Reynolds & Co v Australian Stock Exchange & Anor

CATCHWORDS : ADMINISTRATIVE LAW - particular tribunals or bodies - National Adjudicatory Tribunal of Australian Stock Exchange Limited - jurisdiction to hear charges relating to conduct occurring prior to 13 October 1998 - jurisdiction to hear charges relating to conduct occurring prior to 25 October 1993 - ASSOCIATIONS AND CLUBS - disciplinary tribunals - construction of transitional provisions in relation to jurisdiction of tribunal - whether duplicity is a ground for invalidity of a charge - requirements of fair procedure - PROFESSIONS AND TRADES - stockbrokers - disciplinary proceedings - when bringing of charges is an abuse of process - requirements of fair procedure - WORDS AND PHRASES - "things and circumstances created by or under the Articles of Association" - extends to alleged breach of Articles concerning which no disciplinary action was taken before repeal of Articles - extends to Rules made under authority of Articles of Association before those Articles were repealed Crimes (Sentencing Procedure) Act 1999 Companies Act 1958 Companies Act 1961 LEGISLATION CITED : Corporations Act 2001 (Cth) Corporations Law Interpretation Act 1901 (Cth) Interpretation Act 1987 (NSW) Limitation Act 1969 Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 Attorney General (NSW) v Quin (1990) 170 CLR 1 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Burger King Corp v Hungry Jacks Pty Ltd [2001] NSWSC 187 Burns v TAFE Commission of NSW (Spender AJ, Supreme Court of New South Wales, 15 November 1994, unreported) Byrne v Garrisson [1965] VR 523 Chapmans Ltd v Australian Stock Exchange Limited (1995) 17 ACSR 524 Codelfa Construction Pty Limited v State Rail Authority of News South Wales (1982) 149 CLR 337 Cooke v Purcell (1988) 14 NSWLR 51 Cox v Caloundra Golf Club Inc (Thomas J, Supreme Court of Queensland, 27 September, 1995 unreported) Duncan v Medical Practitioners Disciplinary Committee [1986] 1 NZLR 513 Electricity Meter Manufacturing Co Ltd v Manufacturers Producers Pty Ltd (1930) 30 SR (NSW) 422 Etherton v Public Service Board [1983] 3 NSWLR 297 Gee v General Medical Council [1987] 1 WLR 564 Herron v McGregor (1986) 6 NSWLR 246 Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church (1993) 31 NSWLR 91 Hudson Securities Proprietary Limited v Australian Stock Exchange Limited (2000) 35 ACSR 55; [2000] NSW SC 203 Hume v Higgins (1949) 78 CLR 116 CASES CITED : Jacobsen v Nurses Tribunal (Dunford J, Supreme Court of NSW, 3 October 1997, unreported) Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 Maxwell v Murphy (1957) 96 CLR 261 McClelland v Burning Palms Surf Life Saving Club [2002] NSWSC 470 McKinlay v Dodds (1984) 3 BPR 9259 McLachlan v Australian Stock Exchange Ltd (1998) 30 ACSR 139 McLachlan v Australian Stock Exchange Ltd (1999) 32 ACSR 524 Mitchell v Royal New South Wales Canine Council Limited (2001) 52 NSW 242 Minister for Immigration v Kurtovic (1990) 21 FCR 193 Overlook v Foxtel [2002] NSWSC 17 Peatfield v General Medical Council [1986] 1 WLR 243 Peters (WA) Limited v Petersville Limited (2001) 75 ALJR 1385 Polley, Ex parte; Re McLennan (1947) 47 SR (NSW) 391 Public Service Board of New South Wales v Etherton (1985) 1 NSWLR 430 R v Scarlett; ex parte McMillan (1972) 20 FLR 349 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 Reza v General Medical Council [1991] 2 AC 182 Rose and Burgess v Commissioner of Stamps (SA) (1979) 21 SASR 84 S v The Queen (1989) 168 CLR 266 Walton v Gardiner (1993) 177 CLR 378 Reynolds & Company Pty Limited (Plaintiff) PARTIES : Australian Stock Exchange Limited (First Defendant) The Chairperson of National Adjudicatory Tribunal of the Australian Stock Exchange Limited (Second Defendant) FILE NUMBER(S) : SC 5436/02 COUNSEL : R McKeand (Plaintiff) J Griffiths SC (Defendants) SOLICITORS : Holman Webb (Plaintiff) Allens Arthur Robinson (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

5436/02 REYNOLDS & CO PTY LIMITED v AUSTRALIAN STOCK EXCHANGE LIMITED AND ANOR JUDGMENT

HIS HONOUR : Nature of the Dispute 1 The plaintiff ("Reynolds") is a stockbroker. The defendant ("ASX") has laid four charges against Reynolds. Broadly, those charges arise from some alleged misconduct of a former employee of Reynolds, which ASX asserts Reynolds is vicariously liable for, various allegedly inadequate enforcement and compliance systems which Reynolds had, and repeated alleged breaches of two different Business Rules of ASX. The first charge is a charge of "prohibited conduct", which relates to a wide range of conduct, over a long period of time. The other three charges, which are alternative charges to the first, relate to certain specific aspects of the conduct covered by the "prohibited conduct" charge. Those charges are due to be heard by the National Adjudicatory Tribunal ("NAT"). 2 Reynolds asserts that NAT does not have jurisdiction to hear allegations which make up some parts of the charges, and seeks a declaration to that effect. Reynolds also seeks some declarations concerning its rights against ASX, and injunctions restraining ASX from prosecuting, and the Chairman of NAT from convening NAT to hear, the charges. 3 The first basis for such injunctions is that it is alleged that the bringing of the charges is a breach of an obligation which ASX owes to Reynolds to act fairly, reasonably and without injustice. The second is that, by reason of the lapse of time since some of the events which are particularised in the charges, loss of documents, unavailability of witness, and other matters, it is alleged that the bringing of the charges is an abuse of process, and so should be stayed. The third basis is that, in relation to some of the matters particularised, Reynolds alleges that ASX knew of certain alleged breaches of rules which it had engaged in, and represented that no action would be taken concerning those breaches, and in consequence ASX is estopped from now laying charges based on those breaches. Background to the Charges 4 Reynolds is a member of ASX, and a Participating Organisation within the meaning of the ASX Business Rules. Since 1989 Mr Julian Reynolds and Mr Arthur John Reynolds (known as John Reynolds) have been directors of Reynolds. From 1989 to 1994 these two men were the only directors. Currently there are four directors. 5 Mr Peter Struk was a securities representative employed at Reynolds from 30 July 1990 to 11 July 2001. On 9 July 2001 Messrs Julian and John Reynolds were informed by another broker that there appeared to be a number of irregular practices in Mr Struk's dealings with a particular client. That same day Mr Struk disappeared, and was missing for about a fortnight. Both ASX, and Reynolds, investigated Mr Struk's dealings. ASX's investigation culminated in a Final Inspection/Investigation Report dated 22 September 2002. The Report concluded that Mr Struk had engaged in misconduct in various ways, resulting in client losses which were estimated at $1,080,000. The types of misconduct which the Report concluded had occurred included trading without instructions from the client or contrary to client instructions, misappropriation of client funds, failure to dispatch contract notes and cash management account statements, incorrect order records, and changing the address on certain client accounts (so that documentation which would have disclosed the unauthorised activities of Mr Struk did not come to the attention of the client). The Report concluded that Reynolds ought to have been put on inquiry regarding the possibility that Mr Struk was engaging in misconduct, in these ways. It concluded that Reynolds' supervision and compliance systems contained certain inadequacies which enabled Mr Struk to engage in that misconduct. The report concluded that Reynolds had breached some trust account rules, and rules concerning extension of credit to employees. The report also examined the type of control which Reynolds exercised over certain representatives who operated from sites away from the Reynolds' main office. Concerning those matters, the report concluded that there may have been some breaches of ASX Business Rules, but that ASX should not pursue disciplinary action concerning them. The Charges 6 The charges were notified to Reynolds on 24 September 2002. Omitting particulars, they are as follows: " Charge 1 Prohibited Conduct: (1) pursuant to Article 52 of the ASX Articles of Association in that during the period from on or about 30 July 1990 to 26 October 1993 Reynolds engaged in conduct which was not efficient, honest or fair or was otherwise conduct prejudicial to the interests of ASX or its members; and (2) pursuant to Article 52 of the ASX Articles of Association in the period from 26 October 1993 to on or about 12 October 1998 and pursuant to ASX Business Rule 13.5.1 and as defined in the Business Rules, in the period from 12 October 1998 to 3 August 2001, in that Reynolds engaged in conduct which amounted to unsatisfactory professional conduct, where the conduct was such that it involved a substantial or consistent failure to reach reasonable standards of competence and diligence and/or conduct which was or could reasonably be considered as likely to be prejudicial to the interests of the Exchange or its Members or, its Participating Organisations or Affiliates with respect to the following matters. (i) misconduct on the part of Mr Peter Struk, a securities representative of Reynolds; (ii) a failure to put in place and enforce adequate supervision and compliance systems with respect to the activities of Mr Struk; (iii) a failure to adequately inquire into and investigate the conduct of Mr Struk in circumstances where there were factors that ought to have put Reynolds on inquiry regarding Mr Struk's activities; (iv) the withdrawal by Reynolds of client funds from Reynolds' trust account in circumstances where the funds were not paid to the person entitled thereto or in accordance with the written directions of that person as required by ASX Business Rule 1.2.2.(4); and (v) a failure by Reynolds to ensure it received the funds for the purchase of or subscription for securities on behalf of an employee of Reynolds and the immediate family or family company of an employee and/or director of Reynolds at a time on or before Reynolds was required to settle the transaction as required by ASX Business Rule 5.11.

Charge 2 A breach of ASX Business Rule 1.2.2(4) in the period from 3 September 1990 to 3 August 2001 in relation to withdrawals made by Reynolds from its trust account to make deposits in cash management accounts operated on behalf of its clients in circumstances where those withdrawals were not authorised in writing by the client. Charge 3 A breach of ASX Business Rule 1.2.2(4) in the period from 29 April 1996 to on or about 4 July 2001 with respect to withdrawals from Reynolds' trust account of 5 payments that had been deposited in the trust account for the credit of the wrong client. Charge 4 A breach of ASX Business Rule 5.12A with respect 4 trades and 4 subscriptions for securities in the period from 3 October 1995 to 10 June 1998 and of Rule 5.11 with respect to 4 trades and 1 subscription for securities in the period from 23 February 1999 to 4 July 2001 in that Reynolds did not ensure that it received the funds for the purchase of or subscription for any securities on behalf of an employee of Reynolds or the immediate family or family company of an employee and/or director of Reynolds at a time on or before Reynolds was required to settle the transactions. The matters, which are the subject of the above charges, are also set out in Final Inspection/Investigation Report 2001083 & 2002023." 7 The Notice of Charge contains in excess of 10 pages of particulars of Charge 1. The particulars of Charges 2, 3 and 4 each refer to certain individual paragraphs of the particulars already given of Charge 1. The Court's Jurisdiction 8 Reynolds submits that the jurisdiction of the Court to grant the relief it seeks has two bases. One is the jurisdiction of the Court to intervene in the affairs of statutory and voluntary tribunals in certain circumstances (eg Mitchell v Royal New South Wales Canine Council Limited (2001) 52 NSW 242). The other is that section 793B of the Corporations Act 2001 (Cth) provides that the Business Rules of the ASX have effect as a contract under seal between the ASX and the members, that in bringing the charges against Reynolds, ASX is acting in breach of that contract, and that an injunction should be granted to restrain that breach. 9 ASX does not contest that the Court has jurisdiction to make the orders and declarations sought, only the appropriateness of the making of those orders and declarations. The second defendant, the National Adjudicatory Tribunal, does not seek to put any submissions to the Court. In those circumstances there is no occasion to give further consideration to the basis of the court's jurisdiction. The Argument that NAT Lacks Jurisdiction 10 The relief which Reynolds seeks, on the ground that NAT lacks jurisdiction, is as follows: "Declaration that the National Adjudicatory Tribunal of the First Defendant ("National Adjudicatory Tribunal") has no jurisdiction or authority under the Constitution or the Business Rules of the First Defendant to hear and determine the charges contained in the First Defendant's Notice of Charges dated 24 September 2002 served on the Plaintiff: (a) Insofar as they allege conduct by act or omission of the Plaintiff or Mr Peter Struk that occurred prior to 13 October 1998; (b) Insofar as they allege conduct by act or omission of the Plaintiff or Mr Peter Struk that was contrary to any Articles or Business Rules of the First Defendant that were not in operation immediately prior to 13 October 1998; (c) Insofar as they charge the Plaintiff with either prohibited conduct contrary to article 52 of the articles of association of the First Defendant, committed prior to the deletion of article 52(3), or breaches of the articles or Business Rules contrary to article 51, committed prior to the deletion of article 51(5) (25 October 1993 in each case). The Position in 1990 11 Because Charge 1 deals with a period of time commencing on or about 30 July 1990, the jurisdiction argument of Reynolds requires certain aspects of ASX's Constitution and disciplinary powers and procedures to be looked at from that date. In 1990 ASX was a company limited by guarantee. Reynolds was a Member Organisation of ASX. The Articles of Association of ASX contained the following provisions. The headings to Articles set out below are not part of the Articles, but insertions I have made. " [Board's powers of delegation] 6(1) The Board may delegate any of its powers to:- (a) any Member, director or employee of the Exchange or one of its subsidiaries, or (b) a committee … consisting of such Members, partners of Members, directors of the Exchange or a State Subsidiary or of a Member Corporation or employees of the Exchange or a subsidiary of the Exchange, as it thinks fit, and may authorise the delegate to subdelegate all or any of the powers so delegated. Without limiting the generality of the foregoing, the Board may delegate to a committee of directors of a State Subsidiary its powers under Articles … 51, 52 … Where a committee of directors of a State Subsidiary exercises the powers of the Board - (i) in respect of articles 51, 52 … a majority of the directors of the Committee or such greater number as the Board may stipulate who are present, shall concur in a decision, and (ii) in any other case, a majority of the directors of the Committee who are present shall be required to concur for a decision to be made. (6) Notwithstanding any provision to the contrary in these Articles, questions arising at a meeting of a Committee shall be determined in accordance with any directions given under subarticle (2), and if no directions are given, by a majority of votes of the Committee members present and voting. [Disciplinary procedure for breaches of Articles or Rules] 51(1) If the Board considers that a … Member Organisation should be charged with a breach of any of the Articles or Rules, it shall give the … Member Organisation concerned written notice of the particulars of the charge and of the date (being not less than 7 days after the date when such notice is served) when such charge is to be heard … (2) If any … employee … of a … Member Organisation does any act or refrains from doing any act which if done or not done (as the case may be) by a … Member Organisation would constitute a breach of the Articles or Rules, such act or omission shall be deemed, for the purposes of this article to be the act or omission of the … Member Organisation concerned and punishable hereunder accordingly. (3) If any … Member Organisation is found guilty by the Board of a breach of any of the Articles or Rules, the Board may - (a) censure the … Member Organisation; or (b) impose a fine not exceeding $25,000 … upon … the Member Organisation; and/or (c) suspend the … Member Organisation from all or any of privileges of membership of the Exchange and/or prohibit the … Member Organisation from transacting any business with or through any Member Organisation for a period not exceeding 3 months upon such terms and conditions as the Board thinks fit. (5) No … Member Organisation shall be found guilty unless at least 9 directors concur in such decision. (7) Without derogating from the provisions of Article 51(1) to (6) above, the Board may proceed against Members or Member Organisations for breaches of the Articles and Rules in accordance with Rule 1.4.2(5A). (8) The Board shall conduct any hearing in accordance with this Article without bias, and shall give the … Member Organisation a fair hearing and otherwise shall observe the Rules of natural justice. [Disciplinary procedure for Prohibited Conduct] 52(1) If the Board considers a … Member Organisation should be charged with conduct (herein called "prohibited conduct") which is not efficient, honest or fair or is otherwise conduct prejudicial to the Exchange or its Members (whether such prohibited conduct constitutes or involves a breach of any of the Articles or Rules or not) it shall give the … Member Organisation concerned written notice of the particulars of the charge and of the date (being not less than 7 days after the date when such notice is served) when such charge is to be heard … (2) If any Member or Member Organisation is found guilty by the Board of prohibited conduct, the Board may:- (a) censure the … Member Organisation; or (b) impose a fine not exceeding $25,000 upon … such Member Organisation; and/or (c) suspend the … Member Organisation from all or any of privileges of membership of the Exchange … or … (d) expel … a Member who is a partner in the Member Organisation, or a Member who is an officer, employee or consultant of the Member Organisation, from membership of the Exchange. (3) No … Member Organisation shall be found guilty by the Board of prohibited conduct unless at least 9 directors concur in such decision. (5) The Board shall conduct any hearing in accordance with this Article without bias, and shall give the … Member Organisation a fair hearing and otherwise observe the Rules of natural justice. [Right of Appeal] 54. A Member or Member Organisation found guilty under Articles 51 or 52 and censured, fined, suspended, prohibited from transacting business or expelled or a Member who ceased to be a member under Articles 38(4), 38(5) or 45 may appeal: (a) where the decision was made by a delegate of the Board - to the Board; (b) where the decision was made by the Board - to an Appeal Committee" 12 So the reader can understand the scope of that right of appeal, Article 38(4) empowers the Board to give notice to a Member that he she or it ceases to be a Member, if satisfied that there has been a wilful omission or misstatement upon a material point prior to the admission of that Member. Article 38(5) empowers the Board to give notice to a Member Corporation that it no longer complies with the requirement for membership, if so satisfied. Article 45 provides: "The Board may request any Member who it has reason to think is no longer devoting the substantial part of the working week to the business of a Member Organisation as a partner, officer, employee or consultant, or does not hold any necessary licence pursuant to the Securities Industry Act 1980 or any corresponding legislation of a State or Territory or Australia, to show cause by appearing before the Board or otherwise why he should not cease to be a Member. If, after considering the representations of the Member, the Board resolves (not less than 9 directors concurring) that the Member is in the opinion of the Board no longer devoting the substantial part of the working week to the business of a Member Organisation as a partner, officer, employee or consultant, or does not hold any necessary licence under the Securities Industry Act 1980 or any corresponding legislation of a State or Territory of Australia, and should therefore cease to be a Member, such Member shall, subject to Article 54, cease to be a Member from the time specified in the resolution." Amendments 30 July 1991 13 Effective from 30 July 1991 the Articles of Association of ASX were amended. Relevantly for present purposes, a new definition was inserted in Article 1: "'Committee' includes any committee (other than an Appeal Committee) or Board of Advice the members of which comprise such: (a) Members (other than Member Corporations); (b) partners, directors and employees of Member Organisations, Member Corporations or subsidiaries of Member Corporations; and (c) directors or employees of the Exchange or its subsidiaries, as the Board may appoint from time to time. …" 14 The previous Article 6(1) was omitted, and replaced with an Article as follows: "6(1) The Board may delegate any of its powers to: (a) any number of Members, directors or employees of the Exchange or its subsidiaries; or (b) a Committee or Committees, as it thinks fit, and may authorise such delegates to sub-delegate all or any of the powers so delegated. Without limiting the generality of the foregoing, the Board may delegate to a Committee some or all of its powers under Articles … 51, 52, … and (as the Board may determine from time to time) some or all of its powers in relation to any other Article. If the Board has delegated some of its powers to a State Subsidiary and the State Subsidiary so requests, the Board shall revoke the delegation and delegate those powers to a Board of Advice. Where a Committee exercises the powers delegated to it by the Board: (i) in respect of Articles 51, 52, … (notwithstanding the provisions of those Articles) a majority of members of the Committee, or such greater number as the Board may stipulate who are present, shall concur in any decision made or opinion formed, and (ii) in any other case, a majority of the members of the Committee who are present shall concur in any decision made or opinion formed." 15 Article 6(6) was amended so that each reference to "committee" became a reference to "Committee". Articles 51 and 52 were not amended. Amendments 25 October 1993 16 On 25 October 1993 further amendments were made to the Articles of Association of ASX. A new Article 6 was included, as follows: "6(1) The Board may from time to time and upon any terms and conditions and subject to any restrictions that it considers appropriate: (a) confer on the Managing Director any of the powers of the Board (which powers may be conferred so as to be concurrent with, or to the exclusion of the powers of the Board); and (b) withdraw or alter any of the powers conferred on the Managing Director under Article 6(1)(a). (2) A power of the Board unless it has been conferred exclusively under Article 6(1) or delegated exclusively under Article 6(3), is exercisable only: (a) by resolution at a meeting of the Board at which a quorum is present; or (b) by a resolution of the directors under Article 17. (3) The Board may delegate any of its powers to: (a) any number of Members, directors or employees of the Exchange or its subsidiaries; (b) a Committee, and may authorise such delegates to sub-delegate all or any of the powers so delegated. Without limitation, the Board may delegate to a Committee some or all of its powers under Article … 51, 52 … (4) Where a Committee exercises the powers delegated to it by the Board any decision made or opinion formed by the Committee shall require the concurrence of a simple majority of members of the Committee or such greater number as the Board may stipulate. The Chairman of the Committee shall have a casting vote in addition to his deliberative vote. (5) A delegate to which any powers have been delegated under Article 6(3) shall exercise the powers so delegated to it in accordance with any directions of the Board and a power so delegated when exercised by the delegate in accordance with this Article 6(5) shall be deemed to have been exercised by the Board." 17 A new definition was included in Article 1: ""Prohibited Conduct" includes: (a) conduct which amounts to impropriety affecting professional character and which is indicative of a failure either to understand or to practice the precepts of honesty or fair dealing in relation to clients or the public; (b) unsatisfactory professional conduct, where the conduct is such that it involves a substantial or consistent failure to reach reasonable standards of competence and diligence; (c) conduct which is or could reasonably be considered as likely to be prejudicial to the interests of the Exchange or its Members, and need not involve a breach of any of the Articles or the Rules or a contravention of any law." 18 Article 51 was amended in some respects only. There was a new Article 51(3) whereby "If any … Member Organisation is determined by the Board to have, by act or omission, contravened any of the Articles or Rules, the Board may: (a) censure the … Member Organisation; or (b) impose a fine not exceeding $100,000 upon the … Member Organisation; and/or (c) suspend the … Member Organisation from all or any of the privileges of membership of the Exchange; and/or (d) prohibit the … Member Organisation from transacting any business with or through any Member Organisation for a period not exceeding 3 months upon such terms and conditions as the Board thinks fit; and/or (e) require that the … Member Organisation institute in a form directed by the Board or upgrade to the satisfaction of the Board, an eduction and compliance programme designed to prevent future contraventions of the Articles or Rules by the … Member Organisation and the partners, officers, employees and representatives of the … Member Organisation; and/or (f) require the … Member Organisation to pay the total commission or gross profit or part thereof arising from the transaction concerned to the Exchange and the Board may deal with such amount in such manner as it thinks fit."

