Australian Securities and Investments Commission v Hellicar

[2012] HCA 17

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(Judgment by: Heydon J)

Australian Securities and Investments Commission
vHellicar

Court:

Judges: French CJ
Gummow J
Hayne J

Heydon JCrennan J
Kiefel J
Bell J

Legislative References:
-

Case References:
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Hearing date:
Judgment date: 3 May 2012

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Judgment by:
Heydon J

[179] On 15 February 2001 the James Hardie group of companies were haunted by a spectre -- the spectre of asbestos litigation. This had been so for many months. But on that day they hoped to banish it for good.

Events up to 14 February 2001

[180] The spectre did not directly affect the holding company of the James Hardie group, James Hardie Industries Ltd But it had enormous indirect effects. That company was a public company. Its shares were traded on the Australian Stock Exchange ("the ASX"). It had manufactured and sold asbestos products. But it had ceased to do so in 1937. Two of its wholly owned subsidiaries had manufactured and sold asbestos products much more recently. James Hardie & Coy Pty Ltd did so from 1937 to 1987. Jsekarb Pty Ltd did so from 1978 to 1987. No company in the James Hardie group manufactured or sold asbestos after 1987. However, many people made claims against the two companies last mentioned for physical injury allegedly caused by their exposure to asbestos. Directors and executives of the companies anticipated that many similar claims would be made. They faced an intractable problem. At any one moment they knew what claims had been made. They knew approximately what it would cost to meet those claims. They knew or ought to have known that over time that cost had risen faster than the rate of inflation. But they could not know of the group's asbestos liabilities which had been incurred but not yet reported. Nor could they know of liabilities which had not yet been incurred but in time would be. The time before they gained accurate knowledge could be very long. That is because some asbestos-related diseases are contracted only many years after exposure, and diagnosed later still. The state of asbestos litigation involving the James Hardie group was constantly examined at board meetings. Asbestos litigation was seen as affecting the share price. It was seen as jeopardising the long-term future of the subsidiaries. It was seen as jeopardising perhaps even the survival of the group as a whole.

[181] To some extent judicial authority had appeared to immunise James Hardie Industries Ltd from legal responsibility for its subsidiaries' asbestos liabilities. ^[173] But the board was concerned that, whether by a change in the stream of judicial authority or by legislative intervention, liability for or the responsibility to meet asbestos claims might be made to fall upon James Hardie Industries Ltd itself. Hence, as the Court of Appeal stated, James Hardie & Coy Pty Ltd and Jsekarb Pty Ltd were something of a millstone hanging around the group's neck.

[182] On 2 July 1998 James Hardie Industries Ltd issued an announcement to the ASX of its intention to form a wholly owned subsidiary in The Netherlands. That company was to acquire all the operating companies in the James Hardie group. The board had discussed the proposal on 2 June 1998. The board had approved the proposal and the announcement on 30 June 1998. However, the plan was not fully implemented: James Hardie & Coy Pty Ltd and Jsekarb Pty Ltd remained subsidiaries of James Hardie Industries Ltd.

[183] On 3 December 1999, Mr Morley, the Chief Financial Officer, signed a board paper concerning "Project Green". Project Green involved a scheme of arrangement under which existing James Hardie Industries Ltd shareholders would exchange four out of every five shares for four shares in "Newco NV, a listed company which would have full ownership of the JHNV group." The paper went on: "The remaining 1 JHIL share currently held by each existing shareholder would continue to be so held, but would own only the rump portion of James Hardie, including [James Hardie & Coy Pty Ltd]." The paper described various tax and other advantages in the plan. It also listed some "[m]ajor issues". One was "increased take-over risk" with "the asbestos litigation poison pill clearly separated from operating assets". Another was "obtaining shareholder and court approval to a Scheme of Arrangement for this corporate reorganisation, and minimising the opportunity for asbestos-related spoilers to interfere and object".

[184] At the 17 February 2000 board meeting of James Hardie Industries Ltd Mr Morley presented a paper dated 4 February 2000. It stated that one of the "major drivers" for Project Green was "the desire to effect a separation of James [Hardie Industries Ltd]'s ongoing operating assets from the legacy liabilities contained in [James Hardie & Coy Pty Ltd]." It listed as a working assumption for Project Green that "there must be a strong probability that the transactions to establish the structure can be completed, without disruption by spoilers or legal/regulatory difficulties". At the 17 February 2000 meeting, Mr Shafron, the General Counsel and Company Secretary, also presented a paper dated 4 February 2000. Part D, "Big Picture Options", discussed possible ways to assist James Hardie Industries Ltd "in separating itself from its asbestos liability."

[185] Papers or slide presentations discussing various possible solutions to the problem created by the inherited asbestos liabilities were presented to the board at its meetings held on 13-14 April 2000, 17 May 2000, 13 July 2000, 18 August 2000, 15 November 2000, 13 December 2000 and 17 January 2001.

[186] By at least this period, if not earlier, compensation of asbestos claimants had become a matter of public interest in several senses of that expression. Within the board and senior management there was a keen awareness that the success of the separation proposal depended upon the reaction of "stakeholders". The expression "stakeholders" was not limited to existing or prospective shareholders. It included asbestos victims groups, unions, plaintiffs' law firms, the Government and the media. The board and senior management saw the media as important in moulding reaction to what was done to remove asbestos liability from the group. There was, to use the words of an April 2000 board paper, "a raft of potentially hostile and emotional stakeholders". What would have made them not merely potentially but actually hostile and emotional would have been an insufficiency of funding, upon separation, to meet asbestos claims against James Hardie & Coy Pty Ltd and Jsekarb Pty Ltd. ^[174] The trial judge found that the material coming to the board from April 2000 to February 2001: ^[175]

advised that a successful communications strategy was essential to the achievement of any separation and central to that was the need to convince stakeholders that there were sufficient assets available to meet asbestos claims.

[187] The difficulty was, as a slide presentation by management to the August 2000 board meeting put it, "we cannot argue strongly that the funds left behind will be sufficient under every conceivable scenario". ^[176] Thus both the board and management were acutely conscious of the sufficiency question. They were also acutely conscious of the allied and inseverable question of how to communicate with "stakeholders" about sufficiency.

[188] On 13 December 2000, the Chief Executive Officer sent a memorandum to directors. He foreshadowed that at the 17 January 2001 board meeting, approval would be sought to establish a foundation as trustee of the shares in James Hardie & Coy Pty Ltd This was seen as removing it from the James Hardie group. The matter was urgent. Management feared that before March 2003 -- perhaps as early as July 2001 ^[177] -- a new Australian accounting standard would be adopted. That standard would compel James Hardie Industries Ltd to include in its balance sheet an undiscounted estimate of the long-term total asbestos liabilities to which it might be subject. Management had earlier feared that this could significantly affect the balance sheet. The estimate of asbestos liabilities might be more than the market was expecting. The memorandum did not omit reference to a "communications strategy". It said, optimistically, that "press releases would explain the creation of the trust as providing certainty for creditors and potential claimants that the assets of [James Hardie & Coy Pty Ltd] were irrevocably secured for their benefit".

[189] The board papers for the 17 January 2001 meeting included a paper explaining the proposal. The foundation was to hold the shares in Jsekarb Pty Ltd as well. The proposal would ensure that approximately $214 million would be available for the creditors, including future asbestos claimants, of the two subsidiaries. The paper warned that legislatures might declare James Hardie Industries Ltd or another company in the group liable for the asbestos-related liabilities. It warned that legislatures might freeze the assets of that company or those companies until undertakings about suitable financial support of James Hardie & Coy Pty Ltd and Jsekarb Pty Ltd were given. The paper contained a draft press release and draft questions and answers. It recommended that for various reasons this announcement should be made at the same time as the James Hardie group's third quarter results were announced, on 16 February 2001. The Court of Appeal found that these documents did not convey the proposition that all asbestos claims were fully funded.

[190] On 17 January 2001 the board met. Mr Baxter (Senior Vice President, Corporate Affairs) gave a presentation on the communications strategy. But the board rejected the proposal. The minutes stated:

The Chairman noted that the concept appeared to have some merit, but that the question of funding for the Company required more work. He requested management to continue developing the concept and to report progress, particularly in relation to funding, at the February meeting.

The Court of Appeal gave three reasons for the board's rejection of the proposal. The adequacy of funding was seen as a moral issue. The proposal would not be well received by stakeholders. The communications strategy as presented would not be able to neutralise potential stakeholder opposition.

[191] The board papers for the 15 February 2001 meeting proposed increased funding for the foundation. The board papers also included communications strategy documents. They said that it was not possible to assure external stakeholders that funds set aside would be sufficient to meet all future claims by victims of asbestos diseases. The Court of Appeal found that these documents did not promise full funding for asbestos claimants. The papers included a demand by the Chief Executive Officer for a decision at that meeting, on the ground that the new accounting standard would be promulgated before 31 March 2001, the end of the James Hardie group's financial year. If the proposal were approved, it would be necessary to make an announcement to the ASX.

The legal background to the events of 14-16 February 2001

[192] The issues in these appeals turn on what happened on 14-16 February 2001. In evaluating the probabilities, it is useful to bear in mind two key groups of legal obligations on James Hardie Industries Ltd.

[193] If there were no announcement to the ASX, adoption of the separation proposal would be information that was not generally available. It would also be information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of James Hardie Industries Ltd shares. By reason of s 1001A of the Corporations Act 2001 (Cth), ^[178] read with r 3.1 of the ASX Listing Rules, James Hardie Industries Ltd would have been obliged "immediately" to tell the ASX that information. Quite apart from the commercial significance of any "communications strategy", the company's legal obligations made the questions of which directors or officers of the company should prepare, approve and issue an announcement to the ASX, and what it should say, crucial.

[194] The other group of legal obligations related to the minutes of the directors' meeting of 15 February 2001. James Hardie Industries Ltd was under an important statutory duty to keep minute books in which within one month of directors' meetings it recorded the proceedings and resolutions, and ensured signature by the chair of the meeting or of the next meeting. ^[179] Further, if that duty had been complied with, s 251A(6) would have created a presumption that any resolution recorded in the minutes had been passed, rebuttable only if the contrary had been "proved". Although these duties rested on the company, in the last resort the directors were responsible for ensuring compliance with them -- particularly since the relevant resolutions to be recorded were those of the directors themselves. Non-compliance with s 251A(1) and (2) was a criminal offence punishable by fine. Further, s 1307(1) made it a criminal offence punishable by fine for an officer of a company to falsify a book affecting or relating to its affairs. Section 1308(2) provided that a person who, in a document required by the Corporations Act, made or authorised the making of a statement that to the person's knowledge was false or misleading in a material particular was guilty of a criminal offence punishable by fine. Section 1308(4) provided that a person who, in a document required by the Corporations Act, made or authorised the making of a statement that was false or misleading in a material particular without having taken reasonable steps to ensure that it was not false or misleading was guilty of a criminal offence punishable by fine.

[195] The relevance of this consideration goes beyond legal obligation. Provisions of this kind correspond with a strong feeling that accurate minutes should be kept of general meetings and committee meetings in organisations of all kinds. They include businesses; educational and medical institutions; social and sporting clubs; cultural and religious groups; professional and trade associations; trade unions; community bodies and political parties. The members of these organisations, humble as they often are, see it as important that minutes accurately record what took place. How much greater is the importance of accurate minutes in the case of directors running a large wealthy multinational public company, listed on stock exchanges, in which thousands of people had invested on the faith of a belief that its affairs were efficiently conducted?

