R v O'HALLORAN

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

JUDGMENT 1 HIS HONOUR: This is a motion to quash an indictment. The applicant, James Francis O'Halloran, is charged under s 998 Corporations Law with having done something that was intended to create a false or misleading appearance with respect to the price of securities of Jeffries Industries Limited in that he instructed Clive Powell to sell 170,000 shares held by Fame Decorator Agencies Pty Limited in Jeffries Industries Limited down to a price of thirteen cents. 2 The Crown intends to put its case this way. Jeffries Industries Limited (Jeffries) was a public company listed on the stock exchange. Part of its issued share capital comprised converting preference shares (the shares). The rights of holders of the shares included the right in certain circumstances to have them converted into fully paid ordinary shares. There were times at which those rights could be exercised, but the Articles of Association provided for the acceleration of the conversion date if Jeffries did not pay certain dividends within certain times. On 28 April 1995 the directors of Jeffries announced that dividends payable for the period ended 30 April 1995 would not be paid, and that announcement precipitated the rights of holders of the shares to convert them and take up ordinary shares. The Articles prescribed a formula by which a shareholder's entitlement to ordinary shares should be calculated. One of the factors was or was calculated from the weighted average sale price of all fully paid ordinary shares in Jeffries sold on the Exchange during the twenty trading days immediately before the conversion date. One effect of the application of the formula would be that the lower the weighted average sale price was, the more fully paid ordinary shares a given number of preference shares would produce. The last of the twenty trading days over which the weighted average sales price was to be calculated was Friday, 28 April 1995. 3 The applicant, a former chairman of Jeffries, controlled Fame Decorator Agencies Pty Limited (Fame). Fame was the trustee of a family superannuation trust of which the applicant was a beneficiary. Fame owned some of the shares. On 28 April the applicant instructed a broker, Mr Clive Powell, to sell 170,000 of Fame's shares down to a price of thirteen cents. 4 Sales of ordinary shares in Jeffries were not heavily traded. In March 1995 about 755,000 ordinary shares had sold at prices ranging from twenty-five cents to thirty-five cents each. In April, up to and including 27 April, about 40,000 shares were sold at prices ranging from thirty-five cents to fifty cents. During the morning of 28 April there was a sale of 5,000 shares at forty-five cents each. Following the applicant's instructions to Mr Powell these sales took place during the last five minutes of trading on 28 April. 28,000 shares were sold at thirty-five cents, 5,000 at thirty cents, 16,000 at twenty-eight cents, 20,000 at twenty-six cents, 6,000 at twenty-five cents, 20,000 at fourteen cents, 74,000 at thirteen cents and 1,000 at twenty-six cents. 5 The false or misleading appearance the Crown asserts that the applicant intended was in an artificially low sale price of the ordinary shares in Jeffries on 28 April and an artificially low average weighted sale price for the twenty days of the calculation period, resulting in an artificially high rate of conversation from preference shares to ordinary shares. 6 These issues are raised by the application to quash the indictment.

1. Whether the Commonwealth Director of Public Prosecutions has power to bring this prosecution;

2. Whether the indictment is bad for duplicity; and

3. Whether s 998 applies to any instruction given by the applicant to Mr Powell. 7 The parties have also asked the Court to deal with a submission that it would be an abuse of process for the Director of Public Prosecutions to proceed in respect of any sale other than those made at thirteen cents and fourteen cents.

The power of the Commonwealth Director of Public Prosecutions 8 The offence charged is a creation of the Corporations Law, which is contained in s 82 Corporations Act 1989 (Commonwealth) (the Commonwealth Act). By s 7 Corporations (New South Wales) Act 1990 (the New South Wales Act) the Corporations Law so contained applies as a law of New South Wales. This proceedings is brought by the Commonwealth Director of Public Prosecutions (DPP) and the question is whether the DPP has power to prosecute for an asserted breach of a law of New South Wales. 9 The sources and scope of the DPP's authority were discussed by the High Court of Australia in The Queen v Hughes [2000] HCA 22. The DPP has ministerially derived functions and powers under laws corresponding to the Commonwealth Act. The Court held that the Corporations Act of Western Australia was such a corresponding law. There is no significant difference between the New South Wales Act and the Act there under consideration. 10 One effect of Pt 8 of the New South Wales Act is to substitute the Commonwealth prosecuting regime for the New South Wales regime. See particularly ss 28(1)(a), 29, 30(1), 31(1), 33. These functions include the institution and carrying on of prosecutions on indictment for indictable offences under relevant laws of the Commonwealth including s 998. 11 However, where provision is enacted affording the consent of the Federal Parliament to the conferral of State functions and powers upon an officer or authority of the Commonwealth it must be possible to demonstrate the constitutional validity of the provision. It is insufficient to point simply to the co-operative legislative scheme for corporations. The existence of constitutional authority must be demonstrated to exist in any particular case. The Queen v Hughes paras 30-36; 110-112.