The previous Article 51(5) (the provision requiring at least 9 Directors to concur in a finding of guilt of a contravention of the Articles or Rules) was deleted. 19 A new Article 52 was included, as follows: "(1) If the Board considers a … Member Organisation should be charged with Prohibited Conduct it shall give the … Member Organisation concerned written notice of the particulars of the charge and of the date (being not less than 7 days after the date when such notice is served) when such charge is to be heard. … (2) If any … Member Organisation is determined by the Board to have engaged, whether by act or omission, in Prohibited Conduct, the Board may: (a) censure the … Member Organisation; or (b) impose a find not exceeding $100,000 upon the … Member Organisation; and/or (c) suspend the … Member Organisation from all or any of the privileges of membership of the Exchange; and/or (d) prohibit the … Member Organisation from transacting any business with or through any Member Organisation for a period not exceeding 3 months upon such terms and conditions as the Board thinks fit; and/or (e) require that the … Member Organisation institute in a form directed by the Board or upgrade to the satisfaction of the Board, an education and compliance programme designed to prevent future Prohibited Conduct by the … Member Organisation and the partners, officers, employees and representatives of the … Member Organisation; and/or (f) require the … Member Organisation to pay the total commission or gross profit or part thereof arising from the transaction concerned to the Exchange and the Board may deal with such amount in such manner as it thinks fit; and/or (g) expel … a Member who is a partner in the Member Organisation, or a Member who is an officer, employee or securities representative of the Member Organisation, from membership of the Exchange." 20 Article 52(3), which previously had required nine directors to concur in a decision to find a Member Organisation guilty of Prohibited Conduct, was deleted. 21 A new Article 55A was included. "(1) The following provisions shall govern the establishment and operation of the National Adjudicatory Tribunal: (a) The Board shall establish a National Adjudicatory Tribunal for the purposes of hearing and adjudicating upon and determining penalties in relation to a notice to show cause pursuant to Article 45 or any charge made against Members or Member Organisations pursuant to Article 51 or 52. (b) The Board shall appoint to the National Adjudicatory Tribunal a natural person Member as chairperson and a natural person Member as deputy chairperson and shall determine the period for which they are to hold those offices. (c) The National Adjudicatory Tribunal shall, when it is meeting, comprise either: (i) the chairperson or, in that person's absence, the deputy chairperson appointed pursuant to Article 55A(1)(b) who shall act as chairperson of the proceedings and 2 persons selected by the chairperson from the Tribunal Panel; or (ii) where neither the chairperson nor deputy chairperson appointed pursuant to Article 55A(1)(b) are willing or able to act in connection with a particular proceedings, 3 persons selected by the chairperson from the Tribunal Panel, one of whom has been nominated by the chairperson to act as the chairperson for the purposes of the particular proceeding. (2) The chairperson of the proceeding shall appoint a date, time and place for the hearing and cause reasonable notice to be given to each of the Exchange and the Member or Member Organisation of the same. The National Adjudicatory Tribunal may vacate a hearing date for which notice has previously been given and appoint a substitute hearing date provided reasonable notice of the latter date is given to the parties and may adjourn and re-convene its proceedings as it thinks fit. (3) Proceedings of the National Adjudicatory Tribunal shall take place in private except that the National Adjudicatory Tribunal shall permit 2 representatives of each of the Exchange and the Member or Member Organisation concerned, and may permit more than 2 representatives of the Exchange or such Member or Member Organisation, to be present and make submissions. A representative may, in relation to a natural person Member, be that Member and in all cases may be an officer or employee of the party represented or any other person approved by the National Adjudicatory Tribunal or a barrister or solicitor of a State or Territory of Australia or of the High Court of Australia. (4) If a Member or Member Organisation or the Exchange does not wish to appear in person or be represented at proceedings before the National Adjudicatory Tribunal that Member of Member Organisation or the Exchange may, not less than 5 days before the hearing date determined pursuant to Article 55A(2), lodge with the National Adjudicatory Tribunal a written submission for consideration by the National Adjudicatory Tribunal in relation to the hearing. (5) National Adjudicatory Tribunal proceedings shall be conducted with as little formality and technicality, and with as much expedition, as a proper consideration of the matters before it permit. Subject to this Article 55A, the National Adjudicatory Tribunal may conduct its proceedings as it thinks fit and may make a transcript of proceedings at a hearing, a copy of which shall be available to the Exchange, the relevant Member or Member Organisation the subject of the proceedings and where a natural person Member is the subject of the proceedings, to the Member Organisation with whom that Member was connected at the time of the action which gave rise to the notice to show cause or the charge. (6) The National Adjudicatory Tribunal shall determine the matter without bias and shall give both the Exchange and the Member of Member Organisation a fair hearing and shall otherwise observe the rules of natural justice. The National Adjudicatory Tribunal may obtain such legal advice as it thinks appropriate in the circumstances and may have its legal advisors present at a hearing. (7) Each member of the National Adjudicatory Tribunal shall have and shall exercise a deliberative vote including the chairperson. The chairperson shall not have a casting vote. (8) The National Adjudicatory Tribunal shall, within 30 days of making its decision give to the Exchange and the Member or Member Organisation affected thereby, the reasons in writing for its decision." Amendments 13 October 1998 22 Act number 199 of 1997 (Cth) introduced into the Corporations Law sections 766A to 766D. Those sections empowered ASX to change the type of corporation it was, from being a company limited by guarantee to being a public company limited by shares. The objective was to enable ASX to undergo a demutualisation process, so that members could be issued with shares, and also, eventually, for ASX to become listed on the Stock Exchange. Section 766D provided: "(1) The change of type does not: (a) create a new legal entity; or (b) affect the Exchange's existing property, rights or obligations (except as provided by subsection (2)); or (c) render defective any legal proceedings. (2) On the change of type, the following things happen: (a) the liability of each member and past member as a guarantor on the winding up of the Exchange is extinguished; (b) the members cease to be members of the Exchange; (c) shares are taken to be issued equally among all persons who satisfy the criteria set out in Articles 83 and 84 of the Exchange that were added by the 18 October 1996 special resolutions dealing with the change of type, and each of those persons becomes a member of the Exchange and is taken to have consented to be a member of the Exchange; Note: The Exchange must maintain a register of members that complies with subsection 169(3). (d) the proposed amendments of the constitution, business rules and listing rules of the Exchange take effect." 23 Pursuant to section 766C Corporations Law, notice was given in the Gazette, on 5 October 1998, that on 13 October 1998 ASX would change type from a company limited by a guarantee to a company limited by shares. That change of type accordingly took effect on 13 October 1998. On 13 October 1998, as contemplated by section 766D(2)(d) Corporations Law, amendments to ASX's Articles of Association took effect. Those amendments consisted of the complete replacement of the Memorandum and Articles of ASX by a new constitution. The new constitution had no definition of "Prohibited Conduct". It had a definition whereby; ""Transition Time" means the beginning of the day of 13 October 1998." 24 There were provisions that: "1.3 Unless a contrary intention appears, expressions used in this Constitution which are defined in the Corporations Law have the same meanings as in the Corporations Law . 1.4 This Constitution is to be interpreted subject to the Corporations Law " 25 The new constitution had no provision analogous to Article 51 or 52 of the previous Articles of Association, whereby a stockbroker or stockbroking entity could be disciplined. Nor did it contain any provision analogous to the previous Article 55A, establishing the NAT and laying down its procedures. The constitution contained, however, provision for ASX to make two different types of rules, Listing Rules and Operating Rules. The Constitution said: "Operating Rules means rules concerning the operation of Financial Markets operated by the Company and includes any procedures relating to those rules required by the Corporations Law." 26 Both before and after 13 October 1998 ASX had rules of this type, which it called Business Rules. Extensive amendments were made to those Business Rules effective on 13 October 1998 to take account of its new Constitution and status. As part of those amendments, the topic of disciplining stockbrokers and stockbroking entities came to be dealt with by ASX's Business Rules. 27 Clause 13.1 of the Constitution, as originally adopted, provided: "the Company must make and promulgate Business Rules concerning: (a) the maintenance and operation of markets and facilities operated by the Company; (b) the admission, recognition, rights and obligations of corporations and partnerships as participating organisations of the Company; (c) participating organisations' access to and use of markets and facilities operated by the Company; (d) the recognition, rights and obligations of other persons as affiliates of the Company; (e) consequences of breach of any such rules by a participating organisation or affiliate, including suspension and exclusion from the status of participating organisation or affiliate; and (f) such ancillary and incidental matters as the Directors think fit." 28 The Constitution contained a transitional provision, as follows: "25.1 This constitution must be read and construed in such a manner that: (b) every committee and tribunal constituted under the articles of association of the Company in force before the Transition Time continues to exist and to function subject to and shall be regarded as appointed under this constitution; (f) unless a contrary intention appears, all persons things and circumstances appointed or created by or under the articles of association of the Company in force before the Transition Time shall continue to have the same status, operation and effect after the Transition Time." 29 The ASX Business Rules presently include the following:

""Prohibited Conduct" includes: (a) conduct which amounts to impropriety affecting professional character and which is indicative of a failure either to understand or to practice the precepts of honesty or fair dealing in relation to clients or the public; (b) unsatisfactory professional conduct, where the conduct is such that it involves a substantial or consistent failure to reach reasonable standards of competence and diligence; (c) conduct which is or could reasonably be considered as likely to be prejudicial to the interests of the Exchange or its Participating Organisations or Affiliates, and need not involve a breach of any of the Rules or a contravention of any law. "Rules" means these ASX Business Rules. "Transition Time" means the beginning of the day notified in accordance with subsection 766C(1) of the Corporations Act. INTERPRETATION 7. Unless expressly stated otherwise, where a Rule is: (a) amended; (b) deleted; or (c) lapses or otherwise ceases to have effect, that circumstances does not: (d) revive anything not in force or existing at the time at which that circumstance takes effect; (e) affect the previous operations of that Rule or anything done under that Rule; (f) affect any right, privilege, obligation or liability acquired, accrued or incurred under that Rule; (g) effect any penalty, forfeiture, suspension, expulsion or disciplinary action taken or incurred in respect of any breach of that Rule; (h) effect any investigation, disciplinary proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, suspension, expulsion or disciplinary action, and any such investigation, disciplinary proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture, suspension, expulsion or disciplinary action may be imposed as if the circumstance had not taken effect. 8. In Rule 7(e), "anything done" includes, but is not limited to: (a) the making of a determination or passing of a resolution; (b) the granting or exercise of a power, including a delegated power; (c) the execution of a document; or (d) the appointment of any person to, or removal of any person from, an office or position. 9. Unless expressly stated otherwise, in determining whether the act or omission of a party constituted a contravention of the Rules or constituted Prohibited conduct, the matter shall be determined with regard to the Rules in force at the time of the relevant act or omission. 14. In the interpretation of a Rule in the ASX Business Rules, a construction that will promote the purpose or object underlying the ASX Business Rules is to be preferred to a construction that would not promote the purpose or object.

