Australian Securities and Investments Commission v Hellicar

[2012] HCA 17

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(Judgment by: French CJ, Gummow J, Hayne J, Crennan J, Kiefel J, Bell J)

Australian Securities and Investments Commission
vHellicar

Court:

Judges:
French CJ
Gummow J
Hayne JHeydon J

Crennan J
Kiefel J
Bell J

Legislative References:
-

Case References:
-

Hearing date:
Judgment date: 3 May 2012

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Judgment by:
French CJ
Gummow J
Hayne J
Crennan J
Kiefel J
Bell J

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v BROWN

Australian Securities and Investments Commission v Gillfillan

Australian Securities and Investments Commission v Koffel

Australian Securities and Investments Commission v Terry

Australian Securities and Investments Commission v O'brien

Australian Securities and Investments Commission v Willcox

Australian Securities and Investments Commission v Shafron

The principal issues

[1] The Australian Securities and Investments Commission ("ASIC") may apply ^[1] for a declaration of contravention of civil penalty provisions of the Corporations Act 2001 (Cth) ("the Corporations Act"), ^[2] pecuniary penalty orders, ^[3] compensation orders ^[4] and orders disqualifying a person from managing corporations for a period. ^[5] In proceedings in which declarations of contravention, pecuniary penalty orders and disqualification orders were sought, ASIC alleged that the defendants who are the present respondents had each breached his or her duty as a director or an officer of a listed public company. ASIC alleged, and the directors denied, that the directors had approved the company's releasing to the Australian Stock Exchange ("the ASX") an announcement that was misleading. The minutes of the board meeting, confirmed at a subsequent board meeting, recorded the tabling of a draft announcement and its approval by the board.

[2] ASIC's witnesses were found to have no actual recollection of relevant events at the meeting (a meeting which had occurred more than seven years before they gave their evidence at trial). The defendants submitted that ASIC did not prove that a draft announcement had been tabled at the meeting or approved by the board. The draft announcement that had been prepared just before the board meeting had not been included in the papers the board members were sent and was altered by management after the board meeting without reference to the board. The minutes of the board meeting were shown to be inaccurate in some respects. The company's solicitor, who had attended the meeting and supervised the preparation of draft minutes for the meeting, was not called by ASIC to give evidence.

[3] Did the facts that the draft announcement was altered after the meeting and that the minutes were shown to be wrong in some respects, coupled with ASIC's not calling the company's solicitor, entail that ASIC failed to prove that the draft announcement was tabled and approved? In particular, was the Court of Appeal right to overturn the primary judge's finding that the board had approved the draft announcement on the footing that "the cogency of ASIC's case" was undermined by its failure to call the solicitor when not calling the solicitor was "contrary to [ASIC's] obligation of fairness"?

[4] The issues identified arise in appeals brought by ASIC against orders of the Court of Appeal of the Supreme Court of New South Wales ^[6] (Spigelman CJ, Beazley and Giles JJA) setting aside declarations of contravention, pecuniary penalty orders and disqualification orders made at first instance ^[7] in respect (among others) of seven non-executive directors of James Hardie Industries Ltd ("JHIL") -- Meredith Hellicar, Michael Robert Brown, Michael John Gillfillan, Martin Koffel, Gregory James Terry, Geoffrey Frederick O'Brien and Peter John Willcox -- and in respect of JHIL's general counsel and company secretary -- Peter James Shafron.

[5] The appeals raise issues of considerable public importance. Their disposition requires a close consideration of particular aspects of the evidence before the primary judge, his findings of fact, and conclusions of fact reached by the Court of Appeal. That consideration directs attention to the significance of minutes of meetings of directors as evidence of decisions taken at their meetings.

[6] The Court of Appeal was wrong to conclude that ASIC did not prove that the draft ASX announcement in question was tabled and approved at the board meeting.

[7] The minutes of the board's meeting were a formal record (subsequently adopted by the board as a correct record) of what had happened at the meeting. That record was created and adopted close to the time of the events in question. The minutes were evidence of the truth of the matters recorded -- in particular, that a draft ASX announcement was tabled and approved.

[8] The minutes were not shown to have recorded falsely that the draft announcement was tabled and approved. The matters on which the respondents relied as founding an inference, or otherwise demonstrating, that the minute recording the tabling and approval of a draft announcement was false were not inconsistent with the minutes being accurate. None of those matters required the conclusion that no draft ASX announcement was tabled or the further conclusion that no draft ASX announcement was approved.

[9] The Court of Appeal was wrong to hold that ASIC breached a duty of "fairness" by not calling the solicitor. The Court of Appeal further erred in concluding that a failure to call a witness, in breach of a duty of "fairness", diminished the cogency of the evidence that was called.

[10] Other, related issues are raised by an appeal brought by Mr Shafron against certain findings of contravention of s 180(1) of the Corporations Act concerning what advice he should have given the board or JHIL's managing director and chief executive officer. The particular issues raised by Mr Shafron's appeal will be considered ^[8] separately.

[11] The balance of these reasons is organised as follows:

Some basic facts

[12] Until October 2001 JHIL was the ultimate holding company of the James Hardie group of companies. JHIL was a listed public company; its shares were listed on the ASX. Two wholly owned subsidiaries of JHIL, James Hardie & Coy Pty Ltd ("Coy") and Jsekarb Pty Ltd ("Jsekarb"), had manufactured and sold products containing asbestos. Each of Coy and Jsekarb was subject to claims for damages for personal injury suffered by those who had come in contact with its asbestos products.

[13] In 2001 the board of JHIL expected that there would be further claims made against Coy and Jsekarb. The board of JHIL decided to restructure the James Hardie group by "separating" Coy and Jsekarb from the rest of the group. This was to be done by JHIL establishing a foundation (the Medical Research and Compensation Foundation -- "the MRCF") to manage and pay out asbestos claims made against Coy and Jsekarb and to conduct medical research into the causes of, and treatments for, asbestos-related diseases. Jsekarb and Coy would make a Deed of Covenant and Indemnity with JHIL under which Jsekarb and Coy would make no claim against and indemnify JHIL in respect of all asbestos-related liabilities and, in return, JHIL would, over time, pay Jsekarb and Coy an amount of money. New shares would be issued by Coy and Jsekarb to be held by or for the ultimate benefit of the MRCF; JHIL's shares in both Coy and Jsekarb would be cancelled. A new company, James Hardie Industries NV ("JHINV"), would be incorporated in the Netherlands and that company would become the immediate holding company of JHIL and ultimate holding company of the James Hardie group.

[14] On 15 February 2001, the board of JHIL met to consider the separation proposal. What happened at that board meeting is the focus of these proceedings.

[15] Minutes of the meeting of the directors of JHIL held on 15 February 2001 were confirmed by the board, at a meeting held on 3-4 April 2001, as a correct record and subsequently "[s]igned as a correct record" by the chairman of the board at or after that April meeting. All of the directors of JHIL had received the minutes of the February meeting with their board papers for the April meeting. One of the respondents in this court, Mr Willcox, did not attend the April meeting; all other respondents did.

[16] The minutes of the meeting of 15 February 2001 recorded a number of matters relating to the separation proposal. They included the board's resolution that "it is in the best interests of [JHIL] to effect the Coy and Jsekarb Separation" and a number of other resolutions relating to the separation. Critical to the present matters, the minutes recorded:

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.

[17] On 16 February 2001, JHIL sent to the ASX a media release entitled "James Hardie Resolves its Asbestos Liability Favourably for Claimants and Shareholders" ("the final ASX announcement"). The document referred to the establishment of the MRCF. It said, among other things:

The Foundation [MRCF] has sufficient funds to meet all legitimate compensation claims anticipated from people injured by asbestos products that were manufactured in the past by two former subsidiaries of JHIL [Coy and Jsekarb].

JHIL CEO Mr Peter Macdonald said that the establishment of a fully-funded Foundation provided certainty for both claimants and shareholders.

...

In establishing the Foundation, James Hardie sought expert advice from a number of firms, including PricewaterhouseCoopers, Access Economics and the actuarial firm, Trowbridge. With this advice, supplementing the company's long experience in the area of asbestos, the directors of JHIL determined the level of funding required by the Foundation .

" James Hardie is satisfied that the Foundation has sufficient funds to meet anticipated future claims ," Mr Macdonald said. (emphasis added)

[18] The MRCF did not have sufficient funds to meet all legitimate compensation claims which were reasonably anticipated in February 2001 from people injured by asbestos products that were manufactured in the past by Coy and Jsekarb.

[19] It was found at trial ^[9] and on appeal to the Court of Appeal ^[10] that, in February 2001, the directors of JHIL ought to have known that these statements about the MRCF's funding were misleading in four particular respects. Neither the finding that the statements were misleading in each of those respects, nor the finding that the directors ought to have known that the statements were misleading, was put in issue in this court. The central issue in this court was whether the Court of Appeal should have found, as it did, ^[11] that ASIC had not proved that a draft of the announcement made to the ASX by JHIL was tabled at the February meeting of the board and had not proved that the directors approved that draft.

The proceedings

[20] In February 2007, ASIC commenced proceedings in the Supreme Court of New South Wales ^[12] against those who ASIC alleged had been directors and officers of JHIL at relevant times, and against both JHIL and JHINV. Attention may be confined to the proceedings against directors and officers. Not all of the natural persons who were defendants at first instance are parties to ASIC's present appeals.

[21] ASIC alleged, among other things, that those who are the respondents to ASIC's appeals in this court were directors (or, in the case of Mr Shafron, an officer) of JHIL in February 2001. ASIC alleged that at the meeting of the board of JHIL held on 15 February 2001 a draft ASX announcement was tabled and approved by the board. ASIC alleged that the draft announcement had included statements about the sufficiency of the MRCF's funds to meet asbestos claims that were misleading and that the final ASX announcement was not materially different from the draft. ASIC alleged, among other things, that the directors, by approving the draft announcement, contravened s 180(1) of the then applicable corporations legislation ^[13] and thus, by operation of relevant transitional provisions, ^[14] s 180(1) of the Corporations Act. That is, ASIC alleged that each director of JHIL who is now a respondent had failed to discharge his or her duties to JHIL with the degree of care and diligence that a reasonable person would exercise if they were a director of a corporation in JHIL's circumstances, and had the responsibilities which the director in question had. ASIC further alleged (among other things) that Mr Shafron, as general counsel and company secretary, should have advised the board that the draft ASX announcement "was expressed in too emphatic terms concerning the adequacy of Coy and Jsekarb's funding to meet all legitimate present and future asbestos claims". ^[15]

[22] ASIC sought declarations of contravention, pecuniary penalties and orders disqualifying the respondents from managing corporations.

First instance

[23] After a lengthy trial, the primary judge, Gzell J, found ^[16] that the present respondents had breached their duties under s 180(1) and subsequently made ^[17] declarations of contravention and other orders in respect of each of the present respondents. The primary judge dismissed ^[18] the applications made by the present respondents to be excused ^[19] from their breaches and made disqualification orders ^[20] and pecuniary penalty orders ^[21] against each of them.

[24] The declaration of contravention that was made in respect of each of Ms Hellicar and Messrs Brown, Terry, O'Brien and Willcox declared that at the February board meeting the director concerned had approved a draft ASX announcement which conveyed, or was capable of conveying, four statements which the director ought to have known were misleading. Those statements were ^[22] that:

(a)

the material available to JHIL provided a reasonable basis for the assertion that it was certain that the amount of funds made available to the MRCF would be sufficient to meet all legitimate present and future asbestos claims brought against Coy and Jsekarb;

(b)

JHIL's chief executive officer, Peter Donald Macdonald, believed that it was certain that the amount of funds made available to the MRCF would be sufficient to meet all legitimate present and future asbestos claims brought against Coy and Jsekarb;

(c)

all of the directors, or at least a majority of them, believed that it was certain that the amount of funds made available to the MRCF would be sufficient to meet all legitimate present and future asbestos claims brought against Coy and Jsekarb; and

(d)

JHIL had received expert advice from PricewaterhouseCoopers and Access Economics that supported the statement that it was certain that the amount of funds made available to the MRCF would be sufficient to meet all legitimate present and future asbestos claims brought against Coy and Jsekarb.