Trade and commerce among the States 12 Three heads of power were put forward as empowering the DPP to prosecute. The first was trade and commerce among the States: Constitution s 51(i). This requires an examination of the system of trading securities on the Australian Stock Exchange (ASX). 13 In April 1995 the system by which securities listed on ASX were bought and sold was called the Stock Exchange Automated Trading System (SEATS). All securities trading on ASX was effected through SEATS in the following manner. The SEATS mainframe computer was installed at ASX premises in Sydney. It was connected through the telecommunications system to on-line terminals installed in stockbrokers' offices in all States of Australia. Such terminals could be operated only by SEATS operators approved by ASX to operate in that capacity. Access to the system could be gained only through a SEATS operator in a stockbroker's office, so anyone wishing to buy or sell securities listed on ASX could do so only through such a stockbroker. 14 When a client instructed a stockbroker to make an offer to sell or buy securities, a person in the stockbroker's office would direct the SEATS operator to enter a bid to sell or buy the requisite number of shares at the appropriate price. Such bids were transmitted from the stockbroker's terminal to the ASX computer and were there recorded. Having become recorded, those bids became known to all stockbrokers throughout Australia. 15 Offers to sell and buy securities were grouped and listed in order of price, with higher offers listed first and lower offers last, and then in order of times of entry into the system of offers, with the earliest offers listed first and the latest last. Whenever a buying bid matched a selling bid the computer programme generated a transaction of sale, and that fact was recorded in the system and particulars transmitted to all terminals. 16 Matches were made and contracts thereby concluded according to the order in which bids were recorded. So, if a bid were entered to buy, say, 100,000 shares at fifty cents and SEATS already had on record bids to sell, say, 10,000 shares at forty cents and, say, 200,000 shares at thirty cents, the programme would generate transactions of sale of 10,000 shares at forty cents and 90,000 at thirty cents. 17 In this way a stockbroker could observe the whole Australian market in securities, enter, amend and withdraw offers to sell or buy and know when other brokers throughout Australia were doing the same. So anyone anywhere in Australia wishing to trade in ASX listed securities could do so with others anywhere else in Australia. 18 Sales concluded in this manner were made on credit. When informed in the manner I have indicated of the conclusion of a sale, the selling broker would send the share certificate and document of transfer to the buying broker by post. On receipt of those documents the buying broker would draw a cheque in favour of ASX and have it delivered to the branch of ASX in the State of the buying broker. That State office would draw a cheque in favour of the selling broker and send it to that broker. 19 The evidence establishes that the broker who sold shares on behalf of Fame was in New South Wales and that of the seven buying brokers three were in Melbourne and four in Sydney. 20 In Bank of New South Wales v The Commonwealth (1948) 76 CLR 1 (the Bank Nationalisation case) Dixon J said this about commerce at 381-382: I cannot think that the essential content of the expression "trade commerce and intercourse" in s. 92 is any less than is included in the conception of commerce in the modern American view of the commerce power. I am not speaking of the spread of that power over an immense field of activities that are incident to commerce. It is the central conception expressed in the word to which I refer. It covers intangibles as well as the movement of goods and persons. The supply of gas and the transmission of electric current may be considered only an obvious extension of the movement of physical goods. But it covers communication. The telegraph, the telephone, the wireless may be the means employed. It includes broadcasting and, no doubt, it will take in television. In principle there is no reason to exclude visual signals. The conception covers, in the Untied States, the business of press agencies and the transmission of all intelligence, whether for gain or not. Transportation, traffic, movement, transfer, interchange, communication, are words which perhaps together embrace an idea which is dominant in the conception of what the commerce clause requires. But to confine the subject matter to physical things and persons would be quite out of keeping with all modern developments. The essential attributes which belong to the conception should determine the field of human activities to which it applies. To place among the essential attributes the requirement that there should be goods for sale or delivery or a man upon a journey, is to mistake the particular for the general, the concrete example for the abstract definition, and to yield to habits of thought inherited from a more primitive organization of society. 21 In a paper written almost thirty years ago - The Constitutional Power of the Commonwealth to Regulate the Securities Market (1971) 45 ALJ 388 - Professor Howard observed that a concept of trade and commerce of that character and scope would include such a characteristically modern concept as dealing in shares. Bearing in mind the manner in which ASX-listed securities were traded in 1995, I think that observation apt. The contrary was not submitted by the applicant. However, whether that trade and commerce was among the States is a separate question. 22 Speaking of the banking industry, Dixon J concluded in the Bank Nationalisation case that relevantly the business of the private banks necessarily included -