TRANSITIONAL PROVISIONS 1. Any act or thing done under or for the purposes of a provision of the Business Rules as in force prior to the Transition Time ("Old Business Rules") has effect from that date as if it had been done under or for the purposes of the corresponding provision of the Business Rules that come into force at the Transition time ("New Business Rules"). 2. Subject to Rule 1, the rescission of the Old Business Rules and the approval of the New Business Rules do not disturb the continuity of status, operation or effect of any act or thing done under or for the purposes of the Old Business Rules. 3. In Rules 1 and 2, "act or thing done" includes, but is not limited to: (a) the making of a determination or passing of a resolution; (b) the granting or exercise of a power, including a delegated power; (c) the execution of a document; or (d) the appointment of any person to, or removal of any person from an office or position." 30 The ASX Business Rules contain no definition of "Business Rules". In the terminology of the Business Rules, after 13 October 1998 Reynolds is a Participating Organisation. 31 The amendments to the Business Rules which started on 13 October 1998 introduced the following new provisions: "13.5.1(1) If the Exchange considers that [a] … Participating Organisation … should be charged with a breach of any of the Rules or Prohibited Conduct, it shall give the Participating Organisation … concerned notice of the particulars of the charge and of the date (being not less than 7 days after the date when such notice is served) when such charge is to be heard … (2) If any Employee … of a Participating Organisation does any act or refrains from doing an act which if done or not done (as the case may be) by the Participating Organisation would constitute a breach of the Rules or Prohibited Conduct, such act or omission shall be deemed for the purposes of this Rule 13.5.1 to be the act or omission of the Participating Organisation concerned and dealt with hereunder accordingly. (3) If any … Participating Organisation … is determined by the National Adjudicatory Tribunal to have, by act or omission, contravened any of the Rules or engaged in Prohibited Conduct, the National Adjudicatory Tribunal may (a) censure the … Participating Organisation …; (b) impose a fine not exceeding $250,000 (payable to the Exchange) upon the … Participating Organisation …; (c) suspend the … Participating Organisation from all or any of the privileges of the status of … Participating Organisation (as the case may be) of the Exchange; (d) prohibit the … Participating Organisation … from transacting any business with or through any Organisation for a period not exceeding 3 months upon such terms and conditions as the National Adjudicatory Tribunal thinks fit; (e) require that the … Participating Organisation … institute or undertake in a form directed by the Exchange or upgrade to the satisfaction of the Exchange, an education and compliance programme designed to prevent future contravention of the Rules by the … Participating Organisation … and the Employees of the Participating Organisation; (f) require the … Participating Organisation … to pay the total commission or gross profit or part thereof arising from the transaction concerned to the Exchange and the Exchange may deal with such amount in such manner as it thinks fit. … (g) in the case of Prohibited Conduct only, cancel the recognition of the … Participating Organisation … 14.2.1. National Adjudicatory Tribunal (1)(a) There shall be a National Adjudicatory Tribunal for the purposes of: (i) carrying out any function given to the National Adjudicatory Tribunal under the Rules; and (ii) performing such other functions delegated to it by the Exchange. (b) The chairperson and deputy chairperson of the National Adjudicatory Tribunal shall be an Affiliate or Responsible Executive or any other person of good reputation and high business integrity, appointed for the period determined by the Exchange (c) The National Adjudicatory Tribunal shall, for the purposes of a hearing, comprise either: (i) the chairperson or, in that person's absence, the deputy chairperson appointed pursuant to rule 14.2.1(1)(b) who shall act as chairperson of the proceedings and 2 persons selected by the chairperson from the Tribunal Panel; or (ii) where neither the chairperson nor deputy chairperson appointed pursuant to rule 14.2.1(b) are willing or able to act in connection with a particular proceeding, 3 persons selected by the chairperson from the Tribunal Panel, 1 of whom has been nominated by the chairperson to act as the chairperson for the purposes of the particular proceeding. (3) The National Adjudicatory Tribunal shall, within 30 days of making its decision give to the Exchange and the … Participating Organisation … affected thereby, the reasons in writing for its decision. 14.2.3 Proceedings of Tribunal (1) Proceedings of a Tribunal shall take place in private except that the Tribunal shall permit 2 representatives of each of the Exchange and the … Participating Organisations … or any other person of good reputation and high business integrity concerned and may permit more than 2 representatives to be present and make submissions. A representative may be a member or employee of the party represented or any other person approved by the Tribunal or a barrister or solicitor of the Supreme Court of a State or Territory of Australia or of the High Court of Australia. (2) If [a] Participating Organisation, … or the Exchange does not wish to appear in person or be represented before the Tribunal, that … Participating Organisation … or the Exchange may, not less than 5 days before the date of the hearing, lodge with the Tribunal a written submission for consideration by the Tribunal in relation to the hearing. (3) Proceedings shall be conducted with as little formality and technicality, and with as much expedition, as a proper consideration of the matters before the Tribunal permit. Subject to this Rule 14.2, a Tribunal may conduct its proceedings as it thinks fit and may make a transcript of proceedings at a hearing, a copy of which shall be made available to the Exchange, to the … Participating Organisation … the subject of the hearing … . (4) A tribunal shall determine a matter without bias and shall give both the Exchange and the … Participating Organisation … fair consideration and otherwise shall observe the rules of natural justice. (5) The decision of a Tribunal shall be determined according to a simple majority of votes of the Tribunal members. Each member shall have and shall exercise a deliberative vote. The chairperson shall have a deliberative but not a casting vote." 14.4 Tribunal Panel There shall be a Tribunal Panel comprised of no fewer than 10 persons nominated by the Exchange from time to time." 32 The Business Rules as amended on 13 October 1998 contained, at the commencement of the Definitions, "In these Rules, unless the contrary intention appears: (a) where a provision of these Rules refers to or has effect for the purposes of a particular provision of the Corporations Law - the word or expression has in that provision of these Rules the same meaning as it has in that provision of the Law; and (b) in any other case - the word or expression has the same meaning in these Rules as it has in the Corporations Law." 33 Those Business Rules contained an interpretation provision: "Division 10 of Part 1.2 of the Corporations Law applies in relation to these Rules as if they were an instrument under the Law." 34 At that time, section 761 of the Corporations Law contained a definition: ""Business Rules" in relation to a body corporate means: (a) in the case of a body corporate that conducts … a stock market - any rules, regulations or by-laws that are made by the body corporate, or that are contained in its constitution, and that govern: (i) the activities or conduct of that stock market; or (ii) the activities or conduct of persons in relation to that stock market other than rules, regulations or by-laws which are listing rules of the body corporate …" 35 This definition was introduced into the Corporations Law by Act number 199 of 1997, the same Act which had included in the Corporations Law sections 766A-766D, enabling ASX to change its type. The First Jurisdiction Argument 36 Reynolds submits that: "Insofar as the charges allege that offences were committed by any conduct (act or omission) of either Reynolds or Mr Peter Struk prior to 13 October 1998 there is no jurisdiction in the NAT to hear such charges. The reason is that in spite of the transitional provisions in force at 13 October 1998, when the pre-existing articles (including Article 52) and Business Rules were repealed any offences committed contrary to Article 52 or the old Business Rules did not subsist beyond the Transition Time. Neither Article 25 of the Constitution nor the Transitional Provisions in the Business Rules, effective from 13 October 1998, apply to conduct in contravention of the old Business Rules (defined so as to include the previous articles)." 37 It is incorrect to say that the pre-existing Business Rules were repealed as at 13 October 1998 - rather, there were extensive amendments to the Business Rules. To say this is, however, to correct a detail of Reynolds' submission, not to deal with its substance. 38 A similar, but not identical, argument was considered in the Supreme Court of South Australia in McLachlan v Australian Stock Exchange Ltd (1998) 30 ACSR 139. There, a broker had been charged, in January 1998, with prohibited conduct under Article 52 of the then Articles of ASX. Those charges had not been determined prior to 13 October 1998. The plaintiff argued (as recorded by Lander J at 151): "… that the repeal of the Articles and the Rules made under the articles means that the National Adjudicatory Tribunal has no jurisdiction to continue to hear the charges laid under the repealed articles and rules. Further, he argues, the transitional provisions under the constitution and the business rules do not save the procedures in place for disciplinary proceedings prior to 13 October 1998."

(That submission is inaccurate in saying that the Business Rules were repealed, rather than amended substantially, on 13 October 1998. The broker in McLachlan had argued that because the Articles of ASX were repealed, that brought with it a repeal of the rules made under those Articles. The Articles of ASX, at all relevant times, had contained a Clause 70, reading: "The Board may make Rules not inconsistent with these Articles for the order and good government of the Members or Member Organisations of the Exchange and its affairs including, without limiting the generality of the foregoing, Rules with respect to the conduct of business by Member Organisations or with respect to the activities of partners, officers, employees or consultants of Members or Member Organisations and may amend, alter or repeal such Rules."

Hence the submission that the repeal of the Articles of ASX had also resulted in a repeal of the Rules.) 39 Lander J rejected that argument. His Honour held that Clause 25.1(b) of the Constitution (set out in paragraph 28 above) had the effect that the National Adjudicatory Tribunal which had been established under Article 55A prior to 13 October 1998, continued to exist after that day. Further, Clause 25.1(f) of the Constitution (also set out in paragraph 28 above) had the effect of continuing in existence the Notice of Charges which had been laid under the Articles of Association of the company prior to 13 October 1998. There remained a problem, of whether Article 52 continued to have effect, notwithstanding its repeal, to provide a norm of conduct which had continuing application for the purpose of those charges. His Honour held that the transitional provisions in the Business Rules should be construed using the definition of "Business Rules" contained in 761 of the Corporations Law (set out in paragraph 34 above). So construed, the "Old Business Rules" included not only rules which met the description in section 761 and were contained in the document called "Business Rules" by ASX, but also provisions of the Articles of ASX which met the description of "Business Rules" in section 761. Article 52 was such an Article. 40 The decision of Lander J was affirmed on appeal: McLachlan v Australian Stock Exchange Ltd (1999) 32 ACSR 524. Olsson J (with whom Mullighan and Nyland JJ agreed) regarded it as sufficient to uphold the appeal that Article 25(1)(b) and 25(1)(f) between them preserved both the National Adjudicatory Tribunal, and any matters which were before it and undisposed of, at least to the extent necessary to complete such matters. His Honour also said, at [94]: "Moreover, I am by no means sure that the ingenious argument based on the definition of "Business Rules" reflects the true intention and legal effect of the [New Business Rules]."

That remark is clearly an obiter dictum . 41 Mr McKeand, counsel for Reynolds, submits that the ratio of the McLachlan cases is that pending charges before the NAT as at 13 October 1998 were preserved; that the ratio of the McLachlan cases does not show that there is any right for ASX to lay charges after 13 October 1998 concerning events that happened before 13 October 1998; and that, consistently with the doubts expressed by Olsson J, the "ingenious argument based on the definition of "Business Rules"" should not be adopted. 42 In my view, Clause 25.1(f) of the Constitution of ASX suffices to preserve the liability of Reynolds to be proceeded against for a breach of the Articles of Association, even if no charge alleging that there had been such a breach had been laid prior to 13 October 1998. The liability to answer for a breach of the Articles is a "thing [or] circumstance … created by or under the Articles of Association of the Company in force before the Transition Time", within the meaning of Clause 25.1(f). 43 In Byrne v Garrisson [1965] VR 523 Gowans J considered a situation where a director was charged with an offence under the Companies Act 1958. He was charged at a time after the 1958 Act had been repealed by the Companies Act 1961. Section 4(2) of the Companies Act 1961 provided that, unless the contrary intention appeared in the Act: "All … things and circumstances … created by or under any of the repealed … Acts … or existing … under any of such Acts … immediately before the commencement of this Act shall under and subject to this Act continue to have the same … effect as they respectively would have had if such Acts … had not been repealed." 44 Gowans J said, at 526: "It is said for the defendant that a conviction for an offence may be a "thing" or a "circumstance", but a breach constituting an offence before conviction is not. Further, it is said that the word "liability" refers to a civil liability only. But "thing" is an apt expression to describe an event, a fact or that which can be thought of, and an act or deed or omission, which is a breach of a statutory provision by reason of the terms of the provision, falls within the expression "things and circumstances existing under" the statute. If unaffected by anything taking place before the commencement of the repealing Act, it falls within the expression "things and circumstances existing under [the repealed Act] immediately before the commencement of [the repealing Act]". A breach of the provisions of an Act is not inherently incapable of having an effect, and by the terms of paragraph (a) it is to continue and to have the same effect as it would have had it if the repealed Act had not been repealed." 45 Those words of Gowans J are not part of the ratio of the case, because his Honour went on to hold that the words, "under and subject to this Act" in the transitional provision cut down the scope they would otherwise have. Even so, those words seem to me to be right, and applicable to the construction of Clause 25.1(f) of the Constitution of ASX. 46 There are two other considerations which I bear in mind in reaching this conclusion. The first is that, one effect of provisions of interpretation statutes which say that repeal of an Act does not affect any obligation or liability accrued or incurred under the repealed Act (eg section 8 Act Interpretation Act 1901 (Cth) section 30 Interpretation Act 1987 (NSW)) is to keep alive any criminal responsibility that has already been incurred under the Act, even if it has not been charged or prosecuted for at the time of repeal of the Act: Hume v Higgins (1949) 78 CLR 116 at 129; Byrne v Garrisson [1965] VR 523 at 529; R v Scarlett; ex parte McMillan (1973) 20 FLR 349. Something which can properly be described as an obligation or liability accrued or incurred can also be described as a "thing" or "circumstance". There is sufficient analogy between an uncharged criminal offence, and an uncharged breach of ASX's Articles of the type alleged against Reynolds to make this line of authority highly persuasive concerning the construction of Article 25.1(f). 47 The second matter I take into account is the intimate interrelationship which exists between the ASX Constitution and some provisions of the Corporations Law. Not only did the new Constitution come into existence pursuant to section 766D of the Corporations Law, but as well ASX, at the time of adoption of the Constitution, was conducting a stock exchange pursuant to approval granted under section 769 of the Corporations Law. Section 769(2) empowered the Minister to approve a body as a stock exchange only if he or she was satisfied that: "(b) the body's business rules make satisfactory provision: … (ii) for the exclusion from membership of: (A) any person who is not of good character and high business integrity; (B) any body corporate where a director of the body corporate, a person concerned in the management of the body corporate or a person who has control, or substantial control, of the body corporate is not of good character and high integrity; (iii) for the expulsion, suspension or disciplining of a member for conduct inconsistent with just and equitable principles in the transaction of business or for a contravention of the body's business rules, of this Chapter or of the conditions of a licence held by the member; (iv) for the monitoring of the compliance with, and for enforcement of, the body's business rules … (viii) generally for the carrying on of the business of the proposed stock exchange with due regard to the interests of the public … "