[25] The declaration made in respect of each of Messrs Gillfillan and Koffel was to the effect that he breached his duties by voting in favour of the resolution without either asking for a copy of the draft announcement or knowing its terms, or by failing to abstain from voting in favour of approval of the announcement. ^[23]

[26] The declarations made ^[24] in respect of Mr Shafron hinged about: first, his not having tendered advice to the board that the draft announcement was "expressed in too emphatic terms" concerning the adequacy of funding and that the draft announcement was misleading; second, his not having advised the board that the advice given by PricewaterhouseCoopers and Access Economics about a cash flow model of funding available to meet asbestos claims was limited and had not verified important assumptions that the advisers had been given and instructed not to consider; and, third, his not having advised the chief executive officer or the board to consider whether some information about the Deed of Covenant and Indemnity to be given by Coy and Jsekarb to JHIL should be disclosed to the ASX. As noted at the outset of these reasons, issues about all except the first of these contraventions by Mr Shafron will be examined separately.

[27] The steps which the primary judge took in deciding to make the declarations of contravention concerning the approval of a draft ASX announcement can be summarised as follows:

(1)

A draft ASX announcement was taken to the board meeting of 15 February 2001 by JHIL's Senior Vice-President of Corporate Affairs, Mr Greg Baxter. ^[25]

(2)

The draft Mr Baxter took to the meeting was what came to be known as the "7.24 draft announcement" or the "draft ASX announcement" (a draft which Mr Baxter sent by email at 7.24 on the morning of 15 February 2001). ^[26]

(3)

The 7.24 draft announcement was distributed, at the board meeting, to each director who was physically present when the board considered the separation proposal. ^[27] They were the chairman, Mr A G McGregor, five non-executive directors (Ms Hellicar and Messrs Willcox, Brown, Terry and O'Brien) and Mr Macdonald (the chief executive officer of JHIL). In addition, the 7.24 draft announcement was distributed to Mr Shafron ^[28] and two representatives of JHIL's lawyers (Allen Allen & Hemsley -- "Allens") who attended the meeting: Mr David Robb and Mr Peter Cameron.

(4)

One or both of Mr Macdonald and Mr Baxter spoke to the 7.24 draft announcement at the meeting. ^[29] The purpose of distribution and discussion of the draft announcement "was to approve its release". ^[30]

(5)

The practice of the JHIL board was not to put a matter formally to a meeting as a resolution. The chairman would summarise the position and directors assented by indicating their approval or remaining silent. ^[31]

(6)

The 7.24 draft announcement was before the board, was considered by the board, and was approved by the board. ^[32]

(7)

Neither of the two directors of JHIL who participated in the meeting by telephone (Messrs Gillfillan and Koffel) raised any objection that he did not have a copy of the 7.24 draft announcement; neither asked for a copy of it; neither abstained from approving the draft announcement. ^[33]

(8)

Those non-executive directors who were in physical attendance at the meeting (Ms Hellicar and Messrs Willcox, Brown, Terry and O'Brien) breached s 180(1) by assenting to the resolution approving the 7.24 draft announcement. ^[34]

(9)

Each non-executive director who participated in the meeting by telephone (Messrs Gillfillan and Koffel) breached s 180(1) by failing either to request a copy or familiarise himself with the contents of the 7.24 draft announcement or to abstain from voting in favour of the resolution. ^[35]

(10)

The general counsel and company secretary of JHIL (Mr Shafron) did not advise, but should have advised, the board that the 7.24 draft announcement "was expressed in too emphatic terms concerning the adequacy of Coy and Jsekarb's funding to meet all legitimate present and future asbestos claims and in that respect it [the announcement] was false or misleading". ^[36] Failing to proffer advice of this kind was a failure to discharge his duties to JHIL with the degree of care and diligence that a reasonable person would exercise if he or she were an officer of a corporation in JHIL's circumstances, occupied the office of general counsel and company secretary and had the same responsibilities within the corporation as Mr Shafron; it constituted a breach of s 180(1). ^[37]

[28] At trial, ASIC called two witnesses who had attended the relevant part of the board meeting of 15 February 2001 -- Mr Baxter and Mr Stephen Harman, the financial controller of JHIL.

[29] Not all non-executive directors gave evidence at the trial. Mr Brown, Mr Gillfillan, Ms Hellicar, Mr Koffel and Mr Willcox did (as also did Mr Phillip Morley, the chief financial officer of JHIL and a director of Coy and Jsekarb until 15 February 2001). Mr O'Brien and Mr Terry did not give evidence. Neither Mr Macdonald (a defendant in the proceedings) nor Mr Shafron gave evidence. Neither ASIC nor any defendant called either of the two bankers from UBS Australia (Mr Anthony Sweetman and Mr Ian Wilson) who attended the meeting. Neither ASIC nor any defendant called Mr Robb of JHIL's solicitors, Allens. (The other representative of Allens at the meeting -- Mr Peter Cameron -- had died on 21 February 2006. The chairman of JHIL, Mr McGregor, had also died before trial.)

Appeal to the Court of Appeal

[30] The present respondents appealed to the Court of Appeal against the declarations of contravention, pecuniary penalty orders and disqualification orders, and against the primary judge's refusal to excuse the contravention. They submitted that the primary judge should not have found that the draft ASX announcement which ASIC alleged had been tabled and approved at the February board meeting had been either tabled or approved.

[31] The Court of Appeal concluded ^[38] that ASIC did not establish at trial that the 7.24 draft announcement was tabled at the February board meeting or that the non-executive directors had approved that draft announcement. The Court of Appeal allowed ^[39] the appeals by the present respondents. The Court of Appeal set aside the declarations and orders made against each of the non-executive directors and ordered that ASIC's proceedings against those parties be dismissed. In Mr Shafron's case the Court of Appeal set aside the declaration of contravention that had been made in relation to the approval of the draft ASX announcement (and made other orders in connection with issues raised by other contraventions by Mr Shafron that are considered in Mr Shafron's appeal to this court).

[32] The Court of Appeal treated ^[40] the issues about what happened at the meeting as "not wholly a case of circumstantial evidence, because there is evidence such as the minutes of the meeting", but said: "None the less, we consider that we should take a similar approach, and so will determine whether ASIC proved the passing of the draft ASX announcement resolution from 'the united force' of all the evidence."

[33] The Court of Appeal made a minutely detailed examination in its reasons of all of the evidence that any party to the appeals to that court suggested might bear upon what should be found to have been said or done at the meeting of the board of JHIL on 15 February 2001. But as these reasons will demonstrate the matters to which the present respondents pointed in their arguments in the Court of Appeal and again on appeal to this court as bearing upon what should be found to have been said or done at that meeting were not of equal significance.

[34] As noted earlier, ASIC called Mr Baxter and Mr Harman to give evidence about the relevant parts of the February board meeting. The Court of Appeal concluded ^[41] that "[n]either Mr Baxter nor Mr Harman had an actual recollection of what occurred at the meeting". The Court of Appeal accepted ^[42] that it could not reasonably be doubted that Mr Baxter took a draft announcement to the board meeting of 15 February 2001 and concluded ^[43] that the particular draft taken was the 7.24 draft announcement. The Court of Appeal further concluded ^[44] that it was more probable than not that a copy of the 7.24 draft announcement was given to the two representatives of JHIL's solicitors, Allens -- Mr Peter Cameron and Mr Robb -- at the February board meeting. But, as noted, the Court of Appeal was not satisfied ^[45] that the 7.24 draft announcement was tabled or that the non-executive directors of JHIL voted in favour of a resolution approving the announcement and its being sent to the ASX.

[35] The Court of Appeal held ^[46] that only "[s]ome strength in ASIC's case [lay] in the minutes of the February meeting and their adoption at the April meeting". The Court of Appeal concluded ^[47] that although "[t]here was some basis for finding that the draft ASX announcement resolution had been passed ... [h]aving 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".

Some undisputed facts

[36] Throughout the consideration of the issues argued in these appeals, it will be necessary to keep some undisputed facts at the forefront of consideration.

[37] The JHIL board agreed at the meeting of 15 February to the separation of Coy and Jsekarb from the James Hardie group. The making of that decision, and the terms on which the separation was to be effected, were matters that had to be announced ^[48] to the ASX. (Both the decision to separate and the terms on which the separation would be effected constituted information "that a reasonable person would expect to have a material effect on the price or value" ^[49] of JHIL's shares.) Mr Baxter took the 7.24 draft announcement about the separation to the meeting. An announcement about the separation was made to the ASX on the day after the separation decision was made. (As these reasons later demonstrate, the announcement was made in terms that were not materially different from the draft that Mr Baxter took to the meeting.) The announcement was misleading. The minutes of the February meeting recorded the directors' approval of the draft announcement. In April the directors approved the minutes of the February meeting as an accurate record of what was decided at that meeting.

[38] If, as the Court of Appeal concluded, no one gave direct evidence of what happened at the February meeting, why should it not be found in the light of these established facts that, as the primary judge found, the 7.24 draft announcement was tabled and approved at the meeting?

The respondents' principal arguments

[39] The respondents submitted in this court, as they had in the Court of Appeal, that the primary judge was wrong to conclude that the 7.24 draft announcement was tabled or approved at the February board meeting. They submitted that the 7.24 draft announcement was changed in a number of ways after the board meeting had finished and that those changes would not have been made if it had been tabled and approved. They submitted that the minutes did not accurately record the order in which matters were considered at the February meeting and that there were other demonstrable errors in the minutes. (The respondents attributed the subsequent approval of the minutes to the respondents' own want of care.) And the respondents submitted that the Court of Appeal was right to place the emphasis it did on the circumstance that ASIC did not call Mr Robb to give evidence of what he had seen and heard at the February meeting.

[40] Before dealing with these arguments there are some matters of history to which reference must be made.

Proposals for separation

[41] Since as early as 1996, the board of JHIL had been considering and taking some steps towards a corporate restructuring of the James Hardie group. As part of that restructuring, JHIL's directors had been considering separation of "the asbestos litigation poison pill" from the "operating assets" since at least December 1999.

[42] In April 2000, the board was told that the restructuring could be disrupted or hindered if the separation was seen as "James Hardie abandoning its responsibilities to claimants". Thereafter the board considered separation proposals at several meetings. It is enough to direct attention to the board meetings of January 2001 and February 2001.

[43] A detailed paper was put to the board in January 2001 considering "the establishment of a stand alone trust company to manage the asbestos liabilities in the James Hardie Group". The objective of establishing the trust was described as being that "[a]sbestos liabilities would be effectively, but not completely, separated from [JHIL]". The paper recorded that JHIL then accounted for asbestos liabilities "by providing for the expected costs of known claims" (emphasis added). But as the paper also recorded, when Australian Accounting Standards Board, Provisions and Contingencies , Exposure Draft No 88, December 1997 ("ED88") became effective -- then expected to be in March 2003 -- it seemed "probable" that JHIL would have to provide "for at least the minimum amount of the expected future liability" and "significant disclosure concerning the nature and extent of potential future asbestos liabilities will have to be made" (emphasis added).

[44] The proposal put to the board at its January meeting -- the "net assets model" -- proceeded from the premises (noted ^[50] by the Court of Appeal) that "the maximum quantum of funds available to Australian asbestos claimants is the existing net assets of [Coy] and Jsekarb" and that "[t]here is no sound rationale for increasing the net assets of [Coy] and Jsekarb and thereby expanding this quantum of funds available to claimants". Accordingly, the proposal put to the board was that JHIL give its shares in Coy and Jsekarb to a trust and that the net assets of Coy and Jsekarb be applied by the trust to meeting existing and future asbestos claims. In addition, JHIL would give $2 million to the trust for research into asbestos-related diseases.

[45] The board paper for the January meeting explained, under the heading "Risks", that "[t]he creation of the Trust would ... carry with it the message that JHIL would not support [Coy] and Jsekarb in the event that funds prove to be insufficient". It also said that the "effect of the Trust and associated arrangements" may be subject to "attack", including through legislation by which JHIL was "declared liable for all of the asbestos related liabilities of its subsidiaries" or by the freezing of JHIL's assets "pending undertakings [being given] suitable to" government.

[46] A slide presentation made to the board at its January meeting emphasised the same concerns, saying, under the heading "Key Risks": "Separation per se not problematic, issue is statement not to support Coy". The presentation canvassed the "[p]ossible consequences" and said that the "[l]ikelihood of government action" -- "making JHIL liable for conduct of subs" -- "cannot be discounted".

[47] The January board paper and the slide presentation made to the board at its January meeting each dealt extensively with a "Communications Strategy". The recommendations made in the board paper about "how to announce any establishment of a Trust" were said to be:

developed with the aims of:

•

positioning the initiative as a "business" news as opposed to a "general" news story;

•

having financial markets recognise and reward the certainty and finality of separation;

•

attracting as little attention as possible beyond the financial markets;

•

managing fallout and minimising damage to James Hardie's reputation generally; and

•

minimising the potential for government intervention.

