its decision comes into operation, the reference in s 43(5C) to the Tribunal's making an order must be a reference to s 43(5B). That follows from the fact that, once it has made a decision, the power given by that provision is the only power available to it to affect the date on which the decision it gives comes into operation. Section 43(5B) contemplates that any deferment of the date of its operation is specified in the decision when it is given.

266. On 17 March 2009, another member of the Tribunal made an order. Its first two paragraphs read:

"UPON APPLICATION of the applicant for an order staying a decision made 19 January 2009 in the above case, the Tribunal has decided to issue the following orders and directions:

1. That pursuant to s 35(2) of the Administrative Appeals Tribunal Act 1975, the applicant continue to be described by the letters 'JTMJ' for the purposes of this application;
2. That publication of the respondent's decision dated 19 January 2009 to ban the applicant from providing financial services for a period of 10 years in the Commonwealth Gazette under s 920E(2) of the Corporations Act 2001, and entering it in the Register maintained under s 922A of the Corporations Act 2001 and Regulations made there under, be stayed until the decision of the Tribunal on the application for review comes into operation or until further order of the Tribunal;

267. The next paragraph sets out the "... conditions placed on the applicant for the duration of the order contained in paragraph two (2)." These conditions require JTMJ to, for example, undertake certain training sessions, that he not place any orders for the purchase or sale of the Company's shares on the market operated by the ASX and that he include certain information in all order records that he completes for the SB Firm. Paragraphs 4 and 5 expand upon the order made under

s 35(2) of the AAT Act. Paragraphs 6 to 10 deal with procedural matters relating to the lodgement of material and the date of the hearing.

268. The conditions set out in [3] of the member's order appear to assume that he had made an order staying the operation of ASIC's decision to make the banning order. It is my view that he had not made such an order. All that he had done was to stay the implementation of the decision rather than its operation. I will explain why the stay of one does not stay the other.

1. The extent of the power to stay in the context of a banning order

269. At [79]-[84] above, I have set out the nature of a banning order and of its consequences. I have also set out ASIC's power to make a banning order. It makes it by giving written notice to the person against whom the banning order is made after it is satisfied that one or more specified events have occurred and it has followed the specified procedure. That is set out in s 920A and ASIC's obligation to give reasons is found in s 920F. The consequences of a banning order are set out in

ss 920B and 920C. Section 920D is concerned with the variation or cancellation of a banning order and is not relevant in this case. Section 920E(1) provides for the date on which a banning order takes effect. It is the date on which it is given to the person against whom it is made.

270. Section 920E(2) to (4) require ASIC to give notice of the banning order. In relation to all banning orders, s 920E(2) requires it to:

"... publish a notice in the Gazette as soon as practicable after making, varying or cancelling a banning order. The notice must state when the action took effect and:

(a) in the case of the making of a banning order - set out a copy of the banning order; or

(b) in the case of the variation of a banning order - set out a copy of the banning order as varied."

Section 920E(3) regulates the contents of the notice and s 920E(4) requires ASIC to give further notice of banning orders made against persons participating in a licensed market or a licensed CS facility.[288] Section 922A(1) requires ASIC to establish and maintain one or more registers relating to financial services. The regulations prescribe the way in which that is done. In relation to persons against whom a banning order has been made, ASIC must include such details as the person's name, the day on which the banning order took effect and whether it is permanent or for a fixed period.[289]

271. In Australian Securities and Investments Commission v Administrative Appeals Tribunal,[290] Downes and Jagot JJ considered:

"... that the act of publication is part and parcel of both the operation and the implementation of the banning order. The work a banning order does is made effective, at least in part, by its publication. The steps required to complete the statutory process involved in the making of a banning order include its publication. This is sufficient to enliven the AAT's powers under s 41(2) of the AAT Act. ..."[291]