Amendments to the business rules of a securities exchange were required to be notified to ASIC, under section 774 of the Corporations Law. 48 The Constitution of the ASX should be interpreted consistently with the legislative policy expressed in section 769. It would, it seems to me, be seriously detrimental to Parliament's evident desire that ASX only have as members, or as people involved in the management of members, people of good character and high integrity, and that there be an effective scheme for expulsion, suspension or disciplining of members, if the effect of introduction of the Constitution were to be that there was a general amnesty for all contraventions of the Articles, upon the company changing its type on 13 October 1998. In saying this, I should make clear that it is not alleged by ASX that anyone other than Mr Struk has been involved in any personal dishonesty - however, if the argument concerning jurisdiction which Reynolds presents is right, it would mean that shockingly dishonest conduct committed by an ASX member before 13 October 1998 could not be made the subject of a charge by ASX. Likewise, if the argument concerning jurisdiction which Reynolds presents is right, it would mean that infractions of the Articles committed before 13 October 1998, no matter how significant they were for the proper operation of the Stock Exchange, could not be made the subject of a charge by ASX. 49 It is only Charge 1 which alleges that there has been a breach of the Articles of Association in the period prior to 13 October 1998. Charges 2, 3 and 4 allege breaches of the Business Rules, over periods which are in part prior to 13 October 1998. However, the Business Rules prior to 13 October 1998 were made under authority of the Articles. Therefore, those Business Rules themselves count as "things … created by or under the Articles of Association of the company in force before the Transition Time", within the meaning of clause 25.1(f) of the ASX Constitution. For the same reason as the liability of Reynolds to be proceeded against for a breach of the Articles committed prior to 13 October 1998 is preserved, so also, by a separate operation of Clause 25.1(f), the liability of Reynolds to be proceeded against for a breach of the Business Rules committed prior to 13 October 1998 is preserved. 50 What I have written so far is sufficient to reject Reynolds' first jurisdictional argument. As well, however, it seems to me that the argument which Lander J accepted, based on construction of the expression "business rules" is right. That argument provides a separate route by which the operation of Article 52 is preserved, for the purpose of the present case. 51 Charges 2, 3 and 4 allege contraventions of Business Rules 1.2.2(4) and 5.1.2A at various times. ASX submits that rule 7 of the Interpretation provisions in the present ASX Business Rules (set out in paragraph 29 above) provides a further means whereby, even though those provisions of the Business Rules have been amended from time to time, ASX's ability to charge the plaintiff with a breach of those Rules is preserved. 52 Mr McKeand submits that the ambit of Clause 7 of the Interpretation Provisions is limited, because of the definition of "Rules" as "these ASX Business Rules" (emphasis added). The suggestion inherent in that submission is that it is only the Business Rules as adopted from 13 October 1998 which are "these ASX Business Rules". I do not accept that submission. There have been Business Rules, referred to by that name, both before and after 13 October 1998. As I have already held, the Business Rules as they existed prior to 13 October 1998 were continued by Clause 25.1(f) of the ASX Constitution. The continuity of those Rules was recognised by the fact that, to give effect to the demutualisation of ASX, only some of the previous rules were amended; the rest continued unchanged. 53 In my view, clause 7 of the Interpretation rule should be construed so that it relates to the ASX Business Rules in whatever form they might have been from time to time. So construed, interpretation rule 7 preserves the old form which a Business Rule had from time to time, for the purpose of bringing a charge concerning breach of it, even after that Business Rule has been amended or repealed. Such a construction is also supported by Clause 14 of the interpretation provisions of the ASX Business Rules (set out in paragraph 29 above). 54 I should mention that this argument of ASX concerning interpretation rule 7 is not enough, by itself, to enable ASX to prosecute charges 2, 3 and 4. That is because the business rules involved are ones which set a norm of conduct, but do not state any consequence for breach of that norm. One needs to go to Article 51, in the period before 13 October 1998, to find the provision which states the consequence of breach of the norm. However, it is a consequence of my earlier finding about the scope of constitution Article 25.1(f) that Article 51 is preserved to perform that function. 55 Reynolds presents an alternative version of its first submission, that: "Even if the position stated above was incorrect an alternative position would apply to leave the NAT with jurisdiction only in respect of any offences committed contrary to the articles and rules as they existed immediately prior to the Transition Time. Offences contrary only to earlier versions of the articles and Business Rules did not subsist beyond 13 October 1998. The reason is that article 25.1(f) applies to offences (assuming that it applies to any offences) in relation to the "articles … in force before the Transition Time (which articles) shall continue …" Hence, any offences that arose under articles no longer in force immediately prior to that Transition Time do not continue and the NAT has no jurisdiction to hear them. The position is the same for any offences that arose under the Business Rules that were no longer in force prior to the Transition Time." 56 This submission requires the words "in force before" to mean "immediately before" rather than "at any time before". 57 I reject that submission. I simply do not see any reason why the provision should be so construed. The construction of "in force before" as meaning "at any time before" is well open on the ordinary meaning of the words of Clause 25.1(f). The evidence shows that the Business Rules were amended with considerable frequency, over many years prior to 13 October 1998. There is no sensible reason why the form which the Business Rules took immediately prior to 13 October 1998 should be preserved, but the form which they took a few months prior to 13 October 1998 should not be preserved. The factors which I have earlier referred to in favour of a construction of the Constitution consistent with the Corporations Law, are against the construction for which Reynolds contend. Clause 14 of the Interpretation provisions of the ASX Business Rules is also against it. Further, even if that construction for which Reynolds contend was right, it would not be enough to demonstrate that NAT lacks jurisdiction in any particular way in the present case. Rather, it would move the focus of enquiry back, to changes there had been to the Articles before they came to be in the form they were in immediately before 13 October 1998. It would then be necessary to look at the particular changes, decide whether those changes were in substance matters of repeal of in substance matters of mere amendment, and, if they were in substance matters of repeal, whether the resolutions which effected that repeal themselves contained transitional provisions which had the effect of preserving, for certain purposes, the Articles in a prior form. That exercise has simply not been attempted. Reynolds' first jurisdictional point fails.

Second Jurisdiction Point 58 Reynolds submits that: "Between 1990 and 25 October 1993 both Articles 51 and 52 contained paragraphs that conferred a substantive right on Members and Member Organisations to an entitlement to have all charges under Articles 51 and 52 heard by the Board and for no finding of guilty to be made "unless at least 9 directors concur in such decision". The form of expression used is clearly that of the conferral of a right. It is not expressed as a power of the Board. In any event, even if it was not to be interpreted to be the conferral of a substantive right but rather a procedural provision, the procedure is clearly non-delegable ( Cox v Caloundra Golf Club Inc (unreported, Supreme Court of Queensland, Thomas J, 27 September 1995)." 59 In deciding whether, prior to 25 October 1993, a member had a substantive right to be found guilty only upon a decision made by nine directors, it is not sufficient to look only at Articles 51(5) and 52(3) - rather, one must construe the Articles of Association as a whole. 60 Under the Articles in 1990, the Board had power to delegate its powers, under section 6 of the Articles as they then stood (set out in paragraph 11 above). It was expressly contemplated by section 6, that powers under Article 51 and 52 could be delegated. The notion of delegating powers under Article 51 and 52 makes sense only if the delegate was able to actually make a decision, concerning the matters referred to in Articles 51 and 52. While Article 6(1) expressly contemplates the possibility of there being a delegation to a committee of directors of a State Subsidiary of the powers of the Board under Articles 51 and 52, that delegation to the State Subsidiary is said to be "without limiting the generality of the foregoing". If that expression is to be given meaning, then the general power of delegation to a committee, contained in section 6(1)(b) must extend to the powers under Articles 51 and 52. Further, if such a delegation is made, it is the effect of Article 6(6) that a decision can be given by a majority of votes of the committee members present and voting. That Article 6(6) is said to be one which applies "notwithstanding any provision to the contrary in these Articles" makes clear that, if there were to be a delegation under Article 6 to a committee, then, notwithstanding Article 51(5) and Article 52(3), a decision of guilt could be arrived at by a majority of that committee. For these reasons, the particular Articles under consideration here differ from the Articles which were being considered in Cox v Caloundra Golf Club Inc. 61 A similar conclusion can be reached under the amendments to the Articles which became effective on 30 July 1991. The version of Article 6 (1) which was then adopted (set out in paragraph 14 above) made quite clear that there was a power for the Board to delegate its powers under Article 52 to a committee, and that a majority of such committee could make the requisite decision under Article 52, unless the Board imposed some requirement for there to be a greater number before a decision could be made, when delegating its powers under Article 52 to that committee. 62 The reader will have observed that the identity of the people to whom a delegation can be made under either form of Article 6 is limited. Neither under Article 55A introduced in October 1993, nor under the present regime under section 14 of the Rules, is there any requirement for a member of the NAT to have any of the particular types of connection with the Exchange which Article 6 (either as at 1990, or following the amendments of 30 July 1991) required to enable a delegation to occur. Thus, even though the Board had power to make a delegation of power to hear a charge against Reynolds for a contravention of Article 51 or 52 to a committee, pursuant to Article 6, that is not what has actually happened in the present case. The NAT is not such a committee. 63 In the field of statutory interpretation, there is a well recognised distinction between procedural and other statutes - some statutes create or modify or abolish substantive rights or liabilities, while other deal with the pursuit of remedies (Maxwell v Murphy (1957) 96 CLR 261 at 286 per Fullagar J). Pearce and Geddes, Statutory Interpretation in Australia, 5th edition, paragraph [10.20] say: "… if a statute is concerned only with the way in which certain rights are to be enforced or is quite literally concerned with court procedure, it will operate retrospectively. This means that it is applicable to all actions commenced after the procedural statute to enforce rights, whether those rights arose before or after the enactment of that statute." 64 In my view, a similar approach to construction should be taken of provisions of Articles of Association which set up institutions or procedures, in the way that Article 55A does. 65 When the NAT was first established, by Article 55A in October 1993, it provided a new procedure by which charges pursuant to Articles 51 and 52 could be determined. There was still power, under Articles 51 and 52, for the Board to determine such charges itself, if it so desired. There was power for the Board to delegate some of its powers to a committee, under Article 6(1). The NAT provided a third procedural route by which such charges could be heard and determined. 66 When the NAT was first established, there is no reason to believe it was intended that it would have jurisdiction to hear charges for contraventions of Articles 51 or 52 where the subject matter of those charges arose only after Article 55A was introduced. If that were so, the Tribunal might take a long time to build up to a full workload. 67 Prior to the adoption of Article 55A, there was, in my view, no substantive right in a Member or Member Organisation to have charges under Article 51 or Article 52 heard by the Board, and a finding of guilty made only if nine or more were in favour of such a finding. The possibility of there being a finding by a committee, which acted by majority, shows that there was not such a substantive right. Because there was no such substantive right, and there has been no submission that there was any other substantive right which would be encroached upon by the NAT hearing charges relating to events which happened before that Tribunal existed, that Tribunal could, upon being created, hear charges relating to events which happened before it was created. Counsel for Reynolds accepts that the NAT as it existed prior to 13 October 1998 is the same body as the NAT which existed after that date. It follows that the NAT has jurisdiction to hear charges relating to conduct which occurred prior to 29 October 1993. Reynolds' second jurisdictional argument fails. Alleged Unfairness and Injustice of the Charges 68 Other relief which Reynolds seeks is: (A) Declaration that it is an implied term of the Business Rules of the First Defendant that the First Defendant would act in good faith in performing its obligations and exercising rights under those Business Rules. (B) Declaration that the First Defendant has not acted in good faith in charging the Plaintiff with the charges preferred in the First Defendant's Notice of Charges dated 24 September 2002 served on the Plaintiff. (C) Declaration that by reason of the acts and inaction of the First Defendant since 30 July 1990 and the reliance thereon by the Plaintiff the First Defendant is estopped from prosecuting the charges preferred in the First Defendant's Notice of Charges dated 24 September 2002 served on the Plaintiff. (D) Declaration that in charging the Plaintiff and in seeking to prosecute those charges in accordance with the procedures specified for preparation of the proceedings and the hearing of the charges the First Defendant has acted oppressively, unfairly, unreasonably, contrary to natural justice and contrary to fundamental principles of common justice, in relation to the Plaintiff. 69

Section 793B of the Corporations Act 2001 (Cth) provides: "The operating rules (other than listing rules) of a licensed market have effect as a contract under seal: (a) between the licensee and each participant in the market; and (b) between a participant and each other participant; under which each of those persons agrees to observe the operating rules to the extent that they apply to the person and to engage in conduct that that person is required by the operating rules to engage in." 70 Reynolds submits that there is an obligation on ASX, when preferring a charge, to act in a way which involves no injustice, is not unfair, and is not unreasonable. Reynolds says that ASX's power to prefer a charge is a contractual power, and is therefore subject to an implied term requiring that power to be exercised in good faith (Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church (1993) 31 NSWLR 91; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349; Burger King Corp v Hungry Jacks Pty Ltd [2001] NSWSC 187); Overlook v Foxtel [2002] NSWSC 17. Reynolds submits that the form of the charges is inherently unfair, and involves ASX in breaching obligations which it owes to Reynolds. Thus, Reynolds argues, it was appropriate for it to come to court at this stage, seeking relief, rather than asking NAT for relief now, and rather than coming to court when NAT had conducted its hearing and had come to a conclusion. 71 Relevant to the argument that there is unfairness in the form of the charge are some Guidance Notes which ASX has issued. Note number 3/01, issued 30 March 2001 states is purpose as being to outline "the practices and procedures followed by ASX when it takes disciplinary action under the Business Rules in relation to a Participating Organisation." Under the heading "Contested Hearings", it gives a précis of certain of the Business Rules on that topic and an account of the procedure followed. Part of that account includes: "The Tribunal will also invite the parties to address it on the question of any sanction which it would be appropriate to impose, in the event that it finds that the Rules have been contravened. It may call for addresses to be made on the question of sanctions as part of the submissions in support of or in opposition to the charge, or it may ask that those submissions be made if and when it makes a finding that a contravention of the Rules has occurred." 72 In other words, it is a matter for NAT to decide whether, in any particular case, questions of liability and penalty should be heard in the one hearing, or whether NAT should conduct a hearing on questions of liability, and after making a finding on liability (which would necessarily, because of NAT's obligation to give reasons, include the reasons for that finding) hold a separate hearing on the question of penalty. 73 The Guidance Note also states, at its commencement: "Nothing in this note necessarily binds ASX in the application of the Rules in a particular case. Nor does anything in this note bind the National Adjudicatory Tribunal or the Appeal Tribunal or restrict either Tribunal in adopting such practices and procedures as each considers appropriate in its discretion from time to time." 74 This gives NAT great flexibility in adjusting its procedures to suit the particular case before it, subject always to NAT's obligation under Clause 14.2.3(4) of the ASX Business Rules (set out in paragraph 31 above). 75 On 14 October 2002 Corrs Chambers Westgarth, the legal advisers to the NAT, wrote to Reynolds, giving notice that a hearing of the charges would be held on 19 November 2002. (That hearing date had been vacated by the time this case was argued.) The letter continued: "The procedures for these proceedings are set out in the ASX Business Rules Guidance Note 3/01 regarding ASX disciplinary proceedings. These procedures will be followed at the hearing and we would ask that you review that Guidance Note and adhere to it." 76 The letter notified that the Chairman had set the following timetable: "1 Reynolds to indicate to the Tribunal and the ASX whether it intends to contest any or all of the charges particularised in the abovementioned Notice of Charges by no later than 21 October 2002 2 Reynolds to provide an outline of submissions in relation to the charges and a list of people who will be attending the hearing to the Tribunal and the ASX by no later than 29 October 20002 3 ASX to provide an outline of submissions in relation to the charges to the Tribunal and Reynolds by no later than 9 October 2002 4 Reynolds to provide any submission in reply to the Tribunal and the ASX by no later than 14 November 2002. Please ensure your strict compliance with this timetable." 77 On 20 October 2002 Holman Webb, solicitors for Reynolds, wrote to the members of the NAT and to the relevant inspector at ASX, giving notice that Reynolds intended to contest all charges. Holman Webb foreshadowed the possibility of an argument about whether the Tribunal had jurisdiction, and continued: "In the meantime we note with some curiosity that Reynolds have not been informed what evidence is to be adduced against them in support of the charges as they presently stand. Obviously Reynolds cannot provide even preliminary submissions by 29 October in circumstances where they are not aware of what witnesses are to be called to support the charges and what documents are to be tendered. Once we have received that information work can proceed on preliminary submissions, although, of course, issues of jurisdiction and as to the form of the charges will also need to be resolved before it will be appropriate to serve preliminary submissions. At this point the timetable set by the Tribunal seems out of kilter with reality. We say this not to be impertinent but keeping in mind our client's entitlement to a fair hearing. The requirements of natural justice entitle Reynolds to a reasonable opportunity to prepare to meet the charges after being informed of the nature of the case put against it. Obviously some preparation has been possible and tentative views have been formed as to the potential witnesses that Reynolds will call. Be that as it may, there are substantial matters to be resolved before essential matters of preparation can proceed and so we await your response." 78 On 22 October 2002 ASX replied, stating: "… the evidence on which ASX will rely at the hearing on 19 November 2002 consists of those documents which are attachments to the Final Inspection/Investigation Report dated 20 September 2002 which have already been provided to Reynolds. ASX will also refer to the Final Inspection/Investigation Report itself in the course of the hearing. As is commonly its practice (see Guidance Note number 3/01 "ASX Disciplinary Proceedings" at p6), I confirm that ASX does not intend to call any witnesses to give oral evidence at the hearing." 79 ASX went on to suggest that Reynolds' written submissions should include arguments relating to jurisdiction, to request the names and occupations of any witnesses which Reynolds proposed to call to give oral evidence, and identification of any documentary evidence which Reynolds intended to adduce. ASX also disputed Holman Webb's contention that the timetable was, "out of kilter with reality". 80 On 25 October 2002 Holman Webb wrote to the members of the NAT, and the relevant ASX officer, providing submissions not on the merits of the charges, but on contentions closely similar to those raised in these proceedings - namely, that there were serious limitations on NAT's jurisdiction to hear the charges, that the charges were bad for multiplicity (and hence "defective, embarrassing, oppressive, unjust and unfair") and very late in being brought. It asserted that the deficiencies in the charge were such that meaningful and comprehensive submissions in response to Charge 1 could not be put, particularly when they were required prior to the presentation of any evidence. Holman Webb continued: "A further consequence is that Reynolds is unable to make submissions specific to any one charge, in the rolled up set of charges, as to whether or not the charge has been proved, when it is not fully clear which particulars and consequently what evidence is relied upon in support of that charge. Reynolds is entitled to prepare its evidence in defence of the charge. That can only be partially done with the charges in their present form. As allegations of multiple offences are included in charge 1 a simple finding of guilty of the charge would not identify which of the offences relate to that finding. However, the NAT is obliged to give reasons for its determination of the charges in accordance with Business Rule 13.5.1(5). Such reasons should take account of the evidence and submissions put forward by Reynolds. Because Reynolds is substantially disadvantaged in its capacity to put submissions and prepare evidence the chances of erroneous and unjust findings being made are obvious. Rights of appeal are prejudiced when it is not clear which elements of which offences have been found to have been proved in order to support a finding that the charge has been proved. To a lesser extent these considerations are applicable to charges 2, 3 and 4. Also, in the event that it becomes necessary to make a plea in mitigation of penalty Reynolds would not be able to identify what matters arising from the factual evidence would be likely to be taken into account by the Tribunal. These matters result in procedural unfairness to Reynolds. In addition it is impossible in some cases and oppressively difficult in other for Reynolds to defend the charges in relation to records and work practices and employees extending back as far as 13 years." 81 Holman Webb also referred to ASX's indication that the Report of 20 September 2002, and its attachments, would be relied on. Holman Webb said, concerning that: "What is unknown is what parts of the 49 page report are to be referred to, in what manner and for what purpose. Until, those questions are answered how can Reynolds be expected to know the case against it and prepare to meet that case? Even assuming there will be some illumination of those matters in submissions served by the ASX, Reynolds is required to provide submissions before any submissions are received by the ASX (an extraordinarily unfair requirement in quasi-criminal proceedings). Then, Reynolds can expect to receive its first indication of the unknown matters in relation to the Report only 10 days before the appointed hearing. With respect to the ASX, such a situation is absurdly unjust. Reynolds will have no reasonable opportunity to prepare any defence to the charges." 82 While asserting that the deficiencies they had identified could not be cured by the provision of further particulars, Holman Webb also asked for certain further particulars. 83 On 5 November 2002 ASX wrote to the solicitor for NAT, requesting that the Tribunal hold a preliminary hearing to determine the matters which Holman Webb's letter had raised. ASX went on to make submissions concerning the substance of Holman Webb's contentions. A further timetable was also proposed. 84 Reynolds began these proceedings on 8 November 2002. 85 The power of ASX to prefer charges against a Participating Organisation, and the powers of the National Adjudicatory Tribunal to hear and determine any such charges, arise from the Constitution of ASX and its Business Rules. It is to those documents, supplemented by any implications which arise in them as a matter of law, and added to by any duties which are superimposed as a matter of law, that one must turn to find the standards by reference to which ASX must act in preferring such a charge. And likewise the standards by reference to which the NAT must act in hearing a charge. 86 It is clause 13.5.1 of the Business Rules (set out in paragraph 31 above) which confers the power of the Exchange to make a charge. In terms, it sets no precondition for the making of a charge than that the Exchange considers that the Participating Organisation should be charged with a breach of any of the Rules or Prohibited Conduct. However it needs to be read subject to clause 13.3 of the Constitution of ASX, which says: "Powers conferred upon the Company by the Operating Rules (and, in particular, admission, exclusion, expulsion, suspension and discipline) must be exercised: (a) fairly and impartially; (b) in the interests of the public; and (c) with due regard for principles of natural justice"

