REGINA v FIRNS

COUNSEL : Appellant: M Hobart/D Allen Respondent: T A Game SC/M Buscombe SOLICITORS : Appellant: Tzovaras Yandel Respondent: Commonwealth Director of Public Prosecutions CATCHWORDS : Corporations Law - s1002G - insider trading - legislative history of Division 2A of the Corporations Law - when is material "readily observable" - whether a judgment read in open court constitutes "readily observable" information - whether information must be available in Australia before it is "readily observable" - appeal upheld. D DECISION : Appeal upheld, conviction and sentence quashed and acquittal entered.

Carpenter Pacific Resources NL (Carpenter) was an Australian company listed on the Australian stock exchange. Its main business in 1995 was holding exploration licences in Papua New Guinea through wholly owned subsidiaries.

The appellant's father, Mr Ron Firns, was an executive director at the time, as was Mr Richard Hill, the chairman and company secretary. The role of general manager was undertaken temporarily by Mr James Kruse, an employee of Mr Hill's accountancy firm.

One of Carpenter's subsidiaries registered in Papua New Guinea, Matu Mining Pty Ltd (Matu), was granted in 1994 an exploration licence over a large area in Papua New Guinea thought to have gold prospects. Within this area, a smaller area was the subject of a special mining lease, and owned by an unrelated company, Kare Puga Development Corporation Pty Ltd. The introduction of new regulations under the Papua New Guinea Mining Act 1992 added hard rock rights to the alluvial right under the special mining lease, effectively divesting Matu of a valuable incident of its exploration licence.

Matu challenged the validity of the regulation in the National Court of Papua New Guinea, and having lost at first instance later appealed to the Supreme Court of Papua New Guinea. The appeal was heard in October 1994 in open court, and judgment was reserved.

On Friday 28 July, at about 9:30am the judgment was handed down in open court, upholding the appeal and declaring the regulation invalid. Mr Kruse and a solicitor from the firm representing Carpenter in Papua New Guinea were present. At 9:40 the news was telephoned to Mr Hill. Mr Hill telephoned his fellow directors, beginning with Mr Firns senior. Mr Firns senior telephoned the news to the appellant in Brisbane at about 10:08am. Shortly before 10:27 the appellant phoned a Brisbane stockbroker and purchased 400,000 Carpenter shares at two and half cents in his wife's name. He identified himself as "Ken Wiggins", his wife's maiden name. The appellant also arranged for the purchase of a further 338,000 shares at three cents each in favour of his friend, Peter Coombes. The ASX was not notified of the successful judgment until the following Monday. In mid August 1995, the parcels of Wiggins and Coombes shares were sold at a market price of nine and twelve cents.

Mr Firns was convicted in the District Court on two charges involving prohibited conduct by a person in possession of inside information under s1002G of the Corporations Law. Mr Kruse was also tried separately on the same facts, but was acquitted.

This is an appeal from Mr Firns' conviction. The principal ground of appeal is that the trial judge erred in refusing to direct verdicts of acquittal. The issue is whether the information used by the appellant was "generally available" in the sense that it consisted of "readily observable matter" at the time the appellant purchased the shares. Mr Firns also submitted that the jury were misdirected when they were told that the issue was whether the the Supreme Court of Papua New Guinea decision was readily observable in Australia when it was acted upon.

Held (by Mason P, Hidden J agreeing, upholding the appeal):

The acquittal of Kruse and the conviction of Firns cannot be reconciled on their facts. The decisions turn upon whether it is necessary that something be readily capable of being perceived in Australia before it can be readily observable.

Various theories have been offered as a basis for prohibiting insider trading. The legislative history of Division 2A of the Corporations Law suggests that the current scheme represents an unresolved ambiguity between the market fairness/ "equal access" and market efficiency theories. The market fairness/ "equal access" paradigm cannot be invoked as the sole basis for interpreting the criminal offence. Birmingham v Corrective Services Commissioner (1988) 15 NSWLR 292 (cited); R v Hannes [2000] NSWCCA 503 (distinguished).

Information may be readily observable even if no one in fact observed it. In the present situation the information embodied in the Supreme Court judgment was available, understandable and accessible to a significant group of the public; those present in open court. The judgment was readily observable even if ready observability were to be limited to perceptibility by the unaided human senses.

Division 2A is not confined to protecting the interests of resident Australian investors or dealings in Australian shares. The recognition of modern telecommunication methods such as telephone, television and fax as part of how Australians, and particularly investors, perceive events further highlights the difficulty of testing ready observability from the stance of the hypothetical person "within Australia".

The words "readily observable matter" are an issue for the jury. The direction that it was the ready perceptibility "by those in Australia" that was in issue significantly altered the statutory offence to the detriment of the appellant. These words created a significant risk that the jury could proceed to conviction by inappropriate reasoning. The conviction must be set aside based upon misdirection.

The fundamental principles of open justice are based on the assumption that everything that happens in open court is capable of being observed and reported upon, thereby ensuring continuing accountability. A judgment is readily observable even if time will inevitably elapse before the profession generally learns about it and absorbs its effect.

The words "readily observable matter" cannot be allowed to operate in a vacuum. The question must be asked: to what class of persons must the information consist of "readily observable matter"? R v Hannes [2000] NSWCCA 503 (referred). In this case, for information to be generally available on the basis that it consists of readily observable matter, it must at least be readily observable by members of the Australian public. The alternative construction would defeat the purpose of the Act.

The issue of whether the Crown had negatived beyond reasonable doubt that the successful outcome of the PNG Supreme Court litigation was readily observable material at the time the shares were purchased was properly left to the jury for their consideration. The direction which the trial judge gave to the jury was correct and it was open to the jury to make the finding it made in favour of the Crown on that issue.

Appeal upheld. 2. Conviction and sentence quashed. 3. Acquittal entered.

JUDGMENT 1 MASON P: The appellant was tried and convicted in the District Court on two charges involving prohibited conduct by a person in possession of inside information. He received custodial sentences. 2 The indictment charged that the appellant: 1. On or about 28 July 1995 contravened section 1002G(2) of the Corporations Law in that he: (a) possessed of information that was not generally available but which, if generally available, a reasonable person would expect it to have a material effect on the price or value of securities of a body corporate, namely ordinary shares in Carpenter Pacific Resources NL ("Carpenter shares"); and (b) knew or ought reasonably to have known that such information was not generally available and that if it were generally available it might have a material effect on the price or value of Carpenter shares; purchased, either as principal, or as agent for Linda Christine Firns (also known as Linda Christine Wiggins) … 400,000 Carpenter shares.

On or about 28 July 1995 contravened section 1002G(2) of the Corporations Law in that he: (a) possessed of information that was not generally available but which, if generally available, a reasonable person would expect it to have a material effect on the price or value of securities of a body corporate, namely ordinary shares in Carpenter Pacific Resources NL ("Carpenter shares"); and (b) knew or ought to have known that such information was not generally available and that if it were generally available it might have a material effect on the price or value of Carpenter shares; procured Peter Clement Coombes to purchase 338,000 Carpenter shares.