[196] At the heart of these extraordinarily complex appeals lies a single simple issue. The minutes of the 15 February 2001 meeting recorded a resolution approving an "announcement to the ASX". They stated:

ASX Announcement

The Chairman tabled an announcement to the ASX whereby the Company explains the effect of the resolutions passed at this meeting and the terms of the Foundation (ASX Announcement).

Resolved that:

(a)

the Company approve the ASX announcement; and

(b)

the ASX Announcement be executed by the Company and sent to the ASX.

The Court of Appeal noted that this statement was "fairly prominent, even on a scan of the minutes". ^[180] The respondents submitted that the minutes in that respect were false. The Court of Appeal so found. To find that the minutes of a company listed on the ASX were false in so important a respect was a serious matter legally and commercially. It is fundamental to the running of so large and important an organisation as the James Hardie group that the records of its central decision making organ be correct, lest the foundations on which its future affairs rested be left to the vagaries of corporate memory and changing personnel.

The events of 14-16 February 2001

[197] At 7.28 pm on 14 February 2001 a significant event took place. A draft announcement was prepared ("the 7.28 pm Draft Announcement"). In it, the Chief Executive Officer said, for the first time, that the foundation would have sufficient funding for all future asbestos claims. That was a fateful and dangerous statement. It turned out to be false to a very considerable degree.

[198] On 14 February 2001 senior counsel supplied a written opinion. It contained dismal tidings: that despite James Hardie & Co Pty Ltd v Hall , James Hardie Industries Ltd could be liable for asbestos liabilities after 1980 if it were found to be directing the affairs of the subsidiaries. ^[181] This opinion confirmed one of the warnings in the 17 January 2001 board papers. The opinion was tabled at the 15 February 2001 meeting.

[199] By the time the directors assembled on the morning of 15 February 2001, it was clear that the sands in the glass were running down. The moment of truth had arrived. Management had poured the wine. Would the directors drink it?

[200] They did. Or at least according to the minutes of the 15 February 2001 meeting they did. The minutes recorded the board as implementing a "separation proposal". James Hardie & Coy Pty Ltd and Jsekarb Pty Ltd would be separated from the rest of the James Hardie group. The meeting was attended by the Chief Executive Officer (Mr Macdonald), the Chief Financial Officer (Mr Morley), the Chairman (Mr McGregor, now deceased), two representatives of James Hardie Industries Ltd's solicitors (Mr Peter Cameron, now deceased, and Mr Robb) and two outside corporate advisers (Messrs Wilson and Sweetman). It was also attended by five non-executive directors (Mr Brown, Ms Hellicar, Mr O'Brien, Mr Terry and Mr Willcox). The General Counsel and Company Secretary (Mr Shafron) was also present. Two non-executive directors, Mr Gillfillan and Mr Koffel, participated by telephone. The last eight-named persons were defendants at trial and are respondents to these appeals. Mr Baxter and Mr Harman (Financial Controller) were also present. Mr Brown, Mr Gillfillan, Ms Hellicar and Mr Koffel will below be referred to as the Hellicar respondents.

[201] The separation proposal involved the following steps. James Hardie Industries Ltd's shares in James Hardie & Coy Pty Ltd and Jsekarb Pty Ltd would be cancelled. Jsekarb Pty Ltd would issue shares in itself to James Hardie & Coy Pty Ltd James Hardie & Coy Pty Ltd would issue shares in itself to the Medical Research and Compensation Foundation ("the Foundation"). The intended effect of the separation proposal was that the only assets available to meet the claims of asbestos victims for which a James Hardie company was liable would be the assets of James Hardie & Coy Pty Ltd, Jsekarb Pty Ltd and the Foundation, together with monies paid to the Foundation under a Deed of Covenant and Indemnity entered by James Hardie Industries Ltd, James Hardie & Coy Pty Ltd and Jsekarb Pty Ltd.

[202] On 16 February 2001, James Hardie Industries Ltd announced its results for the third quarter (October-December 2000) of the financial year ending 31 March 2001. It also made an announcement to the ASX describing the separation proposal ("the Final ASX Announcement"). That announcement contained statements about the adequacy of funding to meet the claims of plaintiffs allegedly injured by asbestos. The trial judge found the statements to be false and misleading contrary to s 999 of the Corporations Act. The Court of Appeal did not disturb this finding. The trial judge found that Mr Brown, Ms Hellicar, Mr O'Brien, Mr Terry and Mr Willcox voted in favour of a resolution approving a document which Mr Baxter took to and distributed at the meeting -- "the 7.24 am Draft Announcement". Accordingly, the trial judge held that they approved the making of the Final ASX Announcement, which derived from the 7.24 am Draft Announcement. In consequence, he found that they had contravened s 180(1) of the Corporations Act. The trial judge also found that each of Mr Gillfillan and Mr Koffel had contravened s 180(1) by failing to familiarise himself with the 7.24 am Draft Announcement or by failing to abstain from voting to approve it. And the trial judge found that Mr Shafron had contravened s 180(1) by failing to advise the directors that the terms of the 7.24 am Draft Announcement about adequacy of funding were too emphatic.

[203] The Court of Appeal agreed with the trial judge's conclusions, on the assumption that the directors had approved the 7.24 am Draft Announcement. But it disagreed with the trial judge's conclusions that they had in fact approved it, despite the minute recording approval. ^[182]

The cases of the parties

[204] The respondents' case turned on two allegations. First, despite what the minutes said, no resolution approving an ASX announcement had in fact been passed. Secondly, even if a resolution approving an announcement had been passed, it was not clear what that announcement was.

[205] In contrast, ASIC's case was:

(a)

Mr Baxter took a draft announcement to the meeting -- the 7.24 am Draft Announcement.

(b)

He circulated that document at the meeting.

(c)

The directors approved the 7.24 am Draft Announcement, at least by informal resolution.

(d)

The Final ASX Announcement was not in substance different, at least in its misleading aspects, from the 7.24 am Draft Announcement, and hence the directors' approval of the 7.24 am Draft Announcement was an approval of the Final ASX Announcement.

(e)

The Final ASX Announcement involved the respondents in various contraventions of the Corporations Act.

In these appeals, steps (b), (c) and (d) are controversial -- particularly step (c).

[206] In relation to step (c), the existence of the minute recording the resolution may be said to have cast a "provisional" or "tactical" burden on the respondents. ^[183] If the minute had stood unanswered, it would have been possible, though not obligatory, for the trial judge to find for ASIC. A failure to call any evidence answering the minute would be risky. The respondents' submissions in these appeals appeared to underestimate the weight of the burden created by the minute. Five of them met the provisional or tactical burden by testifying to non-recollection of various kinds -- Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel and Mr Willcox. Three of those five stated a belief that if the 7.24 am Draft Announcement had been before the meeting, they would have remembered the event. These respondent-witnesses also relied on circumstantial evidence to negate what the minute said. Other respondents relied only on the testimony of others and circumstantial evidence. Mr Morley (Chief Financial Officer), on the other hand, thought the minute was correct. The 15 February 2001 meeting took place more than seven years before the trial. Testimony to the effect that a witness does not remember whether an event happened more than seven years ago is unsurprising. That evidence does not prove it did not happen. And even if the evidence of non-recollection is coupled with reasons why the event would probably have been remembered if it had happened, that is no decisive answer. In truth the resolution may have been put and passed during a long and complex meeting without a particular witness noticing its precise terms. If so, testimony that if the resolution had been considered the witness would not have voted for it is not necessarily convincing. There is much room for non-malevolent reconstruction. A much better guide to what probably happened is the directors' approval on 3 April 2001 of the minutes as a correct record. That was an approval of what had happened less than two months before -- while events were fresh in the directors' memories. In view of that approval for the 15 February 2001 minute, it was not irrational for the trial judge to reject the respondents' testimony as mistaken so far as it contradicted the minute. It was in the respondents' interests to cast doubt on the minute by calling independent persons who had a role in its development and were present at the 15 February 2001 meeting. None of them did so.

[207] The 7.24 am Draft Announcement is so described because Mr Baxter sent it at that time on 15 February to the author of an earlier draft. As sent, it contained "text boxes" (ie "tracked changes") indicating deletions. It is now accepted that in the form it took without the text boxes, Mr Baxter brought it to the meeting. The 7.24 am Draft Announcement said that the Foundation would have "sufficient funds to meet all legitimate compensation claims" and was "fully-funded". It was a development of the 7.28 pm Draft Announcement. It must be distinguished from a modification of it ("the 9.35 am Draft Announcement"). It must also be distinguished from the Final ASX Announcement, which embodied further changes.

[208] The trial judge found that at the board meeting, the 7.24 am Draft Announcement was distributed to all persons present, including Messrs Cameron and Robb. The Court of Appeal specifically found that this finding was correct in relation to Messrs Cameron and Robb. Though in other respects it did not endorse it, it did not specifically overturn it. Minutes of the 15 February 2001 meeting were prepared in draft before the meeting. They included reference to a resolution recording the tabling and approval of an ASX announcement in the same terms as those appearing in the final version of the minutes. An amended draft of 21 March 2001 was circulated to all directors before the next board meeting on 3-4 April 2001. At that meeting, the directors approved them as a correct record of the 15 February 2001 meeting. They were signed by the Chairman, Mr McGregor, as a correct record on some date soon after 7 April 2001. In view of the suspicion of flimsiness and doubt which the stance of the respondents in these proceedings caused to be attached to all minutes of meetings attended by directors of James Hardie Industries Ltd at this time, it should be added that the minutes of the 3-4 April 2001 meeting were themselves confirmed as correct and signed by the Chairman at the next meeting on 16 May 2001.

ASIC's case at trial

[209] ASIC's pleadings alleged that what the minutes of the 15 February 2001 meeting said had happened at the meeting -- that is, that a draft ASX announcement had been approved -- had in fact happened. The central issue at trial was whether the directors had assented to the substance of the resolution by informal means.

[210] Even in "draft" form, the minutes of the 15 February 2001 meeting presented for approval to the 3-4 April 2001 meeting constituted a business record of what had happened, admissible as an exception to the hearsay rule. Their probative force was increased by their approval on 3 April 2001. The minutes of the 3-4 April 2001 meeting also constituted an admissible business record. By the conduct it recorded, each director present on 3-4 April accepted for himself or herself the proposition that on 15 February 2001 a draft ASX announcement had been approved. Each thus made an admission to that effect. Mr Willcox was not present on 3-4 April, but his failure to protest at the contents of the draft minutes he received was capable of being treated as an admission by him as well. In evidence he accepted that he read the board papers, which included the draft minutes. He said that his practice was to spend one to three days reading board papers. Although he said it was not his practice to spend "much time" on the minutes of previous meetings, he did seek to assure himself that the essence of major decisions was recorded. He was not prepared to say that he had not read the minutes, and said that he could not recall seeing anything which was so badly misleading that he had cause to do anything about it.

[211] Further, there is documentary evidence in the form of a bill from Mr Robb for work done in the period 5 February to 27 March 2001 for, inter alia, "settling ... board minutes" for James Hardie Industries Ltd, among other institutions. The respondents did not dispute that whatever work Mr Robb charged for, he did. But Mr Willcox and the Hellicar respondents argued that the compendious description of what was done, and the extensive range of documents necessary to effect separation, mean that an inference cannot be drawn that the work for which Mr Robb charged included work which he personally did in settling the 15 February 2001 minutes. However, the board meeting of 15 February 2001 was the most important event of the period. The correctness of its minutes was also very important. Mr Robb had been involved with colleagues in drafting the minutes before the meeting. He was liaising with Mr Shafron during the relevant period. He had been at the 15 February 2001 meeting. It is therefore likely that the 15 February 2001 minutes were among the "board minutes" which Mr Robb settled. There is no evidence that he disapproved them, and that is further support for their probative weight. Mr Robb would have been aware of the need to ensure accuracy in the minutes of a major public company in the relevant circumstances.