(The Constitution, in clause 1.1, defines Operating Rules as "rules concerning the operation of Financial Markets operated by the Company and includes any procedures relating to those rules required by the Corporations Act". Thus , "Operating Rules" within the meaning of the Constitution include the Business Rules.) 87 When clause 13.3 of the Constitution imposes on ASX these obligations concerning, inter alia, the preferring of a disciplinary charge against a Participating Organisation, there is no occasion to inquire whether, by some separate legal route, ASX has become subject to obligations of natural justice, fairness or impartiality concerning the making of disciplinary charges. 88 It is now recognised as the law in New South Wales that every commercial contract has implied in it, as a matter of law, a term requiring the exercise of good faith in the performance of that contract. That term is one which arises not for the purpose of giving effect to the presumed intention of the parties of the contract, in accordance with the tests laid down in Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337, but simply as a matter of law: cf Peters (WA) Limited v Petersville Limited (2001) 75 ALJR 1385, Overlook v Foxtel [2002] NSW SC 17 at [61)-[62]. There might be some room for argument about whether the Constitution and Business Rules of ASX count as a "commercial contract", given that they have a statutory authorisation. One decision in favour of there being such an implication in certain ASX rules is Chapmans Ltd v Australian Stock Exchange Limited (No 2) (1995) 17 ACSR 524, where Beaumont J accepted that ASX was subject to an implied duty to apply good faith, and also reasonableness (in a limited sense, of not coming to a decision which is perverse) in administering the listing rules of ASX. In Hudson Securities Proprietary Limited v Australian Stock Exchange Limited (2000) 35 ACSR 55; [2000] NSW SC 203 Giles JA saw no difficulty in the concept of there being an implication in the Business Rules of ASX (although, differing from Santow J below, Giles JA held there was no need for such an implication because the matter was adequately covered by an express rule). However is not necessary to decide whether there is in fact such an implication, as it seems to me that, even if the implication of a term requiring the exercise of good faith in performance could be made, the end result would be no different, in substance, to what clause 13.3 of the Constitution expressly requires. In particular, it seems to me that if ASX was not acting in good faith, it would not be acting fairly, as Clause 13.3(a) requires it to do. 89 While Reynolds made a submission that ASX was obliged to act in a way which was not unreasonable, the only way it was submitted any such obligation arose was as an aspect of ASX's obligation to act in good faith. Thus, no separate discussion is needed of the alleged obligation to act in a way which is not unreasonable. 90 There is an express obligation on the NAT, under Business Rule 14.2.3(4), to determine a matter brought before it without bias, to give both the Exchange and the Participating Organisation fair consideration, and otherwise to observe the rules of natural justice. ASX was entitled, when charging Reynolds, to proceed on the basis that NAT would comply with its obligations in these respects. 91 A significant complaint which Reynolds makes about the charges is that they suffer from duplicity. So far as Charge 1 goes, Reynolds points to the fact that the charge brings together five broad headings of conduct, each of which itself relates to various different incidents. Further, that charge runs together activities on the part of Mr Struk, for which Reynolds is alleged by ASX to have a merely vicarious responsibility, with conduct on the part of Reynolds itself. So far as charges 2, 3 and 4 go, Reynolds complains that they suffer from duplicity in that each of them relates to more than one instance of a breach of the Business Rules. 92 Duplicity is a concept which has an important role to play in the formulation of indictments or informations, in the criminal law. Its role there is explained by Gaudron and McHugh JJ in S v The Queen (1989) 168 CLR 266 at 284 -285 as including that: "… a Court must know what charge it is entertaining in order to ensure that evidence is properly admitted, and in order to instruct the jury properly as to the law to be applied; in the event of conviction, a Court must know the offence for which the defendant is to be punished; and the record must show of what offence a person has been acquitted or convicted in order for that person to avail himself or herself, if the need should arise, of a plea of autrefois acquit or autrefois convict.... The rule against duplicitous counts has also long rested upon a basic consideration of fairness, namely, that accused should know what case he or she has to meet... Of course, the degree of unfairness or prejudice involved will vary from case to case, and it may be... that on occasions the uncertainty is not "such as to disable the defendant from meeting that charge..." [A] duplicitous count may be productive of prejudice. If the matter proceeds to trial, there is the possibility that evidence will be wrongly admitted or that incorrect directions will be given to the jury. There is also the possibility that a jury, no matter how carefully directed, may reason from the number of offences charged that the accused must be guilty of at least one. However, it may be going too far to equate prejudice with the difficulty of raising a defence of autrefois acquit or autrefois convict…" 93 Duplicity is also a concept which had a role to play in the common law system of pleading in civil cases, before the reforms of the mid-19th-century: Gee v General Medical Council [1987] 1 WLR 564 at 569. At that time issues of fact were tried by juries, and the system of pleading aimed at producing a single issue concerning which a jury could give a decision. Some of the pleading requirements are explained in Sutton, Personal Actions at Common Law (Butterworths, London, 1929) at 158: "The declaration... had on the face of it to disclose a cause of action: if it did not it was immaterial and therefore demurrable: further, it had to disclose one cause of action only, otherwise it raised more than one issue and infringed the rule about singleness, and was therefore bad for duplicity, to use the technical phrase: whereas if it put forward alternative claims it would be bad for uncertainty, for the defendant would not know upon which the plaintiff really intended to proceed. This rule, however, was relaxed to this extent: where different claims could be properly joined in the same writ, they could each be formulated in different counts in the same declaration, but then each count had to conform with these rules and in itself contain a single material and certain demand.... It was only, however, causes of action which could be properly joined in one writ which could thus be joined in different counts in one declaration. To join a count, say, for trover with a count in assumpsit was inadmissible and rendered the whole declaration bad on demurrer. The rule against duplicity, moreover, was not infringed it alleged several matters which formed but one continuing act, as, for instance, depasturing cattle on the plaintiff's land." 94 The modern rules of civil procedure in the courts have different provisions which aim at ensuring a fair trial, in consequence of which the rule against duplicity is long since dead in the civil courts. 95 There is no obligation on ASX never to proffer a charge which is duplicitous. The obligations on ASX are those which are contained in its Constitution and rules, and those imposed or applied by law. There is no express obligation in the constitution or rules requiring the rule against duplicity to be applied. Neither is there any implication of law, or superimposed legal obligation, which requires the rule against duplicity to be observed. While ASX has an obligation to act fairly and in accord with rules of natural justice when it proffers a charge, it is possible for those obligations to be performed even if a charge is duplicitous. 96 ASX's rule which permits a member to be charged with "Prohibited Conduct" has a family similarity to rules which appear in the constitutive rules of bodies governing other occupations which permit disciplining for broadly and imprecisely stated offences like "professional misconduct". Concerning such rules, it has been held that the rule against duplicity does not prevent the bringing together, in one charge of "professional misconduct", of several instances of the one type of conduct (Peatfield v General Medical Council [1986] 1 WLR 243; Gee v General Medical Council [1987] 1 WLR 564), or of several instances of disparate types of conduct (Duncan v Medical Practitioners Disciplinary Committee [1986] 1 NZLR 513 at 546 - 547; Reza v General Medical Council [1991] 2 AC 182; Jacobsen v Nurses Tribunal Dunford J Supreme Court of NSW 3 October 1997 unreported). I propose to follow those decisions. They are consistent with the observation of Ipp AJA (with whom Mason P and Stein JA agreed) in Mitchell v Royal New South Wales Canine Council Limited (2001) 52 NSWLR 242; [2001] NSWCA 162 at 249, [50] that: "I do not suggest that the rule against duplicity that is applicable in criminal cases applies necessarily and to its full extent in disciplinary proceedings of voluntary associations." 97 A sufficient reason why is possible for ASX to bring a charge of "prohibited conduct" against Reynolds, and to rely upon a disparate variety of conduct of Reynolds, is that Business Rule 13.5.1 permits the bringing of a charge of Prohibited Conduct, and definition of "Prohibited Conduct " (set out in paragraph 29 above) is of a sufficient breadth to enable various instances of disparate types of conduct to fall within it. One indication of the breadth is that paragraph (b) of the definition includes, as one possible form of Prohibited Conduct, "consistent failure to reach reasonable standards of competence and diligence" - consistent failure involves repeated instances of falling short. Another indication of the breadth is the fact that the unsatisfactoriness of professional conduct, or the likelihood of conduct being prejudicial to the interests of the Exchange or its Participating Organisations or Affiliates, is not dependent upon only the quality of particular instances of that conduct, but also on whether those instances are isolated ones in an otherwise satisfactory career, or part of a pattern of falling short, possibly in various different ways, of proper standards. 98 The reasonableness of such a construction being put upon the definition is shown by the judgment of Cooke P, Richardson, McMullin, and Somers JJ in Duncan v Medical Practitioners Disciplinary Committee [1986] 1 NZLR 513 at 546: "a case is conceivable in which over a period a practitioner manifests in a diversity of ways, some more serious than others, such extensive disregard of his professional responsibilities that, viewed as a whole, his conduct can rightly be described as disgraceful in a professional respect... we can see nothing in the Act or in natural justice to prevent the Committee, after investigating a range of complaints, from regarding a comprehensive charge is appropriate as well as separate ones. Indeed it might be against the public interest to deny the Committee any right to present an all-embracing charge. It may be important that the appropriate professional tribunal should be able to look at the practitioner's whole attitude to practice." 99 Reynolds relied upon the decision in Mitchell v Royal New South Wales Canine Council Limited (2001) 52 NSWLR 242; [2001] NSWCA 162 to support an argument that fairness required that an association not prefer charges which were duplicitous. I do not accept that Mitchell is authority for any such proposition. Mitchell was an application to set aside a decision which had already been made by the disciplinary committee of a voluntary association. Thus Mitchell differed from the present case, where Reynolds comes to court immediately after the charges have been preferred, and before the Tribunal has had the opportunity of making a decision concerning them. The two complaints which were made in Mitchell concerning the findings of the committee were (at [11]): "(a) the committee of inquiry failed to make certain findings of fact that were essential to its finding that the appellant was guilty of misconduct. The absence of these essential findings meant that the finding of guilt was fundamentally flawed. (b) the findings of the committee of inquiry were ambiguous in material respects and thereby resulted in gross unfairness to the appellant." 100 While Ipp JA refers to the injustice which the criminal law recognised as arising from duplicity, he expressly did not hold that the rule against duplicity applied in disciplinary proceedings. Rather, the case is an illustration of how a duplicitous charge can present a potential for unfairness, which a disciplinary tribunal should guard against. The tribunal in question in Mitchell had not guarded against that potential for unfairness, and hence had fallen into error. The legal error which was found to exist was in its decision, not in the charge and which initiated its proceedings. 101 Even if the rule against duplicity had applied to ASX, that would not necessarily mean that the form of Charge 1 was bad simply because it alleged various alternatives. The three definitions of "prohibited conduct" which have applied at the various times relevant to this case include various elements in the alternative. Even under the criminal law, there could be a single offence which consisted of doing A or B, and for a prosecutor to lay a charge that an accused had done A or B did not necessarily mean that the charge was duplicitous. In ex parte Polley; Re McLennan (1947) 47 SR (NSW) 391, at 392 Jordan CJ (with whom Davidson and Street JJ agreed) held that there was no duplicity in an information alleging that a hotelier "did not keep his licensed premises free from offensive or unwholesome matters" (as required by a section of the Liquor Act 1912). He said, at 392: "But the mere use of the word "or" does not show that it is intended to create two offences. It may sufficiently appear that it is intended to create only one offence of a particular type and to supply one or more instances. Thus, where a statute prohibited a person from having a certain class of things in his possession or control, the essence of the offence so created was regarded by one learned judge as having the things in one's control, possession being instanced as a form of control, and by another learned judge as having the things, possession and control being instanced as modes of having: Hedberg v Woodhall (1913) 15 CLR 531. Where a statute made it an offence to be in charge of a motor vehicle whilst under the influence of drink or a drug, to such an extent as to be incapable of having proper control of it, it was held that there was here only one offence, that of being in charge whilst incapable, drink or drugs being instanced as causes of incapacity: Thomson v Knights [1947] 1 All ER 112. In R v Perry (1946) 174 LT 178 an Act provided a person should be deemed guilty of an offence if, in incurring any debt or liability, he had obtained credit under false pretences or by means of any other fraud. It was held that a charge that at a specific time the accused had in incurring a debt to a specified person obtained credit under false pretences or by means of other fraud was not bad for duplicity. This was presumably on the footing that the essence of the offence was fraud, false pretences being instanced as one type of fraud."