272. Moore J distinguished between the "operation" of a decision and its "implementation". His Honour saw:

"... The operation of a decision (as that expression is used in s 41 of the AAT Act) appears to me to concern the legal consequences of the decision flowing from the operation of the enactment which authorised it or from some other enactment. The authorising enactment (or perhaps some other enactment) may identify consequential or ancillary acts or events which have to be taken or arise after the decision is made. As a matter or ordinary English in the context in which s 41 occurs, the expression 'the operation ... of the decision' seems to me to comprehend those consequential ancillary acts or events. ..."[292]

"... If the decision of the primary decision maker enlivens statutory provisions creating consequences of the type I have been discussing, it would be an entirely natural and obvious part of the statutory scheme for the AAT to have power to modify or prevent those consequences in circumstances where the decision of the primary decision maker might later be set aside.

In the present case, a consequence of making a banning order is enlivening the duty to publish the notice and the duty to make the entry in the register. For the reasons I have just given, the AAT had power to make an order preventing the operation of the decision by preventing, for the time being, the performance of these duties.

It is, in relation to the notice and the register, unnecessary to consider whether the power to make the order also flowed from the expression '[the] implementation of the decision' in s 41(2). However, for completeness,

I should indicate that I doubt this is so. ..."[293]

273. In Australian Securities and Investments Commission v Administrative Appeals Tribunal, the Full Court of the Federal Court did not have to consider a situation in which the banning order had not been given to the person against whom it had been made. Therefore, its attention would not have been drawn to the fact that a banning order does not come into effect until it is given to the person against whom it has been made.[294] It is one thing to make it but, I would respectfully suggest, another to implement it by giving it. Once it is given, the banning order comes into operation. This interpretation is supported by the fact that ASIC cannot publish the notice in the Gazette until it has been given because, among the information it must publish, is the date on which the banning order took effect: s 920E(2)(a). The date on which it took effect is the date on which it was given: s 920E(1). The interpretation is also supported by reference to ASIC's obligation to maintain a register of banned persons. Regulation 7.6.06(1)(b) provides that ASIC must include in that register "the day on which the banning order took effect". Again, it took effect only after it was given and not by virtue merely of being made.

274. In the case I must consider, the banning order has clearly been given to JTMJ and, when it was given, it came into effect. Once in effect, it was on any view in "operation". On the view of either the majority or of Moore J in Australian Securities and Investments Commission v Administrative Appeals Tribunal, s 41(2) of the AAT Act confers power on the Tribunal to stay the operation of the decision. That extends to power to stay the consequential or ancillary acts or events that attend that decision as well as the operation of the decision at all. In the case of a banning order, that power would extend to giving the banning order to the person if the person were to become aware of the decision before it were given.[295] It would also extend to the publication of the notice in the Gazette, the entry in the register of banned persons and, if relevant, the notice to the operator of the licensed market or CS facility.

1. The exercise of the power in relation to the banning order made against JTMJ

275. The power given to the Tribunal under s 41(2) of the AAT Act is exercised in respect of identifiable consequences of a decision's having been made provided those consequences are properly characterised as relating to either the operation or implementation of the decision. In the case of the order made on

17 March 2009, the consequences that are identified are the publication in the Gazette and the entry in the register. Those consequences are stayed. No reference is made to the operation of the decision and it is not stayed. Therefore, it remained in effect from the day it was given until the present day. If JTMJ has been continuing to act as an AR, it would be understandable in view of the conditions that are imposed on him by [3] of the member's order. They are consistent with an order's having been made. If consideration were to be given to taking action against JTMJ for acting contrary to a banning order, it is to be hoped that regard is had to the way in which a quick reading of the member's stay order could easily have led him to think that he had an order staying the effect of the banning order.