The board paper recorded, under the heading "Timing", that it was recommended that "any announcement be made on Friday 16 February to coincide with the announcement of JHIL's Q3 results and the related management presentations to analysts and business media". It was said that this would "help us position the Trust as a 'business' story". As the Court of Appeal noted, ^[51] there was attached to the January board paper a "draft news release" which "can be seen as the beginnings of the draft [ASX] release in issue in these proceedings". The slide presentation was to the same effect as the board paper.

[48] The minutes of the January meeting referred to "a stand alone trust company that could support asbestos related medical research and manage the asbestos liability of subsidiary companies". The minutes recorded that:

The directors discussed the trust concept and asked questions of management and advisers.

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.

In fact, the board had rejected ^[52] the net assets model of funding the proposed trust. As the primary judge recorded, ^[53] "management was sent away to do more work on the separation proposal to ensure sufficient funds were available to meet all present and future asbestos claims" (emphasis added).

[49] The matter was again put before the board at its next meeting: the meeting of 15 February 2001. Under a new proposal, JHIL not only would "vest" shares in Coy and Jsekarb in the trust that was to be established and give an increased amount of $3 million for research but also would pay, over time, $100 million ($70 million net present value) to Coy and Jsekarb. In return, Coy and Jsekarb would each indemnify JHIL against any liabilities JHIL incurred in respect of asbestos claims and each promise not to make any asbestos-related claim against JHIL. (Coy would also promise to acquire all shares in JHIL from a sole shareholder if certain conditions were satisfied. This was referred to at trial as the "put option", ^[54] but that aspect of the proposal was not in issue in the appeals to this court and need not be noticed further.) The payment of $100 million over time and the promises by Coy and Jsekarb were to be provided for in the Deed of Covenant and Indemnity.

[50] The board papers for the February meeting were sent to directors in early February and included a paper by Mr Macdonald (the chief executive officer of JHIL) recommending that JHIL "Implement Separation by creating a Foundation now". As with the January proposal, the paper recorded Mr Macdonald's recommendation that the JHIL board agree to the creation of the MRCF at its meeting on 15 February "for announcement, together with JHIL's Q3 results, on Friday 16 February". Mr Macdonald concluded his paper by saying that "James Hardie needs to act now". The reason he gave for the urgency was that the new accounting standard (ED 88) was now likely to be promulgated before the end of JHIL's financial year (which ended on 31 March). (As noted earlier in these reasons, the board had been told at its January meeting that the new standard would adversely affect the company's accounts by requiring provision for not only present but also expected future asbestos liabilities.)

[51] Attachments to the board paper identified what were described as "separation issues" and a "communication strategy". The "communication strategy" recorded that "[o]ur central communications conundrum is that we will not be able to provide key external stakeholders with any certainty that the funds set aside to compensate victims of asbestos diseases will be sufficient to meet all future claims".

[52] At the February meeting, a series of slides was presented to the board. One slide, entitled "Update on Board paper", recorded that "[s]ince we issued the Board paper, we have continued to investigate and analyse the key risks and fine-tune our key messages and strategy". The slides showed that the amount to be contributed over time by JHIL to Coy and Jsekarb was $112 million (with a net present value of $72 million). The board papers distributed earlier in the month had said that the amount would be $100 million (with a net present value of $70 million). Under the heading "Fund life expectancy/sensitivity" reference was made to the key assumptions that had been used in modelling the availability of funds to meet expected claims and it was said: "Surplus most likely outcome". Two of the "[k]ey messages" set out in another slide were that "[t]he Foundation expects to have enough funds to pay all claims" and that "[t]he position of claimants is substantially improved because the Foundation provides much greater certainty that compensation will be available to meet all future claims". And many of the slides were devoted to identifying how the company would (as one slide put it) "'sell' the proposal to external stakeholders".

The central conundrum

[53] The directors denied that they had approved any draft ASX announcement at the February board meeting. That is, the directors denied that they had approved the 7.24 draft announcement, which said that the MRCF would have "sufficient funds to meet all legitimate compensation claims" anticipated and was "fully-funded".

[54] That answer to ASIC's case necessarily contained some intrinsic tensions if not outright contradictions.

[55] After a process of consideration and development that had gone on for well over a year, the board approved a separation proposal in February 2001. The board did that having refused to approve a different separation proposal at the immediately preceding board meeting (in January 2001) and having required management to continue to develop the concept "particularly in relation to funding". It is thus evident that the directors regarded the funding of the MRCF as a centrally important issue and it could not be assumed that the directors approved the separation proposal not having any view about whether the MRCF would have sufficient funds. The respondents did not suggest to the contrary.

[56] Before the February board meeting was held, the company's solicitors prepared (under the supervision of Mr Robb) draft minutes for the meeting which provided for the tabling and adoption of a draft ASX announcement. That the draft minutes made that provision reflected, first, the company's obligation to make the announcement and, second, the fact that an announcement of this kind would ordinarily be approved by the JHIL board.

[57] After the board meeting an announcement was made to the ASX. The announcement was not identical to the draft that Mr Baxter took to the board meeting but, as will later be shown, it was not different in any material respect.

[58] Mr Robb, who had supervised preparation of the draft minutes, attended the February board meeting. In late March Mr Robb sent a bill to JHIL for work done by Allens in relation to the separation proposal. The work included "settling various completion documents and board minutes as required by Alan Kneeshaw [the manager of secretarial services for the James Hardie group] for JHIL, Coy, Jsekarb, the Foundation and MRCFI [a wholly owned subsidiary of the MRCF]".

[59] Draft minutes of the February meeting (which included reference to the tabling and adoption of a draft announcement) were distributed to all board members with the board papers for the April board meeting and were adopted (apparently without demur) at the April board meeting. Either those minutes were right to record the directors' approval of a draft announcement or they were not. By adopting the minutes the board members indicated that they had assented to the several steps recorded in those minutes as having been taken at the February board meeting to approve and effect the separation of Coy and Jsekarb, including the step of approving a draft announcement to the ASX.

[60] The directors knew that their approval of the proposal had to be announced to the ASX. Did they, as they now say, leave to the decision of management the way in which the decision would be announced and leave to the decision of management what would be said about a proposal that all directors knew could be very controversial? Or did they, as their minutes recorded, approve what was to be said to the market?

[61] The principal changes that were made to the separation proposal between the net assets model rejected at the January board meeting and the proposal that was approved at the February meeting were changes to increase the funds that Coy and Jsekarb would have to meet asbestos claims. The amount of money that JHIL would pay to Coy and Jsekarb was fixed having regard to advice which the board was told at its February meeting had been received from Mr Stephen Loosley, "former NSW Secretary ALP, former NSW Senator, now head of PWC Legal in Sydney": "to strengthen the adequacy of funding so that we could argue that the most likely outcome was that all claims would be met". The amount was fixed at a level sufficient to support one of the key messages the board was told was to be conveyed: that "[t]he Foundation expects to have enough funds to pay all claims". And the primary judge found ^[55] that one of the respondents, Mr Brown, asked the chief executive officer of JHIL during the February board meeting, "are you sure there are going to be sufficient funds in the trust?", and was told, " Yes there are . We have got the best actuarial modelling. We have shown that we can meet the cash requirements each year. We are providing enough funds for future claims ." (emphasis added)

[62] Why would the directors not approve of a statement that said that the MRCF was fully funded and that it would have sufficient funds if that was the basis on which they approved the separation proposal? Why should the primary judge have concluded, as the respondents in this court asserted, that the relevant minute of the February board meeting, adopted at the April meeting, was false?

[63] As has been noted, the respondents advanced three arguments: first, that the making of alterations to the text of the 7.24 draft announcement after the board meeting showed that the announcement had been neither tabled at, nor approved by, the board at its February meeting; second, that the minutes of the February board meeting were demonstrably inaccurate in some respects; and finally, ASIC not having called Mr Robb to give evidence, that the Court of Appeal was right to conclude that ASIC had not proved its case.

[64] It will be convenient to deal with these arguments in turn. But it is the minutes of the February and April board meetings that provide the necessary starting point for consideration of the issues which are raised by those arguments.

The board minutes

[65] The text of the relevant part of the February board minutes has been set out earlier in these reasons. Reference has already been made to the board's approval, at its April meeting, of the minutes of the February meeting as an accurate record and to the chairman's signing the minutes "as a correct record".

[66] Section 251A(1) of the Corporations Law provided (and at the time of the trial s 251A(1) of the Corporations Act provided) that a company "must keep minute books in which it records within 1 month: ... (b) proceedings and resolutions of directors' meetings". Subsection (2) of those provisions provided that the company:

must ensure that minutes of a meeting are signed within a reasonable time after the meeting by 1 of the following:

(a)

the chair of the meeting;

(b)

the chair of the next meeting.

Subsection (6) provided:

A minute that is so recorded and signed is evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved.

[67] The primary judge found ^[56] that the minutes of the February meeting were not recorded in a minute book within one month of the meeting. That finding is not in issue. The primary judge further concluded ^[57] that:

Since the minutes of the 15 February 2001 meeting were not recorded in a minute book within 1 month, it follows that s 251A(6) was not engaged and the minutes have no special evidentiary value.

This conclusion, and the construction of the relevant provisions upon which it depended, were not challenged in the argument of the present matters and it is neither necessary nor appropriate to examine those matters further. Argument of the present appeals proceeded (and these reasons proceed) on the basis that tendering the minutes of the February board meeting worked no reversal of the onus of proof of the matters recorded in the minutes.

[68] No separate consideration was given by the primary judge, or in the Court of Appeal, to whether s 251A(6) applied to the minutes of the April board meeting. It is, therefore, appropriate to assume that those minutes are not to be treated as evidence of the proceedings to which they relate unless the contrary was proved.

[69] The minutes of both the February and April board meetings were admitted in evidence. Both sets of minutes were admissible as business records ^[58] and were evidence of the truth of the matters that they represented. The February board minutes were thus evidence of the facts that a draft ASX announcement was tabled and that it was approved; the April board minutes were evidence of the fact that the board had approved the minutes of the February meeting as an accurate record of proceedings at that earlier meeting.

[70] The case which the respondents advanced was that the relevant minute in the February board minutes was false: no draft ASX announcement was tabled at the meeting; no draft ASX announcement was approved at that meeting. The case which the respondents advanced entailed that the board's subsequent adoption of the February board minutes as an accurate record of proceedings was also false, in the sense that the minutes that were adopted were not an accurate record of proceedings at and resolutions passed at the February meeting.

[71] The respondents' allegations of falsity must be assessed in the light of not only the statutory provisions ^[59] requiring the keeping of minute books but also those statutory provisions ^[60] of the Corporations Law and the Corporations Act making it an offence for a person to make or authorise the making of a statement, in a document required by or for the purposes of the Act, that, to the person's knowledge, is false or misleading in a material particular, and an offence to make or authorise the making of such a statement without having taken reasonable steps to ensure that it was not false or misleading. The respondents' arguments that the February and April minutes were false in the relevant respects were arguments that, if accepted, may go so far as to demonstrate that the respondents (other than Mr Shafron) had failed to take reasonable steps to ensure that the company's minute books were not false or misleading.

Why start with the board minutes?

[72] As has already been noted, the minutes of the board meetings of February and April were evidence of the truth of what they represented.

[73] The respondents submitted, in effect, that demonstration of any important error in the minutes cast doubt upon their accuracy in recording that a draft ASX announcement was tabled and approved. And at a more fundamental level, the respondents' submissions about the significance of inaccuracies in the minutes, alterations to the announcement and the absence of evidence from Mr Robb depended upon the proposition that the minutes were no more than one of several circumstances which bore upon the task of inferring (from the combined weight of the evidence) what had been said and done at the meeting. At times the respondents' submissions, and the reasoning in the Court of Appeal, veered towards the proposition that ASIC had had to prove at trial that the minutes were an accurate record. That was not the ultimate issue in the trial. Rather, the issue was, having regard to the nature of ASIC's claims and the respondents' defences, the nature of the subject-matter of the proceeding and the gravity of the matters which ASIC alleged, ^[61] did ASIC establish, on the balance of probabilities, that (as the minutes recorded) the 7.24 draft announcement was tabled and approved by the board?

[74] Witnesses who gave evidence at trial of what had happened at the meeting described conversations and events that had taken place many years earlier. The record of events at the February board meeting that was made closest to their occurrence was the minutes as they were adopted at the April board meeting. With the evidence that Mr Baxter gave about his taking the 7.24 draft announcement to the board meeting (a fact not now in dispute) the force of the minutes was that the 7.24 draft announcement was approved. Absent evidence to the contrary, ASIC proved its case by tendering the minutes.