See also Paul, Duplicity in Indictments and Informations (1935) 8 ALJ 430. 102 Concluding that the rule against duplicity does not apply when ASX brings a charge against a Participating Organisation does not mean, however, that either ASX, or the NAT, is free to ignore those factors, concerned with fairness in procedure, which provide the rationale for the ongoing application of the rule against duplicity in criminal law. Reynolds is still entitled, by virtue of ASX's obligation to accord fairness in procedure, to know precisely what is that is alleged against it. It is entitled to know not only the charges that are alleged against it, but also to have proper particulars of each charge: Etherton v Public Service Board [1983] 3 NSWLR 297 (Hunt J). There is a fundamental difference between a charge, and particulars of it. A charge is the allegation that a particular norm of conduct which binds Reynolds has, on a particular occasion or over a particular period, been broken. Particulars are a statement of the precise circumstances in which it is alleged that norm has been broken. The particulars differ from the evidence by which the charge will be proved, and a reference to the evidence proposed to be relied on is not necessarily a satisfactory providing of particulars: Public Service Board of New South Wales v Etherton (1985) 1 NSWLR 430, at 432-433 (Street CJ), 434 (Samuels and McHugh JJA). At the time of the hearing before me, the process of requesting, and providing, particulars was ongoing; it is not apparent to me that it is complete. If ASX does not provide proper particulars to the Reynolds, the NAT has both the power, and the responsibility, to order that they be provided. If NAT were not to require particulars to be provided to Reynolds, when they were needed, NAT would be in breach of its own obligations under Business Rule 14.2.3(4) (set out in paragraph 31 above). As well, ASX's obligation to accord fairness in procedure requires it to give Reynolds sufficient time to be able to prepare its case. In mentioning in this judgment particular matters which are required by ASX's obligation to accord fairness in procedure, I am not stating exhaustively what that obligation of ASX requires. 103 Charge 1 relies on both conduct of Mr Struk, for which could Reynolds is said to have a vicarious responsibility, and conduct of Reynolds itself. Reynolds alleges that this mixing together of these two types of conduct is inherently unfair. I am not persuaded that this is so. There was some argument before me about whether it was legally possible for Reynolds to be held answerable, as part of the charge of Prohibited Conduct, for conduct of Mr Struk for which it bears only a vicarious responsibility, but that argument was not sufficient to persuade me that it was legally impossible for Reynolds to be held so answerable. I should make quite clear that, by saying this, then I am not expressing any view about whether it is possible for Reynolds to have such a legal responsibility -- the matter was simply not argued in sufficient depth before me. In saying that, I am in no way critical of counsel -- that particular point was one of a very large number in a hearing brought on urgently. Further, the hearing was conducted in circumstances where ASX had not clearly articulated the basis upon which it alleged that conduct for which Reynolds had only a vicarious responsibility could be taken into account. In any event the lack of emphasis on that point is readily attributable to a recognition that the task of persuading a court to intervene in proceedings in a disciplinary tribunal, to give what amounts to a summary judgment or strike out of one aspect of the proceedings in the tribunal, is a difficult one. 104 It is likely that at the hearing before the NAT, there will be legal argument about whether conduct engaged in by Mr Struk can fall within the definition of Prohibited Conduct, as that definition existed at the time of the various items of conduct of Mr Struk which are relevant. If the NAT concludes that, on the proper construction of the definition of Prohibited Conduct, conduct which Reynolds did not engage in personally, is not within the definition of Prohibited Conduct, then the situation will be that any such conduct of Mr Struk cannot be taken into account in deciding whether Reynolds has engaged in Prohibited Conduct. It is a matter for the NAT, in regulation of its own procedure, to decide whether it is more convenient to decide a preliminary question about whether conduct of Mr Struk can be conduct for which Reynolds had a vicarious responsibility which falls within the definition of Prohibited Conduct before proceeding to consider whether Mr Struk in fact engaged in the conduct which is alleged, or whether that question of law can more conveniently be decided in the course of the hearing itself. Presumably this would depend, to some extent, on whether Reynolds intended to put in issue that Mr Struk had engaged in certain of the conduct alleged against him. 105 A finding that Prohibited Conduct has occurred is one which the NAT could make only after it had decided whether or not the various individual acts which are particularised as constituents of that Prohibited Conduct had actually occurred. It well may be that some of the allegations of ASX, about those individual acts, are not made out. In the process of deciding whether Prohibited Conduct has occurred, the NAT must, if it is to go about its task properly, first decide which of the actions alleged to be constituents of the Prohibited Conduct have occurred, and then whether the overall evaluation which should be given to those actions which the NAT finds actually occurred is that they fall within the description set out in the definition of Prohibited Conduct. If the NAT were to come to the conclusion that conduct of Mr Struk for which Reynolds has a merely vicarious responsibility falls within the definition of Prohibited Conduct, the NAT would also need to decide whether the same weight should be given, for the purpose of the overall evaluation of the conduct which was found to have occurred, to conduct of Mr Struk for which Reynolds had a vicarious liability, and conduct which Reynolds had actually engaged in itself. In the argument before me ASX accepted that when there is an omnibus charge it is incumbent upon the decision-maker to identify with precision, in the reasons, which element or aspect of that omnibus charge is found against, or in favour of, the person accused (transcript 104). That concession on the part of ASX is correct. 106 When there is an omnibus charge, like the Prohibited Conduct charge, particular difficulties are presented to the tribunal concerning the way in which it should proceed concerning penalty. In McClelland v Burning Palms Surf Life Saving Club [2002] NSWSC 470; (2002) 191 ALR 759 I said, at [125]; 792: "Fair procedures, when applied by a process of construction and implication to these rules, would require that Mr McClelland have the opportunity of making submissions on both guilt, and penalty ( Stone v Law Society (NT) (1992) 108 FLR 332 at 344; Malone v Marr [1981] 2 NSWLR 894; Hall v New South Wales Trotting Club Ltd [1977] 1 NSWLR 378). However, there is no rule of law to the effect that it is not possible for there to be a single hearing which addresses both questions of guilt, and on a contingent basis, questions of penalty ( Barnes v Australian Telecommunications Commission (1989) 25 FCR 283 at 290-291.) Most civil litigation involving claims for damages accord the plaintiff a single hearing, where the quantum of damages is argued about on the contingent basis that the court ultimately decides that liability is established, but the court's procedures are not thereby shown to be unfair ones." 107 Even though there is no rule of law that is not possible for there to be a single hearing which addresses both questions of guilt and, on a contingent basis, questions of penalty, the circumstances of a particular hearing can sometimes be such that procedural fairness requires the hearings on liability and penalty to be split. In deciding whether the present case was one which required a split hearing, the NAT would need to ask itself whether the permutations of possibilities, (about findings which might be made on elements of the case on liability) are so complex that it would not be fair to expect Reynolds to contemplate all permutations, on a contingent basis, and deal with penalty at the same time as a hearing on liability. Another factor which the NAT would need to take into account is whether the undoubted need to give Reynolds the opportunity to put forward evidence concerning penalty would, in the circumstances of these charges, be fairly available to Reynolds, at a time when the findings on liability were not known. 108 There is yet another factor which the NAT will need to take into account, in ensuring that it acts fairly concerning the charge of Prohibited Conduct. It arises from the fact that the penalty regime for prohibited conduct has changed over the years. It has gone from a $25,000 fine or censuring, suspension or prohibition for a period not exceeding three months in 1990 (paragraph 11 above) to a more elaborate penalty regime, including a fine of $100,000, in 1993 (paragraph 19 above), to the present penalty regime which includes a fine of $250,000 and various other alternative penalties (paragraph 31 above). 109 Those changes in the penalty regime have coincided with changes in the definition of "prohibited conduct". Over the period from 1990 to 25 October 1993, the definition of "prohibited conduct" was conduct, "... which is not efficient, honest or fair or is otherwise conduct prejudicial to the Exchange or its Members (whether such prohibited conduct constitute or involves a breach of any of the Articles or Rules or not) is." 110 From 25 October 1993 to 13 October 1998 the definition was: "(a) conduct which amounts to impropriety affecting professional character and which is indicative of a failure either to understand or to practice the precepts of honesty or fair dealing in relation to clients or the public; (b) unsatisfactory professional conduct, where the conduct is such that it involves a substantial or consistent failure to reach reasonable standards of competence and diligence; (c) conduct which is or could reasonably be considered as likely to be prejudicial to the interests of the Exchange or its Members, and need not involve a breach of any of the Articles or the Rules or a contravention of any law." 111 After 25 October 1998, that definition was altered only by substituting, for the words "or its Members" in paragraph (c) the words "or its Participating Organisations or Affiliates". 112 Reynolds has foreshadowed that it proposes arguing that, if it were to be found guilty of prohibited conduct, the penalty should be limited by reference to the time when the acts which given rise to that finding occurred. One basis upon which Reynolds will so argue is clause 9 of the Interpretation provisions of the present ASX Business Rules (set out in paragraph 29 above). Another basis on which Reynolds proposes to put this argument is by arguing by analogy with the statutory provisions whereby if an Act increases the penalty for an offence, the increased penalty applies only to offences committed after the commencement of the provision of the Act increasing the penalty (section 55 Interpretation Act 1987 prior to 1999, Crimes (Sentencing Procedure) Act 1999 since 1999. The rather messy common-law position concerning this topic is summarised in Pearce and Geddes, Statutory Interpretation in Australia 5th edition paragraph [9.19].) To enable such an argument to be put, it will be necessary not only for the NAT to identify the times at which various facts which it has relied upon to arrive at a finding of prohibited conduct occurred, but also to apply the correct legal conclusion about whether in truth Charge 1 alleges one offence, or more than one. 113 Even though there has been an offence against the Articles or Rules of ASX called "prohibited conduct" continually since 1990, looking at the definitions of "prohibited conduct" over that period shows that the substance of the legal norm referred to by that expression has changed over that period. In my view, Charge 1 of the charges brought against Reynolds involves in substance two charges. The definition of "prohibited conduct" over the period from 1990 to 25 October 1993 contains significant differences from the definition which applied thereafter. However, the minute difference to the definition of "Prohibited Conduct" which was made in 1998 does not alter the substance of that norm. Thus, there is one charge involving the allegations set out in the first subparagraph of Charge 1, and a different, but a single, charge involved in the allegation set out in the second subparagraph of Charge 1. 114 Even though the rule against duplicity does not apply to these proceedings, it is still necessary to identify how many charges are laid, because the number of charges laid has an effect on what penalty can be imposed. Also, identification of the time period over which a single charge of an omnibus nature runs will be relevant to whether conduct which occurred in, for instance, 1990 can properly be taken into account in deciding whether Reynolds is guilty of the charge made under the second subparagraph of Charge 1. In Duncan v Medical Practitioners Disciplinary Committee [1986] 1 NZLR 513, at 547-548 Cooke P said: "In Daly v General Medical Council [1952] 2 All ER 666 the Privy Council, in a judgment delivered by Lord Porter, indicated that before making a finding as to whether conduct charged amounted to infamous conduct the Medical Disciplinary Committee were entitled to take into account, not only evidence bearing on the particular charge (adultery with a patient), but also evidence as to other matters which may or may not have been associated with similar conduct and which occurred some years earlier. We respectfully agree with Jefferies J that in the light of the later judgment of their lordships, delivered by Lord Jenkins in Felix v General Dental Council [1960] AC 704, 721 it would be unsafe to treat conduct not referred to in any charge currently before the Council as relevant in determining whether conduct charged is so serious as to be disgraceful.". 115 While I respectfully agree with those observations, they are not sufficient to dispose of the point with which I am at present concerned. In my view, if the charge which is considered is one that, in substance, over the period from 30 July 1990 to 26 October 1993 Reynolds engaged in conduct which was not efficient, honest or fair or was otherwise conduct prejudicial to the interests of ASX or its members, it is not possible for the NAT to look to conduct which occurred outside that period, in deciding whether that charge is made out. Similarly, for the purpose of the charge contained in the second subparagraph of Charge 1, is not possible for the NAT to take into account conduct which occurred outside the period 26 October 1993 to 3 August 2001. 116 Given that the penalty regime has changed during the period covered by the charge in the second subparagraph of Charge 1, it will also, it seems to me, be a part of according procedural fairness to the parties that there be findings about whether those events which occurred prior to the change in tariff regime are, in themselves, sufficient to amount to Prohibited Conduct, and also whether those events which occurred after the change in the tariff regime are, in themselves, sufficient to amount to Prohibited Conduct. 117 Another way in which Reynolds submits that Charge 1 is unfair to it is that, because of its omnibus nature, it would not be possible for Reynolds to plead guilty to the charge. While one can readily accept that Reynolds would have considerable difficulty in deciding it was appropriate to simply plead guilty to Charge 1, there is nothing to stop Reynolds from making such admissions as it sees fit of factual elements which are relevant to the charge. 118 In summary, I am not persuaded that the proffering of the charges in the form in which they have been made has involved ASX in breach of any legal obligation which it owes to Reynolds. The only way in which Reynolds alleged that ASX had not acted in good faith in charging the plaintiff with those charges is that ASX was in breach of its obligations to Reynolds, by making charges in that form. It follows that Reynolds has not succeeded in establishing that ASX had not acted in good faith in charging Reynolds with those charges. In these circumstances, there is no utility in making a declaration about whether there is, or is not, an implied term of the Business Rules of ASX that ASX would act in good faith in performing its obligations and exercising rights under the Business Rules. Abuse of Process 119 The charges brought against Reynolds extend back to July 1990 -- a period of a little over 12 years before the charges were laid. Reynolds submits that it should not be required to answer charges which are based in part on facts which are so old. It points to the limitation periods that the legislature has considered reasonable to impose in relation to some similar matters. Section 1316 of the Corporations Law and of the Corporations Act 2001 (Cth) each provided for a limitation period of five years for proceedings for a criminal offence against that Act (or, with the Minister's consent, at any later time). The usual limitation period for an action for breach of contract under the Limitation Act 1969 is six years. 120 Reynolds points out, in aid of its submission, that in relation to litigation concerning events long past, prejudice frequently occurs which is incapable of proof. In Herron v McGregor (1986) 6 NSWLR 246, at 254-255 McHugh JA (as he then was) said, in the context of a disciplinary inquiry against a medical practitioner: "The public interest requires that complaints be lodged and dealt with as expeditiously as possible... A person with reasonable ground for complaint, therefore, should pursue it with reasonable diligence. Memories fade. Relevant evidence becomes lost. Even when written records are kept, long delay will frequently create prejudice which can never be proved affirmatively. As the United States Supreme Court said in Barker v Wingo (at 532) "what has been forgotten can rarely be shown". In some cases delay makes it simply impossible for justice to be done..." 121 McHugh J returned to this theme in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, at 551: "The enactment of time limitations has been driven by the general perception that "[w]here there is delay the whole quality of justice deteriorates" ( R v Lawrence [1982] AC 510 at 517, per Lord Hailsham of St Marylebone LC). Sometimes the deterioration in quality is palpable, as in the case where a crucial witnesses is dead or an important document has been destroyed. But sometimes, perhaps more often than we realise, the deterioration in quality is not recognisable even by the parties. Prejudice may exist without the parties or anybody else realising that it exists. As the United States Supreme Court pointed out in Barker v Wingo (1972) 407 US 514 at 532 "what has been forgotten can rarely be shown" . So, it must often happen that important, perhaps decisive, evidence has disappeared without anybody now "knowing" that it ever existed. Similarly, it must often happen that time will diminish the significance of a known fact or circumstance because its relationship to the cause of action is no longer as apparent as it was when the cause of action arose. A verdict may appear well based on the evidence given in the proceedings, but, if the tribunal of fact had all the evidence concerning the matter, an opposite result may have ensued. The longer the delay in commencing proceedings, the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose." 122 The particulars which have been provided of the charges show that most of the incidents which are relied upon by ASX are ones which have occurred on or after 24 September 1996 -- that is, within the six-year period before laying of the charges which Reynolds implicitly concedes would not involve any abuse of process. However the number of incidents which are relied upon by ASX, and which occurred prior to 24 September 1996, is by no means so small that they can be ignored. Particularly is this so when the nature of the two omnibus charges contained in Charge 1 is such that the total significance of those particular incidents which are found proved needs to be evaluated -- there is at least a theoretical possibility that taking into account incidents prior to 24 September 1996 might tip the balance from activities which, considered as a whole, do not amount to Prohibited Conduct, to activities which, considered as a whole, do amount to Prohibited Conduct. 123 There are some factual matters which Reynolds relies upon in connection with its contention that for the charges to proceed concerning the older matters alleged would be an abuse of process.