[212] The probative weight of the minutes is also increased by the fact that there is no evidence that any member of management disapproved them, and there is evidence that several did not disapprove them. One member in the latter category was Mr Shafron, who attended both the 15 February and the 3-4 April 2001 board meetings, who was a legal practitioner, and who was the General Counsel and Company Secretary for James Hardie Industries Ltd. Others included the Chief Executive Officer and the Chief Financial Officer. The Chief Financial Officer, Mr Morley, received a draft of the minutes on 21 March 2001, and attended both the 15 February 2001 meeting and the 3-4 April 2001 meeting. He gave evidence that his "honest belief has always been that [the] minutes were accurate and correct".

[213] The probative weight of the minutes is also supported by the urgent need to make a decision about the Foundation in view of the impending change in accounting standards. It is supported by the importance of an ASX announcement which was not only required by law but was seen as a key element in a "communications strategy", the goal of which was to reassure hypercritical stakeholders that asbestos claims would be fully met. It was discontent over that matter which seems to have influenced the board not to approve the management's proposal considered on 17 January 2001.

[214] In all the circumstances, the following statement of the trial judge is scarcely surprising: "I do not accept that not one of the non-executive directors who gave evidence was aware of the recorded resolution in the draft minutes approving the [7.24 am Draft Announcement]." ^[184]

[215] The accuracy of the minutes is further confirmed by the directors' failure to protest about the terms of the Final ASX Announcement, which were in substance the same as those of the 7.24 am Draft Announcement. In accordance with the usual practice for ASX announcements, the Final ASX Announcement was sent to the directors by facsimile and email. No director complained that the Final ASX Announcement had not been approved at the 15 February 2001 meeting. Further, a telephone conference was organised for 20 February 2001 so that the directors could hear a report on the aftermath of the "separation announcement". At least Ms Hellicar participated in it. Neither she nor any other director who might have participated made any complaint about the Final ASX Announcement. These facts increase the probability that an ASX announcement was approved on 15 February 2001 after the substantive separation proposal was approved. Indeed the board's approval of the substantive proposal was not readily separable from their approval of what stakeholders were to be told about it.

[216] Finally, the probative weight of the minutes is supported by the circumstances leading up to the meeting. That meeting may have been the most significant in the company's history. The company in question was one of the largest and most important in the country. The directors knew that hostile critics would closely scrutinise the decision and company statements associated with it. They were acting in circumstances of extreme urgency. There was no legal capacity to resolve that there should be separation without announcing that fact to the ASX. There was no commercial point in resolving on separation without announcing that fact. And there was no commercial point in any announcement unless an assurance of sufficient funding for asbestos claims was given. To resolve that there should be separation without announcing any such assurance would create only damaging controversy from "hostile and emotional stakeholders" and "asbestos-related spoilers". The draft announcements in the hands of management on 14 and 15 February 2001, the last of which was taken into the meeting as the 7.24 am Draft Announcement, spoke of sufficient or full funding for all legitimate claims. Taken together, these circumstances comprised immensely powerful evidentiary support for ASIC's case.

The failure to call Mr Robb

[217] Why, then, did the Court of Appeal reject the minutes? Their Honours' reasoning centred on the failure of ASIC to call Mr Robb as a witness.

[218] The Court of Appeal said: ^[185]

As a matter of fairness ... Mr Robb should have been called by ASIC ...

The failure to call Mr Robb means more than disinclination to draw inferences favourable to ASIC's case. Failure of a party with the onus of proof to call an available and important witness, the more so if the failure is in breach of the obligation of fairness, counts against satisfaction on the balance of probabilities ... Absence of evidence from Mr Robb, whom ASIC should have called, tells against achieving [satisfaction on the balance of probabilities to the Briginshaw ^[186] standard].

... Having regard in particular to the failure to call Mr Robb, with consequences for the cogency of ASIC's case, we do not think ASIC discharged its burden of proof.

[219] If the reasoning which led to these conclusions is sound in relation to Mr Robb, it is presumably sound in relation to Messrs Wilson and Sweetman, whom ASIC did not call either. Giles JA thought so, although Spigelman CJ and Beazley JA did not. However, the matter can be examined in principle by reference to Mr Robb alone.

[220] Had the Court of Appeal not adopted this reasoning, it would probably have agreed with the trial judge's conclusion that the 7.24 am Draft Announcement had been approved. In that sense the reasoning was crucial. It is therefore desirable to examine it first.

The nature and consequences of the Court of Appeal's reasoning

[221] The Solicitor-General of the Commonwealth, who presented ASIC's oral argument in chief, described a key part of the Court of Appeal's reasoning as "an interesting agglomeration of rather disparate thoughts." A little more politely, it might be said that the Court of Appeal's reasoning is long, detailed and complex. It has two strands.

[222] The first strand rests on the idea that there was a "duty of fairness" which ASIC had allegedly breached: "Failure of a party with the onus of proof to call an available and important witness, ... if the failure is in breach of the obligation of fairness, counts against satisfaction on the balance of probabilities". The second strand may exclude the need for a breach of a duty of fairness: "Failure of a party with the onus of proof to call an available and important witness ... counts against satisfaction on the balance of probabilities". ^[187]

[223] Before examining the merits of each strand in the Court of Appeal's reasoning, it is appropriate to describe its consequences, to seek to explain those consequences, and to place the reasoning in conceptual context.

[224] The consequences of the Court of Appeal's reasoning . The Court of Appeal considered that the failure to call Mr Robb meant that the evidence which ASIC called "suffers in its cogency". ^[188] It "undermines the cogency" of ASIC's case. ^[189] It "counts against satisfaction on the balance of probabilities". ^[190] It "tells against" it. ^[191] A consequence of the reasoning seems to be that there is to be a discounting or depreciation of the evidence which has been called by reason of the failure to call other evidence.

[225] If the Court of Appeal's decision is correct, two results will certainly flow. First, penalty proceedings will increase in length and complexity, for regulatory agencies will attempt to satisfy their new duty by calling more, not less, evidence. It will be natural for them to err on the safe side. Testimonial discrimination will be replaced by testimonial bloat. Secondly, there will be immensely time-consuming debate, at trials and in appeals, about whether the duty has been satisfied. Justice must be done though the heavens fall, but these are grave evils. Are they necessary evils?

[226] Explanations for the Court of Appeal's reasoning . Is the purpose of this alleged rule punitive -- threatening regulatory agencies with a weakening of their cases to encourage compliance with a desired norm by way of both particular and general deterrence? Of course, some rules of evidence result in the exclusion of evidence for disciplinary purposes. But a rule discounting the weight of evidence which was properly obtained and which has been admitted would be a new and unusual technique in the law of evidence.

[227] Is the alleged rule some unexpressed application of the principle omnia praesumuntur contra spoliatorem -- all things are presumed against a wrongdoer? It is true that ASIC made a deliberate choice not to call Mr Robb. But ASIC was not a spoliator, unless a "duty of fairness" created a positive norm backed by this sanction.

[228] The Court of Appeal's reasoning rests in part on the idea that penalty proceedings brought by ASIC have a serious character which attracts the Briginshaw v Briginshaw ^[192] standard reflected in s 140(2) of the Evidence Act 1995 (NSW) ("the Evidence Act"). ^[193] In proceedings of that kind, the court said that it is necessary to discover the "true facts". ^[194] ASIC's case must, said the court, "represent the truth, in the sense that the facts relied upon as primary facts actually occurred." ^[195] And the "true facts" cannot be discovered unless every available witness has been called by ASIC. These references to "true facts" and "primary facts [that] actually occurred" may echo a passage in Deane J's judgment in Whitehorn v R which the Court of Appeal quoted. He said that a prosecutor represents the State and must "act with fairness and detachment and always with the objectives of establishing the whole truth in accordance with the procedures and standards which the law requires to be observed and of helping to ensure that the accused's trial is a fair one." ^[196] Deane J's language is not matched by other members of the court in Whitehorn v R . Thus Dawson J said: ^[197]

A trial does not involve the pursuit of truth by any means. The adversary system is the means adopted and the judge's role in that system is to hold the balance between the contending parties without himself taking part in their disputations." ^[198]

Further, it is not ASIC's duty to arrive at a final conclusion regarding the truth of the evidence it tenders about the facts in issue. ASIC must, after making proper inquiries, believe that it has reasonable and probable cause to institute the proceedings, and to tender the items of evidence said to support the "facts" alleged to be "true". But it is for the judiciary to decide what "actually occurred" and what "facts" are "true". Contrary to what the respondents appeared at times to submit, performance of that judicial task is not preconditioned on the performance of the same task by the executive.

[229] The conceptual context of the Court of Appeal's reasoning . The principles stated by the Court of Appeal can be placed in conceptual context by comparing them with three other principles.

[230] First, the Court of Appeal made it plain that it did not consider that ASIC had a duty to call available witnesses equivalent to that which the Crown has in a criminal prosecution. It held that its prior ruling in Adler v Australian Securities and Investments Commission ^[199] to this effect had not been overturned by Rich v Australian Securities and Investments Commission . ^[200] No application to this court was made to overrule Adler v Australian Securities and Investments Commission on this point.

[231] However, on occasion the Court of Appeal wavered between rejecting and accepting an analogy with the prosecutor's duty. The duty recognised by the Court of Appeal and the prosecutor's duty are in truth quite different. When the prosecution does not comply with its duty to call witnesses, that "may constitute misconduct and may result in a miscarriage of justice", leading to the allowing of an appeal ^[201] and, commonly, an order for a new trial. But when ASIC fails to comply with the Court of Appeal's reasoning, the consequence apparently is not an order for a new trial. It is an adjustment -- by discounting or depreciation -- of the evidence that was received in the light of the failure to call other evidence. This adjustment is to occur in circumstances where the content of the untendered evidence may be a matter of legitimate doubt and speculation.

[232] Secondly, the Court of Appeal accepted ^[202] that its reasoning went "beyond Jones v Dunkel ". ^[203] Indeed, it agreed with the trial judge's conclusion that the rule in Jones v Dunkel did not apply. As the Court of Appeal said, two consequences can flow from the unexplained failure of a party to call a witness whom that party would be expected to call. One is that the trier of fact may infer that the evidence of the absent witness would not assist the case of that party. The other is that the trier of fact may draw an inference unfavourable to that party with greater confidence. But Jones v Dunkel does not enable the trier of fact to infer that the evidence of the absent witness would have been positively adverse to that party. ^[204] The position in the United States is different. ^[205] In turn, that has evidently led to the imposition of stricter preconditions than those which exist under Jones v Dunkel . Thus McCormick says: ^[206]

The cases fall into two groups. In the first, an adverse inference may be drawn against a party for failure to produce a witness reasonably assumed to be favorably disposed to the party. In the second, the inference may be drawn against a party who has exclusive control over a material witness but fails to produce him or her, without regard to any possible favorable disposition of the witness toward the party. Cases in the second group are increasingly less frequent due to the growth of discovery and other disclosure requirements.

The Court of Appeal did not hold that the United States position should be adopted, though Mr Shafron incorrectly contended that it corresponded with Australian law. In any event, Mr Robb fell into neither of McCormick's categories.