[75] What the respondents sought to establish was that other evidence founded an inference that the minute recording approval of a draft announcement was false. It was the respondents' case that depended upon inference; ASIC's case did not. Hence the need to start with the minutes. To treat the minutes, as the Court of Appeal did, as just one of a number of circumstances that bore upon the issue of fact failed to recognise the nature of the evidence that ASIC adduced and the nature of the argument that the respondents sought to advance.

Alterations to the 7.24 draft announcement

[76] The respondents gave great emphasis in their submissions in this court, as they had at trial and on appeal to the Court of Appeal, to the way in which ASIC had pleaded its case. ASIC identified the relevant contraventions by reference to the 7.24 draft announcement. The respondents submitted, and it is to be accepted, that the trial was conducted on the footing that ASIC alleged that the directors had assented to a particular form of text -- the 7.24 draft announcement -- not on a footing that the directors had assented to particular messages being conveyed (whatever their form) that were messages capable of conveying particular misrepresentations. Thus, so the respondents submitted, the fact that management, with or without assistance from Allens, thought it open to them to change the text of the 7.24 draft announcement after the meeting (as they did) pointed against the board having approved the text which ASIC alleged had been tabled at the meeting and approved by the board.

[77] The final text of the announcement sent to the ASX differed from the text of the 7.24 draft announcement in several respects. The 7.24 draft announcement was itself a revision of an earlier draft. The revisions to that earlier draft were made by Mr Baxter. At 7.24 am on 15 February 2001, Mr Baxter sent the revised draft back to its author (with text boxes on the draft showing the changes he had made) and he told the author:

here are my comments on the news release -- no doubt we can refine further later today -- this is the version I will take to the Bd meeting . (emphasis added)

[78] Copies of a draft ASX announcement in the form of the 7.24 draft announcement (but without the text boxes appearing on the copy which Mr Baxter had sent at 7.24 am) were produced to ASIC from the files at Allens, JHIL's solicitors, and the files of a company in the Brierley group of companies (BIL Australia Pty Ltd -- "BIL"), a group which held a substantial shareholding in JHIL, and a group with which two of the respondents -- Mr O'Brien and Mr Terry -- were associated. Allens produced two copies of the draft, each with handwritten comments of Mr Robb and one with comments presumed ^[62] to be by Mr Peter Cameron. ASIC relied on the fact that Allens and BIL had the 7.24 draft announcement as showing that the 7.24 draft announcement had been distributed to those who attended the February board meeting. That other directors had not produced a copy of it was explained by the practice of those other directors who gave evidence at the trial not to keep copies of board papers. ^[63] That JHIL did not have the 7.24 draft announcement in its files was explained by the evidence of Mr Donald Cameron (another company secretary of JHIL) that only the final version of any ASX announcement was kept by the company, all earlier drafts being destroyed. ^[64]

[79] ASIC's submission that production of the 7.24 draft announcement by Allens and BIL demonstrated that the representatives of Allens and BIL who attended the February meeting received the document there should be accepted. The Court of Appeal found ^[65] that the two Allens lawyers were given the draft at the February meeting. The submission advanced by some respondents that the document might have come into the possession of BIL after the meeting does not accommodate the fact that the 7.24 draft announcement was soon superseded. The alternative explanations for BIL having a copy of the document advanced by the respondents (founded on Mr O'Brien of BIL having "separate lines of communication outside of JHIL Board meetings with management and in particular Mr Macdonald" or upon the possibility that the document had come to BIL during later proceedings) ^[66] were speculative and improbable. And once it is decided, as it was both at trial and on appeal to the Court of Appeal, that Mr Baxter took the 7.24 draft announcement to the February board meeting, it is not readily to be supposed, in the light of its production by Allens and BIL, that Mr Baxter kept the document with his other papers and did not distribute it to those who attended the meeting. The primary judge was right to hold that the 7.24 draft announcement was distributed at the meeting.

[80] Two further drafts of the ASX announcement were made: one at about 9.35 am on 15 February (after the board meeting had started at 9.00 am) and the other at about 7.42 pm on that day. Subject to one qualification, the final ASX announcement was substantially in the form of this last draft. The qualification that must be made is that the final announcement said that the MRCF would commence operations with assets of $293 million; the draft created at 7.42 pm had said $285 million. Such other differences as there were between the last draft and the final announcement are immaterial.

[81] The Court of Appeal concluded ^[67] that some of the differences between the 7.24 draft announcement and the draft produced at 7.42 pm were "unexceptional". Others, the Court of Appeal said, ^[68] were of "more significance", an expression which, in the context in which it was used, must be understood as referring to the significance the court attributed to the changes in determining whether the 7.24 draft announcement had been tabled and approved, not as referring to any question about what representations the 7.24 draft announcement or the final ASX announcement conveyed.

[82] The changes that were made to the body of the 7.24 draft announcement to arrive at the final ASX announcement are most easily identified by reproducing its text, striking through the deletions and underlining what was inserted:

James Hardie Industries Limited (JHIL) announced today that it had established a foundation to compensate sufferers of asbestos-related diseases with claims against two former James Hardie subsidiariesthe company and fund medical research aimed at finding cures for these diseases.

The Medical Research and Compensation Foundation (MRCFFoundation), to be chaired by Sir Llewellyn Edwards, will be completely independent of JHIL and will commence operation with assets of $293284 million.

The Foundation haswill have sufficient funds to meet all legitimate compensation claims anticipated from people injured by asbestos products that were manufactured in the past by two former subsidiaries of JHIL.

JHIL CEO, Mr Peter Macdonald said that the establishment of a fully-funded Foundation provided certainty for both claimants and shareholdersthe best resolution for all stakeholders.

"The establishment of the Medical Research and Compensation Foundation provides certainty for people with a legitimate claim against the former James Hardie companies which manufactured asbestos products," Mr Macdonald said.

"The Foundation will concentrate on managing its substantial assets for the benefit of claimants. Its establishment has effectively resolved James Hardie's asbestos liability and this will allow management to focus entirely on growing the companysolely on asbestos for the benefit of claimants allowing James Hardie to pursue its very exciting growth prospects for the benefit of all shareholders."

A separate fund of $3 million has also been granted to the Foundationset aside for scientific and medical research aimed at finding treatments and cures for asbestos diseases.

The $293284 million assets ofvested into the Foundation includes a portfolios of long term securitiescommonly traded shares, a substantial cash reserve, properties which earn rent and insurance policies which cover various types of claims, including all workers compensation claims.

Fund manager, Towers Perrin has been appointed to advise the Foundation on itsmanage the Foundation's investments, which will generate investment income and capital growth.

In establishing the Foundation, James Hardie sought expert advice from a number of firms, including actuaries Trowbridge, Access Economics and PricewaterhouseCoopers, Access Economics and the actuarial firm, Trowbridge. With tThis advice, supplementinged the company's long experience in the area of asbestos, the directors of JHILand formed the basis of determined ing the level of funding required by the Foundationto meet all future claims.

"The directors of James Hardie isare satisfied that the Foundation haswill have sufficient funds to meet anticipatedall future claims," Mr Macdonald said.

The initial $3 million for medical research will enable the Foundation to continue work on existing programs established by James Hardie as well as launch new programs.

When all future claims have been concluded, the Foundation will convert any remaining assets to cash and these surplus funds will be used to support furtherdonated to a reputable medical and or scientific and medical research organisation involved in work on lung diseases.

Mr Macdonald said, Sir Llewellyn Edwards, who has d resigned as a director of James Hardie Industries Limited to take up his new appointment as chairman of the Foundation, has enjoyed a long and distinguished career in medicine, politics and business. His experience with James Hardie will assist the Foundation to rapidly acquire the knowledge it needs to perform effectively. Sir LlewHe is a director of a number of organis zations including Westpac Banking Corporation and is also Chancellor of the University of Queensland.[ ^[69] ]

The other Foundation directors areinclude Mr Michael Gill, Mr Peter Jollie and Mr Dennis Cooper.

[83] Who made these changes was not explored by the primary judge. ^[70] The Court of Appeal observed ^[71] that the changes were "largely unexplained". The Court of Appeal referred ^[72] to Mr Baxter's evidence in chief that he recalled that Mr Robb and he discussed making changes to "the draft JHIL media release" and that he "usually made the changes that [Mr Robb] recommended", but the Court of Appeal made no particular findings ^[73] about who proposed or made the changes. Argument in this court proceeded on the footing that the changes were made by the management of JHIL without reference to the board and that at least some of the changes may have been suggested by either Mr Peter Cameron or Mr Robb of Allens. The respondents' submissions in this court, as at trial and in the Court of Appeal, emphasised the fact that changes were made. That is, as the Court of Appeal noted, ^[74] the respondents submitted that:

the evidence of the conduct of management and Allens after the meeting, including changes to the draft ASX announcement, were inconsistent with ASIC's case that an unqualified and unconditional resolution was passed at the February meeting ...

ASIC did not allege some kind of approval in principle, leaving open later change.

[84] It is enough for present purposes to deal directly with only five of the changes that were made to the text of the 7.24 draft announcement.

[85] Reference was made in the second and eighth paragraphs of the announcement to the value of the assets of the MRCF. The value stated was changed from $284 million to $293 million. The Court of Appeal said ^[75] that this was "not a minor matter".

[86] In the third and eleventh paragraphs, the word "anticipated" was introduced. So, the third paragraph of the announcement was changed ^[76] as follows:

The Foundation haswill have sufficient funds to meet all legitimate compensation claims anticipated from people injured by asbestos products that were manufactured in the past by two former subsidiaries of JHIL.

The fourth paragraph was changed ^[77] as follows:

JHIL CEO, Mr Peter Macdonald said that the establishment of a fully-funded Foundation provided certainty for both claimants and shareholdersthe best resolution for all stakeholders.

The tenth paragraph, dealing with advice provided by Trowbridge, Access Economics and PricewaterhouseCoopers, was changed ^[78] as follows:

With tThis advice, supplementinged the company's long experience in the area of asbestos, the directors of JHILand formed the basis of determined ing the level of funding required by the Foundationto meet all future claims.

And the eleventh paragraph was changed ^[79] as follows:

"The directors of James Hardie isare satisfied that the Foundation haswill have sufficient funds to meet anticipatedall future claims," Mr Macdonald said.

[87] The Court of Appeal was of the view ^[80] that "the subsequent changes detract from an inference that the board passed the draft ASX announcement resolution" (emphasis added). And the Court of Appeal concluded ^[81] that the changes which have just been described were "significant" because their making:

suggests that making them was thought to be open despite whatever had occurred at the meeting, and thus that whatever had occurred at the meeting was less than the draft ASX announcement resolution. If a draft news release was before the board, the board did not give it final sign off as an important announcement according to the process described by Mr Baxter, but the final terms of the news release and ASX announcement were left to management.

[88] Taken as a whole, the amendments made to the 7.24 draft announcement are properly described as textual rather than substantive. If particular attention is given to the changes that have been described, none of them altered the sense of what was being said in the document as a whole. And no party argued in this court that the primary judge was wrong to conclude, as he did, ^[82] that the 7.24 draft announcement and the final ASX announcement conveyed identical misrepresentations.

[89] As the primary judge found, ^[83] the change in value for the assets of the MRCF was made by the financial controller of JHIL to make the announcement accord with the figure that would be recorded as an extraordinary loss in JHIL's books of account. Understood in this light the change is unremarkable.

[90] As for the other changes that have been specially mentioned, only two particular points need be made beyond the general observation that the changes were textual and not substantive. First, although some emphasis was given in argument and in the reasons of the Court of Appeal ^[84] to the insertion of the word "anticipated" in the third and eleventh paragraphs, that change followed from changing those paragraphs to refer to the funds the MRCF had rather than the funds that it would have. The insertion of the word "anticipated" was entirely consistent with, and did not alter the sense of, what had been said in the 7.24 draft announcement. Second, contrary to the view expressed ^[85] by the Court of Appeal, the changes made to the announcement did not move "[t]he focus of the determination of the level of funding ... from the advisers to the directors".

[91] The respondents pointed to some other considerations which they submitted supported the conclusion that the board did not, as ASIC had alleged, approve the 7.24 draft announcement.

[92] Mr Baxter gave evidence that significant ASX announcements, like the announcement in issue in these matters, would usually be considered by the board but that, before being sent to the board, a draft announcement usually required "the approval of the CEO, the CFO, General Counsel, and the company's external legal advisers". ^[86] In this case, none of Mr Macdonald, Mr Morley (the chief financial officer) or Mr Shafron had seen the 7.24 draft announcement before the February board meeting began. Nor had Allens seen or approved the draft before the meeting. Reference was made in this respect to a written policy adopted by JHIL as governing announcements by the company. The steps which Mr Baxter said would usually be followed were steps that were consistent with the written policy. The respondents submitted that it was improbable, both in the light of this policy and more generally, that Mr Baxter would have shown the board an incomplete and insufficiently developed document.