(a) the constant interstate transmission of funds and transfer of credit;

(b) constant business communication and intercourse among the States;

(c) the regular use for the purposes of interstate transactions of instruments of credit and of title to goods and their interstate transmission;

(d) the integration of interstate banking transactions with the entire business of the bank to form a system spreading over the Commonwealth without regard to State lines; and

(e) the furtherance of commercial dealings by interstate traders in goods by performing an indispensable part in such transactions. 23 This reasoning was adopted in the Privy Council: The Commonwealth v Bank of New South Wales (1949) 79 CLR 497 at 632-633. 24 In the paper to which I have referred, Professor Howard expressed the view that, given appropriate changes of terminology, the five conditions enumerated by Dixon J applied as much to stock exchanges as to banks and considered that there was a reasonably close analogy between the two fields of endeavour. Professor Howard pointed to the operation of the securities market even then as an interdependent nationwide phenomenon, observing that it relied heavily on credit and that much interstate communication and commerce took place. He referred to the then current move for a national secretariat. Such observations may in my view be more confidently made in view of the interstate character of ASX dealing under SEATS, which could not operate without constant interstate communication and commerce and heavy reliance on credit between institutions in one State and another. 25 See also A I Tonking, Federal Competence to Legislate for the Control of the Securities Market (1973) 47 ALJ 231 at 238. 26 Two submissions were made on behalf of the applicant. The first was that the comparison between the securities trading business and the banking business was inappropriate and that any interstate feature of the formation or performance of a contract for trade in securities, for example the delivery interstate of scrip or the payment interstate of a purchase price, was no more than an incident of the contract and did not make it an interstate contract. Reliance was placed on Hospital Provident Fund Pty Limited v State of Victoria (1952-1953) 87 CLR 1. The two plaintiffs in that case were insurers, incorporated in and carrying on a hospital benefits business in Victoria. They had branches in other States and carried on certain interstate activities in the course of that business, for example paying money from an office in one State to contributors in other States by way of hospital benefits, receiving in one State contributions sent from another State, maintaining offices, staffs, equipment and funds in other States transmitting funds, documents and communications from one State to another and having servants and agents travelling frequently from one State to another on the business of the company. 27 In comparing the banking and insurance businesses, the Court referred to the last of Dixon J's five conclusions in the Bank Nationalisation case and observed that there was a close analogy between the business of banking and the business of interstate carriage of goods. A person who performs such activities, it was said, is not only himself engaged in commerce but plays an indispensable part in the commerce of others: Fullagar J at 37-39. See also the judgments of Dixon CJ at 17-18 and Taylor J at 44-45. 28 It was submitted on behalf of the applicant that the input and distribution of information through SEATS was not itself trade and commerce and that delivery of a share certificate or a cheque across a State border was no more than an incident of a contract, such as the delivery of a policy or the payment of a premium as in Hospital Provident Fund v State of Victoria, which did not lead to the conclusion that the commercial activity was among the States. 29 It seems to me that there is a more fundamental quality of "interstateness" about SEATS than about, for example, an insurance office making contracts the performance of which might entail interstate activities. ASX is headquartered in one State not because the manner in which it trades requires it to have any special association with that State, but because the mainframe computer essential to SEATS must be situated somewhere. But SEATS is a national system, and the mainframe computer is no less essential than the terminals situated in a ASX-licensed stockbrokers' offices in all States of Australia. I think that SEATS is a national system and that the trade in securities to which it gives affect is national. 30 In my opinion it is possible to identify features of SEATS analogous to the five features of the banking system identified by Dixon J. They are the constant interstate transmission of funds and transfer of credit, constant business communication and intercourse between brokers among the States, the regular use for the purposes of interstate transactions of instruments of credit and of title to securities and their interstate transmission, the integration of interstate transactions for the sale and purchase of securities with the entire business of ASX to form a system spreading over the Commonwealth without regard to State lines, and the furtherance of commercial dealings by interstate traders in securities by performing an indispensable part in such transactions. 31 I think that the buying and selling of securities by means of SEATS is trade and commerce among the States. 32 The applicant's second submission was that even if SEATS transactions between brokers in different States were within the power of the Commonwealth to control by legislation, those wholly within any State were not. This is a matter of some significance because the sales of the shares at thirteen cents and fourteen cents were made within the confines of New South Wales and, as will appear, the applicant asserts that it would be an abuse of process for the DPP to rely on any other sale as involving a breach of s 998. 33 It would be unreasonable in my view to regard as excluded from the regulating power of the Commonwealth Parliament some transactions made in a national system of marketing solely because the buyer and seller happened to be in the same State. No such restriction would apply to intrastate banking transactions carried out as part of the national system. I do not think that such transactions can effectively be segregated. It is necessary for a significant part of a national system like banking or trade in securities to be regulated in the interests of the regulation of the whole. Redfern v Dunlop Rubber (1964) 110 CLR 194; Western Union Telegraph Co v Foster 247 US 105 (1918); Howard The Constitutional Power of the Commonwealth to Regulate Securities Market at 391.