3 The principal ground of appeal was that the trial judge erred in refusing to direct verdicts of acquittal. The information used by the appellant was a decision of the Supreme Court of Papua New Guinea announced in open court and promptly relayed to the appellant through a chain of telephone messages culminating in a call from his father. The appellant submits that such information could not constitute information that was "not generally available". Alternatively, the verdict was unreasonable in this regard. 4 Secondly, it is submitted that the jury were misdirected when they were told that the issue was whether the decision of the Supreme Court of Papua New Guinea was readily observable in Australia when it was acted upon. 5 There were other grounds of appeal, including a challenge to the severity of the sentence.

Facts 6 Carpenter Pacific Resources NL (Carpenter) was a company incorporated in Australia whose shares were listed on the Australian Stock Exchange (ASX). In 1995 its main business was the holding of exploration licences in Papua New Guinea, primarily through wholly owned subsidiaries. 7 There were two Carpenter directors who had executive functions at the relevant time. The chairman and company secretary was Mr Richard Hill, a Sydney-based chartered accountant. The other executive director was Mr Ron Firns, the appellant's father. 8 In 1995 Carpenter's full time general manager in Papua New Guinea had resigned and his role was undertaken temporarily by Mr James Kruse. He was an employee of Richard Hill & Associates, Mr Hill's accountancy firm. (Mr Kruse was acquitted in a related insider trading prosecution, discussed below.) 9 One of Carpenter's subsidiaries was Matu Mining Pty Ltd (Matu), a company registered in Papua New Guinea. In October 1993 it applied for an exploration licence, EL1093, over a large area (220 km) in Papua New Guinea thought to have prospects of gold. By virtue of a ballot, its application was due to be processed in priority to other applicants. Carpenter informed ASX that it expected to obtain the exploration licence. The process of acquiring EL 1093 was ultimately completed in August 1994. 10 Within the larger area of EL 1093 was a smaller area which was the subject of a special mining lease, SML1. The latter tenement was owned by an unrelated company Kare Puga Development Corporation Pty Ltd. Prior to December 1993 SML 1 only conferred the right to prospect for alluvial gold as distinct from the "hard rock rights". 11 In December 1993 the Papua New Guinea government made the Mining (Transitional Provisions) Regulation 1993, purportedly pursuant to the Mining Act 1992. The effect of the regulation was to add the hard rock rights to SML 1's alluvial right, thereby divesting Matu of a valuable incident of EL 1093. Since Matu was then in the process of acquiring EL 1093 the regulation was obviously adverse to Carpenter's interest because it effectively removed Carpenter's right to explore for gold in the area covered by SML 1. 12 Matu challenged the validity of the regulation in the National Court of Papua New Guinea. Proceedings were commenced on 20 December 1993. The challenge was dismissed in March 1994. Carpenter issued a public announcement indicating that it had referred the judgment to its lawyers for advice on whether to appeal. 13 Matu appealed to the Supreme Court of Papua New Guinea. The appeal was heard in October 1994 - in open court - and judgment was reserved. 14 Throughout the proceedings in the National Court and the Supreme Court of Papua New Guinea, Carpenter issued a number of press releases which were sent to ASX in discharge of Carpenter's continuous disclosure requirements under the ASX Listing Rules. These press releases also tracked the progress of Warden's hearings related to Matu's application for EL 1093 down to its successful outcome in August 1994. In addition, there were articles in the Sydney Morning Herald (1 April 1995, 8 April 1995 and 13 May 1995) and the Australian Financial Review (7 June 1995) which referred or alluded to the pending decision of the Supreme Court. 15 On the evening of 27 July 1995 the Supreme Court indicated that judgment would be handed down the following day in Port Moresby at 9.30am. Naturally this came to the attention of Carpenter's officers in Port Moresby and Sydney. This notification was not the information upon which the prosecution was based. 16 Mr Hill told his fellow director, Mr Firns senior, that judgment was to be handed down the next day. The two men discussed public announcements assuming both a successful and an unsuccessful outcome. Pessimistically expecting that the appeal would be lost, Mr Hill prepared an appropriate draft press release to the ASX. 17 Judgment was handed down at about 9.30am on Friday 28 July. The appeal was upheld and the regulation declared invalid. 18 Mr Kruse was present in open court when the judgment was delivered. So too was a solicitor from the firm of solicitors representing Matu/Carpenter in Papua New Guinea. So too were newspaper reporters and landowners from the affected area (cf AB 64, 151). The time zone in Port Moresby was the same as in Sydney. At about 9.40am the good news was phoned through by Carpenter's solicitor in Port Moresby to Mr Hill in Sydney. That solicitor had been telephoned by another solicitor who had been at the Supreme Court. 19 Mr Hill immediately phoned his fellow directors. He started with Mr Firns senior, who was in Sydney at the time. Mr Firns senior telephoned the news to the appellant, in Brisbane, at about 10.08am. 20 Shortly before 10.27am the appellant telephoned a Brisbane stockbroker and arranged the purchase of the 400,000 Carpenter shares in the name of the appellant's wife that are the subject of the first count in the indictment. The appellant was not an existing client of the broker. He identified himself as "Ken Wiggins", a surname he had never before used. He asked the broker to buy $10,000 worth of shares in the name of his wife, "Linda Christine Wiggins". "Wiggins" was her maiden name. 21 In 1995, as today, ASX transactions were effected through a computer system known as SEATS (Stock Exchange Automatic Trading System). It matches buyers with sellers. Only licensed operators may access it to effect an order, but others may access it to find details of buying and selling prices and "trades". 22 In response to "Mr Wiggins'" instructions, the broker accessed SEATS and found that Carpenter shares were selling at two and half cents. The Wiggins purchase was effected through SEATS at that price at 10.27am. 23 At about the time he arranged the purchase of the shares for his wife, the appellant arranged with the broker to purchase a further parcel of 338,000 shares at three cents each. This purchase was procured in favour of a friend, Peter Coombes, who was telephoned by the broker to confirm that he wanted to buy the shares as arranged by "Mr Wiggins". The broker effected the purchase through SEATS at 11.00am at three cents per share. This acquisition is the subject of the second count in the indictment. 24 These share dealings occurred before Mr Hill received a faxed copy of the judgment (at c11.30am). Later in the day Mr Hill consulted with his fellow directors and settled the form of a notification to the ASX that told the stock exchange and investors generally of Carpenter's success in the Supreme Court. The document was not finalised until late that day (a Friday). It was sent to ASX the following Monday. 25 The parcels of Wiggins and Coombes shares were sold in mid August 1995 when the market price was between nine and twelve cents. 26 The Crown alleged that the information about the Papua New Guinea judgment was information that was not generally available until after the ASX was first notified, which was about 1.30pm on 28 July 1995. That notification was made at the Perth branch of the ASX by an unrelated company interested in the judgment (AB 451-2). By that stage the purchases referred to in the indictment had been effected. 27 Newspaper reports of the decision of the Supreme Court of Papua New Guinea first appeared in Papua New Guinea on 31 July 1995 and Australia on 1 August 1995.

Elements of the offences 28 Section 1002G of the Corporations Law relevantly provides: 1002G(1) [Application of section] Subject to this Division, where: (a) a person (in this section called the "insider" ) possesses information that is not generally available but, if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of securities of a body corporate; and (b) the person knows, or ought reasonably to know, that: (i) the information is not generally available; and (ii) if it were generally available, it might have a material effect on the price or value of those securities; the following subsections apply. 1002G(2) [No purchase or sale etc of securities] The insider must not (whether as principal or agent): (a) subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell, any such securities; or (b) procure another person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities….