[93] In addition to these departures from the ordinary procedures followed in relation to ASX announcements, Mr Baxter gave evidence that, if reference was to be made in an announcement to third parties such as Trowbridge, PricewaterhouseCoopers and Access Economics, as was proposed in the 7.24 draft announcement, the consent of those third parties to what was to be said about them would be sought before the announcement was made. Consent was not sought from any of these third parties until the afternoon of 15 February 2001, after the board meeting had finished. Mr Shafron sought consent from Trowbridge in an email he sent at 8.12 on the evening of 15 February 2001. In his email he said that "[t]he wording we propose in the press release simply says that James Hardie got advice from Trowbridge" and that "[a]s of the moment the document is not available for me to attach" (emphasis added). The respondents submitted that these events and statements pointed to the board not having approved any particular text of a proposed announcement.

[94] Two other points made by the respondents about the alterations to the 7.24 draft announcement should be examined at this point but may then be dismissed from further consideration.

[95] Some of the respondents sought to recast a point which they had lost at trial and upon which the Court of Appeal did not rely. At trial, Mr Morley gave evidence that he had seen Mr Robb write the word "anticipated" on a form of press release in the early hours of 16 February when Mr Morley was working in Mr Robb's office on the proposed Deed of Covenant and Indemnity. At trial, the respondents submitted ^[87] that this evidence, taken with other matters, prevented the primary judge from finding that, as ASIC had alleged, Mr Baxter took the 7.24 draft announcement to the February board meeting. The primary judge found ^[88] that Mr Morley "was mistaken as to the timing of this event" and rejected ^[89] the respondents' argument. (As noted earlier, both the primary judge and the Court of Appeal found that Mr Baxter took the 7.24 draft announcement to the board meeting.)

[96] In this court, some of the respondents submitted that Mr Morley's evidence of Mr Robb's annotating a press release (coupled with Mr Morley's lack of reaction to that being done) was inconsistent with the board having approved the draft announcement. Mr Robb considered himself to be free to change the draft and Mr Morley did not think that, in doing that, Mr Robb was acting inconsistently with the board's decision. But recast in this way, the argument was no more than a particular example given in support of the more general proposition that the making of changes to the announcement was inconsistent with its having been approved. Mr Morley's evidence in this respect (even if accepted) did not advance the respondents' case.

[97] The respondents also referred to a statement which Mr Peter Cameron of Allens had given to the Special Commission of Inquiry into the Medical Research and Compensation Foundation established by the New South Wales Government in February 2004. What was said in that statement, if accepted, would demonstrate that before the February board meeting began Mr Cameron and Mr Robb spoke by telephone with Mr Macdonald and Mr Shafron about the accuracy of the claims data which underpinned the Trowbridge actuarial report. The respondents submitted, and the Court of Appeal accepted, ^[90] that, as a result of the conversation, Mr Cameron and Mr Robb "must" have gone into the board meeting uncertain of whether the reports upon which the board was being asked to act (or at least the report from Trowbridge) provided a sound footing for decision about the separation proposal. The respondents submitted that it followed that it was "most unlikely" that Mr Cameron or Mr Robb would have allowed the meeting to approve the 7.24 draft announcement without one of them interrupting proceedings and pointing out that he (or they) entertained these uncertainties.

[98] The respondents pointed to that part of Mr Cameron's statement in which he said that he had told Mr Macdonald and Mr Shafron:

With the Board meeting so soon, I am simply not in a position to absorb and assess the detail of what has happened.

But as the Court of Appeal recorded, ^[91] Mr Cameron's account of his conversation continued. According to Mr Cameron, he continued by saying to Mr Macdonald and Mr Shafron:

"My primary concern is whether this information has any impact on the key conclusions in the proposals going to the Board and the financial models which are based on the Trowbridge report. In short, I need to understand the bottom line before we talk to the Board. Is there any reason to depart from the view that the Foundation will be fully funded?" (emphasis added)

Mr Cameron stated that Mr Macdonald replied: "Absolutely not." And as the Court of Appeal also recorded, ^[92] a file note taken by Mr Robb of this conversation included, at the end:

"PC [Mr Cameron] -- had been concerned to confirm position

PMac [Mr Macdonald] -- they are the most recent full set of numbers -- last quarter is higher

PC -- no reason to depart from view that fully funded ?

PMac -- yes that is the case ." (emphasis added)

[99] Far from requiring the conclusion that the representatives of Allens entered the board meeting uncertain about whether the Trowbridge report supported an assertion that the MRCF would be "fully funded", the evidence of Mr Cameron's statement pointed firmly towards the conclusion that Messrs Cameron and Robb had been assured by Mr Macdonald, in the hearing of Mr Shafron, that the report did support what was said both in the 7.24 draft announcement and the final ASX announcement about the MRCF being "fully funded". The Court of Appeal was wrong to conclude that Messrs Cameron and Robb " must have gone to the meeting uncertain about whether ... a surplus was the most likely outcome" ^[93] (emphasis added). This evidence did not establish the premise for the respondents' submission that Mr Cameron or Mr Robb would not have allowed the board to approve the 7.24 draft announcement without one of them interrupting the meeting. Nor did this evidence support the more general proposition advanced by the respondents that the alterations made to the 7.24 draft announcement showed that that announcement was neither tabled nor approved at the board meeting.

[100] Four points may then be made about the respondents' arguments based on the alterations that were made to the 7.24 draft announcement.

[101] First, the emphasis that the respondents gave to the way in which ASIC pleaded its case must be assessed in the light of why ASIC put its case in the way it did. ASIC pleaded its case as hinging about the board's approval of the 7.24 draft announcement because: first, the board's own minutes said that the board had approved a draft announcement; second, Mr Baxter said he took the 7.24 draft announcement to the meeting; and third, the production of copies of a draft announcement in the form of the 7.24 draft announcement by Allens and BIL showed that the 7.24 draft announcement had been distributed at the meeting. That is, ASIC pleaded its case in the way it did because that was what ASIC said the documentary records showed had occurred.

[102] The second point to make about the respondents' arguments based on the alterations that were made to the 7.24 draft announcement is that the significance to be given to JHIL's usual practices for approving important draft ASX announcements not being completed before the February board meeting must be assessed against the speed with which events unfolded in February.

[103] The board had been told in both its January and February board papers that, if the separation was to be effected, it was best to announce the decision at the same time as JHIL's third quarter financial results were announced on 16 February 2001. The final details of the separation proposal were not set out in the February board papers, distributed on about 7 February. The final details of the separation proposal were described only in the slide presentation made to the board in the course of the February meeting. A draft ASX announcement was included in the board's papers for the January meeting but none was included with the board's February meeting papers. The announcement sent in January related to the net assets model for funding the MRCF and that model was rejected at the January meeting. It was plain to all concerned that, if the separation proposal was approved at the February board meeting, for announcement on the following day, there would have to be an ASX announcement made immediately. Yet a draft announcement for the February proposal was not prepared until 14 February. And it was that draft, as amended by Mr Baxter at 7.24 on the morning of 15 February, that was taken to the board meeting. All this being so, the failure to follow normal procedures for preparing ASX announcements was unsurprising and, contrary to the respondents' submissions, did not support the conclusion that the 7.24 draft announcement was not tabled and approved.

[104] Third, ASIC alleged and the primary judge found ^[94] that the 7.24 draft announcement and the final ASX announcement made the same misrepresentations. The correctness of that finding was not in issue in the proceedings in this court. As has been shown, when read in the context of the whole announcement none of the alterations that were made to the text was substantial. That is, as ASIC alleged in its pleading, the 7.24 draft announcement and the final ASX announcement "were not materially different".

[105] Fourth, the argument that management (with or without the participation of Allens) would not have altered the 7.24 draft announcement as they did, if the board had approved it, proceeded from one of two alternative premises. Either the argument proceeded from the premise that board approval fixed every last element of the text of the announcement immovably, so that any alteration made by management or Allens showed that the board had not approved the announcement, or it proceeded from the premise that the changes made were of a kind that could not properly have been made and for that reason would not have been made if the board had approved the announcement. Neither premise should be accepted.

[106] The first form of premise (described in argument by saying that the announcement had been "set in stone") would entail that any alteration, however inconsequential, to the text of the 7.24 draft announcement was unauthorised. The minutes of the February meeting also recorded that the Deed of Covenant and Indemnity (referred to in the minutes as the "Deed of Indemnity") had been tabled and that the board had resolved that it be executed. Yet the evidence of Mr Morley, relied on by the respondents for other purposes, about his working at Mr Robb's office on amendments to that deed after the board meeting would, by the same reasoning, require the conclusion that the deed was neither tabled nor approved for execution at the meeting.

[107] The first of the alternative premises for the respondents' arguments about the significance to be attached to the alterations that were made to the 7.24 draft announcement should not be accepted. The proposition takes its force from the content that it seeks to give to the idea of "approval" by the board -- content that is sufficiently conveyed by the metaphor of "set in stone". To understand approval by the board as having that meaning would give the notion a rigidity which it does not have. Whether a deed that is later executed or an announcement that is later published is the document which the board approved must be determined by more than a literal comparison between texts. Slips and errors can be corrected. In at least some cases better (but different) wording can be adopted. The rigid rule which underpinned the respondents' submissions should not be accepted. The bare fact that alterations were later made does not demonstrate that the document was not approved by the board. Nor does that fact demonstrate that what was sent to the ASX was not the document which the board resolved was approved and was to be sent. Account must be taken of what alterations were made and the circumstances in which they were made.

[108] As for the second of the alternative premises, its validity depends upon combining two considerations -- the identification of some changes as changes that "could not properly have been made" and the proposition that because they could not properly have been made after approval, they would likely not have been made if approval had been given. The criterion by which some changes would be classified as changes that could not properly be made was not identified in argument. Assuming, however, that some criterion or criteria could be formulated for that purpose, the second element of the premise (that therefore the changes would not have been made if approval had been given) presupposes that it would have been evident to those making the changes that they had gone beyond what the board had approved. When, as was accepted to be the case here, the changes that were made did not alter the misrepresentations that were made in the 7.24 draft announcement, it is not to be supposed that those who made the changes would recognise that they had gone beyond proper bounds -- for it was not shown that the changes that were made altered in any material way the substance of the announcement that the board had approved. And even if that were not so, the making of the changes would show no more than that those who made them had no authority to do so; their making the changes would not, and in this case did not, show that the 7.24 draft announcement had not been approved.

[109] The four points that have been made about the respondents' arguments based on the alterations to the 7.24 draft announcement respond to the arguments advanced by the parties in this court and the matters that arise from the reasons of the primary judge and the Court of Appeal. There is, however, a further point to be made which was not mentioned by any party in argument in this court and was not dealt with in the reasons of either the primary judge or the Court of Appeal. It concerns the authority Mr Macdonald and certain others were given to alter documents relating to the separation proposal.

[110] The minutes of the February board meeting recorded the tabling of a power of attorney which appointed Mr Macdonald and others, severally, as attorneys for JHIL "to execute, exchange and deliver all documents in connection with constituting the Foundation". The minutes recorded that the board resolved "to execute the Power of Attorney". A power of attorney dated 15 February 2001, executed as a deed poll by JHIL (by the chairman, Mr McGregor, and one of the company secretaries, Mr Donald Cameron) and tendered in evidence at the trial, gave the attorneys very wide powers. Those powers included power to "[c]omplete any blanks in, supplement or amend any Document" (a term defined in the power as including "Australian Stock Exchange Announcements") (emphasis added). On the face of it, this document presents a further very considerable, even insurmountable, obstacle in the way of accepting those arguments of the respondents that depended upon the making of changes to the 7.24 draft announcement. The minutes, and the power of attorney, read together, appear to demonstrate that the board gave Mr Macdonald power to alter the draft ASX announcement. But the point not having been explored in argument, nothing more need be said about it.