Communications 34 In that it transmits information between the ASX computer and brokers' terminals and requires the posting of documents and cheques, SEATS involves the transmission of information by postal, telegraphic, telephonic or other like services: Constitution s 51(v). It was submitted by the DPP that if under s 51(v) the Commonwealth can prohibit the transmission of any information it wishes then it can prescribe such relaxations as it wishes, that is, it can prescribe what information may not be so transmitted and whether those transmitting it should be punished. 35 Reference was made to and Herald and Weekly Times v The Commonwealth (1966) 115 CLR 418. There was a statutory prohibition of transmission of messages by wireless telegraphy except as authorised by or under the statute. Wireless telegraphy included television broadcasts. The Commonwealth Parliament enacted the Broadcasting and Television Act 1965, which introduced a system of licensing in relaxation of the prohibition. Under attack were provisions creating offences by persons not the holders of television licences who engaged in certain conduct, for example, holding shares in a licensee whilst having no legal or beneficial interest in the shares and no degree of control over the licensee and holding certain directorships which would ordinarily give little say in the actual control of the affairs of a licensee. 36 Such provisions were held to be within the communications power because together they were a means to an end which was within power, namely that of ensuring freedom of competition between television stations. Kitto J said at 433-434 - … any provision which operates to create or delimit a power in given circumstances to relax in favour of a television station the general prohibition upon television transmission has, of necessity, by reason of the very fact that it has that operation, the character of a law with respect to television services. It is not necessary, in order that a provision so operating shall be within the constitutional power, that the persons, things, situations or events referred to in it shall themselves possess characteristics which supply a further link with the subject of television services. … A law which qualifies an existing statutory power to relax a prohibition is necessarily a law with respect to the subject of the prohibition. Even if the qualification gives it the additional character of a law upon some other topic - even, indeed, if that other topic be not a subject of federal legislative power - it is still a law with respect to the subject of the prohibition, and is valid if that subject lie within federal power … The main attack … must succeed unless the conduct which is thus made unlawful is so relevant to the subject of television services that a law forbidding it is a law with respect to that subject. 37 S 998 is not directly about communications by the relevant media, but it may concern them indirectly because, given the nature of SEATS, it is possible that anything done in contravention of the section may be done by means of any of the relevant communications media. (In fact, the act alleged against the applicant was giving instructions by telephone.) But I think that such use of the media would be no more than a mere incident of the prohibited conduct. 38 I do not think, using the terminology of Kitto J, that the conduct made unlawful by s 998 is so relevant to the subject of postal, telephonic, telegraphic or other like services as to be a law with respect to those services.