29 When information is generally available is defined in s1000B as follows: 1002B Information generally available (2) Information is generally available if: (a) it consists of readily observable matter; or (b) without limiting the generality of paragraph (a), both the following subparagraphs apply: (i) it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of bodies corporate of a kind whose price or value might be affected by the information; and (ii) since it was so made known, a reasonable period for it to be disseminated among such persons has elapsed. (3) Information is also generally available if it consists of deductions, conclusions or inferences made or drawn from either or both of the following: (a) information referred to in paragraph (2)(a); (b) information made known as mentioned in subparagraph (2)(b)(i). 30 The offences charged had six broad elements: 1. The accused possessed information ; "Information" is defined in s1002A. It was proved that the appellant received information about the Supreme Court judgment through his father.

2. that was not generally available ; This is the critical point in the appeal.

if the information were generally available a reasonable person would expect it to have a material effect on the price or value ; Section 1002C provides a relevant definition. It is not seriously disputed that the news of the favourable judgment that was used by the appellant constituted information which a reasonable person would expect to have a material effect on the price of Carpenter's shares.

of securities of a body corporate ; There is no issue on this account.

the accused knows or ought reasonably to know (i) that the information is not generally available; and (ii) if it were generally available, it might have a material effect on the price or value of those securities . There was ample evidence of this aspect of mens rea , which the jury obviously accepted. The appellant knew that the information he obtained from his father would have a material effect on the price of the Carpenter shares and that it had been passed on to him in advance of any announcement to the public (see esp Ms Daniels at AB 96, 98-9; Mr Coombes at AB 100-2; private examination of appellant at AB 401, 408, 412-3, 421, 441).

the accused (whether as principal or agent) purchased the securities (count 1); or the accused procured a third person to purchase the securities (count 2) These elements of the offences were clearly proved to the satisfaction of the jury.

Two inconsistent verdicts 31 Mr Kruse and the appellant were separately tried on charges of insider trading. The acquittal of Kruse and the conviction of the appellant cannot be reconciled on the facts. 32 Mr Kruse had been present at the Supreme Court in Port Moresby when judgment was delivered and he presumably arranged the purchase of Carpenter shares by telephoning a broker. At his separate trial, he was acquitted by direction of O'Reilly DCJ (R v Kruse, District Court of New South Wales, 2 December 1999). Judge O'Reilly QC held that what happened in the Supreme Court at 9.30am was in the "public arena" and therefore constituted "readily observable matter" within s1002B(2)(a). He concluded that the facts had to be directly observable in a public arena, but that the public arena did not need to be confined to Australia or to any State in Australia. It was sufficient that the arena was "public" in the Shorter Oxford Dictionary sense of being "open to general observation, existing, done or made in public, manifest, not concealed". 33 At the appellant's trial, Judge Sides QC rejected the application for a verdict by direction at the close of the Crown case (AB 181-5). His ruling was given approximately one month before the ruling in Kruse. 34 As regards s1002B(2)(a) ("readily observable matter"), Judge Sides held that the words mean readily or easily noted or noticed or perceived: and that perception is not limited to sight perception. He concluded nevertheless that the announcement of the Supreme Court decision in open court in Port Moresby did not establish that the judgment was "readily observable". When he summed up to the jury, Judge Sides told them that par (a) meant that the Crown had to establish beyond a reasonable doubt: … that the material or information was not easily noticed or perceived by any of our senses by someone who was within Australia . In the context of this case that means that the information about the outcome of the appeal in the Supreme Court of Papua New Guinea was not easily noticeable or not easily perceived by those in Australia . (emphasis added)

35 Judge Sides correctly told the jury that the Crown had to negative beyond reasonable doubt both of the propositions contained in pars (a) and (b) of s1002B(2). Par (b) is not in issue in this appeal. However, some of Judge Sides' directions concerning par (b) may have reinforced a perception of an exclusively local (ie Australian) focus of the regulatory regime. As to paragraph (b) the jury were informed that: So far as this case is concerned what is involved in par (b) is information that in some fashion is made known to the marketplace or is likely to be conveyed to the marketplace and given sufficient time for it to be disseminated within the market place. The market place that I am speaking about in this regard involves those who are engaged in or associated in the investing in shares or securities in mineral resource exploration corporations or companies listed on the Australian Stock Exchange. As I have said there is a requirement not only that the material be made available to that market place but that there be a reasonable time for it to be disseminated within that market place. 36 The acquittal of Kruse and the conviction of the appellant cannot be reconciled on their facts. The contrasting trial rulings in Firns and Kruse turn upon whether it is necessary that something must be readily capable of being noticed or perceived in Australia before it can be said to be readily observable. Firns said "yes", Kruse "no". 37 One learned commentator has suggested that the two decisions can be reconciled on the basis that the question at issue in Kruse was whether the information about the Supreme Court decision was readily observable in Papua New Guinea having regard to Mr Kruse's presence there at the time he learnt the information and acted upon it (see Dr Gordon R Walker, "Insider Trading in Australia: When is information generally available?" (2000) 18 Company and Securities Law Journal, 213 at pp215-216). The author suggested that the results are reconcilable because they reflect the two different arms of s1002 of the Corporations Law, with Kruse being dependent on s1002(b). 38

Section 1002 provides: 1002 Application of Division This Division applies to: (a) acts and omissions within this jurisdiction in relation to securities of any body corporate, whether formed or carrying on business in this jurisdiction or in Australia or not; and (b) acts and omissions outside this jurisdiction, whether in Australia or not, in relation to securities of a body corporate that is formed or carries on business in this jurisdiction.

39 Neither party to this appeal supported the suggested distinction between Kruse and Firns. I agree that it is without foundation. Section 1002 emphasises the extraterritorial reach of Division 2A. But it does not prescribe any different operation for Division 2A depending upon whether par (a) or (b) is engaged. Indeed, there will be situations where both arms of s1002 may be engaged in a single prosecution.

The legislative purpose(s) of the prohibition 40 There is lengthy philosophical debate about the object of prohibiting insider trading. Because of this, care needs to be taken to ensure that a judge does not unconsciously read his or her own philosophy into the enactment and then use it as the basis for construing the enactment consonant with that philosophy. The need for caution is heightened in light of the conflicting signals in the extrinsic material and recognition that one is dealing with a serious criminal offence (cf Chew v The Queen (1992) 173 CLR 626 at 632). Classical theories of statutory interpretation endorse a liberal interpretation of provisions designed to protect classes of vulnerable people such as investors and consumers. On the other hand criminal statutes are construed strictly having regard to the common law's concern for the liberty of the subject. 41 The Explanatory Memorandum that accompanied the Corporations Amendment Bill 1991 explained that the legislation arose out of the Report of the House of Representatives Standing Committee on Constitutional and Legal Affairs, Fair Shares for All: Insider Trading in Australia, AGPS, Canberra, 1989 (the Griffiths Report). The Committee is usually referred to as the Griffiths Committee, after its chairman, Alan Griffiths MP. 42 Various theories have been offered as a basis for prohibiting insider trading and, conversely, in defence of insider trading (see Griffiths Committee, at ss3.1.2-3.1.3; Semann, Freeman and Adams, "Is Insider Trading a Necessary Evil for Efficient Markets?: An International Comparative Analysis" (1999) 17 Companies and Securities Law Journal 220; Exicom Pty Ltd v Futuris Corporation Ltd (1995) 18 ACSR 404 at 408-9). 43 The Griffiths Committee pointed out that the theories that have been offered as a basis for prohibiting insider trading include the concepts of: • fairness, ie market participants should have equal access to the relevant information from the company which issues the securities;