[233] The doctrine on which the Court of Appeal relied went beyond Jones v Dunkel in causing the evidence tendered, not to be left unimproved, but to be discounted or diminished in its weight. Even if it applied, which it does not, ^[207] Jones v Dunkel does not assist the respondents. An inference that Mr Robb's evidence would not have assisted ASIC in no way damages the strong impact of the minutes. And there were no inferences from other evidence which were adverse to ASIC and thus to be strengthened by Mr Robb's absence.

[234] The third principle which is distinct from the Court of Appeal's reasoning is that the less evidence a party bearing the burden of proof calls, the more likely it is that that party will fail to satisfy its burden. That general statement is subject to qualifications. A party need not call certain types of evidence if the opposing party does so. There is no need for a party to call all available evidence, if what that party and the opposing party have called is sufficient. However, it is one thing to say that a party's failure to call available evidence prevents it from discharging the burden of proof. It is another thing to say that the failure to call available evidence results in a discounting of the evidence which was called.

[235] It is convenient now to analyse the Court of Appeal's reasoning, first by reference to the duty of fairness, and then by reference to what might be called Blatch v Archer ^[208] analysis.

The duty of fairness

[236] The respondents' attitude to the " duty of fairness ". It is controversial whether any of the respondents asked the Court of Appeal to recognise a "duty of fairness" with all the consequences the Court of Appeal attributed to it. Certainly not all of them did. In this court, the written submissions of the Solicitor-General of the Commonwealth subjected the "duty of fairness" to very damaging criticism. The respondents, perhaps detecting a depressing odour of morbidity and impending failure in the largely unsolicited bounty that the Court of Appeal conferred on them, contended that the two strands of the Court of Appeal's reasons were distinct and independent. The respondents' written submissions either did not support recourse to the duty of fairness or downplayed it. Thus counsel for the Hellicar respondents said that "the primary (but not only) framework within which to review the availability of inferences was the principle in Blatch v Archer . But counsel advanced no argument in support of the "duty of fairness". Mr Shafron adopted the submissions of the Hellicar respondents. In addition, he submitted that "the finding of a breach of the obligation of fairness did not enable any inference to be drawn that would not, in any event, have been drawn pursuant to Blatch v Archer ". Mr Shafron also submitted that the "existence of a duty of fairness [was] immaterial to the assessment of ASIC's evidentiary case [and] had no consequence beyond the ordinary application of the principle in Blatch v Archer ." Mr Terry submitted that the alleged breach of the obligation of fairness " reinforced , rather than was the sole basis of, the [Court of Appeal's] finding that ASIC had failed to establish the critical factual issue to the relevant standard." (emphasis in original) He submitted that it was not necessary, in order to decide these appeals, to determine whether ASIC failed in an obligation to act fairly. Mr O'Brien and Mr Willcox adopted the submissions of the Hellicar respondents and those of Mr Terry. In oral submissions, counsel for the Hellicar respondents went further: they declined to submit that ASIC "acted unfairly", and they declined to submit that ASIC's failure to call Mr Robb caused "a discounting of the entire case". Counsel for Mr Terry, on the other hand, said that he "does not shy away from the Court of Appeal's reasoning" on unfairness.

[237] The Court of Appeal's conclusion in relation to ASIC's duty to act fairly was avowedly novel. Their Honours said that in the context of enforcement proceedings by a regulatory agency, "the usual rules and practices of the adversary system may call for modification", ^[209] but they accepted that there "is ... no case in which the failure to call a witness has been held to constitute a breach of the obligation of fairness." ^[210]

[238] The Court of Appeal relied on three factors to support its conclusion that ASIC had an obligation of fairness, breach of which discounted and damaged the cogency of its case. The first was ASIC's obligation as a model litigant, said to be derived partly from the common law and partly from formal governmental statements. The second was the need to ensure a fair trial. The third derived from ASIC's powers and functions.

[239] ASIC as a model litigant . ASIC did not dispute that it had an obligation to conduct proceedings fairly, as a model litigant. But it argued that that obligation did not create duties on it different from those which apply to other litigants in relation to the calling of witnesses in civil proceedings. ASIC accepted that there is, in the words of Griffith CJ, an "old-fashioned traditional, and almost instinctive, standard of fair play to be observed by the Crown in dealing with subjects". ^[211] Its powers are exercised for the public good. It has no legitimate private interest in the performance of its functions. And often it is larger and has access to greater resources than private litigants. Hence it must act as a moral exemplar. ^[212]

[240] ASIC also did not dispute that it had a duty to act as a "model litigant"pursuant to the Legal Services Directions made under s 55ZF of the Judiciary Act 1903 (Cth). But App B of the Directions does not create any specific obligation of the kind which the Court of Appeal relied on. In any event, s 55ZG(3) of that Act provides that non-compliance cannot be raised in any proceeding except by or on behalf of the Commonwealth. The Commonwealth has the same rights as any other litigant. ^[213] It has the same powers to enforce those rights. ^[214] That is so whether the Commonwealth is suing or being sued. And it is so even where, as here, no other person could have brought the proceedings. ^[215] Nothing in the Legal Services Directions suggests that the Commonwealth's obligations as a model litigant extend to the question of which witnesses it should call. And nothing suggests that if the Commonwealth fails to call a particular witness, the evidentiary consequences are those that the Court of Appeal's reasoning contemplated. The Solicitor-General of the Commonwealth correctly submitted that the duty to act as a model litigant requires the Commonwealth and its agencies, as parties to litigation, to act fairly, with complete propriety and in accordance with the highest professional standards, but within the same procedural rules as govern all litigants. But the procedural rules are not modified against model litigants -- they apply uniformly.

[241] The need to secure a fair trial . The second factor the Court of Appeal relied on was the need to secure a fair trial. The Court of Appeal began with the proposition that the principle of a fair trial is one of the most basic principles of the Australian legal system. It cited numerous authorities, mainly relating to abuse of process, to that effect. But why should the principle of a fair trial entail the consequences propounded in the Court of Appeal's reasoning? The Court of Appeal noted that the principle of a fair trial is the raison d'être for the prosecutorial duty to call witnesses. But it correctly denied that ASIC was subject to that prosecutorial duty. ^[216] The Court of Appeal also stated: ^[217]

the public interest can only be served if the case advanced on behalf of the regulatory agency does in fact represent the truth, in the sense that the facts relied upon as primary facts actually occurred. It is not sufficient for the purposes of, at least, most regulatory regimes that, in accordance with civil laws of evidence and procedure in an adversary system, one party has satisfied the court of the existence of the relevant facts. The strength and quality of the evidence advanced on behalf of the state is a material consideration, which has received acknowledgement in the case law.

The first sentence must be qualified. As discussed above, ^[218] the regulatory agency need not do more, after making proper inquiries, than consider, with reasonable and probable cause, that its case represents "the truth". The second sentence is not correct: it is enough for ASIC to satisfy the court that facts sufficient for liability exist, albeit to a Briginshaw standard. As for the third sentence, the strength and quality of the evidence is material to whether the standard of proof is satisfied. But nothing more has been acknowledged in the case law.

[242] ASIC's powers and functions . To support the role of a fair trial in advancing its reasoning, the Court of Appeal presented an analysis of ASIC's powers and functions. They are extensive. But the Court of Appeal did not explain how their "cumulative effect" justified the creation of a duty on ASIC to call witnesses. As the Solicitor-General of the Commonwealth asked: "Is this an implication from the statutory scheme? Is it a rule of the common law? Is it a rule of evidence in particular?"

[243] The only provision to which the Court of Appeal referred giving ASIC any greater power in the conduct of litigation (as distinct from pre-trial information gathering powers) is s 1317R of the Corporations Act. It gives ASIC a power to "require a person to give all reasonable assistance in connection with" a declaration of contravention or a pecuniary penalty order. But s 1317R(5) prevented that power from being invoked against Mr Robb, since he had been a legal representative of two defendants. Although the Court of Appeal referred to s 1317L of the Corporations Act, their Honours did not explain how that enactment could stand with its reasoning. It provides that in hearing proceedings like the present, seeking a civil penalty, the court "must apply the rules of evidence and procedure for civil matters". The section speaks of the rules that apply in ordinary suits between ordinary civil litigants. It leaves open no room for modifying those rules where the moving party is ASIC. Until the decision of the Court of Appeal under challenge, there was no rule of evidence or procedure in civil cases imposing a duty on ASIC to call witnesses. To create that rule was not only to change the common law, but to undermine the legislative regime requiring civil proceedings as the mode of trial for civil penalties. Had the legislation made civil penalties recoverable in criminal proceedings, the prosecutor's duty to call witnesses would have applied. But it made civil penalties recoverable in civil proceedings. That excludes any duty of that kind. The background to the civil penalty regime further supports that conclusion. This case concerns the enforcement of the law against directors and officers. Before provisions providing for the recovery of civil penalties for breach of directors' duties of care and diligence were enacted in 1993, the criminal law was applied -- a fine of $200,000 or imprisonment for five years: Corporations Law, s 1311 and Sch 3. The substitution of civil penalties for criminal sanctions highlights the move away from criminal to civil procedure. This transition was later made explicit by s 1317L, which commenced in 2000. When in 2007 s 1349 of the Corporations Act removed the privilege against exposing oneself to a penalty, the relevant Explanatory Memorandum stated that that was to have "effect despite the court being required to apply the rules of evidence and procedure for civil proceedings." ^[219]

[244] ASIC's compliance with rules securing a fair trial . Section 1317L ensures that the rules of evidence and procedure in civil cases apply in actions for a penalty. In consequence, certain safeguards built into those rules ensure that trials conducted in accordance with them are fair. ASIC complied with the rules. It filed a detailed statement of claim. It provided particulars. It served affidavits and witness statements where that was possible. Where that was not possible it served lists of topics which it was expected the evidence would deal with. It provided the respondents with transcripts of all relevant examinations conducted under s 19 of the Australian Securities and Investments Commission Act 2001 (Cth), all evidence given to the Special Commission of Inquiry into the Foundation, and the whole of its database. ASIC's counsel opened its case at length. This gave the respondents a full opportunity to understand and meet that case. Mr Robb's cooperation with ASIC was incomplete. In part, this was because of James Hardie Industries Ltd and James Hardie Industries NV. Those companies prevented Mr Robb from assisting ASIC until the eve of the trial on the claimed ground that he owed them a duty of confidentiality. It was also because when Mr Robb provided material to ASIC well after the trial started, it was incomplete, unsigned and unsworn. However, ASIC waived privilege over it and provided it to all respondents. After deciding not to call Mr Robb as a witness, ASIC offered to call on a subpoena it had served on Mr Robb in order to ensure his attendance if the respondents desired it. Quite apart from that, even if Mr Robb was reluctant to confer with the respondents -- the point is controversial -- he was equally available to both sides to be called. Mr Terry submitted that ASIC had promised to call Mr Robb. Even if it had, it was not a binding promise. The respondents pointed to no detrimental reliance on the promise. No respondent appears to have made any submission to the trial judge or the Court of Appeal that the lateness of ASIC's decision not to call Mr Robb had any impact either on their own decision not to call him, or on the method by which they had cross-examined the ASIC witnesses. No respondent sought an adjournment in order to consider whether to call Mr Robb. ASIC made all its witnesses available for further cross-examination. Only one respondent accepted the offer.