Corporations 39 The final head of power contended for was that with respect to trading or financial corporations formed within the limits of the Commonwealth: Constitution s 51(xx). The Commonwealth has power to legislate with respect to all acts of trade and all acts done for the purposes of trade by trading and financial corporations. Actors & Announcers Equity Association v Fontana Films (1982) 150 CLR 169; Commonwealth v Tasmania (1983) 158 CLR 1. 40 According to the evidence of Mr Phillip John Cave and to the annual report of Jeffries and its subsidiaries of 30 June 1995 the group of companies comprising Jeffries and its subsidiaries was in the business of abrasive blasting, cleaning and application of protective coatings to steel and metal, including rubber to metal lining and industrial painting. Such work was undertaken under contract for private enterprises and government bodies throughout Australia and in Thailand. Contracts included work on a pipeline project, a shopping centre, a bridge and dockyard installations. The majority of the work of the subsidiary companies was described in the annual report as essentially factory-based. 41 It was not contended on behalf of the applicant that in carrying out work of that kind the subsidiary companies were not trading corporations. It is therefore unnecessary for the Court to enter upon such an inquiry. The DPP, on the other hand, did not submit that Jeffries was a trading corporation by virtue of the fact alone that it was a holding company of each of the subsidiaries. The inquiry was thereby confined to the question whether Jeffries had acquired the character of a trading or a financial corporation by the manner in which it had involved itself in the business affairs of its subsidiary companies. 42 Even if it is also a holding company, a corporation will be a trading corporation when its trading activities form a sufficiently significant portion of its overall activities as to merit its description as a trading corporation. R v Federal Court of Australia; ex parte WA National Football League (Adamson) (1979) 143 CLR 170. Similarly, if a substantial and not insignificant part of a corporation's activities are financial, it is properly characterised as a financial corporation. Re Ku-Ring-Gai Co-operative Building Society (No 12) Limited (1978) 22 ALR 621. The term "financial" is not a term of art and has no special meaning: State Superannuation Board v Trade Practices Commission (1982) 150 CLR 282 per Mason, Murphy and Deane JJ at 305. 43 Mr Cave involved himself in "corporate turnaround projects". He identified under-performing companies, judged whether their performance could be satisfactorily improved and, if so, invested money in them and assumed executive power. In October 1994, having inquired into the financial position and prospects of Jeffries, he provided financial assistance to it by means of a bank guarantee in the sum $600,000. On 10 October 1994 he was appointed managing director and chief executive officer. At the same time an associate of Mr Cave, Mr Daniel Wong, became a director and company secretary. Both also became directors of all the subsidiary companies of Jeffries. At 30 June 1994 there were sixteen such subsidiary companies. At 30 June 1995 there were seventeen. Jeffries beneficially held all the shares in each of those subsidiary companies. 44 Mr Cave and Mr Wong regarded Jeffries and all the subsidiary companies as a single corporate entity and managed it accordingly. They intended it to prosper as an entity and in order to achieve that end they exercised through Jeffries a strong financial control over the affairs of all the subsidiary companies. 45 Each of the subsidiaries traded on its own behalf. Gaining contracts, sending out invoices, incurring debts and receiving payment. However, no subsidiary controlled its own finances. When a subsidiary company needed to raise working capital it was obliged to go to Jeffries. Mr Cave and Mr Wong devised a manner of financing all the companies in the group through borrowings made only by Jeffries. Jeffries had a $2.15 million loan facility with a financial institution and it exacted from each of the subsidiary companies a guarantee to the lender and a pledge not to charge its assets or borrow money other than from Jeffries. In this way, whenever a subsidiary needed working capital it could, if Jeffries considered it appropriate, obtain it through Jeffries' loan facility. Having borrowed the money, Jeffries on-lent it to the subsidiary but did not charge interest. 46 Jeffries lent such money, at least in part, by directly discharging debts incurred by the subsidiaries. When a subsidiary received an invoice either the subsidiary itself would pay or Jeffries would pay. It was Jeffries, under the control of Mr Cave and Mr Wong, who decided which manner of payment would be employed on any occasion. 47 When a subsidiary received money in payment of an invoice it had rendered, that money was more often than not paid directly into the bank account of Jeffries. It was Jeffries who decided into which account the money would be deposited on any occasion. 48 This control of monies coming in and going out on account of the subsidiary companies was maintained by Jeffries for the benefit not only of the subsidiary companies involved but for that of Jeffries and of every other member of the group. 49 The principal subsidiary companies in the Sydney metropolitan area were called BGC Marine Services (NSW) Pty Limited, BGC Marine Services (Aust) Pty Limited and BGC Marine Service Pty Limited. The name of BGC Marine Services (Aust) Pty Limited was displayed on the works. So was the name of Jeffries. 50 In this way Jeffries performed a function far greater than that of a holding company. It does not state the position too highly to say that the survival of the subsidiaries and each of them depended upon the preparedness of Jeffries to continue to finance it by raising sufficient working capital. Having assessed the profitability and prospects of each subsidiary company, Mr Cave and Mr Wong decided whether they would continue to support it by raising loan capital through Jeffries. If they decided not to support any subsidiary company they simply withheld funds. During Mr Cave's stewardship such a thing happened on two occasions and each subsidiary or collection of subsidiary companies were obliged to go into voluntary liquidation. 51 It seems to me that although Jeffries never directly traded with the clients of its subsidiaries, it did involve itself so closely and directly in the trading activities of each of them that it can properly be said that it carried on trading activities and that they formed a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation. 52 The facts lead me to the conclusion that the activities of Jeffries in raising capital and in directly involving itself in the payment and receipt of monies properly payable and receivable by the subsidiaries, Jeffries made a substantial and significant part of its activities financial so that it might properly be said that it was a financial corporation.