• fiduciary duty, ie a person who holds a position of trust should not make a personal profit from that position without the informed consent of the beneficiaries;

• economic efficiency, ie insider trading is damaging to the integrity of the financial market; and

• corporate injury, ie insider trading injures the company which issued the securities, the shareholders in the company and investors who deal with insiders. 44 Alternative theories have, however, been expressed in defence of insider trading. Professor Henry Manne has suggested that insider trading is beneficial on the grounds of enhancing market efficiency, since trading by insiders sends signals to the market which help move the price of securities towards their real value, thus bringing about a better informed and more efficient market (H Manne, "In Defence of Insider Trading" (1966) 43 Harvard Business Review 113). 45 The legislative history suggests that Parliament left the courts with a scheme embodying the ambiguous embrace of the market fairness/"equal access" and market efficiency theories. 46 The predecessor of Division 2A was s128 of the Securities Industry Code. In Hooker Investments Pty Ltd v Baring Bros Halkerston & Partners Securities Ltd (1986) 10 ACLR 462 at 464, Young J said that one approached s128: … with the idea that it is directed to people who are trading in the market place and are involving themselves in a transaction where a price could be affected by information and the purpose of the Act is to prevent one person having an unfair advantage from another.

47 These comments were endorsed in the Court of Appeal in that case (Hooker Investments Pty Ltd v Baring Bros Halkerston & Partners Securities Ltd (1986) 5 NSWLR 157 at 163). In Exicom Young J repeated his comments and applied them to s128's successor, s1002G of the Corporations Law. He found that the transaction in Exicom fell outside s1002G because it was not: … a situation where an insider [was] making use of information in a market to gain an advantage over an outsider (at 410).

48 One finds clear statements in the Griffiths Report that the basis for regulating insider trading was the need to guarantee investor confidence in the integrity of the securities markets (see eg at s5.3.9). The Committee endorsed the principles adopted in 1981 by the Committee of Inquiry into the Australian Financial System (the Campbell Committee) where it was stated that: The object of restrictions on insider trading is to ensure that the securities market operates freely and fairly, with all participants having equal access to relevant information. Investor confidence, and thus the ability of the market to mobilise savings, depends importantly on the prevention of the improper use of confidential information. (s3.3.6, quoting from Australian Financial System , Final Report of the Committee of Inquiry, AGPS, Canberra, 1981, p382).

49 In the Explanatory Memorandum the following appears (emphasis in original): 307. Some commentators have suggested that regulation of insider trading is not necessary, as insider trading enhances the efficiency of the securities market through the faster dissemination of information. The Government's policy view is, however, that it is necessary to control insider trading to protect investors and make it attractive for them to provide funds to the issuers of securities, for the greater and more efficient development of Australia's resources. The effects of insider trading on investor confidence are regarded as outweighing any efficiencies arising from the faster dissemination of information which some commentators allege would accrue if insider trading were decriminalised.

50 On this approach, equality of access to the relevant market is the critical factor. Under this theory, restrictions on insider trading are designed to ensure that the market operates fairly, with all participants having equal access to relevant information. The playing field is to be levelled. The derived concept of precluding "unfair advantage" was adopted by Young J and the Court of Appeal in the passages set out above. 51 This is all very well in providing insight into one aspect of the general philosophy underlying Division 2A. And it is reflected in s1002B(2)(b). However, the appellant was not charged with making "unfair" use of information relevant to the value of Carpenter shares. And the Crown had to negative both arms of s1002B(2) to secure a conviction. 52 The critical element of the offences charged was the requirement that the Crown prove that the information was not generally available, as that term is defined in s1002B. The vital issue in this appeal is whether the information used by the appellant was "generally available" in the sense that it consisted of "readily observable matter" at the time when the appellant effected (count 1) and procured (count 2) the two purchases before 11am on 28 July 1995. 53 Section 1002B is set out above. The language of the statutory definition of "generally available" and the drafting history of that definition demonstrate that the Griffiths Committee's clear vision of an underlying policy of promoting fairness in the market through equal access to information became badly blurred in the legislative process. This did not happen through oversight, although it is possible that different participants in the legislative process concentrated on one factor to the exclusion of the other or persuaded themselves that two essentially conflicting policies could be brought into sharp focus at the point of statutory definition. Regrettably for the courts at least, this has not happened. The result has been a form of legislated astigmatism because the attempt to converge essentially incompatible policy goals has produced a patchy blurring of the image (cf definition of astigmatism in Penguin New English Dictionary: "a defect of an optical system, eg a lens of the eye, in which rays from a single point fail to meet in a focal point, resulting in patchy blurring of the image".) 54 In the following paragraphs I seek to demonstrate why the statutory definition of "generally available" focusses in opposite directions and why in my opinion the market fairness/"equal access" paradigm cannot be invoked as the sole basis for interpreting the criminal offence with which this appeal is concerned. 55 The Griffiths Committee had recommended that the concept of general availability should be defined in the legislation. However, the definition proposed by the Committee was narrower than that later enacted. The difference is of significance, as are the reasons. The Committee stated: 4.5 Availability of information 4.5.1 Relevant to determining the type of information covered under the insider trading provisions, it was argued in some submissions that the concept of general availability lacks precision and should be replaced by a provision which indicates the manner of disclosure and ensures that the information is likely to be available to the ordinary investor. It was suggested that such a provision could specify a reasonable waiting period for the information to be absorbed. 4.5.2 LCA [Law Council of Australia] noted that, in the United States, the American Law Institute's proposed Federal Securities Code has moved towards the specification of precise times from the release of information to the time when it can be regarded as sufficiently absorbed by the market that insiders are free to trade. For example, LCA indicated that it considered unsatisfactory that an insider should be able to leave a press conference and go straight to the telephone and start buying stock before the market has had sufficient time to absorb the information. 4.5.3 However, on the grounds of market efficiency, there was opposition to the proposal that there be specification of precise times between release and absorption of information. AMP argued: … if we were to wait until every investor had an opportunity to assess information we would be forced to suspend stocks every time there was a news release. 4.5.4 AMP suggested that the interests of the private sector are best served by allowing market professionals to have instant access to information, so as to produce a properly priced security, thereby reducing the opportunity for insider trading. 4.5.5 While acknowledging that the absence of a time rule may disadvantage small investors vis a vis market professionals, the NCSC indicated that any arbitrary period is likely to be unrealistically long in some cases and penalise the diligent. Conclusions 4.5.6 The Committee reiterates its view that any concept which is fundamental to the operation of the legislation must be expressed in clear and practical terms. As the term "generally available" is critical in determining whether insider trading has occurred, uncertainty about its application indicates a need to clarify the concept. 4.5.7 It is clearly compatible with the intent of the legislation if an insider gains an advantage from the dissemination of inside information before the market has had a reasonable time to absorb that information. Accordingly, the concept of general availability should be defined by providing that the information should be available to a reasonable investor, and by requiring a reasonable time period for the dissemination of the information. In addition, guidelines should be issued by the regulatory agencies on appropriate methods for disclosure of information. 4.5.8 However, the Committee is opposed to incorporating a fixed time period within the legislation, as this may well impact on the efficient operation of the securities markets and may penalise individual initiative and diligence. Instead, the given circumstances of a case should be taken into account when deciding whether the time frame involved was reasonable.