[245] These circumstances reveal that the rules of evidence and procedure in civil cases as applied in these proceedings afforded safeguards securing a fair trial. They reveal that the Court of Appeal's reasoning requiring ASIC to call Mr Robb was not justified.

[246] The novelty of the Court of Appeal's reasoning is accentuated by a distinction the majority drew in relation to the content of the rule the obligation of fairness creates. Spigelman CJ and Beazley JA said: "A regulator is under no duty to call every bystander or eyewitness who could give relevant evidence." ^[220] Instead, their Honours said: ^[221]

a possibility is not sufficient to require that [a witness] be called in the exercise of a duty of fairness on the part of the regulator. What is required is some basis for an inference that there was a significant degree of probability that the witness would have relevant knowledge.

The majority pointed to no words in any case or any statute or any accepted principle justifying these nuances.

[247] The respondents' conduct of the trial . It is questionable whether, even if the Court of Appeal's reasoning is correct, it should have treated the supposed failure of ASIC to comply with it as decisive. That is because none of the respondents now seeking to uphold the correctness of the Court of Appeal's reasoning -- faintly though they do this -- advanced any submission to the trial judge during the trial proper that it either was or should be the law, until after the evidence had closed. Mr Terry applied for a stay of proceedings, during but independently of the trial proper. He did so only on the ground, not now pressed, that ASIC had the same obligation as a prosecutor to call material witnesses. And Mr Terry's submission in final address involved inviting the judge to depart from binding authority. ^[222] The decision of the Court of Appeal to uphold that authority was not challenged in this court. Had any notice been given before the evidence in the trial closed that the respondents wished the trial judge to act on the reasoning the Court of Appeal later propounded, it would have been open to ASIC to call evidence explaining why it did not call Mr Robb. A prosecutor can do this from the bar table, ^[223] but in a civil case any assertions of this kind should probably be given in evidence. ASIC's explanation must have been relevant, because the Court of Appeal's reasoning is based on fairness. Questions of fairness do not operate in the abstract, but by reference only to what is fair in the circumstances of a particular case. And ASIC was in a position to call evidence about what Mr Robb would have said. It did so in relation to Mr Terry's stay application. But there was no occasion for it to do so in relation to the main trial. Creating a new rule by judicial legislation necessarily involves legislating retrospectively. However, the pernicious effects of retrospectivity can be diminished if it is possible by evidence for the party adversely affected by the new rule to adjust to it. The respondents gave ASIC no such opportunity here. They should not be permitted to take advantage of that circumstance.

[248] What could Mr Robb have said ? The content of what Mr Robb would or could have said was relevant to whether ASIC had breached its "duty of fairness". That must be so, because the Court of Appeal stressed the need for ASIC's case to "represent the truth" ^[224] and to ensure that the proceedings "were determined on true facts". ^[225] The Court of Appeal's reasoning apparently requires that the absent witness be "an available and important witness". ^[226] On what basis could Mr Robb be called "important"? On what basis could he be described as able to give evidence relevant to a fact in issue? Why did the Court of Appeal say that he would "probably have knowledge" about what happened at the 15 February 2001 meeting? ^[227] And, to refer to the even more extreme submission of Mr Shafron, how could it be said that Mr Robb's "conduct and state of mind was of central importance to ASIC's case"? There is no material in evidence to suggest what Mr Robb knew or remembered or could have said. Apparently he did not take clear contemporaneous notes. A solicitor in his position would have attended innumerable meetings and dealt with countless clients in the period of more than seven years that elapsed between the 15 February 2001 meeting and the trial. All the directors who gave evidence said they had no recollection of events in which they were personally and directly involved. If so, why should Mr Robb, who was not a director but an independent professional, be likely to have any recollection of those events?

[249] Had Mr Robb been called, there were three mutually exclusive possibilities about what he might have said. First, he might have said that he had an actual recollection that the minutes substantially corresponded with what happened. Secondly, he might have said that he could not remember what had happened, and that refreshment of his memory from the minutes did not revive actual recollection, thus causing his evidence not to rise above the minutes. Thirdly, he might have said that the minutes were false. Neither of the first two possibilities would have assisted the respondents' case or damaged ASIC's. The respondents' submission that ASIC should have called Mr Robb so that they could have cross-examined him to suggest that the minutes were false assumes that the third possibility was correct. Mr Robb had supervised the drafting of the minutes before the meeting. He had participated in the settling of the minutes after the meeting. He had charged for these activities. If he had admitted participation in the preparation of a false minute, he would have risked admitting that he had aided and abetted criminal offences under ss 251A and 1308 of the Corporations Act: see Criminal Code (Cth), s 11.2. Cross-examiners setting for themselves the goal of eliciting admissions from Mr Robb that a most important part of the minutes was an elaborate lie and that he had aided and abetted the commission of crimes would have been possessed of the most boundless and heroic optimism. Not only would that outcome be inconsistent with the minutes and the surrounding circumstances, it would be contrary to Mr Robb's own interests in every way. It is, in fact, inherently very unlikely.

Blatch v Archer analysis

[250] The respondents' authorities . The Court of Appeal's conclusion cannot be supported by reference to the first strand in its reasoning, resting on a duty of fairness. The respondents in this Court preferred to support the outcome on the second strand. It is based on the Briginshaw qualifications to the standard of proof on the balance of probabilities in proceedings of the present kind, as reflected in s 140(2)(a)-(c) of the Evidence Act. It is also based on the following passages. In Blatch v Archer ^[228] Lord Mansfield CJ stated:

It is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.

In G v H ^[229] Brennan and McHugh JJ stated:

when a court is deciding whether a party on whom rests the burden of proving an issue on the balance of probabilities has discharged that burden, regard must be had to that party's ability to adduce evidence relevant to the issue and any failure on the part of the other party to adduce available evidence in response.

In Ho v Powell ^[230] Hodgson JA stated:

in deciding facts according to the civil standard of proof, the court is dealing with two questions: not just what are the probabilities on the limited material which the court has, but also whether that limited material is an appropriate basis on which to reach a reasonable decision.

...

In considering the second question, it is important to have regard to the ability of parties, particularly parties bearing the onus of proof, to lead evidence on a particular matter, and the extent to which they have in fact done so.

In Shalhoub v Buchanan ^[231] Campbell J stated:

failure of a party who bears an onus of proof to call an available witness who could cast light on some matter in dispute can be taken into account in deciding whether that onus is discharged, in circumstances where such evidence as has been called does not itself clearly discharge the onus. This is an application of Lord Mansfield's maxim.

In Whitlam v Australian Securities and Investments Commission ^[232] Hodgson, Ipp and Tobias JJA stated:

the principle in Briginshaw calls attention to the requirement that a party seeking a finding of serious misconduct produce adequate material to enable a court to reach a comfortable satisfaction on such a serious matter. Although this is not the same as the obligation of the Crown to call available evidence in a criminal prosecution, we think it is fair to say that a person seeking such a finding does need to be diligent in calling available evidence, so that the court is not left to rely on uncertain inferences.

And in Cook's Construction Pty Ltd v Brown ^[233] Hodgson JA stated, in an ex tempore judgment:

where a party has to prove something and prima facie has available evidence that would directly deal with the question, a court will be very hesitant in drawing an inference in that party's favour from indirect and second-hand evidence, when the party doesn't call the direct evidence that prima facie it could have called, at least unless some explanation is given, or the circumstances themselves provide an explanation.

[251] The respondents' authorities analysed . For various reasons these citations do not support the respondents.

[252] First, statements of this kind often merely illustrate the rule in Jones v Dunkel . A good example is the passage in Cook's Construction Pty Ltd v Brown , which appears in the context of a discussion of Fabre v Arenales , ^[234] a leading authority on Jones v Dunkel . Another is the passage in Whitlam v Australian Securities and Investments Commission , which counsel for Mr Terry correctly described as "a Blatch v ArcherPayne v Parker case". Another is the passage in G v H , for the proposition Brennan and McHugh JJ assert is immediately thereafter illustrated by a quotation from Weissensteiner v R ^[235] that sets out the rule in Jones v Dunkel .

[253] Secondly, not one of these passages asserts the Court of Appeal's proposition that a failure to call certain evidence leads to a discounting of the evidence actually called.

[254] Thirdly, the references to "power" and "ability" do not deal with the present circumstances. Mr Robb was not within the control or in the camp of one side rather than another. Although Mr Robb may have given ASIC more cooperation than he gave the respondents, ASIC's power over Mr Robb was no greater than that of the respondents. In fact, it may have been less: the respondents were in a position to appeal to ancient loyalties and the companionship of past struggles.

[255] Fourthly, the Court of Appeal seemed to doubt whether satisfying the standard of proof depends on the trier of fact's personal belief. Thus the Court of Appeal referred to the following statement in Rejfek v McElroy : ^[236]

proof of fraud should be clear and cogent such as to induce, on a balance of probabilities, an actual persuasion of the mind as to the existence of the fraud.

The Court of Appeal then stated: ^[237] "References in the authorities to 'actual persuasion' should be understood as equivalent to the state of 'satisfaction' ... It should not be understood as requiring a subjective 'belief'." After seeking to explain away the contrary opinions of others, their Honours stated: ^[238] "'persuasion' is not equivalent to 'belief'." Why not? In Ho v Powell Hodgson JA was stressing that fact finding on the civil standard of proof does not depend only on the comparison of probabilities in the light of limited evidence. But he was also stressing that it depends on actual persuasion -- a state of personal belief. He was saying that that may be unattainable if the materials for decision are slight. His Honour's point, as expounded in his article ^[239] cited both in Ho v Powell and in Whitlam v Australian Securities and Investments Commission , was:

mathematical probabilities can be based on most general and scanty material, so that it may be unreasonable to act upon such probabilities; and, in particular, in our adversarial system, it may be unreasonable to act upon them where the party bearing the onus of proof does not make a reasonable attempt to lead evidence concerning the particular facts.

This was not a case in which the materials for decision were slight, general or scanty.

[256] Fifthly, these cases, and Shalhoub v Buchanan in particular, merely point out that the greater the failure of a party bearing the onus of proof to call available witnesses with valuable evidence to give, the harder it is to satisfy that onus. The Court of Appeal appeared to accept as much when it said that its rule "takes matters beyond Jones v Dunkel , and beyond what was said in, for example, Shalhoub ." ^[240] The cases illustrate nothing more than Dawson J's observation: "When a party's case is deficient, the ordinary consequence is that it does not succeed." ^[241] Counsel for the Hellicar respondents put the following submission about the principle stated in Blatch v Archer :

The underlying rationale for this principle can be simply put: a party with the burden of proof is expected to meet the requisite proof. If a party provides limited evidence when further evidence was available, a tribunal of fact is entitled to consider that failure when assessing whether the party has produced evidence to satisfy the standard of proof.

That is correct. And counsel's submission that that rationale was recognised in Ho v Powell is also correct.

[257] However, counsel for the Hellicar respondents submitted that the authorities quoted above support the view that where a witness who could have been called by a party is not called "the direct evidence of that party may be more readily rejected and the inferences for which that party contends may be treated with greater reserve". (This substantially quoted Glass JA's words in his reasons for judgment in Payne v Parker . ^[242] ) They also contended that the trier of fact could make "an assessment of the overall weight of the evidence unfavourable to that party." (This paraphrased part of Austin J's reasons for judgment in Australian Securities and Investments Commission v Rich . ^[243] ) The better reading of these propositions drawn from Glass JA's and Austin J's reasons is that the weaker one party's evidence, the less adequate that party's evidence as a whole may be to meet a burden of proof. Items of evidence can have a mutually reinforcing character even if they are not strictly corroborative of each other. They can have that character even if they are circumstantial only. ^[244] But the two quoted propositions do not support or correspond with the Court of Appeal's reasoning. The Court of Appeal did not hold that, in the absence of Mr Robb's evidence, a piece of evidence capable of giving rise to uncertain inferences only was insufficient to satisfy ASIC's burden of proof. Rather it held that an exact proof -- the minutes -- should be given discounted weight and reduced cogency because of Mr Robb's absence.