The inaccuracies in the minutes

[111] It was not disputed in this court that the minutes of the February board meeting did not record all events at the meeting in the order in which they happened. So, for example, the minutes referred to one of the non-executive directors of JHIL, Sir Llewellyn Edwards, leaving the meeting before the execution of certain documents was noted when, in fact, he left the meeting at a later time. Nor was it disputed in this court that there were other errors in the minutes. The minutes recorded that the directors noted a substantial shareholders notice but the minutes gave the wrong date for that notice. And the primary judge found ^[95] that the minutes were wrong when they recorded, as they did, that the board had "approved Mr Macdonald continuing to explore strategic options for the Gypsum business". As part of the slide presentation made to the board at its February meeting in connection with consideration of the separation proposal, one action sought from the board was described as approval of "commencement of the sale process to test value of gypsum ( sale subject to Board approval if acceptable bids are received)" (emphasis added). The particular recommendation made to the board might well be thought to be sufficiently captured by the more general description given in the minutes but it is not necessary, for present purposes, to go beyond noticing that the relevant minute differed from the recommendation put to the board.

[112] The primary judge also found ^[96] that the minutes were erroneous in not recording another of the actions that had been described in the slides put to the board at its February meeting: "Continue to progress restructuring preparation for Board approval in May". Given that the action spoken of in the slide was action to be undertaken by the management of JHIL, and not its board, and given further that the slide did not explicitly seek board approval for undertaking this work, it is greatly to be doubted that the minutes are properly to be seen as inaccurate because no record was made of this matter. But again, it is sufficient to observe that the minutes differed from the material put before the board in this respect.

[113] None of these inaccuracies bears directly upon whether the 7.24 draft announcement was tabled and approved at the meeting.

[114] The minutes relating to the separation of Coy and Jsekarb from JHIL, set out under the heading "Creation of Foundation", recorded the tabling of 15 different documents and the passing of 17 separate resolutions. The minutes relating to the separation were by far the largest section of the February board minutes: they occupied more than five of the eight pages of minutes.

[115] There were said to be three demonstrable errors in the minutes relating to the separation. In two places the amount that JHIL would contribute to the MRCF pursuant to the terms of the Deed of Covenant and Indemnity granted by Coy and Jsekarb to JHIL was said to be "A$65 million net present value", whereas slides presented at the board meeting showed that the amount that was to be paid by JHIL would have a net present value of $72 million. The Court of Appeal described ^[97] this as "a significant inaccuracy".

[116] The third error was to record that the chairman tabled a power of attorney (as has been mentioned) appointing, among others, Mr Guy Jarvi as an attorney for JHIL "to execute, exchange and deliver all documents in connection with constituting the Foundation". Mr Jarvi was not appointed as an attorney in the tabled power. But the primary judge found ^[98] that "[t]he matter was rectified at the April 2001 board meeting".

The significance of inaccuracies in the minutes

[117] The respondents submitted in this court, in effect, that demonstration of any important error in the minutes cast doubt upon their accuracy in recording that a draft ASX announcement was tabled and approved. The respondents submitted that taken together the errors in and omissions from the minutes meant that their probative value was minimal. The respondents also submitted that the minutes were drafted before the February board meeting and for that reason should not be treated as an accurate record of what happened at the meeting. Both of these arguments were accepted ^[99] by the Court of Appeal.

[118] Although the Court of Appeal regarded ^[100] the "reliability" of the minutes of the February meeting as "very much open to question", the fact that some parts of the minutes were inaccurate does not necessarily imply that other parts of the minutes (in particular the minute that recorded the tabling and approval of a draft ASX announcement) were inaccurate. And similarly, the fact that the minutes were drafted before the meeting does not necessarily imply that they did not accurately record what happened at the meeting.

[119] The submission which the Court of Appeal accepted, ^[101] that "the minutes were drafted before the meeting, and were not a true record of what had occurred at the meeting because they had been drafted before the meeting" (emphasis added), depended for its force upon an unstated premise: that the draft prepared before the meeting was not considered after the meeting. But that premise was not right.

[120] As the Court of Appeal recorded, ^[102] Mr Robb had sent Mr Shafron draft minutes of the meeting on the morning of 15 February 2001 at 8.05 am. On 21 March 2001, Mr Shafron sent, by email, a modified version of the draft minutes to Messrs Macdonald and Morley. The Court of Appeal correctly observed ^[103] that this modified version of the minutes included, for the first time, "the matters other than the establishment of the [MRCF]" and "took up much" of the draft Mr Robb had sent on 15 February. But the draft which Mr Shafron sent to Messrs Macdonald and Morley did not take up all of Mr Robb's draft. A comparison of the drafts of 15 February and 21 March reveals that there were, as ASIC submitted, a number of substantive changes made to that part of the 15 February draft that dealt with the separation. Resolutions were removed and the order of some resolutions was changed. The heading to the minute about the draft announcement was altered and "Chair" was changed to "Chairman" in the text of the recital to the resolution. Other stylistic and typographical changes were made in other parts of the minutes dealing with the separation. Thus, the premise implicit in the Court of Appeal's reasoning, that the minutes did not receive attention after the February board meeting, and therefore necessarily did not reflect what happened at that meeting, is not to be accepted.

[121] In any event, the time at which the minutes were drafted must not be permitted to obscure the significance of the decision, in April, to adopt them as a correct record, a matter to which the Court of Appeal gave little weight. As the Court of Appeal correctly found, ^[104] "the resolution in the ASX announcement minute was fairly prominent". Yet despite this, the directors approved the February minutes as a correct record and those who gave evidence at the trial were left to explain this by saying only (in one case) that he never read board minutes and (in the other cases) that the director concerned had not read them with sufficient care. All this being so, the Court of Appeal identified no sufficient reason for concluding, as it did, ^[105] that only "[s]ome strength in ASIC's case [lay] in the minutes of the February meeting and their adoption at the April meeting".

[122] The primary judge also held that two other parts of the evidence pointed to the conclusion that the board had approved the 7.24 draft announcement at its February board meeting. First, as ASIC emphasised in this court, there was the so-called "correlation evidence" given by Mr Brown. ^[106] Second, there was the complete absence of any evidence of protest after the event, by any member of the board, about the announcement that JHIL in fact made to the ASX. ^[107] Something should be said about both subjects.

Mr Brown and the "correlation evidence"

[123] Eight persons who had attended the 15 February board meeting (Ms Hellicar and Messrs Baxter, Harman, Brown, Gillfillan, Koffel, Willcox and Morley) gave evidence at the trial. None professed to have any specific recollection of a draft announcement being tabled or of an announcement being approved. Some, but not all, of those witnesses recalled discussion about the company's "communications strategy". And it is to be borne in mind that the board papers for both the January and the February meetings had given this subject extended and prominent treatment.

[124] Mr Brown said that he believed "there was significant discussion about the communication of the Foundation to all outside parties" and that "there was ... a discussion ... of the key messages that were to be provided to the market". (One of the slides presented at the meeting was headed "Summary of key issues for consideration" and referred to "Positioning/key stakeholder messages".) In the course of cross-examination by counsel for ASIC, Mr Brown accepted, among other things, that following the January board meeting, "if the management was going to put up a proposal again, there were two things that [he] expected of them: one, it would be fully funded ... [a]nd, two, that's the message they would be conveying to the market". Mr Brown said that "there was a whole lot of discussion in the board meeting" about the "communications strategy", "and that was the focus of the board meeting, for the board to be satisfied that the Foundation had sufficient funds to meet its obligations".

[125] Mr Brown described, in his evidence in chief, an exchange he had had with Mr Macdonald during the February board meeting about the sufficiency of funding for the MRCF. The primary judge said ^[108] that:

Mr Brown's evidence was that he asked Mr Macdonald at the 15 February 2001 meeting: "Can we be sure that the funds we allocate to the Foundation on the basis of the Trowbridge report are sufficient? Is the Trowbridge report sound and fit for purpose?".

Mr Brown said that Mr Macdonald replied: "If we can't tell all of the interested stakeholders that there will be enough funds then we will have great difficulty getting acceptance of the plan and it won't work". Mr Brown accepted that was a statement about the content of the announcement to the ASX.

Mr Brown said he responded: "I appreciate that difficulty, but that is not an answer. My question is: are you sure there are going to be sufficient funds in the trust ?" To which Mr Macdonald said: " Yes there are . We have got the best actuarial modelling. We have shown that we can meet the cash requirements each year. We are providing enough funds for future claims ".

Mr Brown said that no one else at the meeting said anything to qualify what Mr Macdonald had said." (emphasis added)

[126] Mr Brown also gave evidence at the trial explaining how the term "fully funded" had come to be used in the course of the February board meeting. He said:

I believe that at probably the January but certainly the February meeting, the concept was that the board was looking at and it was being proposed to the board that the actuarial estimate provided sufficient funds. That's a longwinded way of expressing something. I believe that the shorthand way that was developed in that meeting was to say it was fully funded, but fully funded in the context of sufficiently funded to the actuarial estimate.

[127] Based on his consideration of the evidence given, not only by Mr Brown but also by others who attended the February board meeting, the primary judge concluded: ^[109]

that one or other or both of Mr Macdonald and Mr Baxter spoke to the draft ASX announcement and put the statements as to the key message to be communicated to the market set out in that document that Mr Brown agreed were likely to have been stated and, to lesser extent, Mr Koffel agreed might have been stated.

[128] The Court of Appeal, however, concluded ^[110] that the primary judge's reasoning on this aspect of the matter had proceeded by four steps:

(a)

the draft announcement (which the Court of Appeal referred to as a "draft news release") "contained a number of statements";

(b)

Mr Brown recalled management (Mr Macdonald or Mr Baxter) "voicing statements in the terms of those in the draft news release at the February meeting";

(c)

"the only source for the statements was the draft news release" (emphasis added); and

(d)

"it should be inferred that management voiced the statements from the draft news release".

[129] The Court of Appeal determined ^[111] that it was in a position to decide for itself whether the evidence given by Mr Brown amounted to no more than his acceptance that it was possible that a number of matters had been put by management as key messages to be conveyed to the market and to others. The Court of Appeal further concluded: ^[112] "We do not think that recollection lay behind Mr Brown's answers involving likelihood, nor was a basis laid for reconstruction."

[130] It may be doubted that the latter conclusion by the Court of Appeal gave sufficient weight to the advantages the primary judge had in assessing the effect of Mr Brown's evidence, ^[113] but it is not necessary to decide whether that is so. Rather, attention should be directed to the Court of Appeal's further conclusions ^[114] that, having regard to what was said in the slides presented to the board at the February meeting, "[t]he correlation with the draft news release seen by the judge is in our view weak" and that "acceptance by the board that a strong assurance of sufficiency of funding should be given does not satisfy the pleaded case of the specific draft ASX announcement resolution".

[131] It may readily be accepted that what was said by Mr Macdonald in his exchange with Mr Brown, what was said on the slides that were shown to the board at its February meeting, and what was said in the 7.24 draft announcement about the sufficiency of funding to be provided to the MRCF were not materially different. Indeed, any real difference between what the board was told by Mr Macdonald in response to Mr Brown's questions, what the board was told in the slides and what was said in the 7.24 draft announcement (repeated to no materially different effect in the final ASX announcement) may well have engendered some doubt about whether the 7.24 draft announcement was tabled at the board meeting. But the substantial identity of all of this material was not inconsistent with the tabling and approval of the 7.24 draft announcement. And the conclusion which the primary judge had reached (that Mr Macdonald or Mr Baxter, or both, had probably spoken to the draft announcement) on the basis of the "correlation evidence" was not shown to be unfounded by pointing to the fact that the board was told the same things in several different ways. None of what Mr Brown said was inconsistent with the minutes accurately recording that a draft ASX announcement was tabled and approved.

[132] If, as the Court of Appeal concluded, Mr Brown's evidence was not founded on recollection and proceeded from no established basis for reconstruction, the Court of Appeal was right to conclude that his evidence would of itself not have proved that an announcement was tabled and approved. But the minutes were themselves evidence of those facts. The critical observation to make about Mr Brown's evidence is that it did not deny that the minutes were accurate.

Absence of later protest

[133] ASIC led evidence at trial which it said showed that, after JHIL sent the final ASX announcement to the ASX, the directors were sent copies of it but made no protest about its terms. ASIC submitted that the absence of protest supported its case.

[134] Although little reference was made to this evidence in the course of the proceedings in this court, the Court of Appeal noted ^[115] that the primary judge found ^[116] that the personal assistant to Mr Donald Cameron (one of JHIL's company secretaries) arranged a telephone conference on 20 February 2001 for "interested Directors" to "hear a report on the aftermath of the separation announcement". Those directors who gave evidence at the trial denied any recollection of such a telephone conference being arranged or held. But the primary judge found, ^[117] contrary to those denials, that a telephone conference, in which at least Ms Hellicar participated, was held. The primary judge also found ^[118] that copies of the final ASX announcement were sent to the non-executive directors.