Recommendation 4 4.5.9 The Committee recommends that, for the purposes of the insider trading provisions, information be defined as generally available where it is disclosed in a manner which would, or would be likely to bring it to the attention of a reasonable investor, and where a reasonable period of time for the dissemination of the information has elapsed.

56 Had this recommendation been adopted, s1002B(2) would have contained par (b) (or something similar), but not par (a) and perhaps not subsection (3). Yet Parliament chose to include these additional and alternative means of establishing that information was "generally available". In doing so, the legislation effectively undermined the policy objective stated in s4.5.7 of the Griffiths Committee Report. The Explanatory Memorandum explained the drafting of s1002B in the following terms: Section 1002B - Information generally available Background 325. The Committee recommended that information be defined as "generally available" where it is disclosed in a manner which would be likely to bring it to the attention of a "reasonable investor", and where a reasonable period of time for the dissemination of the information has elapsed. 326. Concern was expressed that in consequence of the adoption of this definition in the exposure draft, information directly observable in the public arena would not be regarded as generally available, as it has not been "made known". It was considered that a person could be liable for insider trading where he/she traded in securities on the basis of, for example, an observation that the body corporate had excess stocks in a yard. This was not the intention of the provisions. 327. Further, although it was not intended that the provisions would regard as inside information such things as deductions and conclusions which investors, brokers or other market participants may make based on independent research of generally available information, a number of submissions considered that this intention was not reflected in the provisions. Proposed amendment 328. Proposed section 1002B is a reflection of the Committee's recommendation in relation to generally available information. For information to be generally available, subsection 1002B(2) requires either that it: • consist of readily observable matter, ie facts directly observable in the public arena (subparagraph (a)); or • be made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of bodies corporate of a kind whose price or value might be affected by the information. This provision is intended to defined the term 'generally available' in terms appropriate to closely held and unlisted companies as well as listed companies with dispersed shareholdings. It would not be sufficient for information to be released to a small sector of the investors who commonly invest in the securities. The information must be made known to a cross section of the investors who commonly invest in the securities; and • a reasonable period of time has elapsed for the information to be disseminated. This provision is designed to prevent an insider, who is aware of information prior to its release, getting an unfair head start on other market participants, not to require an embargo on trading of such duration that it constitutes an impediment to the efficient operation of the market (subparagraph (b)). 329. Proposed subsection 1002B(3) makes it clear that information is also generally available if it consists of deductions, conclusions or inferences based on, separately or in combination, readily observable matter and information that has been made known within subparagraph (2)(b)(i).

57 Both the Committee and the Parliament were concerned not to "penalise individual initiative and diligence" (Committee Report at s4.5.8). However, both Committee and Parliament rejected a bright line definition. And Parliament went further in recognising that, for some types of information, cleverness, swiftness and efficiency are to be encouraged. The Committee's call for drafting clarity was also ignored with the insertion of the opaque words "readily observable matter". 58 These policy and drafting decisions left the courts with a difficult interpretative task. The task is focussed by provisions requiring the Court to give effect to legislative purpose and permitting recourse to extrinsic material (Corporations Law, ss109H, 109J), but the assistance is blurred by the conflicting goals embedded in the essentially two-pronged definition of "information generally available". 59

One commentator has observed that: Insider trading is a curious animal: there are many more journal articles discussing what it should be than reported cases of what it is. We all think we know what it is, yet defining it in the clear language required of a statutory provision with criminal liability attached has proved problematic. Most people agree that it is undesirable, yet there is still debate on precisely why it should be so from a philosophical perspective. (Michael Gething, "Insider Trading Enforcement: Where are we now and where do we go from here?" (1998) 16 Companies and Securities Law Journal 607.)