124 Reynolds has had a computerised accounting system since 1989. It records each client's ledger for transactions (including purchases and sales) and the scrip movements behind such transactions. It records journal entries which cause adjustments to the account (such as payment of a dividend) and movement of money from one account to another account. Those records are fully available, from 1989 onwards. Not all records of Reynolds, however, took a computerised form. As well, there was correspondence to and from clients, written records relating to client instructions, bank statements and other banking records, trust account reconciliations where adjustments have been made by a settlements clerk, copies of orders given by clients, and money market records relating to money which was placed on deposit for clients in cash management accounts. Reynolds has occupied its current premises, in Pitt Street Sydney, continuously since June 1989. It is Reynolds' policy to keep all documents for at least seven years. Records going back to approximately 1997 are retained at the Reynolds' offices at Pitt Street. Earlier records which have been retained are in storage. Mr Julian Reynolds estimated the volume of stored records as being approximately two-thirds of the volume of the courtroom, excluding the part of the courtroom occupied by the Bench. (That evidence was given in court 8B, one of the smaller courts in the Supreme Court building at Queens Square.) The records are stored partly in archive boxes, some in bundles with labels on them which are stacked on shelving. He was unaware of there being any index to those records. No records coming into existence in the period 1995 to 1997 have been destroyed. At the time he gave evidence, Mr Reynolds expected that some pre-1995 records, of the type not maintained on the computer system, could have been destroyed, but he did not know precisely which ones. The state of his knowledge is captured by his statement in oral evidence that: "… a lot of the ancillary records we did not necessarily have. Q. You did have some of the ancillary records in respect of some of the clients did you not? A. I'm sure we did. I wouldn't be able to be specific though." 125 During the 1990's the number of people employed at Reynolds in the processing and support staff fluctuated between about 12 and 18. Prior to 1990 the manager of the back office in Reynolds was Marilyn Jarman, who left Reynolds in 1990. From 1991 to 1999 the manager of the back office was Debi Webber. She retired in 1999 and is now living at Salamander Bay, north of Newcastle. She left Reynolds on good terms. Recently someone from Reynolds has contacted her and asked if she would be prepared to co-operate and help them reconstruct documents or events whilst she was in her role as operations manager, and she agreed. Mr Julian Reynolds has no reason to believe that that offer is not still open. He also says that he suspects that she would probably not want to commit herself to any prolonged involvement. 126 From 1990 to 1998 the head of Reynolds' accounting staff was Shane Gale, who died in November 1998. From 1998 to 2000 the head of accounting was Marlene Geha. From 2000 to 2001 the head of accounting was Greg Hanlon, and from 2001 to date it has been Forbes MacKenzie. Neither Ms Geha nor Mr Hanlon remain in Reynolds' employment. However, Reynolds has not put on evidence to suggest that in practical terms they are unavailable to assist it. 127 Allen Griffiths became a scrip clerk at Reynolds in 1989. He gave evidence that the general back office practice of Reynolds during the 1990s was for the scrip clerk to pass authorities and instructions concerning client funds to the accounts clerk, Shane Gale, for payment, attached to a copy of the relevant sale contract note; the accounts clerk drew the cheque in accordance with the client's instructions and filed the authority or arranged for it to be filed. Around late 1996, Mr Griffiths moved to the front office, as a bookings clerk, and later became a SEATS operator, a position he held until the announcement of Debi Webber's pending retirement in 1999. He took over as manager of Reynolds' back office upon Debi Webber's retirement, and still holds that position. It is part of his responsibility to look after the archiving of Reynolds' records. He gives evidence, on which he was not cross-examined, as follows: "Records held in storage from prior to May 1995 are incomplete. The records relating to the changeover from the ICL computer system to the STAR system in May 1995 and records of journals from prior to May 1995 have been disposed of. Client correspondence files from prior to 1993 have been disposed of. There are archive boxes containing records from the early 1990s that are poorly or incompletely labelled. Other records from prior to 1995 have also been disposed of. There is an undated archive box stored at Waterloo labelled "authorities". I have briefly inspected this box. It contains client authorities with directions for the application of client funds, that are dated between 1996 and 1991. However, it may not contain all such authorities as many authorities of that kind have also been found filed in the correspondence files (now not retained beyond 1993) and there may be other places in which these could have been filed and stored. From the period prior to me taking over as head of operations in 1999 it is sometimes necessary for me to get information from former members of staff in order to specifically locate the whereabouts in the archive boxes of specific documents to determine where they have been filed as the filing systems adopted have changed from time to time. Shane Gale looked after the filing of internal accounts and authorities whilst she was head of accounting from 1991 to 1998. It can now sometimes be difficult to locate, identify and retrieve this material filed during this period." 128 Mr John Reynolds gives evidence, on which he was not cross-examined, as follows: "During the 1990s there were some fundamental changes to back office systems and settlement procedures at Reynolds , with the change from paper based share certificates and transfers to an electronic un-certificated holding statement system with the advent of CHESS. For many years during the transition between these systems Reynolds ran two concurrent settlement processes. As a result of this there were massive changes to the recording and record keeping systems at Reynolds. Many of these changes had to be and were implemented with great haste. One consequence of the change was that many of the older records were archived at an early time. It is now difficult to recall the details of how the recording and record keeping practices of Reynolds operated in the early 1990s. It is even more difficult or impossible to recall some of the detailed procedures that would be relevant to the particulars in paragraph 1.4.2 of the particulars to the charges. I was not personally involved in the implementation or operation of practices that would be considered in order to respect to those particulars. The level of detail required is too great and the relevant personnel are no longer with Reynolds. Adam Griffiths is the only remaining employee who was substantially involved in the back office practices. I am certain that records of client instructions for cash management transactions for much of the early 1990s have been lost or destroyed. Such records would originally have been in several different forms, only one of which was a form of authority to take subsequent verbal instructions. Other forms were in the nature of correspondence and also of notations made on the back of contract notes. The form of contract notes was constantly changed for a variety of reasons. I am unable to say when contract notes were implemented in a form that provided for written instructions for cash management account transactions." 129 Paragraph 1.4.2 of the Particulars to the Charges, referred to in this evidence of Mr John Reynolds, is an allegation that Reynolds failed to put in place and enforce adequate supervision and compliance systems and that Reynolds' supervision and compliance systems were inadequate with respect to Mr Struk, in certain identified respects. The list of those identified respects occupies two pages of typing. 130 That these charges were brought relying, in part, on conduct extending over more than twelve years before the charges were laid is something which calls for explanation. The explanation which ASX gives is that it was only following the disappearance of Mr Struk that it had any reason to investigate his activities. In the course of investigating the activities of Mr Struk, ASX was faced with the question of how it came about that Mr Struk was able to get away, for so long, with his activities. The answer which ASX has arrived at is that the internal controls and systems of Reynolds were inadequate throughout the whole of the period, so that the ongoing misconduct of Mr Struk was not detected. Further, ASX says, in the course of investigating the activities of Mr Struk, and the internal controls and systems of Reynolds, some additional matters which ASX says amount to unsatisfactory conduct on the part of Reynolds came to light. While Reynolds has not formally admitted that any activities of Mr Struk amounted to misconduct, and has denied that there were any deficiencies in its systems and controls or other improper conduct on its part, it does not (with one exception) dispute that the matters which led ASX to lay the charges came to the attention of ASX only in the course of its investigation of Mr Struk. 131 The exception to which Reynolds points is one contained in paragraph 1.5 of the particulars to Charge 1, that: "in the period from 3 September 1990 to 3 August 2001 Reynolds withdrew clients money from its trust account to make deposits into cash management accounts operated at National Mutual and Suncorp Metway on behalf of those clients. Reynolds did not obtain written authorisation from its clients prior to making these withdrawals from its trust account as required by ASX Business Rule 1.2.2 (4)." 132 Those particulars are also the sole basis for Charge 2. Reynolds says that ASX has known about the way it put money into cash management accounts on behalf of clients since the early 1990s, has done nothing about it, and indeed has led Reynolds to understand that no action would be taken concerning it. This gives rise, according to Reynolds, to both an abuse of process is now bringing a charge on that basis, and also to an estoppel against the bringing of any such charge. 133 It is because the particulars in paragraph 1.5 allege withdrawing money from the trust account without authority that Reynolds has given evidence, of the general type which I have quoted above, concerning the destruction of some client authority documents. 134 I shall deal first with the allegation of abuse of process concerning matters other than those contained in paragraph 1.5 of the particulars to Charge 1, and then deal separately with the allegation of abuse of process concerning the matters alleged in paragraph 1.5 of the particulars to Charge 1.

Abuse of process other than concerning paragraph 1.5 135 This Court has jurisdiction to stay proceedings in Tribunals which hear disciplinary matters if the continuance of those proceedings would involve an abuse of process: Herron v McGregor (1986) 6 NSWLR 246 at 251-252; Walton v Gardiner (1993) 177 CLR 378 at 391-392. The jurisdiction of the Court is not confined to cases where the Court is satisfied either that any hearing before the Tribunal would necessarily be unfair or that the proceedings in the Tribunal have been brought for an improper purpose: Walton v Gardiner (1993) 177 CLR 378 at 392, 395. Rather, the Court has power to make an order to stay proceedings "if it is satisfied that the continuation of the proceedings would be "so unfairly and unjustifiably oppressive" as to constitute an abuse of process... the court would only be so satisfied in an exceptional extreme case… [or, alternatively, the court can order a stay if] in all the circumstances, the continuation of the proceedings before the Tribunal would involve unacceptable injustice or unfairness.": Walton v Gardiner (1993) 177 CLR 378 at 392. 136 Factors to be taken into account in deciding whether the continuance of the proceedings would involve an abuse of process include

• the length of time which has elapsed between the events which are the subject of the charge and the laying of the charge (though mere lapse of time by itself is not enough to establish abuse of process: Cooke v Purcell (1988) 14 NSWLR 51 at 78 -79 per Clarke JA)
• the extent to which that that lapse of time is likely to have resulted in relevant evidence becoming unavailable (whether through death or unavailability of witnesses, loss or destruction of documents, or fading of memories), or the person charged otherwise prejudiced
• the reasons for that length of time having passed
• whether the prosecutor has delayed in laying the charge notwithstanding having knowledge of the facts which it relied upon to lay it
• the reasons (if any) for that delay on the part of the prosecutor
• the nature of the charge (so that "the delay that can be tolerated for a street crime in which there are eye witnesses is much less than for a serious complex conspiracy charge": Cooke v Purcell (1988) 14 NSWLR 51 at 79 per Clarke JA.); Burns v TAFE Commission of NSW (Spender AJ, Supreme Court of New South Wales, 15 November 1994 unreported at [76])
• whether the prosecutor has represented, either expressly or impliedly, that no action would be taken on the basis of certain facts known to it
• where the proceedings in question are disciplinary proceedings, "consideration will necessarily be given to the protective character of such proceedings and to the importance of protecting the public from incompetence and professional misconduct on the part of... practitioners": Walton v Gardiner (1993) 177 CLR 378 at 396. 137 I do not find Reynolds' submission that the limitation statutes it identifies should be applied by analogy a particularly persuasive one. There is another provision in the Limitations Act 1969 which seem to bear almost as close an analogy to the present situation as do the two limitation provisions which Reynolds relies upon, but which would lead to a different result. Under section 793B of the Corporations Act 2001 (Cth) the Business Rules of the ASX have effect as a contract under seal between the ASX and participants. During nearly all of the time when the Prohibited Conduct provisions were found in the Articles of Association of ASX, section 180 Corporations Law provided that the Constitution of a company had effect as a contract under seal between the company and each member. Section 16 of the Limitation Act 1969 provides a 12 year limitation period for a cause of action founded on a deed. While not all contracts under seal are deeds (Electricity Meter Manufacturing Co Ltd v Manufacturer's Producers Pty Ltd (1930) 30 SR (NSW) 422; Rose and Burgess v Commissioner of Stamps (SA) (1979) 22 SASR 84; McKinlay v Dodds (1984) 3 BPR 9259; Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 369) the distinction between a contract under seal which is a deed, and a contract under seal which is not a deed, is a distinction in black letter law which does not seem to be closely connected to the substantial justice of allowing a particular charge or charges to proceed. It is the substantial justice of allowing a particular charge or charges to proceed which needs to be considered, in deciding whether it would be an abuse of process for that charge to proceed. Even the five-year period contained in S 1316 Corporations Law and Corporations Act 2001 (Cth) is not a fixed one, as the Minister has power to extend it indefinitely. 138 More important, however, is the fact that limitation statutes are enacted to provide justice with a very broad brush indeed -- there is a recognition by Parliament that, in the most general way, the passing of time can affect the justice of bringing an action, and an extremely arbitrary approach is taken to the drawing of a cut-off point, applicable by reference to categories of litigation which are quite broad. The focus of the court in deciding whether an action should be stayed for abuse of process is different -- the focus is on the justice of the particular case before it being allowed to proceed. This difference in focus between that with which limitation statutes are enacted, and that which the court must adopt in deciding whether an action should be stayed for abuse of process, must necessarily mean that limitation statutes are of little, if any, help. Indeed, the only occasion for a court to consider whether an action should be stayed for abuse of process arising from lapse of time is when Parliament has failed to pass a limitation statute which would prevent the bringing of that action (or, in the case of a voluntary association or corporation, no provision has been included in the constituent rules of the association or corporation which sets a time limit for bringing charges). The applicant for a stay is saying to the court that, even though there is no limitation statute, (or, in the case of a voluntary association or corporation, no provision in the constituent rules of the association or corporation which provides a time limitation on the bringing of charges) there are particular features of the case which make it an abuse of process for the case to be allowed to proceed. 139 I recognise that in Burns v TAFE Commission of NSW (Spender AJ, Supreme Court New South Wales 15 November 1994, unreported) Spender AJ at [53] took the following approach to an allegation of excessive delay in the bringing of a disciplinary charge and against a TAFE teacher: "I find that the limitation period of six years applicable to torts and contracts provides some kind of rough, if arbitrary, guide. As a secondary consideration I intend to take into account the particular circumstance so that, even if more than six years has elapsed since the charges were brought against Mr Burns, if the event complained of is one that may be characterised as singular, precise, or vivid, it should be allowed to go forward. The third consideration is the seriousness of the allegations: serious matters should usually go forward." 140 In that case, the possibility of different limitation periods providing the appropriate analogy does not appear to have arisen, nor the different focuses involved in Parliament enacting a limitation statute, and a court staying an action, been considered. Hence I intend, respectfully, to take a different approach to the application of limitation statutes in deciding whether there is abuse of process.

141 ASX submits that the course of events from Mr Struk's disappearance to the laying of charges provides an indicator of whether there is abuse of process in pressing on with the charges. By letter dated 18 July 2001 ASX directed Reynolds to supply it with an accountant's report in relation to the activities of Mr Struk and the adequacy of Reynolds' procedures and controls. One topic which ASX required that report to address was "a reconciliation of the orders, client accounts and client statements for all clients of Mr Peter Struk from 1 January 1996 to 13 July 2001". Reynolds appointed Williams Hatchman and Keen ("WHK") to prepare the report. WHK delivered four reports to ASX and Reynolds, the last of them on 31 October 2001. Reynolds engaged their own accountants, Davis and Benson, to circularise clients of Mr Struk, and ask for notification of any irregularities there had been in dealings. Reynolds' own staff also investigated the activities of Mr Struk, and co-operated in the investigation WHK was carrying out. Mr Julian Reynolds accepted that the inquiries conducted by Reynolds and its employees were very extensive, thorough and systematic. 142 Following receipt of the four accountants reports from WHK, ASX commenced, in November 2001, a formal investigation in relation to whether Reynolds had engaged in conduct which might give rise to disciplinary or other action. It requested additional information from Reynolds. The investigation resulted in a draft Investigation Report, which was provided to Reynolds in March 2002 for comment. Reynolds provided a detailed response in May 2002. 143 Nowhere in its response to the draft report does Reynolds make any complaint of not being able to fairly deal with the allegations made against it, either through loss of relevant documents, or unavailability of relevant recollections. Indeed, Reynolds' response to the draft report includes the following passages: B10 A proper analysis of the various methods adopted by Mr Struk to engage in the misconduct complained of will indicate that over time as compliance systems changed and were improved Mr Struk's activities and his misconduct changed because of the increases in supervision and compliance. B11 There was not an inadequate system for identifying and dealing with client complaints…… The fact is that Reynolds did have a separation of function between its front and its back office. Reynolds also had in place systems to ensure that mail was received by the persons to whom it was addressed. Reynolds had a back office which dealt with accounts and transaction settlement and execution and a front office which dealt with client instructions. …. Reynolds did have a system to ensure that payments were correctly allocated to client accounts. 2.3 Reynolds did have procedure manuals or the equivalent for front and back office functions at all relevant times 2.14 -2.15 Reynolds has a system for opening mail and delivering it to addressees that has rarely failed in 30 years. 144 The making of these submissions is likely to have drawn the attention of Reynolds and its legal advisers to the information which was available to them concerning the various systems which were in place over the years relevant to the charges. The submissions were made with no hint of qualification or uncertainty. 145 As well, a theme of Reynolds' response to the draft report was that the modus operandi of Mr Struk was such that no reasonable compliance system was likely to have caught him. This is an allegation which can be put by way of defence regardless of evidence about the actual compliance systems which were in place in Reynolds office. 146 It is well recognised in the authorities that the Court can take into account the reasons for the time which has elapsed between the events which are the subject of the charge, and bringing of the charge. The scope of consideration of reasons for the time elapsing would include whether all or part of the reason is that the person complained about has, either deliberately or through his own neglect, incompetence or inadvertence kept the facts on which the charge is based hidden. In the present case, the ASX has acted promptly from the time when it first came to ASX's attention that there might be irregularities concerning the conduct of Mr Struk. In relation to those matters not involved in particular 1.5, the material upon which ASX bases its charge is material which concerns the operations of Reynolds, and was unknown to ASX until, at earliest, the second half of 2001. 147 While prejudice arising from loss of evidence is a relevant factor, any such prejudice needs to be assessed as to whether it is slight, extreme, or somewhere in between. As well, such prejudice needs to be taken into account along with other relevant factors. It is clear that all documents from 1995 onwards are still in existence. At the time this matter was heard in court, Reynolds had not worked out the extent to which there had actually been loss of relevant documents from the period prior to 1995. Hence the task of assessing the extent of prejudice arising from loss of documents cannot be carried out on a sound factual basis. That Reynolds has kept some of its documents in a way which is not well organised is not a matter which is entitled to any great weight in assessing whether it is a unjust for the charge against Reynolds to proceed, in any particular respect. 148 If further focusing on the allegations made by ASX, and further inspection of the documents still held, makes it clear to Reynolds representatives that some specific class of documents, whose relevance to a particular charge can be identified, has been destroyed, this is a proper matter to put to NAT. In relation to all allegations in the charges, ASX bears the onus of proof. The NAT would ordinarily be entitled to infer, if documents were not tendered by Reynolds to rebut any allegations made by ASX, that no such documents existed. If, however documents of a type which are relevant to a particular allegation once existed, but no longer exist, that matter can be put to the NAT as a reason why it ought not draw the inference. As well, it can be put to the NAT that, in the absence of a particular class of documents which were once in the possession of Reynolds but have now been destroyed in the ordinary course of destruction of old records, it ought not be satisfied that particular allegations are made out. In an extreme case of documents having been destroyed in the ordinary course of disposing of old records, Reynolds could submit to the NAT that a fair hearing of certain aspects of the charges was impossible, and that the NAT's obligations under Clause 14.2.3(4) of the Business Rules required it not to continue to hear certain aspects of the charges. 149 The result is that it is not clear to me to what extent relevant documentation will, ultimately, not be available to Reynolds. It is Reynolds' task to persuade the court that continuance with the charges would cause unacceptable injustice, or amount to an abuse of process. The NAT itself has powers and obligations which will enable it to deal with the consequences of documents having been lost, once the extent of the loss of documents is more clearly known. 150 I accept the likelihood that memories will have faded, particularly concerning events and practices at the beginning of the period to which the charges relate. The death of Ms Gale makes one potentially important witness unavailable. However it is not clear to me how significant this fading of memory, or unavailability of Ms Gale, will be. Particularly in relation to systems and procedures, one can often infer what a system or procedure was from looking at the documents which were produced in the course of carrying through that system or procedure. The evidence leaves me in a state of uncertainty about to what extent Reynolds will ultimately be unable to demonstrate to the NAT what its systems and procedures were, because that will depend, at least in part, on what documents remain in Reynolds' possession which can demonstrate those systems and procedures. Further, it is not clear to me to what extent generalised evidence of the systems adopted can be called from people other than Ms Gale, or is available from procedure manuals. 151 The fact that the procedures are ones for the protection of the public is a factor which favours the charges not being stayed. 152 In all these circumstances I am not presently persuaded that allowing the charges to proceed will result in an abuse of process. Para 1.5 of the particulars 153 Business Rule 1.2.2(4) of the ASX presently says: "All monies received by a Participating Organisation for or on account of any client and are required by Rule 1.2.2.(2) to be paid into a trust account shall be retained in the trust account until: (i) withdrawn for the purpose of reimbursing brokerage and other proper charges attributable to the purchase of Securities for or on account of such person; (ii) withdrawn for the purpose of reimbursing money expended in the purchase of Securities for or on account of such person; (iii) paid to the person entitled thereto or in accordance with the written directions of that person; (iv) paid to the Exchange in accordance with the provisions of the Corporations Act; (v) paid as otherwise authorised by law" 154 It has, it seems, been in a form not materially different to its present form since 1990. 155 Nearly every year during the 1990s Reynolds was subject to a compliance inspection by ASX. Each of these visits was typically of some days duration, during which time a number of aspects of the operation of Reynolds were examined and reported on by the ASX personnel. While the aspects of the business being examined changed somewhat from year to year, it almost invariably included an examination of Reynolds' trust account and Reynolds' practices relating to it. ASX's usual practice following such an inspection was to prepare a written draft inspection report, which included details of any deficiencies uncovered, and recommendations concerning what should be done about those deficiencies. That draft report was sent to Reynolds, and Reynolds was given the opportunity to correct any factual errors, and make any comments or submissions it wished concerning the draft report. ASX then produced a final version of the inspection report. 156 Reynolds at all times had a procedure whereby, rather than having a client's money lie idle in Reynolds' trust account, Reynolds would transfer it to a cash management account where the money would earn interest. The allegation made by paragraph 1.5 of the Particulars to Charge 1 is that, by not having written authority from clients to effect those transfers to a cash management account, Reynolds was in breach of Rule 1.2.2(4). Reynolds contends that ASX has at all times been aware of the procedures it adopted for the transfer of money from a trust account to a cash management account, and approved of those procedures, in consequence of which it would be oppressive for ASX to now charge a breach of the Rules concerning those transfers. 157 An ASX Draft Inspection Report dated 30 December 1991 contained the following, under the heading "Call Deposits": "Reynolds do not have a formal agreement with client. A signed letter should be sought from clients with explicit instructions to Reynolds regarding the deposit, the withdrawal and other instructions required ie interest. John Reynolds advised Reynolds deal mainly with the National Mutual Trustee Limited Cash Management Common Fund and Permanent Trustee Co Limited Common Trust Fund No 7 and that interest is always allocated direct to the specific clients account by the Depositee. Usually the accounts are titled as follows: National Mutual Trustees Limited Cash Management Common Fund - Client Name c/- Reynolds & Co Pty Limited Permanent Trustee Co Limited Common Trust Fund No 7 - Reynolds & Co Pty Limited A/c Client Name"