F. The relationship between the stay order and my decision

276. I have taken the time that I have on the stay order because it has caused me a lot of concern. My injury and subsequent lengthy sick leave have meant that

I was not able to complete the hearing and the decision as quickly as I would have liked. That, combined with a stay order that did not do what the parties might have expected it did, may have left JTMJ exposed to an allegation that he has been acting contrary to a banning order. The stay order also has an impact on the way in which

s 43(5C) operates. As things stand at the moment and assuming the Federal Court makes no subsequent order to the contrary, if I do nothing other than make the decision I have indicated I am making, the effect of s 43(5C)(c) and (d) is that, the publication of the details of the banning order in the Gazette and the entry in the register of banned person will continue to be stayed until either the time within which JTMJ may appeal to the Federal Court has expired or, if he lodges an appeal, that appeal is determined. The decision will come into effect immediately as it has not been stayed and, by virtue of s 43(6) will be deemed to have come into effect when ASIC's decision dated 19 January 2009 came into effect i.e. the day on which it was given to JTMJ.

277. It seems to me that the better course would be to have my decision take effect from the day on which ASIC is obliged to publish notice of it and register its details. I could make that the day on which I give my decision but, if there should be an appeal and if I should be found to have made an error of law, the worth of a stay order that was given presumably for the purpose of securing the effectiveness of the determination of the application for review as well as the effectiveness of the hearing would seem to be undermined.

278. Unfortunately, I cannot achieve the outcome I think preferable. For the reasons I have already given, I cannot achieve it by using the power under s 41(2) of the AAT Act at this late stage. If I use the only power that I have at this stage - the power in s 43(5B) - I can defer the operation of my decision to a later date but it will not achieve the outcome I seek. It will not do that because the decision under review has not been stayed and continues to operate until I substitute another. That is so despite the fact that the stay order made by the member might have been intended to stay the operation of the decision to make the banning order itself.

279. I have also faced another problem. My decision is that JTMJ should be the subject of a banning order for a two year period. It is not a two year period commencing on or shortly after 19 January 2009 during which the parties thought the decision was stayed and JTMJ has continued acting as an AR. It is a two year period during which he is the subject of a banning order that is in effect for all practical purposes. The problem has been how I should frame that decision.

280. The powers that I have are those under ss 43(5B) and (6) of the AAT Act. Section 43(6) enables me to order that the decision I am substituting has a different date of effect from that of ASIC. Section 43(6) enables me to specify the date on which the decision comes into effect. Even if I were to defer the date of effect of my decision for the length of the appeal period so that JTMJ can consider his position, the fact that the original decision has not been stayed would mean that he would continue to be subject to a banning order. If I were to delay the date on which my decision comes into operation by using the powers under s 43(5B), the outcome would be the same. For the reasons I have given, I cannot use the powers under

s 41(2) of the AAT Act at this stage. As I do not propose to make any order affecting the publication of the decision in the Gazette or its entry in the register of banned persons, the effect of my decision when read with s 43(5C) will be that, unless the Federal Court makes an order to the contrary, the two year banning period will come into effect immediately and that the publication and entry in the register will be stayed until the appeal period specified in s 44(1) has passed or, if an appeal is lodged in the Federal Court, when the appeal is determined.

1. set aside the decision of the respondent dated 19 January 2009; and
2. substitute a decision that the applicant be prohibited from providing a financial service for a period of three years from the date of this decision.

I certify that the two hundred and eighty-one paragraphs are a true copy of the reasons for the decision herein of

Signed: ....................................................................

[1] CHESS is the Clearing House Electronic Subregister System

[3] Exhibit E at [34] and Exhibit 4 at [19]

[7] M00374154, T documents, T3 at Tab 20

[8] Mr Flynn is employed as an Investigator within the Market Integrity (Deterrence) Division of ASIC.

[13] Re Mann and Capital Territory Health Commission (No. 2) (1983) 5 ALN N261 as set out and adopted in Re Wertheim and Department of Health (1984) 7 ALD 121 at 154

[14] Consequently, it is not faced with difficulties of the sort that potentially faced the Full Court of the Federal Court in Australian Securities and Investments Commission v Narain [2008] FCAFC 120; (2008) 169 FCR 211; Finkelstein, Jacobson and Gordon JJ

[15] Minister for Immigration and Ethnic Affairs v Pochi [1980] FCA 85; (1980) 4 ALD 139

[16] Repatriation Commission v Smith (1987) 74 ALR 537

[17] Administrative Appeals Tribunal Act 1975, s 33(1)(c)

[18] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers

[19] RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1991) 34 NSWLR 129 at 130 per Giles J

[20] Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 5) (1996) 64 FCR 73 at 75 per Lindgren J citing JH Chadbourn (ed), Wigmore on Evidence (1978), Vol 7, par 1917.