60 Since one way of establishing that information is generally available is to show that "it consists of readily observable matter", Division 2A has, I believe, partially and indirectly endorsed the economic-efficiency paradigm as one of the goals of insider trading prohibition. Of course, this casts little light upon whether or not conduct like that of the appellant contributes to such efficiency. 61 It is unnecessary to go further than recognising that endorsement of the concept of economic efficiency appears to underlie the Parliament's decision to insert par (a) into s1002B(2), in preference to the exclusive market fairness paradigm espoused by the Griffiths Committee and trumpeted in the general parts of the Explanatory Memorandum. Whether or not this means that the Australian legislative regime is out of step with insider trading regulation in other countries (cf Semann & Ors op cit) is neither here nor there. This Court's task is to enforce the Australian law, but only after having determined the proper scope of its prohibition. 62 A legislative commitment to an efficient as well as a fair market does not translate automatically into deciding that the "efficient" single trader is to be encouraged at all costs. But it does reinforce my decision to interpret par (a) literally, without forcing its language into a predetermined purposive mould. 63 Corporations law and practice in Australia seek to attack the evils of insider trading through complex requirements of continuous disclosure. In the present case, those responsible for the administration of Carpenter were at least aware of the duties of continuous disclosure and of the sanctions of suspension or loss of public listing on the ASX. Informed commentators have suggested that the criminal regulation of insider trading activities might align itself in particular ways with the particular obligations of continuous disclosure (Semann & Ors, op cit, p237ff; Gething, op cit, p620ff). The suggestion is a worthy one, but it is something for legislators, not for the judicial arm. Division 2A and its criminal sanctions do not link themselves with the scheme of statutory reinforcement of ASX's continuous disclosure rules. The Court must turn back to the words of the enactment. "Readily observable matter": By what means observable? Observable to whom? where observable? 64 These questions lie at the heart of the appeal. 65 Literal and purposive interpretations are not always consonant. Yet there is no pre-determined hierarchy. The general principles are frequently discussed in caselaw which is replete with acknowledgments that a court must make an ultimate judgment in a particular textual, contextual and purposive milieu. 66 A purposive construction will not yield readily to a literal one if words are to be added to those chosen by Parliament. The ultimate task remains one of construction, but the circumstances in which words may be read into a statute are limited. In Bermingham v Corrective Services Commissioner (1988) 15 NSWLR 292 at 302 and other cases, this Court has approved and applied the speech of Lord Diplock in Jones v Wrotham Park Estates [1980] AC 74 at 105 where he said that words can only be read into a statute if three conditions are fulfilled: first, it must be possible to determine from a consideration of the legislation read as a whole precisely what the mischief was that it was the purpose of the legislation to remedy; secondly, the court must be satisfied that Parliament by inadvertence overlooked and omitted to deal with a particular eventuality; and thirdly, the court must be able to state with certainty what words Parliament would have used to overcome the omission if its attention had been drawn to the defect. 67 This approach has been endorsed in the High Court by McHugh J (see Mills v Meeking (1990) 169 CLR 214 at 243-4) and apparently by Kirby J (see James Hardie & Coy Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53 at 81-2). 68 The Corporations Law does not define "readily observable matter". The drafting history and the opening words of par (b) shows that the generality of the words in par (a) are not to be limited by par (b). What also emerges clearly from a comparison between pars (a) and (b) of s1002B is that in par (a) the legislature deliberately held back from placing information under an embargo until the lapse of a fixed time or even a reasonable time from some fixed point of actual disclosure. Paragraph (a) was inserted as an alternative in order not to penalise the efficient, the speedy or the diligent - at least to the degree encompassed by the opaque "readily observable matter". 69 In R v Hannes [2000] NSWCCA 503 the trial judge had spoken of availability "in the marketplace". She did not elaborate upon the words "readily observable matter", describing them as "reasonably plain English". The appellant in Hannes submitted that the jury should have been given directions as to the persons to whom and the manner how the matter in question should be readily observable. It was suggested that the jury should have been told that the matter need only have been readily observable to the public at large; and that the matter had to be "easily able to be perceived by the senses in some way". Spigelman CJ (with whom Studdert J and Dowd J agreed) observed (at [262]-[263]) that, if par (a) was that wide, the trial judge's directions allowed the jury to proceed thus. If they proceeded on some narrower basis, then that was unnecessarily advantageous to the appellant, Hannes. The Chief Justice concluded that "these plain English words" required no elaboration on the trial judge's part. I do not read these remarks as indicating that it may never be appropriate to give the jury further guidance as to the scope and application of par (a). The facts of Hannes and the issues fought at trial simply required nothing further. 70 Section 1002B(2)(a) does not define the class of persons by whom the matter is to be "readily observable". They cannot be confined to existing shareholders or even existing traders of shares on ASX. In any event, the latter class is a very wide one since traders in Australian-listed shares are not confined to Australians, no matter how the latter term is defined. 71 I do not understand the parties to disagree with Sides DCJ's direction that perception is not limited to sight perception. He told the jury that "observable": extends beyond the concept of seeing something with the eye and it includes what can be perceived or what is capable of being noticed. Thus the word "observable" extends beyond the use of our visual sense, for example it would include as well the use of the olfactory senses that is smell, or the auditory senses that is hearing, or the tactile senses that is feeling. In other words people who are visually challenged are not excluded from this concept. Thus "observable" means something that is capable of being noticed or perceived. It is not, however, a question of whether something is easily able to be obtained or is easily available. 72 This exposition appears to confine observability to the capacity to be perceived through direct use of the unaided human senses. Such a direction will be sufficient in some situations, but it may at once be too broad and too narrow. 73 Sometimes information will consist of matter that is directly visible yet it may not be "observable", at least not "readily" so. Examples would be a message which is widely published yet encrypted or a gold nugget lying in a remote corner of a desert. Judge O'Reilly referred to the "public arena" in Kruse (par 32 above). It was the Explanatory Memorandum that glossed s1002B(2)(a)'s "readily observable matter" as "facts directly observable in the public arena" (see at par 328). Such a concept may be helpful in some contexts but my example of the published encrypted message shows that it cannot be taken too far. 74 At other times a direction that confined the jury to perceptibility by the unaided human senses will be too narrow. The present case is an example. 75 Some information has the capacity to generate its own dissemination. Its initial disclosure may be limited, yet the type of information involved and the initial group of persons to whom it is disclosed may ensure that it gets abroad. One would expect share-sensitive information despatched to ASX to have this capacity (cf Kinwat Holdings Pty Ltd v Platform Pty Ltd (1982) 6 ACLR 398, 1 ACLC 194). 76 Here the information embodied in the Supreme Court judgment was available, understandable and accessible to a significant group of the public, ie those present and capable of being present in court in the ordinary course. (I am leaving aside for the moment the issues raised by the venue being in Port Moresby as distinct from Sydney.) The judgment was readily observable to this class. 77 For the purposes of par (a) it does not matter how many people actually observe the relevant information. Nor is par (a) concerned with the time that is likely to elapse between the information becoming "readily observable" and when it was in fact observed. Information may be readily observable even if no one observed it. 78 Even if ready observability were to be limited to perceptibility by the unaided human senses, the published judgment of a Supreme Court is readily observable. A fortiori if, as I believe to be the case, one is not confined to the unaided human senses. Since the demise of the pony express and semaphore and the advent of telephone, telex, facsimile, television and the internet we have come to observe information immediately yet indirectly. Our human senses are engaged, but with the aid of modern means of telecommunication. Absent statutory clarification or restriction, there will be cases where failure to advert to this modern reality skews the true scope of par (a) despite emphasis on the modifying adverb "readily". 79 The appellant challenges the direction that it is the ready perceptibility "by those in Australia" that is in issue. I agree with the appellant that this limitation is not an explicit or implicit part of the statutory definition. In my view, the words added by his Honour significantly altered the statutory offence, to the detriment of the appellant. 80 It may be granted that the protection of fair trading in the Australian sharemarket is the primary focus of the legislative scheme (see Hooker Investments Pty Ltd at 163 (CA)). Non sequitur that the market is viewed as located solely in Australia or that parties protected are those who are "within Australia" or "in Australia". After all, a large proportion of investors in Australian corporations are non-Australians; and a considerable proportion of the shares listed on the ASX are shares of foreign corporations. Division 2A is not confined to protecting the interests of resident Australian investors or dealings in Australian shares (see s1002). 81 There is a further difficulty with the direction that ready observability is to be tested from the stance of a hypothetical person "within Australia". I have already touched upon it. The direction suggests or infers that the readiness of the perceptibility is also to be judged from the viewpoint of individuals located in Australia using their natural senses but without regard to modern methods of telecommunication. The unelaborated direction referring to "those in Australia" carries the seeds of miscarriage when it is recognised that television, the internet (including e-mail) and other means of telecommunication such as the phone and fax are part and parcel of how Australians generally and investors in particular readily perceive events. 82 A sudden crisis in the Middle East may have an immediate impact upon the value of Australian oil shares. That crisis may generate immediate coverage through a cable television provider such as CNN and/or it may be objectively of such a nature that one would expect people to jump on to the telephone, facsimile or e-mail to communicate price-sensitive information almost instantaneously. If the crisis occurs in the dead of the Australian night but during prime time in the United States of America the information is only not readily observable if one reads "in Australia" into the statute and then construes those words in a manner divorced from the realities of the modern world of global telecommunication. 83 The words "readily observable matter" raise a jury issue par excellence. In many contexts judicial gloss of the words would be inappropriate and potentially dangerous (see R v Holden [1974] 2 NSWLR 548 at 551, Hannes at [272]-[273]). Here the "within Australia" qualification (without explanation or elaboration) created a significant risk that the jury could proceed to conviction by inappropriate reasoning. The addition of the words "by those in Australia" certainly confined the inquiry too narrowly, to the significant disadvantage of the appellant. 84 The risk was exacerbated by the failure to alert the jury to the role of telecommunications in how Australian and other investors "readily" observe events. The latter task is a difficult one and I do not wish my remarks about them to be treated as a categorical exegesis of this obscure provision. Every summing-up is to be tested in its factual context. 85 It follows that the conviction must be set aside based upon misdirection. I have not overlooked the absence of protest at the time, although counsel had raised some of the issues in the context of the earlier application for a directed acquittal.