The "Recommendation" portion of that report included a recommendation that Reynolds advise ASX when a formal agreement with clients is in place with regard to the funds placed on deposit. 158 By a letter dated 21 January 1992 from Reynolds to ASX, Reynolds responded to that recommendation by saying: "At the time of the visit, the relevant folder containing written authorities from clients to Reynolds to transfer money market funds was not brought to the attention of your inspectors. However, this has been in place for some time. If you wish to sight this documentation, we would be only too happy to provide it." 159 On 29 January 1992 ASX received from Reynolds a draft form, of a kind suitable for it to send to its clients. It was sent under cover of a "with compliments" slip, not of a covering letter which said anything about the form. The evidence does not disclose any communication by Reynolds to ASX of the circumstances in which such a form was then used, or was proposed to be used. It is apparent from the evidence of Mr Griffiths (paragraph 127 above) that to some indeterminate extent Reynolds was authorised, by means other than these forms, by clients to effect transfers of money to a cash management account. That form was one addressed to Reynolds, which said: "In relation to any monies held in your trust account on behalf of ……………………………………………………………………………., (NAME OF CLIENT) you are hereby authorised to pay all or part of these trust monies in accordance with the oral directions of …………………………………………………………………………….. (NAME OF CLIENT AND/OR PERSON AUTHORISED BY CLIENT). Dated: ……………………………………… ………………………………………………. (Signature of Client)" 160 On 4 February 1992 ASX issued a final inspection report. It included the text I have set out earlier concerning "Call Deposits", from the Draft Report, and added: "Reynolds have since advised that they do have a letter of authority signed by clients. This authority merely authorises the Member Organisation to act according to the client's oral instructions and does not detail the instructions from the client. This could lead to a misunderstanding between the client and the officer of Reynolds receiving the instruction." 161 The conclusion of that report was that, "the Member Organisation does not appear to be in breach of any ASX Rules or provisions of the Corporations Law." That conclusion is one which could be argued to be correct so far as transfers effected pursuant to a form like that sent to ASX on 29 January 1992 are concerned. That argument would depend upon whether a payment made on an oral instruction, when the client had authorised Reynolds in writing to make payments in accordance with oral instructions, was a payment "in accordance with the written directions of that person", within the meaning of Business Rule 1.2.2(4)(iii).

I express no view concerning the correctness of that argument. 162 When an ASX inspection team visited a broker, they took a pre-prepared booklet which identified the particular areas of the broker's business which were to be the subject of the inspection. In relation to each of those areas, the booklet included some commentary, which set out the objective that year's inspection was intended to achieve so far as that area was concerned, the requirements that brokers were expected to adhere to concerning that area, and some explanatory background. There then followed a questionnaire, relating to that particular area, which members of the inspection team filled out on the basis of answers given to them by appropriate officers or staff of the broker. 163 The 1993 ASX inspection of Reynolds was carried out by Ms Manfred and Mr Johnson. One of the areas to be inspected on that occasion related to custodial operations for cash. The inspection booklet stated the objective of that inspection to be "to assist Member Organisations to identify whether they may have a problem with respect to prescribed interests under Corporations Law. Our objective is also to ensure that Brokers are performing their fiduciary obligations in a manner acceptable to the Exchange." The focus of the "background" statement in that booklet, concerning custodial operations for cash, was the risk that brokers who offered cash deposit facilities to their clients might find themselves in breach of the fundraising provisions of the Corporations Law, if those deposits facilities were offered in a way which amounted to the issue of prescribed interests or debentures without a prospectus or trust deed. 164 The questionnaire which was filled out in 1993 relating to custodial operations for cash disclosed that Reynolds placed money on deposit for approximately 250 clients, totalling approximately $2.5m at any one time. These funds were deposited in a "nominee account client", accessed by the broker only. A somewhat delphic note made in that section of the questionnaire reads: "Test 1 No application form or prospectus is supplied to client. The accounts are in the name of Reynolds & Co Pty Ltd not nominee. Withdrawals are made by Reynolds without authority from the client and also deposits except for a contract note. Test 4 Not in name nominee for National Mutual but in name Reynolds & Co Pty Ltd Client advisor can withdraw funds without reference to client or contract note. Not in name nominee but broker name." 165 The booklet records in handwriting a conclusion drawn by Ms Manfred concerning custodial operations - cash. "No prospectus to client or authority to operate account; funds in name firm not nominee client name". That same page records that "nil" disciplinary matters are applicable. 166 Ms Manfred gives evidence, which I accept, that during that investigation of cash custodial issues in 1993 she did not turn her mind to whether breaches of rules other than Business Rule 1.2.2(5) had occurred. That Rule is one which imposes obligations on a Participating Organisation when money is lent to the Participating Organisation in connection with the securities business it carries on. Her evidence in this respect is corroborated by the objective with which the investigation concerning cash custodial issues took place that year. 167 Another section of the questionnaire, concerning internal control evaluation for the trust account, included the following questions and answers: 19 Are payments made to clients or third parties with a trust account cheque? -- yes. Written authority required. Clients generally paid with a general cheque. 20 Does the broker obtain written instructions from their clients when amounts are paid from trust account to third parties? (CL S 869(1))? -- yes." 168 Section 869 of the Corporations Law has at all relevant times provided: "(1) A licensee must not withdraw money from a trust account except: (a) to make a payment to, or in accordance with the written directions of, a person entitled to the money; (b) to make a payment under section 889 to a stock exchange; (c) to defray brokerage or any other proper charge; (d) to pay to the licensee money to which the licensee is entitled, being money that was paid into the trust account but need not have been so paid; or (e) to make a payment that is otherwise authorised by any law of the Commonwealth or of this or any other jurisdiction." 169 The answer to question 20 needs to be appreciated taking into account the text of section 869(1) of the Corporations Law. 170 In another portion of the questionnaire relating to trust account, some questions were asked designed to test the knowledge of the broker's staff of the law and other requirements concerning those operations. One question and answer in that part of the questionnaire was: "5. What is required when trust monies are paid to a person other than the person beneficially entitled thereto? -- written letter by client with details of c/note if relevant. Company - under seal." 171 On 21 July 1993 ASX issued a Draft Inspection Report relating to its 1993 inspection. It included, under the heading "Breaches": "iv) Custodial Operations (Cash) - in that the Member Organisation does not obtain written authority from its Cash Management Trust clients to withdraw funds from trust account and deposit them with the Cash Management Trust. These funds could be considered loans to the broker and as no Appendix 6.1 form authority is obtained from the client, this may be in breach of Rule 1.2.2(5). This is the subject of a separate Inspection Report." 172 Under the heading "Procedural Weaknesses" that Report said: "vi) Custodial Operations (Cash) - in that the Member organisation does not provide a prospectus to its clients or obtain their authority to deposit or withdraw funds. It is also recommended that the funds be lodged in the name of Reynolds' nominee company account client rather than Reynolds & Co Pty Limited." 173 It is to be observed that it is Business Rule 1.2.2(5) which is said to be breached. 174 On 14 October 1993 Reynolds wrote to ASX, responding to the breaches and procedural weaknesses identified in the Draft Inspection Report of 21 July 1993. There was no specific response to breach (iv). Concerning procedural weakness (vi), Reynolds said: "We do have a set procedure for money market accounts which includes a signed authority. Problems arose when National Nominees of its own volition changed the name on everyone of our two hundred-odd accounts without:- (a) bringing it to our attention; and (b) our authority. They have now changed it by our direction to Reynolds (Nominees) Pty Ltd Account Client." 175 On 26 October 1993 ASX issued Reynolds with its Final Inspection Report for that year. That Report identified a breach relating to Custodial Operations (Cash), in the same terms as the Draft Report on that topic (that is, suggesting that there was a breach of Rule 1.2.2(5), but not suggesting that there was a breach of Rule 1.2.2(4).) Under the "Procedural Weaknesses" heading was the item, "vi) Custodial Operations (Cash) - in that the Member Organisation does not provide a prospectus to its clients or obtain their authority to deposit or withdraw funds. It is also recommended that the funds be lodged in the name of Reynolds' nominee company account client rather than Reynolds & Co Pty Limited. In a letter dated 14 October 1993 the Member Organisation advised that they now have a set procedure for money market accounts which includes a signed authority from the client. Funds are also now lodged in the name of Reynolds (Nominees) Pty Ltd - Account client." 176 The recommendation of the Report was, "that the identified possible breaches be progressed in a separate report to the National Adjudicatory Tribunal". 177 In fact nothing was done about charging Reynolds with any of those breaches. It is apparent, however, that the Exchange was not contemplating charging a breach of Rule 1.2.2(4) concerning the custodial operations (cash). It is also apparent that the Draft Report had recorded as a fact that Reynolds did not obtain written authority for transfers from trust account to cash management account (paragraph 171 above), and that that recording of fact was removed from the Final Report, on the basis of Reynolds' letter of 14 October 1993. 178 The topic of by what authority Reynolds transferred money from its trust account to a cash management account on behalf of a client did not emerge in any later inspections. 179 Reynolds submits that the January 1992 Report, after ASX had received the draft letter of authority, conveyed to the reasonable reader that ASX did not regard the practice of acting in accordance with that draft as satisfactory, but that it gave rise to no breach of Rule 1.2.2(4). I accept that submission. 180 It would be relevant to an evaluation of whether it would be abuse of process to now prosecute charges on the basis of Particular 1.5 if ASX's delay in making those charges arose from it having been misled by Reynolds. Reynolds submits that there was no assurance given to ASX inspectors in the 1993 interview that, "written authority was obtained by Reynolds before any trust monies were paid to anyone other than the relevant client" (which is the inference which Ms Manfred now draws from reading the text of the questionnaire). I accept that no inference to that effect can properly be drawn from question 5 in the "test of knowledge" portion of the questionnaire. However it seems to me that the answers given to questions 19 and 20 are to the effect that a written authority was required before payments were made to third parties with a trust account cheque. To the extent that authority forms like the draft set out in paragraph 159 above were relied upon (a matter which has not been gone into before me), that answer was, in one sense, true - transfers were made under cover of a written authority which authorised Reynolds to act on verbal instructions. Whether that is the relevant sense for compliance with Business Rule 1.2.2(4) is another matter. The evidence leaves me unpersuaded about whether the relevant ASX officers understood the answers to questions 19 and 20 in the particular sense which was true, or whether they assumed that the answer meant that specific written authority was given for each transfer, or indeed whether they did not advert to the distinction at all. Given that the answers to questions 19 and 20 are inconsistent with the express statement that funds were transferred from trust account to cash management account without written authority, in the draft report about the breach concerning cash custodial matters (paragraph 171 above), it seems unlikely that, at the time of the inspection, ASX's inspectors were of the view that written authority was obtained for transfers from the trust account to a cash management account. 181 It is quite possible, that when Reynolds made the statement which I have set out above in paragraph 174 above, in its letter of 14 October 1993, it was referring to the blank form of authority which had been produced in 1992. It is also quite possible, on the evidence before me, that ASX's understanding of that letter, referred to in their Final Report set out in paragraph 175 above, involved a misunderstanding of what Reynolds was seeking to convey by its letter of 14 October 1993. I would not be prepared to hold, on the strength of the evidence before me, that anyone connected with Reynolds had deliberately misled ASX concerning the procedures used for transferring money from the trust account to a cash management account. 182 However, I am not persuaded that there was, in 1993, a clear and distinct representation by ASX that it regarded the procedures which Reynolds actually used for transfer of funds from trust account to cash management accounts as satisfactory. I am not satisfied that, insofar as ASX and Reynolds mentioned those procedures in October 1993, they were not talking past each other. 183 That leaves a question concerning what ongoing effect there was of the January 1992 report. In my view, when the question of the procedures which Reynolds used for transfer of funds from trust account to cash management accounts arose in the course of the 1993 inspection, a reasonable reader would not be left, after the 1993 Final Report, with the impression I have set out in paragraph 179 above, concerning those transfers (whatever their extent might have been) made pursuant to a written authority to accept verbal instructions. Rather, a reasonable reader would be left confident that ASX had accepted the assurance in Reynolds' letter of 14 October 1993 that it had a set procedure for money market accounts which included a signed authority, but wondering just what that signed authority might be. Hence, I would not be prepared to hold that the reasonable reader of both the 1992 and 1993 correspondence between ASX and Reynolds would be of the view that ASX knew that when Reynolds transferred money from trust to cash management account it was sometimes acting in accordance with written authority forms which authorised Reynolds to act on verbal instructions, and approved of Reynolds so acting. 184 When that is the case, there is no clear and distinct representation made by ASX, and hence there is no basis for ASX being estopped. 185 In those circumstances, it is not necessary for me to consider any question of whether an estoppel of the type alleged can, as a matter of law, exist against ASX concerning disciplinary functions such as the present, when ASX has its disciplinary functions with statutory approval, and exercises them for a public purpose (cf Attorney General (NSW) v Quin (1990) 170 CLR 1 at 23, Minister for Immigration v Kurtovic (1990) 21 FCR 193 at 219-222 per Gummow J). 186 Reynolds bears the onus of persuading the Court that it would be an abuse of process for the charges to continue, insofar as they relied on paragraph 1.5 of the particulars. The circumstances I have found have not negatived the possibility that in October 1993 ASX misunderstood an ambiguous assurance by Reynolds that it had a set procedure for money market accounts which included a signed authority, and that Reynolds has mistakenly assumed that ASX was approving of money being transferred from trust account to cash management account pursuant to a written authority to accept a verbal instructions. While it would be a very relevant factor to a question of whether it would be an abuse of process, now, to charge Reynolds with the matter set out in paragraph 1.5 of the particulars if ASX had clearly led Reynolds into non-compliance with the Rules, I am not persuaded that ASX has done so. An important element in the way the topic of transfers from trust account to cash management account was ultimately dealt with in 1993 is the ambiguity of the relevant assurance in Reynolds letter of 14 October 1993. It is, ultimately, Reynolds' responsibility to obey the Business Rules; while ASX conduct inspections, that does not relieve brokers from the responsibility of complying with the Rules. In all these circumstances, I am not persuaded that it would be an abuse of process for the charges to continue to rely on the particulars in paragraph 1.5. If ASX were to make out of the facts alleged in particulars paragraph 1.5, the circumstances I have been considering in this section of the judgment would be a relevant, and significant, matter for the NAT to take into account on penalty. Orders 187 I make the following orders:

(1) Proceedings dismissed. (2) Plaintiff to pay costs of defendant. **********

Last Modified: 02/27/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.