[21] Evidence Act, s 76(1)

[22] Evidence Act, s 79

[23] [1999] HCA 2; (1999) 197 CLR 414 at 427

[24] HG v The Queen [1999] HCA 2; (1999) 197 CLR 414; 160 ALR 554 at 432, 566; [58] quoting from a judgment of King J in R v Bonython (1984) 38 SASR 45 at 46-47 and see also Clark v Ryan [1960] HCA 42; (1960) 103 CLR 486 at [4]; 491 per Dixon CJ adopting the notes by JW Smith to Carter v. Boehm 1 Smith L.C., 7th ed. (1876) p. 577

[25] Weal v Bottom (1966) 40 ALJR 436 at 439

[26] [2001] QCA 279; (2001) 121 A Crim R 272 (Qld CA)

[27] [2001] QCA 279; (2001) 121 A Crim R 272 at [81]; 290

[28] [2005] NSWSC 149; (2005) 190 FLR 242

[29] Quick v Stoland Pty Ltd [1998] FCA 1200; (1998) 87 FCR 371

[30] [2005] NSWSC 149; (2005) 190 FLR 242 at [278]; 308

[31] R v Bartlett [1996] VICSC 47; [1996] 2 VR 687 at 695 (Vic CA) per Winneke P

[32] (1984) 38 SASR 45; 15 A Crim R 364 (SA CCA)

[33] (1984) 38 SASR 45; 15 A Crim R 364 at 46-47; 366

[34] Shell Pensions Trust Ltd v Pell Rrischmann & Partners [1986] 2 All ER 911 (QBD)

[35] [2003] VSCA 33

[36] [2003] VSCA 33 at [24]. See also Fortson Pty Ltd v Commonwealth Bank of Australia [2008] SASC 49; (2008) 100 SASR 162 at [114]; 192 per Bleby J

[37] [2005] NSWSC 149; (2005) 190 FLR 242; at [346]-[349]; 324-325

[38] [2001] NSWCA 305; (2001) 52 NSWLR 705

[39] [2001] NSWCA 305; (2001) 52 NSWLR 705 at [85]; 744

[40] Ocean Marine Mutual Insurance Association (Europe) OV v Jetopay Pty Ltd [2000] FCA 1463 at [23] per Black CJ, Cooper and Emmett JJ

[41] [2005] NSWSC 149; (2005) 190 FLR 242; at [267]-[268]; 305-306

[42] Australian Securities and Investments Commission v Rich [2005] NSWSC 149; (2005) 190 FLR 242 at [260]; 304 (citations omitted)

[43] Evidence Act, s 78

[44] [2005] NSWSC 149; (2005) 190 FLR 242 at [297]; 312

[45] (1990) 24 FCR 313; 97 ALR 555 per Lockhart, Wilcox and Gummow JJ

[46] 2nd edition, 1983 at 145-158, (1990) 24 FCR 313; 97 ALR 555 at 351; 594

[47] (1990) 24 FCR 313; 97 ALR 555 at 350; 594

[48] Quoted in Arnotts Limited v Trade Practices Commission (1990) 24 FCR 313; 97 ALR 555 at 350; 594

[49] (1990) 24 FCR 313; 97 ALR 555 at 351; 595

[50] [2006] FCA 1303; (2006) 155 FCR 357; 233 ALR 710

[51] [2006] FCA 1303; (2006) 155 FCR 357; 233 ALR 710 at 374; 725-726

[52] [1985] HCA 58; (1985) 62 ALR 85

[53] [1985] HCA 58; (1985) 62 ALR 85 at 87-88

[54] (1990) 24 FCR 313; 97 ALR 555 at 352; 596

[55] Arnotts Limited v Trade Practices Commission (1990) 24 FCR 313; 97 ALR 555 at 353; 597