Is the verdict otherwise unreasonable having regard to the evidence? Should an acquittal have been directed? Should a new trial be directed? 86 These are separate questions, but they coalesce somewhat in the present case where the facts relevant to whether the Supreme Court's judgment was "readily observable matter" are not in doubt. 87 I have endeavoured to show why, in my opinion, a decision that a particular item of information is "readily observable matter" is a complex and nuanced one that takes into account the international ambit of Division 2A and the capacity for types of information to be relayed across the world instantaneously through modern means of telecommunications. 88 As indicated already, the issue is par excellence a jury question, especially bearing in mind the presence of "readily" in the statutory "definition". This said, there are some categories of information which by their nature and the circumstances of their revelation are inherently observable and readily so. Observability does not depend upon proof that a person or group of persons actually perceived the information. That is not to say that the depositing of information in an obscure portion of a public library would establish ready observability. The issue is a factual or jury one. But the point of present relevance is that the objective and hypothetical circumstances are to be looked at, not merely the actualities in the particular case. Ready observability cannot be located a priori in the Australian capital cities where the ASX has a physical presence. 89 In some cases the matter may be so clear that a court could determine that there was no evidence capable of grounding a conviction based upon proving the negative proposition that the information used by the insider was not "readily observable matter". In other situations, there would be evidence fit to go to the jury but the Crown case would be so weak that any conviction would be unreasonable in the sense expounded in Jones v The Queen (1997) 191 CLR 439. Thirdly, an appellate court considering whether to direct a new trial would have regard to the sufficiency of the evidence to bring about a verdict that would not be unreasonable. 90 It is on the third basis that I have decided that a new trial is inappropriate. 91 The fundamental principles of open justice proceed on the assumption that everything that happens in open court is capable of being observed and reported upon, thereby ensuring continuing accountability (see generally Spigelman, "Seen to De Done: The Principle of Open Justice" (2000) 74 ALJ 290, 378). The requirement that courts sit in public and render themselves accountable through delivery of reasoned judgments proceeds from an assumption that that which happens in open court is capable of reportage to the whole world because it is observable. A published judgment of the highest appellate court in a country is readily observable in every circumstance that I can conceive of. The Crown submitted that a judgment of the High Court of Australia would not necessarily constitute "readily observable matter". It would depend on the notoriety of the issues involved. (Transcript p20). I disagree. In its present form par (a) of s1002B(2) does not turn upon the readiness with which information may be disseminated or absorbed. 92 It would be fallacious to elide the accessibility of information concerning the justice system with actual accession to such information. Nevertheless, in practically every situation that I can conceive of a judgment published in open court by the highest appellate court is readily observable even if time will inevitably elapse before the profession generally learns about it and absorbs its effect. 93 Since writing the above, I have had the benefit of reading the judgment of Carruthers AJ. I readily agree that the application of my construction of s1002B(2)(a) produces a problematic outcome in the present case. Nevertheless, I believe that such outcome is the product of the concept of ready observability chosen by the legislature. In light of the way in which share trading occurs and the stocks capable of being traded on ASX I do not consider it open to me as a judge to imply the presence of words such as "in Australia", "by a person in Australia" or "by a member of the public in Australia". 94 The appeal should be upheld, the conviction quashed and an acquittal entered. 95 HIDDEN J: I agree with Mason P. 96 CARRUTHERS AJ: In this matter I have had the benefit of reading the judgment in draft form of Mason P, and noted the concurrence of Hidden J. Regrettably, I find myself unable to agree with their Honours' conclusions. As this is a minority judgment I will focus on to the crucial issue in the appeal, namely, whether the evidence was capable of establishing beyond reasonable doubt that the judgment of the Supreme Court of Papua New Guinea (which represented a successful outcome for Carpenter Pacific Resources NL) was not information generally available because, at the relevant time, it did not consist of readily observable matter within the meaning of s.1002B (2)(a) of the Corporations Law. 97 Section 1002B is in the following terms: - 1002B Information generally available. (1) This section has effect for the purposes of this Division and Section 1013.

(2) Information is generally available if: (a) it consists of readily observable matter ; or (b) without limiting the generality of paragraph (a), both the following subparagraphs apply: (i) it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of bodies corporate of a kind whose price or value might be affected by the information; and (ii) since it was so made known, a reasonable period for it to be disseminated among such persons has elapsed.

(3) Information is also generally available if it consists of deductions, conclusions or inferences made or drawn from either or both of the following: (a) information referred to in paragraph (2)(a); (b) information made known as mentioned in subparagraph (2)(b)(i). [The italics are mine] 98 Section 1002B was introduced into the Corporations Law by the Corporations Legislation Amendment Act 1991 (Cth). Paragraphs 306 and 307 of the Explanatory Memorandum to the Corporations Legislation Amendment Bill 1991, are in the following terms: - "Schedule 4 - Amendments to the Corporations Law: Insider Trading 306. Insider trading has become a matter of increasing concern within the securities industry and among the wider community over the last few years, contributing to the deterioration of public confidence in the securities markets more generally. 307. Some commentators have suggested that regulation of insider trading is not necessary, as insider trading enhances the efficiency of the securities market through the faster dissemination of information. The Government's policy view is, however, that it is necessary to control insider trading to protect investors and make it attractive for them to provide funds to the issuers of securities, for the greater and more efficient development of Australia's resources. The effects of insider trading on investor confidence are regarded as outweighing any efficiencies arising from the faster dissemination of information which some commentators allege would accrue if insider trading were decriminalised."

99 There can be no doubt that the insider trading provisions of the Corporations Law are designed to protect (amongst others) Australian investors by promoting equal access to information for investors. It must be noted in this context that there is now a remarkably high percentage of the Australian public who hold securities in bodies corporate. Shareholders in companies listed on the Australian Stock Exchange (ASX) cannot now be regarded as a small élite section of the Australian community. 100 The appellant was convicted on two counts under s 1002G of the Corporations Law. Subsections (1) and (2) of s 1002G are in the following terms: - 1002G Prohibited conduct by person in possession of inside information (1) Subject to this Division, where: (a) a person (in this section called the "insider" ) possesses information that is not generally available but, if the information were generally available, a reasonable person would expect it to have a material effect on the price or value of securities of a body corporate; and

(b) the person knows, or ought reasonably to know, that; (i) the information is not generally available; and (ii) if it were generally available, it might have a material effect on the price or value of those securities;

the following subsections apply (2) The insider must not (whether as principal or agent): (a) subscribe for, purchase or sell, or enter into an agreement to subscribe for, purchase or sell, any such securities; or (b) procure another person to subscribe for, purchase or sell, or to enter into an agreement to subscribe for, purchase or sell, any such securities.