[135] There was no evidence that at any time during 2001 any director or officer of JHIL protested about the terms in which JHIL made its announcement to the ASX on 16 February 2001. The Court of Appeal concluded ^[119] that to reason from the directors' failure to complain about the terms in which the announcement was made to a conclusion that the directors had approved the draft ASX announcement, by reference to the finding the primary judge had already made that the announcement had been approved, was circular.

[136] If that was the reasoning that was adopted by the primary judge, the criticism was open. But the better view is that the primary judge reasoned that the absence of complaint about the terms of the final ASX announcement was not consistent with the hypothesis advanced by the directors: that there was no approval and that there would not have been if the 7.24 draft announcement had been tabled. For underpinning much of the argument advanced on behalf of the respondents at trial, on appeal to the Court of Appeal and in this court, was a proposition which, though never expressed in these terms, amounted to saying that, if asked, the directors would never have approved the 7.24 draft announcement because the announcement was evidently misleading. If that were right, why would the directors not have challenged management about what was said in the final ASX announcement? The final ASX announcement was not to any materially different effect from the 7.24 draft announcement. The Court of Appeal was, therefore, wrong to conclude ^[120] that the absence of protest might suggest that the 7.24 draft announcement had not been approved because, if it had, the differences between that draft and the final ASX announcement would have provoked directors to protest. Rather, absence of protest about the terms of the final ASX announcement was consistent with the board having approved the 7.24 draft announcement at the February meeting. It may also have been consistent with the directors not having read the final ASX announcement and with their not having been able or sufficiently interested to participate in the proposed telephone conference. But absence of protest was important to assessing whether, as the directors asserted, they, if asked, would not have approved the 7.24 draft announcement.

[137] The evidence about opportunity for but absence of protest about the final ASX announcement supported ASIC's case; at the very least, it did not show the minutes to be false.

[138] The contrary conclusions reached by the Court of Appeal point to the fundamental difficulty in the court's reasoning that has already been identified. Although, as noted earlier, the Court of Appeal recognised ^[121] that this was "not wholly a case of circumstantial evidence", much of the analysis of the evidence undertaken by the Court of Appeal treated the minutes as no more than one circumstance from which ASIC sought to have the court draw an inference that a draft announcement was tabled and approved. But the minutes were more than just one of several pieces of evidence from whose united force ASIC sought to have the tribunal of fact draw an inference. The minutes were a formal and near contemporaneous record (adopted by the board as an accurate record) of the proceedings at the meeting. The minutes were evidence of what they represented. They were more than a foundation for some further inference. Absent evidence to the contrary, ASIC proved its case by tendering the minutes and, through the evidence of Mr Baxter, identifying the document referred to as the "ASX Announcement". Pointing to other ways in which events might have occurred did not, without more, falsify the minutes.

A "failure" to call Mr Robb?

[139] As noted earlier in these reasons, the Court of Appeal said ^[122] that, "[h]aving 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". It is necessary to set out the steps taken in the Court of Appeal's reasons in arriving at that conclusion.

[140] The Court of Appeal concluded ^[123] that it would not be appropriate to reason by analogy from criminal procedure. The Court of Appeal noted ^[124] that s 1317L of the Corporations Act provided that "[t]he Court must apply the rules of evidence and procedure for civil matters when hearing proceedings for ... a declaration of contravention; or ... a pecuniary penalty order". The Court of Appeal correctly observed ^[125] that it follows that a prosecutor's duty to call material witnesses at a criminal trial (as that duty has been identified by this court in Whitehorn v R ^[126] and R v Apostilides ) ^[127] had no direct application to the proceedings ASIC had brought.

[141] The Court of Appeal recorded ^[128] that ASIC accepted that it had "an obligation to act fairly with respect to the conduct of the proceedings" but ASIC did not accept that its obligation to act fairly required it to call Mr Robb as its witness. The Court of Appeal concluded, ^[129] however, that Mr Robb should have been called by ASIC. The court said: ^[130]

A body in the position of ASIC, owing the obligation of fairness to which it was subject, was obliged to call a witness of such central significance to critical issues that had arisen in the proceedings. The scope of its powers and the public interest dimensions of its functions, most relevantly with respect to ensuring proper internal governance of corporations and that the market for securities in shares was fully informed, was such that resolution of the civil penalty proceedings required it to call, if only with a view to showing (if it were the case) that he could not in fact recall anything on the factual issues and for cross examination by the [defendants], a witness of such potential importance.

How this duty which the Court of Appeal identified ASIC as having differs in any relevant respect from the duty of a Crown prosecutor considered in Whitehorn and in Apostilides was not examined. ^[131] And insofar as the duty was said ^[132] to stem from a proposition "that the public interest can only be served if the case advanced on behalf of [a] regulatory agency does in fact represent the truth, in the sense that the facts relied upon as primary facts actually occurred", that premise is false for at least two reasons.

[142] First, the proposition ignores that even a criminal trial "is not, and does not purport to be, an examination and assessment of all the information and evidence that exists, bearing upon the question of guilt or innocence". ^[133] Each side in a criminal trial "is free to decide the ground on which it or he will contest the issue, the evidence which it or he will call, and what questions whether in chief or in cross-examination shall be asked; always, of course, subject to the rules of evidence, fairness and admissibility". ^[134] Proceedings for declaration of contravention or pecuniary penalty order engage no more stringent requirements.

[143] Second, the proposition that the public interest requires that the facts upon which a regulatory agency relies must be facts that "actually occurred" appears to require the regulatory agency to make some final judgment about what "actually occurred" before it adduces evidence. Deciding the facts of the case is a court's task, not a task for the regulatory authority.

[144] The Court of Appeal concluded ^[135] that the failure to call Mr Robb significantly undermined "the cogency of ASIC's case on the passing of [the] draft ASX announcement resolution". Two, possibly three, distinct considerations were identified by the Court of Appeal as supporting that conclusion. First, it was said ^[136] that "[t]he failure of ASIC to call [witnesses including Mr Robb] engages the principle in Blatch v Archer ^[137] where Lord Mansfield said 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'". Second, it was said ^[138] that "[t]he cogency of ASIC's proof of passing the draft ASX resolution must be assessed with regard to the Briginshaw [ ^[139] ] principles, more correctly s ^[140] of the Evidence Act[140], and the nature of the relief claimed by ASIC and gravity of the consequences".

[145] What may perhaps be seen as constituting a third strand in the Court of Appeal's reasoning was its treatment of the well-known decision of this court in Jones v Dunkel . ^[141] The Court of Appeal, referring to Ho v Powell , ^[142] treated ^[143] what it described as "the principle in Jones v Dunkel " as being "a 'particular application of [the] principle' in Blatch ". The Court of Appeal considered, ^[144] however, that what it found to be ASIC's breach of a duty to call Mr Robb took matters beyond what was decided in Jones v Dunkel . The court said ^[145] that

[t]he 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.

[146] It is convenient to deal separately with each of these aspects of the reasoning of the Court of Appeal, although each was a necessary element in that reasoning.

The source and content of the duty of fairness?

[147] It may readily be accepted that courts and litigants rightly expect that ASIC will conduct any litigation in which it is engaged fairly. Nothing that is said in these reasons should be taken as denying that ASIC should do so. But the Court of Appeal concluded that ASIC was under a duty in this litigation to call particular evidence and that breach of the duty by not calling the evidence required the discounting of whatever evidence ASIC did call in proof of its case. Neither the source of a duty of that kind, nor the source of the rule which was said to apply if that duty were breached, was sufficiently identified by the Court of Appeal or in argument in this court.

[148] Rather, argument for the respondents in this court proceeded, for the most part, by asserting that the actual conclusions reached by the Court of Appeal about the consequences of ASIC not calling Mr Robb could be shown to be correct, even without regard to questions of duty and fairness, and that it was thus not necessary to consider how the duty to which the Court of Appeal referred was derived or what the content of the duty might be. And because it will later be shown that ASIC not calling Mr Robb worked no unfairness to the respondents or other defendants at trial it is neither necessary nor desirable to explore the issues about source or content of the asserted duty in any detail. It is enough to observe the following considerations.

[149] A proceeding brought by ASIC for a declaration of contravention, civil penalty or disqualification is necessarily brought in federal jurisdiction. ^[146] For the purposes of s 75 of the Constitution, ASIC is the Commonwealth. ^[147] It follows that the provisions of the Judiciary Act 1903 (Cth) are engaged and must be considered in determining how the proceedings are to be conducted. In particular, ss 79 and 80 of the Judiciary Act are engaged. And in considering how those sections would apply to pick up relevant State or Territory laws or the common law of Australia so as to provide for a duty of the kind hypothesised, it would be necessary to consider whether and to what extent laws of the Commonwealth such as the Corporations Act or the Australian Securities and Investments Commission Act 2001 (Cth) otherwise provide. None of these issues was considered by the Court of Appeal in connection with its holding that ASIC owed the defendants a duty of fairness that required ASIC to call Mr Robb.

[150] In this court, the Solicitor-General of the Commonwealth submitted on behalf of ASIC that no duty of the kind found by the Court of Appeal should be held to apply because s 64 of the Judiciary Act precluded that conclusion. It was submitted that to find such a duty would not be consistent with the requirement made by s 64 that "[i]n any suit to which the Commonwealth ... is a party, the rights of parties shall as nearly as possible be the same ... as in a suit between subject and subject".

[151] Whether s 64 of the Judiciary Act has an operation of the kind for which ASIC contended is a large question which need not be decided. The respondents submitted that the purposes of s 64 are better seen as giving rights to private parties that they otherwise would not have in suits to which the Commonwealth is a party, such as the right to obtain discovery, ^[148] rather than as denying that the Commonwealth has any special duty or obligation in such a suit. It is not necessary, however, to explore these issues further.

[152] For the purposes of deciding these matters, it is convenient to assume, without deciding, that ASIC is subject to some form of duty, even if a duty of imperfect obligation, that can be described as a duty to conduct litigation fairly. What consequences might be thought to follow if failure to call a witness could, and in a particular case did, amount to a breach of a duty of that kind can then be elucidated by reference first to prosecutorial duties in criminal proceedings.

[153] What was held by this court in Apostilides to be the duty of a Crown prosecutor in relation to the calling of evidence must be understood in the light of a number of relevant considerations. First, it is to be remembered that a criminal trial is an accusatorial process in which the prosecution bears the burden of proving its case beyond reasonable doubt. ^[149] The prosecutor's duty stems from the very nature of the proceedings. Second, as this court pointed out in Apostilides , ^[150] the conclusion that a prosecutor has failed to call a witness who should have been called does not, of itself, require the further conclusion that the conviction recorded at that trial must be set aside. Rather, in the words of the common form criminal appeal statute, the question would be whether, having regard to the conduct of the trial as a whole, there was "on any other ground whatsoever a miscarriage of justice". If a prosecutor's failure to call a witness who should have been called occasioned a miscarriage of justice, the conviction entered at trial would be set aside and a new trial would be ordered. The failure to call the witness could not, and would not, found any reassessment of the evidence that was called at trial, let alone any suggestion that the cogency of that evidence should be discounted.

[154] Indeed so much appears to have been recognised at the trial when trial counsel for Mr Terry applied for an order that ASIC call Mr Robb or for an order that the proceedings be stayed until ASIC did so. Trial counsel accepted that the primary judge was bound by the decision in Adler v Australian Securities and Investments Commission ^[151] to refuse the application. The point was agitated in the appeals to the Court of Appeal in the present matters but again rejected ^[152] on the basis that the Court of Appeal should not depart from what was held in Adler and on the further basis that the argument for a stay depended upon equating proceedings for declaration of contravention and civil penalty with criminal prosecution when s 1317L denied such a step. As already noted, those conclusions of the Court of Appeal should be accepted.

[155] But it is then important to recognise what conclusions could follow if, as the Court of Appeal held, ASIC was under a duty to call Mr Robb. If there was such a duty (and these reasons will explain that ASIC not calling Mr Robb was not unfair to the respondents or any other defendant) it would be expected that the remedy for breach of the duty would lie either in concluding that the primary judge could prevent the unfairness by directing ASIC to call the witness or staying proceedings until ASIC agreed to do so or, if the trial went to verdict, in concluding that the appellate court should consider whether there was a miscarriage of justice that necessitated a retrial. But no solution to the hypothesised unfairness could be found by requiring that the primary judge or an appellate court apply some indeterminate discount to the cogency of whatever evidence was called in proof of ASIC's case. This would seem to be no more than an attempt to "punish" a regulatory authority by denying it the relief it seeks. But that approach would fail to recognise that the regulatory authority seeks the remedy it does for public and not its own private purposes. It is an approach that would seek to supplement, needlessly, the long-established and generally applicable principles that are engaged when a party to litigation does not call evidence that it could be expected to call. ^[153] The asserted principle would evidently have no satisfactory roots. And because the notion of "discounting" the evidence is necessarily indeterminate, the asserted principle would have no certain content.