[56] [2005] NSWSC 149; (2005) 190 FLR 242 at [311]- [312]; 315-316

[57] s 766A(1). Regulations may be made to narrow or extend the circumstances in which a person is taken or not taken to provide a financial service. They may also extend the range of persons taken to provide a financial service to those who facilitate the provision of a financial service in certain circumstances: s 766A(2).

[59] s 911A(1) Section 911D prescribes when a financial services business is taken to be carried on in this jurisdiction.

[73] s 916D(1) but it is qualified by s 916E

[87] Corporations Act, s 761A

[88] Corporations Act, s 763A(1)

[89] Corporations Act, s 761A

[97] Corporations Act, s 1317E(jb)

[98] Corporations Act, s 1317E(1)

[99] Corporations Act, ss 1317F and 1317E(2)(a)-(d)

[100] Corporations Act, s 1041H, Note 1

[101] Corporations Act, s 1041H, Note 2

[102] Corporations Act, s 1041I(1)

[103] Corporations Act, s 1041I(4)

[104] Corporations Act, s 1101F(1A), Note

[105] Corporations Act, s 1101F(2)

[106] Corporations Act, s 9

[107] Corporations Regulations r 7.8.19(1)

[108] Corporations Regulations r 7.8.19(5)

[109] [1981] HCA 68; (1981) 148 CLR 42; 37 ALR 341 per Mason J, with whom Stephen, Murphy, Aickin and Wilson JJ agreed

[110] [1998] NSWSC 157; (1998) 28 ACSR 58

[111] [2009] AATA 50; (2009) 108 ALD 187

[112] [2000] FCA 1142; (2000) 104 FCR 126; 35 ACSR 383; 18 ACLC 794 per Heerey J

[113] (1888) 13 AC 595

[114] (1888) 13 AC 595 at 599-600, approved by Barton J in Lorimer v Smail [1911] HCA 44; (1911) 12 CLR 504 at 510

[115] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers

[116] Macquarie Dictionary, 4th edition, 2005, The Macquarie Library Pty Ltd

[117] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers

[118] [1981] HCA 68; (1981) 148 CLR 42; 37 ALR 341 at [39]; 59; 351-352

[119] [1981] HCA 68; (1981) 148 CLR 42; 37 ALR 341 at [37]; 59; 351

[120] [1981] HCA 68; (1981) 148 CLR 42; 37 ALR 341 at [40]- [42]; 59; 352

[121] [1981] HCA 68; (1981) 148 CLR 42; 37 ALR 341 at [38]; 58-59; 351

[122] [1998] NSWSC 157; (1998) 28 ACSR 58 at 58

[123] [1998] NSWSC 157; (1998) 28 ACSR 58 at 62-63

[124] [1998] NSWSC 157; (1998) 28 ACSR 58 at 63-64

[125] [2009] AATA 50; (2009) 108 ALD 187 at [36]; 195

[126] [2009] AATA 50; (2009) ALD 187 at [37]- [41]; 195-196; footnote omitted

[128] [2000] FCA 1142; (2000) 104 FCR 126; 35 ACSR 383; 18 ACLC 794 at [23]- [25]

[129] [2000] FCA 1142; (2000) 104 FCR 126; 35 ACSR 383; 18 ACLC 794 at [21]- [22]

[130] (2009) 27 C&SLJ 8

[131] (2009) 27 C&SLJ 8 at 21

[132] (2003) 21 C&SLJ 75 and see also Australian Green Shoes, price stabilisation and IPOs - Part 1; (2003) 21 C&SJ 26

[133] (2003) 21 C&SLJ 75 at 81

[134] (2003) 21 C&SLJ 75 at 83 (footnotes omitted)