101 Section 1002 of the Corporations Law must be read with s 1002G. Section 1002, which is set out below, defines the territorial application of the insider trading provisions:

Division 2A Insider Trading 1002 Application of Division This Division applies to: (a) acts and omissions within this jurisdiction in relation to securities of any body corporate, whether formed or carrying on business in this jurisdiction or in Australia or not; and

(b) acts and omissions outside this jurisdiction, whether in Australia or not, in relation to securities of a body corporate that is formed or carries on business in this jurisdiction. 102 Subsection (a) is of importance in the instant case because all the relevant acts and/or omissions said to constitute both offences occurred within Australia. For relevant purposes those acts and/or omissions may be briefly recorded. 103 In July 1995 there was litigation in the Supreme Court of Papua New Guinea awaiting judgment, involving a subsidiary of Carpenter Pacific Resources NL (Carpenter). If the judgment, when delivered, was favourable to Carpenter's subsidiary, the value of Carpenter's shares on the ASX would have reasonably been expected to rise. 104 It should be noted that before the judgment was handed down there was significant interest in Australia as well as Papua New Guinea in the court proceedings. Carpenter disclosed to the ASX the course of the litigation. There were relevant reports in the Sydney Morning Herald, the Financial Review, and Papua New Guinea newspapers. 105 At 9.30am on Friday 28 July 1995, judgment in favour of Carpenter's subsidiary was handed down in Port Moresby at 9.30am. Representatives of Carpenter and the media were in court when the judgment was handed down. The time zone between Port Moresby and Sydney was the same. 106 The successful result was telephoned at 9.40am from Port Moresby by Carpenter's local solicitor to Carpenter's Sydney solicitor, who was also one of its executive directors. He immediately phoned his fellow directors in Australia, including Mr Firns Senior, the appellant's father. That call was made at 10.08am. At about 10.15 am, Mr Firns Senior telephoned the appellant. 107 At about 10.27am the appellant telephoned a Brisbane sharebroker and arranged the purchase of 400 000 Carpenter shares. The appellant falsely identified himself as "Ken Higgins" and his wife as "Linda Higgins", which was her maiden name. The shares were purchased in the name of Linda Higgins, and such purchase was effected at 10.27am. This conduct constituted count 1 in the indictment. 108 At about the same time, the appellant also procured the purchase of 338,000 Carpenter shares in the name of a friend, Peter Coombs. This conduct constituted count 2 in the indictment. 109 Later that day Carpenters' directors settled the form of the notification to the ASX which informed the Stock Exchange, and investors generally, of Carpenter's success in the PNG Supreme Court. It was not however until about 1.30pm on the following Monday that such notification was forwarded to the ASX. Both the above parcels of shares were sold in mid-August 1995 by which time the shares had tripled in value. 110 As stated above, the critical aspect of this appeal is the appellant's contention that the evidence was incapable of establishing beyond reasonable doubt that, at the time the relevant shares were purchased, the information which the appellant received about the success of the litigation constituted readily observable matter within the meaning of paragraph 2(a) of s 1002B. 111 In Regina v Hannes [2000] NSWCCA 503 at para 264 Spigelman CJ (with whom Studdert and Dowd JJ agreed) said that the plain English words readily observable matter required no elaboration on the part of the trial Judge when summing up to the jury in that particular case. These are indeed plain English words, but they are capable of being the subject of much debate as the present case demonstrates. In Hannes there was no dispute that the relevant matter need only be readily observable by the public at large: see para 261. 112 In my view, the words readily observable matter cannot be allowed to operate in a vacuum. In most cases the question must be asked: to what class of persons must the information consist of "readily observable matter"? This was referred to in the course of argument as the "to whom class", or to put it another way: what is the relevant group conducting the observations? See Hannes at para 262. 113 Mr Game SC for the Crown on this appeal submitted (correctly in my view) that the matter must be readily observable by the public at large as it is that group of persons who are capable of trading on the share market in Australia, or in shares of corporations which are formed or carry on business in Australia. The public at large in that sense must, at least, include the Australian public, as the provisions contained in the Corporations Law are clearly designed principally to protect Australian investors by promoting equal access to information for investors. For information to be generally available on the basis that it consists of readily observable matter, it must, at least, be readily observable by members of the Australian public. 114 Paragraph 328 of the Explanatory Memorandum identifies readily observable matter as "facts directly observable in the public arena". The Crown submits (again, correctly in my view) here that the "public arena" must, at least, include the Australian public arena. To suggest otherwise would make a nonsense of the provision and render nugatory the protection sought to be offered by the provision to the Australian investing public. 115 In the instant case the trial Judge concluded that the class of persons to whom the information must be readily observable consisted of "someone who was in Australia". 116 The relevant section of the summing up is in the following terms: - "In summary then this paragraph (a) means that the Crown has to establish beyond a reasonable doubt that the material or the information was not easily noticed or perceived by any of our senses by someone who was within Australia. In the context of this case that means that the information about the outcome of the appeal in the Supreme Court of Papua New Guinea was not easily noticeable or not easily perceived by those in Australia."

117 The appellant contends that a decision of the Supreme Court of Papua New Guinea delivered in open court in Port Moresby, immediately constituted information capable of being readily observable matter. It was submitted that in light of the relevant authorities such as Bermingham v Corrective Services Commissioner (1998) 15 NSWLR 292 at 302, it was impermissible for the trial Judge effectively to insert into the relevant legislation words descriptive of a class of persons to whom the information was, or was not, readily observable. 118 I am unable to accept this view. When one reads section 1002B as a whole, the conclusion which I reach is that the Legislature clearly intended that the "to whom class" in para (a) was to be determined in the light of the circumstances of each particular case. 119 I cannot accept, as the appellant contends, that the Legislature has inadvertently overlooked that information may be readily observable but not readily observable in Australia. Such a construction would defeat the purposes of the Act. There could be no rational possibility of an oversight on the part of the Legislature in this regard. 120 In support of the appellant's argument, reliance was (as one would expect) placed upon the facility and speed with which commercial information can be transmitted throughout the world, even from relatively remote areas; one of the most effective means of communication now being, of course, the World Wide Web. One might add, parenthetically, that there was no evidence that the PNG Supreme Court judgment was at any stage posted on the World Wide Web. 121 The appellant's argument, in my view, also overlooks the precise terms of the phrase readily observable material. The use of the adverb readily is of significance. Readily is defined in the Oxford English Dictionary (2nd Edition) relevantly, as "Promptly, in respect of the time of action; quickly, without delay; also, without difficulty, with ease or facility." 122 The phrase is not readily available material. There is, to my mind, a distinction between material being readily observable and readily available. Material may be available but not observable. The Legislature intended, in my view, to emphasise by the phrase readily observable matter that members of the public should not be required meticulously to search for information likely to have an effect on the price or value of securities of a body corporate. Of course, in every case questions of fact and degree arise as to whether information qualifies as readily observable matter. Such questions are appropriately to be resolved by the jury. 123 In most cases one would expect a reasonable period to elapse between the time information comes into existence and when it qualifies as readily observable matter. Again, the relevant time lapse is a matter for resolution by the jury.

124 For the sake of good order, I should make it clear that I cannot, with respect, accept the correctness of the ruling given by his Honour Judge O'Reilley QC in Regina v James Byron Kruse on 2 December 1999. In my view that case does not assist the appellant. 125 The major ground of appeal here is that the trial Judge erred in refusing to direct verdicts of acquittal. For the reasons set out above I would reject that ground. 126 The issue whether the Crown had negatived beyond reasonable doubt that the successful outcome of the PNG Supreme Court litigation for Carpenter was readily observable material at the time the relevant shares were purchased was properly left to the jury for their consideration. In my view the direction which his Honour gave to the jury, as quoted above, was correct. In the light of the evidence, the jury's finding in favour of the Crown on that issue was open, if not predictable. 127 There is, in my view, no substance in the remaining grounds of appeal. I would dismiss the appeal against conviction.

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