No unfairness in fact

[156] In any event, ASIC not calling Mr Robb as a witness in its case occasioned no unfairness to the respondents or other defendants at the trial.

[157] The Court of Appeal identified ^[154] Mr Robb as a witness who should have been called by ASIC on the basis that he attended the February board meeting and had "sufficient concern" in what was said and done at the meeting as a person responsible for advising on "many legal aspects of the establishment of the [MRCF]" that it could be expected that he would have given attention to (and thus may recall) the events of the meeting. The majority of the Court of Appeal distinguished ^[155] the position of Mr Robb from that of the investment bankers who attended the meeting -- Messrs Wilson and Sweetman -- on the basis of Mr Robb's greater "degree of involvement" in the events of the meeting.

[158] As already noted, the Court of Appeal considered ^[156] that Mr Robb should have been called even if he could not recall anything about what was said or done at the February board meeting. The Court of Appeal was wrong not to examine what evidence Mr Robb would in fact have been expected to give. Examination of that question shows why it was not right to say that "fairness" required ASIC to call him.

[159] Before the trial started, ASIC told Gzell J and the defendants that it expected to call Mr Robb as a witness. Directions had been given by Gzell J requiring ASIC to use its best endeavours to provide the defendants with affidavits or outlines of evidence to be given by the witnesses it intended to call. ^[157] Some days after the trial began, Mr Robb's solicitors gave ASIC's solicitors a draft of part of his proposed statement. ^[158] That draft was not put in evidence at the trial but was given to the defendants' representatives before ASIC closed its case. Mr Robb later indicated that he was not willing to confer with the defendants' representatives. The Court of Appeal referred ^[159] to some of the content of the statement Mr Robb had prepared but made those references in connection with the appeal by Mr Terry against the primary judge's refusal of a stay of proceedings. The draft not having been put in evidence at trial, it is necessary to resolve the present issues without examination of its content.

[160] The Court of Appeal proceeded on the footing that because Mr Robb had attended the February board meeting he "was potentially a very important witness of fact" ^[160] (emphasis added). So much may readily be accepted. But what was the evidence that Mr Robb was in fact likely to give about what was said or done at that meeting? What evidence Mr Robb was likely to have given, as distinct from what evidence he might theoretically have been in a position to give, is critical to any determination of what "fairness" required in this case. And consideration of what evidence Mr Robb was likely to have given must take account of what other evidence showed about the work he did in connection with the February board meeting.

[161] The minutes of the February board meeting that were ultimately adopted were prepared under Mr Robb's supervision. Several drafts of the minutes were prepared before the meeting was held. As early as 7 February 2001, a draft was sent by an employee solicitor of Allens to Mr Shafron at JHIL and to Mr Robb (and another solicitor at Allens) setting out a series of resolutions dealing with the separation of Coy and Jsekarb from the James Hardie group. This draft (and all subsequent drafts) included ^[161] a minute about tabling and adoption of an ASX announcement. As has been explained, the first draft was substantially in the same terms as the minute ultimately adopted. After 7 February, several further drafts were prepared until, on the morning of the meeting, Mr Robb sent Mr Shafron a draft which set out those who were to attend the meeting and, as with earlier drafts, included a minute about tabling and adoption of a draft ASX announcement. Some further changes were made to the minutes after the meeting but the detail of those changes is not presently important. And as already noted, Allens sent JHIL its bill, at the end of March 2001, for work that included settling the minutes of JHIL in relation to the separation proposal.

[162] The respondents submitted that it should not be inferred from the rendering of this bill that Mr Robb looked again at the minutes after the February meeting. The better view of the evidence would require rejection of that submission. But even if it were accepted, the evidence that Mr Robb could be expected to give of what was said or done at the February meeting would have to be assessed in light of the part he had played in preparation of the minutes that were ultimately adopted by the board as a correct record of what was decided at the February meeting. It could be expected that Mr Robb could have given evidence to the effect (a) that he recalled what was said and done at the meeting and it accorded with the minutes which had been drafted and settled under his supervision, or (b) that he had no independent recollection of some or all of what transpired at that meeting, or (c) some mixture of the two. It seems unlikely that he would say that he had not seen, in any of the successive drafts, the reference to tabling and adoption of a draft ASX announcement, a copy of which, as the respondents emphasised for other reasons, he had been given and he had annotated. It seems very unlikely that he would say, contrary to his own interests and the interests of the firm of which he was a member at the relevant times, that he positively remembered that what was recorded in the minutes was untrue.

[163] A conclusion that it was "unfair" for ASIC not to have called Mr Robb as its witness necessarily proceeded from an assumption that ASIC's conduct denied the defendants in the proceedings some advantage or subjected them to some disadvantage. That advantage or disadvantage was never identified. General reference was made to the defendants being denied the opportunity to cross-examine Mr Robb. But to what effect? No reason is advanced to suppose that Mr Robb would have sworn to a positive recollection that a draft announcement was neither tabled nor approved. General reference was made to the difficulty of the defendants calling him "blind" -- without knowing what he would say. (It may be doubted that this was the true position once ASIC gave the defendants part of Mr Robb's statement.) But in any event why would that difficulty cause unfairness if he could not be expected to give evidence that would deny that a draft announcement was tabled and adopted? ASIC not calling Mr Robb caused no unfairness to the respondents or other defendants at trial. The position in relation to Messrs Wilson and Sweetman was no different.

The cogency of proof

[164] The Court of Appeal concluded ^[162] that ASIC's failure to call Mr Robb had "consequences for the cogency of ASIC's case". By this the Court of Appeal meant ^[163] that the cogency of ASIC's proof was diminished.

[165] Disputed questions of fact must be decided by a court according to the evidence that the parties adduce, not according to some speculation about what other evidence might possibly have been led. Principles governing the onus and standard of proof must faithfully be applied. And there are cases where demonstration that other evidence could have been, but was not, called may properly be taken to account in determining whether a party has proved its case to the requisite standard. But both the circumstances in which that may be done and the way in which the absence of evidence may be taken to account are confined by known and accepted principles which do not permit the course taken by the Court of Appeal of discounting the cogency of the evidence tendered by ASIC.

[166] Lord Mansfield's dictum in Blatch v Archer ^[164] that "[i]t 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" is not to be understood as countenancing any departure from any of these rules. Indeed, in Blatch v Archer itself, Lord Mansfield concluded ^[165] that the maxim was not engaged for "it would have been very improper to have called" the person whose account of events was not available to the court.

[167] This court's decision in Jones v Dunkel is a particular and vivid example of the principles that govern how the demonstration that other evidence could have been called, but was not, may be used. The essential facts of the case, though well known, should be restated. The personal representative of a driver who had died in a collision with another vehicle brought an action for damages on her own behalf and on behalf of the deceased driver's dependants. The plaintiff's case depended upon demonstration that the other driver's negligence was a cause of the accident. The plaintiff sought to demonstrate negligence by having the tribunal of fact (in that case a jury) infer from facts concerning the road and the two vehicles involved that the collision had occurred when the defendant's vehicle was on the wrong side of the road. One of the defendants, the surviving driver, did not give evidence at the trial. The court divided about whether the inference which the plaintiff sought to have the jury draw about where the collision occurred was an inference that was open on the evidence. But the court held ^[166] "that any inference favourable to the plaintiff for which there was ground in the evidence might be more confidently drawn when a person presumably able to put the true complexion on the facts relied on as the ground for the inference has not been called as a witness by the defendant and the evidence provides no sufficient explanation of his absence".

[168] The Court of Appeal concluded ^[167] that ASIC's not calling Mr Robb founded an inference that his evidence "would not have assisted the ASIC case". There was no basis for drawing any inference that Mr Robb would have given evidence adverse to ASIC's case. More particularly, there was no basis for concluding that it was more likely than not that he would say that the minutes whose preparation he had supervised were false. The most that could be inferred from Mr Robb not being called by ASIC was that he could not give evidence, from his own independent recollection, of what had happened at the February board meeting. He was not "a person presumably able to put the true complexion on the facts relied on [by ASIC] as the ground" ^[168] for any inference that ASIC sought to have drawn from the evidence. And contrary to the conclusions reached by the Court of Appeal, what Lord Mansfield said in Blatch v Archer permitted no larger conclusion.

[169] ASIC had tendered admissible evidence that, if accepted, showed that the draft ASX announcement had been tabled and approved. This was not a case where ASIC's case depended on inference, let alone on "uncertain inferences", ^[169] or where there was a question about whether "limited material is an appropriate basis on which to reach a reasonable decision". ^[170] It was not a case where "the missing witness would be expected to be called by one party rather than the other" or where it was known that "his evidence would elucidate a particular matter" ^[171] (emphasis added). It was the respondents' case that depended upon inference. The inference they sought to have drawn was that the minutes were not accurate evidence of tabling and approval. ASIC not calling Mr Robb did not entail that the inference which the respondents sought to have drawn could be more safely drawn. It was not to be expected that ASIC would call him (and the respondents not call him) if Mr Robb would have given any evidence that cast doubt on whether the minutes were accurate.

[170] The fact that ASIC did not call Mr Robb did not affect (in the sense of diminish) the cogency of the proof which ASIC advanced. Yet that is the conclusion the Court of Appeal reached: that the cogency of ASIC's proof was diminished because Mr Robb was not called to say no more than "I do not recall".

Conclusion and orders

[171] The Court of Appeal was wrong to set aside the primary judge's finding that the 7.24 draft announcement was tabled at and approved by the directors of JHIL at their meeting on 15 February 2001. It follows that ASIC's appeals to this court should be allowed with costs and consequential orders made.

[172] ASIC sought consequential orders that would dismiss so much of the respondents' appeals to the Court of Appeal as related to the declarations of contravention made by the primary judge that were founded upon the directors' approval of the 7.24 draft announcement. ASIC also sought orders that the respondents pay costs in the Court of Appeal in relation to that issue. ASIC accepted that the issues raised by those grounds of appeal to the Court of Appeal that concerned relief from liability, disqualification and penalty should be remitted to that court for its determination.

[173] In the cases of Mr Terry and Mr O'Brien, ASIC sought orders remitting to the Court of Appeal the issues raised by ASIC's cross-appeals to that court about costs as between ASIC and Messrs Terry and O'Brien. In the case of Mr Shafron, ASIC sought orders that would permit the reconsideration of what sanction or sanctions should be imposed upon him in light of all of the contraventions found against him as well as consideration of his appeal to the Court of Appeal in relation to questions of relief from liability and penalty.

[174] In each of the appeals brought to the Court of Appeal by non-executive directors, ASIC cross-appealed to raise a number of issues "if ... it is found that it was not a contravention to have voted in favour" of the resolution approving the 7.24 draft announcement. ^[172] ASIC having succeeded in its appeals to this court, the issues raised by those cross-appeals do not arise and the orders made by the Court of Appeal dismissing the cross-appeals should stand.

[175] Given that questions of relief from liability and penalty remain to be decided by the Court of Appeal, the better course is not to make orders of the kind sought by ASIC dealing with part only of the several appeals to the Court of Appeal. In particular, no order should now be made dealing with the costs of only one of the issues raised in the proceedings in the Court of Appeal.

[176] In each of ASIC's appeals to this court other than the appeals relating to Mr Terry, Mr O'Brien and Mr Shafron, orders should be made in the following form:

1.

Appeal allowed with costs.

2.

Set aside paras (a), (b), (c) and (e) of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 17 December 2010.

3.

Remit the matter to the Court of Appeal for determination of so much of the appeal to that court as relates to relief from liability and penalty.

4.

The costs of the proceedings in the Court of Appeal are to be in the discretion of that court.

[177] In the appeals relating to Mr Terry and Mr O'Brien, orders in the form of paras 1, 2 and 4 of the orders set out above should be made but para 3 of the orders should provide:

3.

Remit the matter to the Court of Appeal for determination of

(a)

so much of the appeal to that court as relates to relief from liability and penalty; and

(b)

the cross-appeal to that court in relation to costs.

[178] In the case of ASIC's appeal relating to Mr Shafron, orders should be made as follows:

1.

Appeal allowed with costs.

2.

Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made on 17 December 2010 in Matter No 2009/00298416, in which Peter James Shafron was appellant and Australian Securities and Investments Commission was respondent.

3.

Remit the matter to the Court of Appeal for determination of so much of the appeal and cross-appeal in that matter as relates to penalty.

4.

The costs of the proceedings in the Court of Appeal are to be in the discretion of that court.