Duplicity 53 It was submitted by the applicant that the indictment was bad because it charged him with having done something that was intended to create a false or misleading appearance. Reference was made to Murphy v Farmer (1988) 165 CLR 19, where it was held that the word "false", when qualifying something done or said, may mean either purposely or deliberately untrue or merely wrong in fact. It was submitted that the word "false" might therefore have a different meaning from "misleading", giving the indictment an aptitude to produce a verdict the meaning of which was uncertain, with consequent embarrassment for the applicant. 54 It was further submitted that the fact that s 998 deals with market rigging transactions required a distinction between "false" and "misleading". A comparison was drawn with s 995, which is directed at persons who relevantly engage in conduct that is misleading or deceptive or likely to mislead or deceive. 55 Even if the two words do bear the different meanings contended for in the present case, however, that fact alone does not lead to the conclusion that the indictment is duplicitous. The real question, it seems to me, is whether s 998 creates one offence, an element of which is the creation of a false or misleading appearance, or whether it creates two offences, one of which requires the intention to create a false appearance and the other the intention to create a misleading appearance. In Romeyko v Samuels (1972) 2 SASR 529 Bray CJ said at 552 - The true distinction, broadly speaking, it seems to me, is between a statute which penalises one or more acts, in which case two or more offences are created, and a statute which penalises one act if it possesses one or more forbidden characteristics. In the latter case there is only one offence, whether the act under consideration in fact possesses one or several of such characteristics. Of course, there will always be borderline cases and if it is clear that Parliament intended several offences to be committed if the act in question possesses more than one of the forbidden characteristics, that result will follow. 56 See also the summary of cases set forth in DPP (Vic) v Williams [1993] 1 VLR 238 in the judgment of Hedigan J at 242-245. 57 In my opinion s 998 creates not two offences but one. The intent the Crown must prove is to create a false or misleading appearance with respect to the market or price of securities. Only one appearance is required to be proved, and that may be variously or compendiously described as false or misleading in much the same way as that expression was used by Mason J in North v Marra Developments Limited (1981) 148 CLR 42 at 58-59. 58 In my opinion the indictment as framed is not duplicitous.