[258] Members of this court have suggested that Blatch v Archer is to be understood as operating against a party in relation to facts "peculiarly within [that party's] knowledge" ^[245] -- a party who is "ordinarily ... the person best able, and ... often ... the only person able, to give information". ^[246] ASIC was not a party of that kind. No ASIC representative was present at the 15 February 2001 board meeting. All the respondents were, in person or by telephone. Mr Robb provided no signed or sworn or complete statement. What he provided to ASIC was handed on to the respondents. There was no inhibition on any respondent who wished to call him.

[259] The conditions for invoking the " principle in Blatch v Archer . The Hellicar respondents frequently referred Blatch v Archer ";to the "principle in Blatch v Archer ". But in truth the conditions for the application of the "principle in Blatch v Archer " on which they relied were not different from those necessary to invoke the principle in Jones v Dunkel . Two of those conditions were not satisfied. The present appeals thus do not afford an occasion to establish how far, if at all, Blatch v Archer stands for any wider principle.

[260] The Hellicar respondents submitted that ASIC's failure to call Mr Robb had two consequences.

[261] The first consequence was that certain inferences which ASIC allegedly wished the trier of fact to draw:

should be treated with greater reserve and indeed, ultimately, should not be drawn:

(a)

that the [7.24 am Draft Announcement] was handed to Mr Robb at the Board meeting and distributed generally to those in attendance at the Board meeting;

(b)

that there was discussion of the [7.24 am Draft Announcement] at the Board meeting in the presence of Mr Robb and that discussion led to obtaining the Board's approval;

(c)

that Mr Robb and Mr Peter Cameron accepted the "say so" of [the Chief Executive Officer] that the Foundation would be fully funded and this provided the reason why they remained silent and allowed the Board to approve the [7.24 am Draft Announcement], which they were still considering suggesting changes to; and

(d)

in late March/early April, Mr Robb engaged in a considered activity of reviewing and settling the draft minutes to ensure their accuracy, thereby lending extra credibility to them.

[262] The second consequence was that certain other inferences "should be more strongly drawn" from particular alleged facts, namely:

(a)

it is most unlikely that Mr Peter Cameron and Mr Robb would have remained silent during the Board meeting if the Board had in fact been asked to approve the [7.24 am Draft Announcement] Resolution;

(b)

it is highly likely that either or both Mr Peter Cameron and Mr Robb would have informed the Board about their conversation with Mr Shafron and [the Chief Executive Officer before the meeting discussing whether there was full funding] had there been any discussion about the [7.24 am Draft Announcement] at the Board meeting, and they would have indicated that [the company's solicitors] needed more time to consider potential changes to the draft;

(c)

it is highly unlikely that Mr Robb would have participated in making substantial changes to the [7.24 am Draft Announcement] immediately after the Board meeting without reference back to the Board if he had just observed the Board pass the [7.24 am Draft Announcement] Resolution; and

(d)

it is likely that in late March/April Mr Robb did not give the draft minutes of the Board meeting close attention; had he done so, he could not have missed the fact that they did not approve the [7.24 am Draft Announcement] Resolution.

[263] The Hellicar respondents submitted that these consequences depended on what was called "a Blatch v ArcherPayne v Parker analysis". In their submission, that analysis required three conditions to be satisfied. The first condition was that Mr Robb "would be expected to be called by ASIC rather than the defendants". The second was that Mr Robb's "evidence would elucidate a particular matter". The third was that Mr Robb's "absence is unexplained."

[264] Those three conditions are among the conditions required by the Jones v Dunkel line of cases for application of the principle they state. Payne v Parker , ^[247] which is a Jones v Dunkel case, restates them. The first two of the three conditions were not met.

[265] As to the first condition, there was no reason to expect that ASIC, rather than the defendants, would call Mr Robb. The respondents sought to draw an inference that Mr Robb would not have remained silent if the board had been asked to approve the 7.24 am Draft Announcement. As the Solicitor-General of the Commonwealth correctly submitted, the more the respondents contended that Mr Robb could not properly, and hence by inference did not, acquiesce in the approval of so misleading a document, the more they underscored the alignment of his interests with theirs. The eleventh and twelfth defendants were Mr Robb's clients. The other defendants were, or had been, directors or officers of one or both of those companies. If Mr Robb was in the camp of anyone other than himself, he was in the respondents' camp, not ASIC's. The fact that he had his own interests and those of his firm to protect did not place him in ASIC's camp.

[266] As to the second condition, there was no demonstrated reason to think that Mr Robb's evidence would elucidate any particular matter. ^[248]

[267] Hence even if the principle in Blatch v Archer , whether as manifested in the rule in Jones v Dunkel or otherwise, is as extensive as the Hellicar respondents submitted, which was questioned above, ^[249] it cannot apply to the present case.

[268] The relevant "evidence ... to be weighed" included the minutes. Those minutes were minutes of the directors' own doings. All the directors but Mr Willcox acknowledged them to be correct on 3 April. Mr Willcox's silence implicitly acknowledged their correctness. ASIC contended that the minutes were correct. It was in the respondents' power to have contradicted the minutes, and in a sense some of them did so. It was in the power of both ASIC and the respondents to call as witnesses other persons present in order to prove that what the minutes said was either correct or incorrect. Why should ASIC's failure to call any or all of those persons diminish the force of the minutes? The respondents never answered that question convincingly.

[269] The Court of Appeal's reasoning in relation to the duty of fairness and its reasoning in relation to Blatch v Archer have been considered separately. Neither supports its conclusion. Nor is that conclusion supported if the two are considered in combination.

[270] ASIC submitted, in effect, that the Court of Appeal's reasoning regarding the calling of Mr Robb was crucial to its decision to set aside the trial judge's conclusion that the board had approved the 7.24 am Draft Announcement and hence to dismiss the proceedings. There is force in this submission. ASIC then submitted that accordingly there was no reason why the trial judge's finding should not be restored. However, with skill and earnestness, the respondents advanced various arguments for the view that the trial judge's conclusion was unsustainable independently of Mr Robb's position.

The nature of the respondents' case in answer to the minutes

[271] The relevant minute was hearsay evidence that a resolution approving a proposed ASX announcement had been passed. But though hearsay, it was primary evidence. It was, in a sense, "testimonial" evidence, not circumstantial evidence. It depended on inference as little as if the persons who settled the minutes and were present at the 15 February 2001 meeting had given firsthand testimony of what they had heard and seen.

[272] Apart from their evidence about non-recollection, the respondents met that primary non-circumstantial evidence by relying on various forms of circumstantial evidence from which they wished inferences to be drawn. They did so with a particular perception of ASIC's case in mind. ASIC's case, the respondents correctly submitted, was that directors approved an announcement corresponding with a particular text which had been tabled. The respondents submitted that ASIC had not proved that any "announcement to the ASX" had been tabled at the meeting. They submitted that the directors' approval of some themes which management was at liberty to communicate to the ASX in whatever form it chose was one thing. Approval of an "announcement to the ASX" was another. The former did not establish the latter. They submitted that settling and approving an announcement was not the business of the meeting. They submitted that the circumstances made it unlikely that the 7.24 am Draft Announcement was circulated at the meeting. They submitted that the conduct of Messrs Cameron and Robb during the meeting was inconsistent with any approval being given to an announcement. ^[250] They submitted that the contradictions between the 7.24 am Draft Announcement and other contemporaneous materials made its approval unlikely. They submitted that the conduct of management in making changes to the 7.24 am Draft Announcement as it evolved into the Final ASX Announcement reveals a belief that it was at liberty to do so, and that that belief was inconsistent with a resolution approving the 7.24 am Draft Announcement. They submitted that the minutes could be ignored. The many factual errors in them indicated that neither those who helped to prepare them -- the Chairman, the Chief Executive Officer, others in management, Mr Robb -- nor the directors who approved them on 3 April checked them with sufficient care to pick up the fact that no resolution approving any announcement had been passed.

[273] It is now necessary to examine these arguments one by one.

Was the key business of the meeting the decision on separation?

[274] The Hellicar respondents submitted that the directors came to the 15 February 2001 meeting knowing that the key business was the decision on separation. They also came with information about a proposed communications strategy which would necessarily include an ASX announcement, but without being given its terms or told that they would be asked to approve it at the meeting.

[275] The weakness in the submission is that the decision on separation and the communication of that decision to the ASX were inseparably linked. There was no sense in undertaking separation unless its virtues were effectively communicated. What happened at the meeting could, of course, cure the non-enclosure of any draft announcement with the papers.

[276] Approval of a draft ASX announcement was part of the key business of the meeting for the following reasons. On 22 January 2001 a management preliminary work plan had contemplated that a press release would be "workshopped" before the next board meeting. Management also recommended to the board that an announcement be made on 16 February 2001 to coincide with the third quarter profit announcement and "establish a firm on-the-record position which we can then defend as required." As early as 7 February 2001 Mr Robb and other solicitors associated with him were working on draft minutes containing a minute about an ASX announcement. This work involved several drafts, all containing that minute. The last of these drafts before the meeting was sent by Mr Robb to Mr Shafron at 8.05 am on 15 February 2001. Thus both anticipated that there would be approval of an announcement at the meeting, even though no draft of it was in the papers for the meeting and no draft had been checked by senior management or advisers.

Was anything tabled?

[277] When Mr Baxter joined the meeting soon after it started, he had with him the 7.24 am Draft Announcement. There were concurrent findings of the trial judge and the Court of Appeal to this effect. Those findings were copiously supported by evidence. The respondents do not now dispute those findings.

[278] The Hellicar respondents submitted that Mr Baxter had good reasons for not "tabling", ie handing out or circulating, the 7.24 am Draft Announcement at the meeting. One good reason was that since he had not followed the standard procedure in preparing it, it was not ready to be issued. Another was that it made claims inconsistent with other material in the papers for the meeting. This latter point overlaps with a later argument and will be dealt with in relation to it. ^[251] The respondents contended that the James Hardie group's standard procedure for preparing ASX announcements involved approval by management or legal advisers, UBS Australia, the Chief Executive Officer and perhaps the Financial Controller before referral to the board. This had not happened before the 15 February 2001 meeting. However, as just indicated, ^[252] draft minutes prepared before the meeting with Mr Robb's input anticipated that there would be a resolution approving a draft announcement, even though its terms were not yet known. The procedure adopted was not unreasonable in view of the extreme urgency of what was being done. The procedure adopted does not point against the passage of a resolution as the minutes record. The same is true of a procedure which ASIC referred to but which the Hellicar respondents denied. Under that procedure, the Chief Executive Officer and the Chairman could change an approved announcement unless the Chairman thought it appropriate to return it to the board. Even if that procedure existed, non-compliance with it does not, in the circumstances of haste involved, point against a resolution. The need for haste also explains the failure to obtain consent from third parties mentioned in the ASX announcement.