Whether the instruction said to have been given to Mr Powell is capable of being brought within s 998 59 It was submitted that s 998 did not contemplate a mere instruction to a broker such as that alleged by the DPP. S 998, which is headed "False trading and market rigging transactions", is in the following terms so far as is relevant to this application - 998 (1) [Persons not to create misleading appearances] A person shall not create, or do anything that is intended or likely to create, a false or misleading appearance of active trading in any securities on a stock market or a false or misleading appearance with respect to the market for, or the price of, any securities.

… 998 (5) [Circumstances which amount to false or misleading appearances] Without limiting the generality of subsection (1), a person who: (a) enters into, or carries out, either directly or indirectly, any transaction of sale or purchase of any securities, being a transaction that does not involve any change in the beneficial ownership of the securities; (b) offers to sell any securities at a specified price where the person has made or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to buy the same number, or substantially the same number, of securities at a price that is substantially the same as the first-mentioned price; or (c) offers to buy any securities at a specified price where the person has made or proposes to make, or knows that an associate of the person has made or proposes to make, an offer to sell the same number, or substantially the same number, of securities at a price that is substantially the same as the first-mentioned price; shall be deemed to have created a false or misleading appearance of active trading in those securities on a stock market …

998 (9) [Reference to transactions includes offers and invitations] The reference in paragraph (5)(a) to a transaction of sale or purchase of securities includes: (a) a reference to the making of an offer to sell or buy securities; and (b) a reference to the making of an invitation, however expressed, that expressly or impliedly invites a person to offer to sell or buy securities. 60 S 1311, which is headed "General penalty provisions", is in the following terms so far as is relevant - 1311 (1) [Offence] A person who: (a) does an act or thing that the person is forbidden to do by or under a provision of this Law; (b) does not do an act or thing that the person is required or directed to do by or under a provision of this Law; or (c) otherwise contravenes a provision of this Law; is guilty of an offence by virtue of this subsection, unless that or another provision of this Law provides that the person: (d) is guilty of an offence; or (e) is not guilty of an offence.

… 61 It was submitted by the applicant that an instruction to a broker could not constitute conduct for the purposes of subs (1) because only transactions contemplated by subss (5) and (9) were contemplated by subs (1). So there must be, by a combination of subss (5) and (9), at least an offer to sell or buy securities or an invitation for an offer to sell or buy securities. 62 No authority was offered to support such a construction. Subs (5) in terms does not limit the generality of subs (1). The submission is contrary to the plain meaning of the section and is without substance. It is not necessary to consider whether, in any case, this submission might be met with a submission that Mr Powell carried out as agent of the applicant any of the acts contemplated by subss (5) and (9).