[279] There is positive evidence that Mr Baxter tabled the 7.24 am Draft Announcement. Mr Robb's firm produced two identical copies of that document on discovery. BIL Australia Pty Ltd, an institutional shareholder of James Hardie Industries Ltd associated with Mr O'Brien and Mr Terry, also produced a copy of the 7.24 am Draft Announcement. There was no satisfactory explanation given for the latter circumstance except distribution of the 7.24 am Draft Announcement at the meeting. BIL Australia Pty Ltd cannot have received it before it was created at 7.24 am. It is unlikely to have been sent to BIL Australia Pty Ltd or people associated with it after the meeting, for example through direct communication between the Chief Executive Officer and Mr O'Brien. That is because during the meeting the 9.35 am Draft Announcement superseded it. And, contrary to the Court of Appeal's suggestion (which ASIC claimed and Mr Terry conceded had not been raised before that court), neither Mr Terry nor Mr O'Brien was likely to have received it during the Jackson Inquiry in 2004. They had ceased to be directors of James Hardie Industries Ltd by May 2001. There is no evidence that they received any documents during that inquiry. Their counsel do not appear to have cross-examined Mr Baxter to suggest that he had delivered the document to them after the meeting. The five directors who gave evidence said that they did not retain their board papers: they either left them behind or shredded them. James Hardie Industries Ltd did not produce any copy of the 7.24 am Draft Announcement, but that was because its practice was to destroy drafts of documents sent to the ASX and to retain only the final version. Its practice was also to destroy board papers left behind by directors. Thus James Hardie Industries Ltd cannot have sent it to BIL Australia Pty Ltd after the Final ASX Announcement on 16 February 2001. Further, as early as 1.11 pm on 15 February 2001, 21 minutes after the end of the board meeting, the draft announcement being circulated within James Hardie Industries Ltd was the 9.35 am Draft Announcement. Mr Cameron, Mr Robb and people from BIL Australia Pty Ltd are unlikely to have obtained the 7.24 am Draft Announcement after the meeting, since that version was no longer the operative document.

[280] Mr Cameron, Mr Robb, Mr Terry and Mr O'Brien received the 7.24 am Draft Announcement at the meeting. The other persons present therefore probably also received it. It was thus correct for the trial judge to find that it had been "tabled". It may not have been physically tabled by the Chairman. But it was tabled by being handed out with his acquiescence or on his suggestion, as Ms Hellicar said was normal practice.

Mr Cameron's doubts

[281] The respondents contended that there was evidence that just before the board meeting Mr Cameron and Mr Robb raised a question with the Chief Executive Officer and Mr Shafron about whether the actuarial basis of the separation proposal was sound. (Mr Shafron advanced arguments against his participation in the conversation. It is not necessary to resolve this question, in relation to which there is no notice of contention.) The Hellicar respondents submitted that it was most unlikely that these solicitors would have allowed the meeting to approve the 7.24 am Draft Announcement without interrupting and raising their concern. Their silence at the meeting suggested that they did not believe that any announcement was receiving final approval at the meeting.

[282] This is not a sound submission. First, the idea that solicitors, even solicitors as respected as Mr Cameron and Mr Robb, were at liberty to interrupt the business of the meeting would depend on showing that they had been instructed to do this or that it was accepted practice at James Hardie Industries Ltd board meetings. In response to a request for evidence along these lines, counsel for Mr Terry pointed to evidence of the regard in which the solicitors were held and to evidence of what Mr Cameron said at the 17 January 2001 meeting. But this did not prove any relevant instruction or practice. Secondly, the Chief Executive Officer assured the solicitors that the Foundation would be fully funded. He repeated that assurance during the 15 February 2001 meeting under questioning from Mr Brown. It is likely that the solicitors accepted what the Chief Executive Officer said. They did not remove all references in their copies of the 7.24 am Draft Announcement to the claim that the Foundation was fully funded. It was reasonable for the solicitors to accept what the Chief Executive Officer said: he was likely to have much greater knowledge of the technical actuarial issues than they did.

Contradictions between 7.24 am Draft Announcement and other material

[283] Mr Terry submitted that it is most unlikely that the board would have approved a public statement that conveyed an impression that all claimants would certainly recover, as the 7.24 am Draft Announcement did. Certainty of recovery for all claims was at odds with the following material. First, the communications strategy set out in the papers for the 15 February 2001 meeting denied that certainty of that kind was possible. Secondly, in the previous year's accounts the public had been informed that the James Hardie group could not reliably measure its exposure to asbestos-related liabilities. Thirdly, the Chief Executive Officer had told the board in his 13 December 2000 memorandum: "it is not possible today to accurately estimate the total likely asbestos cashflows". Fourthly, it was submitted that the handwritten amendments to the copies of the 7.24 am Draft Announcement pared back representations of certainty to "an expected sufficiency based on an actuarial estimate". Mr Terry further submitted that it is most unlikely that Mr Cameron and Mr Robb would have remained mute had the board formally resolved to approve the 7.24 am Draft Announcement.

[284] These submissions fail. As already noted, under Mr Brown's questioning regarding an impending public announcement, the Chief Executive Officer said at the meeting that he was "sure" there would be sufficient funds in the Foundation. ^[253] No-one disagreed. The trial judge found that Mr Brown was dissatisfied with the communications strategy stated in the 15 February 2001 meeting papers, as he had been in relation to the proposed questions and answers and the draft ASX press release provided with the 17 January 2001 meeting papers. He was dissatisfied because they did not convey certainty of funding. Accordingly, as the trial judge found, Mr Brown welcomed the proposed communications to the market, including an announcement to the ASX, which did indicate certainty of funding. The significance of Mr Cameron's and Mr Robb's silence at the meeting was discussed above. ^[254]

Correlation evidence

[285] The Hellicar respondents submitted that while Mr Brown gave evidence that "messages" suitable for dispatch to the market were discussed and approved in general terms, they were messages which management could implement as it thought fit. The board's approval of the messages did not amount to approval of an announcement along the lines of the 7.24 am Draft Announcement.

[286] Mr Brown testified that the Chief Executive Officer gave an assurance at the meeting that the Foundation would be fully funded and that any announcement would communicate that message. He also testified that part of the communication to the market would be an announcement to the ASX. He also testified that it was "likely" that the Chief Executive Officer or Mr Baxter stated that various messages would be communicated. Each message corresponded with part of the 7.24 am Draft Announcement. Mr Koffel gave evidence that these statements could have been made. On the basis of this evidence, the trial judge found that either the Chief Executive Officer or Mr Baxter had made statements to that effect at the meeting. His Honour found there was a "strong correlation" between these statements and the 7.24 am Draft Announcement. ^[255] The Court of Appeal overturned that finding. It held that the correlation was only "weak". ^[256] It described Mr Brown's evidence as involving speculation, not recollection. However, the evidence does appear to have been based on recollection, even if it was not a recollection which extended to the "specific terms" of what was said. In the last resort, what Mr Brown meant was a matter of judgment. It is the type of judgment which turns on nuance. Truth can lie in a nuance. ^[257] The trial judge saw and heard Mr Brown give evidence for five days. His possession of that advantage makes the assessment of nuance which led to his finding preferable to the Court of Appeal's rejection of it.

[287] The Court of Appeal also considered that Mr Brown's impressions may have derived not from a discussion about the 7.24 am Draft Announcement, but from a slide presentation at the meeting. Mr Brown excluded that possibility. Although Mr Terry submitted to the trial judge that Mr Brown's denial was incorrect, the trial judge was entitled to accept it.

[288] The Court of Appeal also marginalised Mr Brown's evidence by questioning whether management would address the meeting by reference to the 7.24 am Draft Announcement when the same points were made in the slides. But why could it not do so? Mr Baxter had distributed the 7.24 am Draft Announcement. What was to be said to the ASX and the market had been a matter on which the 17 January 2001 proposal had foundered. It was legally necessary and commercially fundamental that something be said. It was urgent that something be said. Mr Brown regarded the messages in the slides as insufficient to remove shareholder concern about sufficiency of funding. Further, Mr Brown remembered the management speech as using the phrases "fully funded" and "certainty". He said they were "much clearer" than the phrases used in the slide presentation ("effectively resolved its asbestos liability", "expects to have enough funds", "much greater certainty").

The significance of the changes to the announcement

[289] As the 7.24 am Draft Announcement evolved into the 9.35 am Draft Announcement and then eventually into the Final ASX Announcement, management made changes, in consultation, to some extent, with Mr Cameron and Mr Robb. ^[258]

[290] The respondents relied on the extent of the changes as evidence that no resolution had been passed. It is sufficient to say that most of them concerned trivial matters involving variations of expression and the correction of minor errors. The stated value of the Foundation's assets changed from $284 million to $293 million. This was not de minimis, but it was not significant. As the trial judge found, the Financial Controller of James Hardie Industries Ltd made the change in order to ensure that the amount corresponded with the extraordinary loss to be entered in the books of that company, which had to be determined at a risk-free discount rate. Another change centred on the introduction of the word "anticipated". Thus the 7.24 am Draft Announcement said: "The Foundation will have sufficient funds to meet all legitimate compensation claims". The Final ASX Announcement said: "The Foundation has sufficient funds to meet all legitimate compensation claims anticipated " (emphasis added). Contrary to what Mr Baxter thought, this did not change the meaning of the paragraph and it was not significant. Each version spoke of the future, but using different words. The net effect of the changes was neutral. The same is true of another change of that kind to the eleventh paragraph. The 7.24 am Draft Announcement and the Final ASX Announcement contained the same misrepresentations. Some of the changes concerned those misrepresentations, but they did not alter the fundamental meaning of what was said.

[291] Mr Baxter's evidence was that it was open to management or to Mr Robb's firm to make changes to the announcement, so long as the Chief Executive Officer was consulted, and that he would expect the Chief Executive Officer to consult the Chairman, who would decide whether to consult the rest of the board. It was not clear whether the respondents' argument was that the making of any change to the 7.24 am Draft Announcement showed that no resolution approving it had been passed. If so, it was unrealistic. Changes which were not substantial could be permissible, unless there were evidence of a contrary practice within James Hardie Industries Ltd. Too substantial a departure from the letter of a resolution might attract later criticism and censure by members of the board. But even that would not negate the proposition that the resolution approving the 7.24 am Draft Announcement had been passed. And it would not negate the proposition that the misrepresentations in the Final ASX Announcement had thereby been approved.

Work in progress

[292] Mr Shafron and the Hellicar respondents relied on the Court of Appeal's characterisation of the 7.24 am Draft Announcement as "a work in progress, with subsequent changes of significance", including those made by Mr Robb and his firm. ^[259] One flaw in this argument is that the changes were not relevantly significant. Another is that the submission attributes an inconsistency to the directors. They placed the full force of their testimony behind an absence or shortage of discussion. It is inconsistent to accept that there was substantial discussion, but only of a work in progress, particularly since the work in question had to be completed within the next 24 hours. Thirdly, the minutes are completely inconsistent with there being no more than indecisive discussion of a work in progress. Fourthly, there is in fact no testimonial support for the submission.

[293] Mr Shafron relied on various items of his own conduct as capable of supporting the inference that he did not believe the board had approved the 7.24 am Draft Announcement. The items in question are at best ambiguous. Mr Shafron's state of mind might more convincingly have been established by direct testimony. But he did not testify. And there is other conduct on his part pointing strongly against any belief that the board treated the matter as a work in progress only. He received drafts of the minutes recording the relevant resolution before the meeting, and they did not speak of a "work in progress". He circulated a draft of the minutes after the meeting, still recording the resolution in that form. He supervised the sending of that draft to the directors. And he was present when the directors approved it as correct at the 3-4 April 2001 meeting.