Whether the DPP may rely on sales of shares other than at thirteen cents and fourteen cents 63 The question arises whether, because of the decision of this Court in related civil proceedings, it would be an abuse of process for the DPP to rely as prohibited acts on any instruction given by the applicant to Mr Powell to sell Fame's ordinary shares other than at thirteen cents and fourteen cents. When Mr Cave heard about the sales of Fame's shares on 28 April 1995 he became concerned, among other things, about the rights of ordinary shareholders in Jeffries, because the lower weighted average price resulting from those sales would give converting preference shareholders proportionately more ordinary shares. After obtaining legal advice, the directors decided to exclude sales made on 28 April 1995 from the calculation of the average weighted sale price. A summons was brought in the Equity Division of this Court by a holder of converting preference shares who was not connected with Fame or the applicant, seeking a declaration that the calculations for conversion should include the sales of 28 April: Fenwick v Jeffries Industries Ltd, Cohen J 18 August 1995. Jeffries, Mr Cave, Mr Wong and the other directors of Jeffries were made defendants. They cross-claimed against Fame, seeking declarations that it had engaged in misleading conduct in breach of s 995(2) Corporations Law and that by virtue of the sales of 28 April 1995 it had created and intended to create a false and misleading appearance with respect to the price of the ordinary shares in Jeffries in breach of s 998. 64 The Australian Securities Commission (ASC) intervened. ASC supported the case for the declarations sought in the cross-claim, including the declaration that Fame was in breach of s 998 in transacting each of the sales of its shares made on 28 April 1995. 65 The applicant was not a party and neither was the DPP. 66 Cohen J made declarations in due course including a declaration that Fame, by virtue of the sales at thirteen cents and fourteen cents, created and intended to create a false and misleading appearance with respect to the price of the ordinary shares of Jeffries in breach of s 998. His Honour was not so satisfied with respect to any sale of Fame's shares at prices ranging from thirty-five cents to twenty-five cents. 67 Fame appealed to the Court of Appeal and ASC cross-appealed. They were the only parties before the Court of Appeal. Fame challenged Cohen J's findings and declarations, including those as to the breach of s 998 by the sales at thirteen cents and fourteen cents. ASC contended that his Honour's findings and declarations did not go far enough and that the other sales on 28 April 1995 had been made in breach of s 998. However, ASC did not pursue the cross-appeal because the legal issues of concern to it were sufficiently covered by Fame's appeal. So the Court of Appeal concerned itself only with the sales at thirteen cents and fourteen cents. By a majority, the Court dismissed Fame's appeal. Special leave to appeal to the High Court was refused. 68 The applicant referred to statements of the members of the majority of the High Court in Rogers v The Queen (1994) 181 CLR 251. The Court in that case held by a majority that issue estoppel has no application in criminal proceedings but that proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive because they seek to litigate anew a case which has been already disposed of by earlier proceedings. See the judgment of Mason CJ at 255-256 and of Deane and Gaudron JJ at 272-278. It was submitted that an assertion by the DPP that the applicant's instructions to Mr Powell to sell at prices other than thirteen cents and fourteen cents were in breach of s 998 would constitute an abuse of process because it would seek to litigate again issues decided by Cohen J and would be a direct challenge to his Honour's judgment. 69 The central purpose of the proceedings before Cohen J was to determine the correctness of the decision by the directors of Jeffries to exclude from the conversion calculation the sales of its shares on 28 April 1995 and so determine the competing claims of converting preference shareholders and ordinary shareholders. Although ASC was an intervening party, called evidence and no doubt made submissions, it sought no orders. Although it was the only respondent to Fame's appeal, it did not press its cross-appeal. In no way did it represent the Commonwealth in the right of a prosecutor. The proceedings were not criminal and there was no intention that any criminal sanction should follow. 70 It often happens that disputes arise between shareholders or officials of corporations, and that those disputes have to be dealt with urgently by the courts in order to enable the companies concerned to fulfil their proper functions. Fenwick v Jeffries Industries Limited was such a case. It was heard in July and the reserved judgment of Cohen J was delivered in August 1995. Like Fenwick v Jeffries Industries Limited, such cases may require the trial judge to make determinations which express or imply findings that there have been breaches of the Corporations Law. It would be a matter of concern to the proper administration of the criminal law if every such determination in favour of a party could be put forward to bar or to justify a stay of criminal proceedings subsequently commenced and arising out of the same facts or to limit the issues properly arising therein. It would threaten public confidence in the administration of justice because serious issues of a criminal kind might thereby be effectively determined in whole or in part in inappropriate fora and by inappropriate means. The need to ensure that wrongdoers were brought to trial would give rise to the need to defer urgent and important civil proceedings until related criminal proceedings could be concluded. The administration of justice would fall into disrepute. 71 The Crown case is that when the applicant gave Mr Powell his instructions they had discussed the state of the market for Jeffries' shares and the applicant knew that there were outstanding bids to buy them at prices ranging between thirty-five cents and twenty-five cents as well as those at fourteen cents and thirteen cents. He knew that the entry of a selling bid at thirteen cents would first match and exhaust all selling offers at higher prices, provided he had enough shares to sell. That is why, notwithstanding his desire to sell at the lowest possible price so as to produce the desired effect on the average weighted sale price of the shares, the applicant arranged for Fame to sell at prices between thirty-five cents and twenty- five cents as well as at fourteen cents and thirteen cents. So the instructions for those sales are capable of being seen as having been given with the same intent as that which accompanied the instructions to sell at thirteen cents and fourteen cents. 72 I do not think in all the circumstances that the reliance of the DPP on the applicant's instructions to Mr Powell to sell at prices between thirty-five cents and twenty-five cents would constitute an abuse of process or that a trial conducted on that basis would seek to litigate again issues decided by his Honour or directly challenge his Honour's judgment. 73 The motion is dismissed. I certify that this order is a proper one for determination on appeal. **********

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