Errors in the minutes

[294] The Court of Appeal accepted submissions by the respondents that there were errors in the minutes of the 15 February 2001 meeting, both in relation to the separation proposal and in relation to other matters. Those errors were certainly numerous. But they lack importance in these appeals. They do not suggest that the minute recording the tabling and approval of the 7.24 am Draft Announcement was false. As ASIC submitted, the errors are qualitatively different from the wholesale inclusion of a resolution that never was. The former were points of detail which might escape attention on a re-reading of the draft minutes. The latter would be glaringly obvious to any reader -- and to at least one of the Chairman, the Chief Executive Officer, Mr Morley, the non-executive directors, Mr Shafron and Mr Robb.

[295] The respondents seek to infer from the errors in the minutes as a whole that the minute recording the tabling and approval of the 7.24 am Draft Announcement is false. There is a problem in that reasoning. If it were sound it would follow that everything else in the minutes is false and the "separation proposal" never took effect. The respondents' enthusiasm for attacking the accuracy of the minutes in detail brought them, as Mr A J L Bannon SC, who presented ASIC's oral argument in reply, submitted, "adventurously close" to the view that the separation resolutions themselves were not passed. Although Mr O'Brien advanced a radical submission to that effect, to be considered below, ^[260] in the end, the other respondents did not go that far. They challenged only the resolution approving the 7.24 am Draft Announcement. But if the separation resolutions were passed, the directors must have thought, after the Chief Executive Officer's assurance to Mr Brown, that there was sufficient funding. And all of the directors must have appreciated the important need for a communication to the ASX satisfactory to troubled and hostile stakeholders in that respect. The board papers were replete with references to this. It was commercially vital. It is thus probable that they agreed to a communication sending that message to the ASX.

The provenance of the minutes

[296] The respondents submitted that because the minutes were drafted before the 15 February 2001 board meeting they could not be treated as an accurate record of what happened. They were a prediction. The Chairman did not use them as an aide-m é moire to guide the meeting through the business. Hence it could not be concluded that the Chairman caused the meeting deliberately to fulfil the prediction. And they were not the result of someone taking careful notes, minute by minute, of what was actually said and done at the meeting, which is the mundane technique of many thousands of organisations much less august than the board of James Hardie Industries Ltd. Mr O'Brien put a more extreme submission. He submitted that the meeting only achieved a very general consensus about separation, and that thereafter the management selected for itself one of a variety of ways of giving effect to that consensus. Hence the purpose of the changes to the minutes was merely to ensure their conformity with decisions taken by management after the meeting, not decisions taken by the directors during it.

[297] These arguments, both in the narrower form and in Mr O'Brien's, have two flaws.

[298] One is that those who drafted the minutes before the meeting knew what had to happen at the meeting if catastrophe were to be avoided. It would have been catastrophic to continue with non-separation when a new accounting standard was about to be introduced. The directors knew that too. The other is that although the minutes were drafted before the meeting, persons present at the meeting checked them afterwards -- the Chief Executive Officer, the Chief Financial Officer, Mr Shafron and Mr Robb. In the course of that process the draft minutes were changed. Further, the gentlemen who prepared the minutes knew that the directors were supposed to check them before approving them as a correct record on 3 April 2001. There was evidence that one director never read minutes and that other directors read them only in part, or flicked or skimmed through them. But those who prepared the minutes did not know this. For all they knew, failure on their part to correct what the minutes said about the resolution might attract criticism. This guaranteed that some care would be taken by those who prepared the minutes.

[299] By 21 March 2001 amendments had been made to the draft minutes in the light of what had occurred at the meeting. One amendment referred to the tabling of a financial model. Another concerned the tabling of counsel's advice (delivered the previous day). If these changes were made in order to ensure that the minutes conformed to what had actually happened, why was the resolution approving the 7.24 am Draft Announcement, which on the respondents' case had not happened, not removed?

[300] The following submission of the Hellicar respondents discloses the unreality of the arguments from error in the minutes and from the provenance of the minutes:

[T]he final minutes adopted in April were no more than an exercise carried out by Mr Shafron or someone else at [James Hardie Industries Ltd] five weeks after the Board meeting seeking to capture what had earlier occurred. The critical failing in what was done here was that the drafter of the minutes took as a starting point the draft which had been circulating prior to the Board meeting but which had never found its way to the Board meeting as a template against which the Board meeting was conducted. The drafter thus assumed, erroneously, that it was appropriate to prepare minutes which broadly assumed the actual Board meeting had followed the detailed logic and structure of the pre-meeting draft minutes, whereas in fact it had never proceeded in this way. While some changes were made to the pre-meeting draft minutes to capture certain aspects of the reality of the Board meeting, the end result was not a substantially accurate reflection of the way the Board meeting had been conducted or of the resolutions which had been adopted. In this process, the anticipation that there might have been a resolution by the Board specifically approving an announcement which was tabled at the Board meeting was retained quite erroneously.

[301] But why was it wrong for the "drafter" to assume that the actual meeting had followed the logic and structure of the pre-existing draft minutes? All relevant persons knew, before, during and after the meeting, that separation depended on carrying out a series of complex technical steps. Those steps were faithfully recorded in the draft minutes and in the final minutes. The last step, as important as any that preceded it, was to comply with James Hardie Industries Ltd's obligation to make an ASX announcement. That is why the resolution appears in the minutes.

[302] Further, the submission quoted above overlooks the following facts. Mr Shafron considered the minutes after 15 February 2001 and he attended both that meeting and the 3-4 April 2001 meeting, as did the Chairman, the Chief Executive Officer and the Chief Financial Officer. Mr Robb both prepared the pre-meeting drafts and considered the draft after the meeting. It would be too great a coincidence if not one of these able and experienced people failed to notice the commission of what on the respondents' case was a glaring blunder, or worse than a blunder -- recording a vitally important resolution which never took place.

[303] This suggests a further unreality in the respondents' case. If there had been no resolution approving an ASX announcement, that fact would have been known to all persons present. The respondents' case assumes that management and Mr Robb, after seeking to comply with the ASX Listing Rules by issuing the Final ASX Announcement, realised that the board had not approved it. Management, on that case, then fabricated a minute recording a resolution, in the sense of adopting the resolution stated in the pre-meeting draft documents which had no basis in fact. That was an extremely risky fabrication, for it assumed that no-one on the board would read the minutes before approving them, or that all directors would forget that they had not approved one of the most important announcements in the company's history.

Mr Gillfillan and Mr Koffel

[304] Mr Gillfillan and Mr Koffel were in the United States during the meeting of 15 February 2001, but were in telephonic contact.

[305] The trial judge found that by their silence Mr Gillfillan and Mr Koffel voted in favour of the resolution approving the 7.24 am Draft Announcement. The Court of Appeal declined to interfere with that finding. Before the Court of Appeal they argued that their conduct did not manifest an intention to exercise a vote. They argued that the board papers did not contain a draft resolution; they did not receive a draft resolution by other means; they were not provided with a copy of the 7.24 am Draft Announcement and it was not read out; the "approval" came from discussion at the meeting only; they were silent; and there was no resolution or statement that silence counted as an affirmative vote. The Court of Appeal rejected these submissions: ^[261]

Messrs Gillfillan and Koffel participated in the meeting, albeit by telephone, and the principal business of the meeting was the establishment of the foundation and all it entailed. On the assumption that the ... resolution [approving the 7.24 am Draft Announcement] was passed, it cannot sensibly be concluded that they did not vote, even if by silence, in favour of establishment of the foundation, for which also there were no draft resolutions. On the same assumption, there is no sound reason to regard announcement of the establishment of the foundation as outside their concurrence by silence.

On the assumption of consideration and approval of the draft news release, Messrs Gillfillan and Koffel understood that [James Hardie Industries Ltd] proposed to issue an announcement, including on the contentious matter of funding, if the separation was approved. On the same assumption, the discussion would have disclosed that the other directors had a document they did not have. At the least they would have heard an extensive discussion, and a time would have come when, according to the practice, [the Chairman] summarised the position. By remaining silent, they joined in the informal resolution.

It may be added that, still on the assumption we have made, the minutes of the February meeting were relevantly a correct record, adopted by Messrs Gillfillan and Koffel among others. The minutes did not record abstention from the ... resolution [approving the 7.24 am Draft Announcement].

[306] In this court, the arguments of counsel for Mr Gillfillan and Mr Koffel centred on the submission that there was a great difference between the separation proposal and the 7.24 am Draft Announcement. They had ample materials in relation to the former, and they were on clear notice that its consideration was a central purpose of the meeting. They had no materials or notice in relation to the latter. Counsel submitted that the evidence of what happened in the meeting was insufficient to suggest that the 7.24 am Draft Announcement, which had not been sent or read out to them, was being raised for approval. Counsel argued that the general practice at James Hardie Industries Ltd board meetings that silence meant consent applied only where what was being decided was clear to all. The silence of Mr Gillfillan and Mr Koffel was an abstention.

[307] The Court of Appeal's conclusions in relation to Mr Gillfillan and Mr Koffel were correct. Whether they read the minutes of the 15 February 2001 meeting or not, they approved them, in company with every other director save the absent Mr Willcox, on 3 April 2001. They did not then indicate that they had abstained from voting. The board's practice was that the Chairman could summarise a position and, unless any directors stated opposition, that was taken to be a unanimous board resolution. In their evidence Mr Gillfillan and Mr Koffel accepted that this was the board's practice. Further, Mr Gillfillan and Mr Koffel were on notice that a public announcement would be made at the same time as the third quarter results were announced if the 15 February 2001 meeting approved the separation proposal. That notice came from the board papers for both the 17 January 2001 meeting and the 15 February 2001 meeting.

[308] Given the activity of management and directors in the months before February 2001, it would have been as obvious to Mr Gillfillan and Mr Koffel as to any other director that the separation proposal was potentially controversial to a degree. The vital need to communicate to the public that the Foundation would have sufficient funding to meet all legitimate claims would have been equally obvious. During cross-examination, Mr Gillfillan and Mr Koffel each accepted that they could have heard a discussion during the meeting about the fact that there would be an announcement about separation. They also each accepted that they knew that James Hardie Industries Ltd proposed to issue an announcement about the sufficiency of funding if the board approved the separation proposal.

[309] If the question whether a director's silence indicates a favourable vote depends on the director's intention, the circumstances permitted an inference that each of Mr Gillfillan and Mr Koffel intended to approve the announcement discussed. If, on the other hand, the question whether a director's silence indicates a favourable vote depends on what a reasonable observer would think, taking account of what each of Mr Gillfillan and Mr Koffel must have heard of the consideration and approval given to an announcement, that observer would have taken them to be voting for approval.

[310] Counsel also submitted that even if Mr Gillfillan and Mr Koffel had voted for the resolution, they were not in breach of the duty of care and diligence that s 180(1) of the Corporations Act created. They submitted that they gave careful attention to what was before them. They submitted that they had no duty of care and diligence to attend to anything more unless the Chairman ensured that they had more.

[311] The following matters are relevant to an assessment of that submission. Mr Gillfillan and Mr Koffel appreciated that a significant announcement was to be made on the controversial subject of whether funding could be assured. The onus was on them to be cautious when voting on the making of the announcement -- either by seeking further information or by explicitly abstaining. They gave evidence that if they had known the terms of the announcement approved, they would not have voted for it. This does not sit well with their conduct in leaving to other directors the task of devising the announcement. The submission must be rejected.